UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 001-09148
THE BRINK’S COMPANY
(Exact name of registrant as specified in its charter)
Virginia
(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
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ý
No ¨
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 ¨
No ý
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý
No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§ 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 ý
No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨
No ý
As of February 20, 2017 , there were issued and outstanding 50,040,196 shares of common stock. The aggregate market value of shares of common stock held by non-affiliates as of June 30,
2016 , was $1,400,285,095 .
Documents incorporated by reference: Part III incorporates information by reference from portions of the Registrant’s definitive 2017 Proxy Statement to be filed pursuant to Regulation 14A.
THE BRINK’S COMPANY
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2016
TABLE OF CONTENTS
PART I
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
1
7
12
13
13
13
14
15
17
18
59
60
118
118
118
119
119
119
119
119
120
120
PART I
ITEM 1. BUSINESS
Overview
The Brink’s Company is a premier provider of secure logistics and security solutions including cash-in-transit, ATM replenishment and maintenance, cash management services,
including vault outsourcing, money processing, and intelligent safe services, international transportation of valuables, and payment services. Our customers include financial
institutions, retailers, government agencies (including central banks), mints, jewelers and other commercial operations around the world. Our global network serves customers in
more than 100 countries. We have ownership interests in companies in 40 countries and agency relationships with companies in additional countries. We employ approximately
60,700 people and our operations include approximately 1,000 facilities and 11,900 vehicles.
Brink’s was founded in 1859 and The Brink’s Company was first incorporated in 1930 under the laws of the State of Delaware (at that time, the Company was named The
Pittston Company). It succeeded to the business of a Virginia corporation in 1986 and was renamed The Brink’s Company in 2003. Our headquarters are located in Richmond,
Virginia. The Brink’s Company, along with its subsidiaries, is referred to as “we,” “our,”, “us,” “Brink’s,” or “the Company” throughout this Form 10-K.
Brink’s operations are located throughout the world with 75% of our revenues earned outside the U.S. during 2016 . Brink’s Largest 5 Markets (U.S., France, Mexico, Brazil
and Canada) represent 63% of consolidated revenues. The following table presents a summary of revenues by segment in 2014 , 2015 and 2016 .
(In millions)
2016
% total
% change
2015
% total
% change
2014
% total
Revenues by segment:
Largest 5 Markets:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Total reportable segments
Other items not allocated to segments
$
752.6
424.5
295.3
285.7
150.2
1,908.3
355.1
387.4
167.5
910.0
90.1
2,908.4
112.2
25
14
10
9
5
63
12
13
6
30
3
96
4
3 $
(2)
(11)
6
(2)
(1)
(4)
(13)
6
(6)
5
(2)
33
730.4
431.5
333.0
270.4
153.7
1,919.0
369.9
444.7
157.4
972.0
85.9
2,976.9
84.5
24
14
11
9
5
63
12
15
5
32
3
97
3
— $
(17)
(14)
(26)
(14)
(12)
(3)
(20)
13
(10)
(11)
(11)
(60)
727.8
517.4
388.2
364.1
179.7
2,177.2
380.6
556.3
139.8
1,076.7
96.6
3,350.5
211.8
20
15
11
10
5
61
11
16
4
30
3
94
6
Total Revenues
$
3,020.6
100
(1) $
3,061.4
100
(14) $
3,562.3
100
Amounts may not add due to rounding.
Geographic financial information related to revenues and long-lived assets is included in the consolidated financial statements on page 77.
1
Vision,
Mission
and
Strategy
Our Vision
Our vision is to be the world’s premier provider of cash management, secure logistics and payment services.
Our Mission and Goal
Our goal is to create value by leveraging our brand, enhancing the customer experience, and aggressively pursuing growth opportunities.
Our Strategy
Our strategy is designed to achieve both organic and inorganic revenue growth while driving margins consistently higher. Our strategy has three pillars:
•
•
•
Accelerate profitable growth ("APG")
Close the gap with operational excellence ("CTG")
Introduce differentiated services ("IDS")
Accelerate profitable growth through:
•
•
•
•
•
growing High-Value Services
growing account share with existing customers
increasing focus on smaller financial institutions
penetrating large, unvended retail market
exploring core and adjacent acquisitions
We have opportunities to grow revenue in higher-margin lines of business such as CompuSafe ® services and recyclers, money processing outsourcing, and Brink’s Global
Services. Our plan calls for growing revenue with both large and small financial institutions, and increasing penetration of the large and underserved retail market. With a Net
Debt-to-Adjusted EBITDA ratio under 1X, as of December 31, 2016, we also have the financial flexibility to complete accretive acquisitions in both core and adjacent markets.
Close the gap with operational excellence by:
•
•
•
leading our industry in safety and security
exceeding customer expectations
increasing operational productivity
We have already begun an aggressive drive to improve internal productivity, optimize cost and achieve industry-leading margins.
Introduce differentiated services through:
•
•
•
leveraging uniform, best-in-class global technology base for logistics and operating systems
offering end-to-end cash supply chain managed services
launching a customer portal and value-added, fee-based services
The third component of our strategy is to introduce differentiated services to our customers by strengthening and leveraging our IT capabilities. Our IT strategy and systems will
also drive improved service levels and operational efficiencies.
2
Services
We design customized services to meet the cash and valuables supply chain needs of our customers. We enter into contracts with our customers to establish pricing and other
terms. Cash-in-Transit and ATM contracts usually cover an initial term of at least one year and in many cases one to three years, and generally remain in effect thereafter until
canceled by either party. Contracts for Cash Management Services are typically longer. Following are descriptions of our service offerings:
Core
Services
(53% of total revenues in 2016 )
Cash-in-transit and ATM Services are core services we provide to customers throughout the world. We charge customers per service performed or based on the value of goods
transported. Revenues are affected by the level of economic activity in various markets as well as the volume of business for specific customers. Core services generated
approximately $1.6 billion of revenues in 2016 .
Cash-in-Transit Services – Serving customers since 1859, our success in Cash-in-Transit is driven by a combination of rigorous security practices, high-quality
customer service, risk management and logistics expertise. Cash-in-Transit Services generally include the secure transportation of:
•
•
•
cash between businesses and financial institutions, such as banks and credit unions
cash, securities and other valuables between commercial banks, central banks and investment banking and brokerage firms
new currency, coins, bullion and precious metals for central banks and other customers
ATM Services
– We manage 94,600 ATMs worldwide. We provide customers who own and operate ATMs a variety of service options. Basic ATM management
services include cash replenishment and first and second line maintenance. We also provide comprehensive services for ATM management through our Brink's
Integrated Managed Services (“Brink’s IMS”) offering, which includes cash replenishment, replenishment forecasting, cash optimization, ATM remote monitoring,
service call dispatching, transaction processing, installation services, and first and second line maintenance.
High-Value
Services
(40% of total revenues in 2016 )
Our Core Services, combined with our brand and global infrastructure, provide a broad platform from which we offer additional High-Value Services, which generated
approximately $1.2 billion of revenues in 2016 .
Global Services - Brink’s Global Services ("BGS") is the leading global provider of secure transport of highly-valued commodities including diamonds, jewelry,
precious metals, securities, currency, high-tech devices, electronics and pharmaceuticals. Our specialized diamond and jewelry operations have offices in the world’s
major diamond and jewelry centers. Serving customers in more than 100 countries, BGS provides secure transportation services including pick-up, packaging, customs
clearance, secure vault storage and inventory management. BGS uses a combination of armored vehicles and secure air and sea transportation.
Cash Management Services - We offer a variety of Cash Management Services, depending on customers’ unique needs. These include:
•
•
•
•
money processing (e.g., counting, sorting, wrapping, checking condition of bills, etc.) and other cash management services
services related to 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
Other cash management services include cashier balancing, counterfeit detection, account consolidation and electronic reporting. Retail and bank customers use
Brink’s to count and reconcile coins and currency, prepare bank deposit information and replenish coins and currency in specific denominations.
Brink's offers a fully integrated approach to managing customers' supply chain of cash. These services include logistical support from point-of-sale through transport,
vaulting, bank deposit and related credit reporting. We also offer a variety of advanced technology applications including online cash tracking, cash inventory
management, check imaging for real-time deposit processing, and a variety of other web-based tools that enable banks and other customers to reduce costs while
improving service to their customers. We believe the quality and scope of our money processing and information systems differentiate our Cash Management Services
from competitive offerings.
Brink’s CompuSafe ® Service . Brink’s CompuSafe ® service provides an integrated, closed-loop system for preventing theft and managing cash. We market
CompuSafe ® services to a variety of cash-intensive customers including convenience stores, gas stations, restaurants, retail chains and entertainment
venues. In a majority of instances, once the specialized safe is installed, the customer’s employees deposit currency into the safe’s cassettes, which can only
be removed by Brink’s personnel. Upon removal, the cassettes are securely transported to a vault for processing where contents are verified and transferred
for deposit. Our CompuSafe ® service features currency-recognition and counterfeit-detection technology, multi-language touch screens and an electronic
interface between the point-of-sale, back-office systems and external banks. Our electronic reporting interface with external banks enables customers to
receive same-day credit on their cash balances, even if the cash remains on the customer’s premises. Recently, some customers have requested specialized
safes permitting customer employees to remove money in a secure manner that was previously deposited in the safe cassettes to meet a current need. We have
also implemented this capability.
3
Virtual Vault . Virtual Vault services combine Cash-in-Transit Services, Cash Management Services, vaulting and electronic reporting technologies to help
banks expand into new markets while minimizing investment in vaults and branch facilities. In addition to providing secure storage, we process deposits,
provide check imaging and reconciliation services, perform currency inventory management, process ATM replenishment orders and electronically transmit
banking transactions.
Payment Services
– We provide convenient payment services, including bill payment processing, mobile phone top-up, and Brink’s Money™ prepaid cards.
Latin America . Bill payment processing services include bill payment acceptance and processing services on behalf of utility companies and other
billers. Consumers can pay bills, top-up prepaid mobile phones and manage accounts at retail agent locations that we operate on behalf of utility companies,
banks and a small number of leased payment locations. This service is offered at over 31,300 locations in Brazil, Mexico, Colombia and Panama.
United States . We offer Brink’s Money™ general purpose reloadable prepaid cards and payroll cards to consumers and employers. Our general purpose
reloadable cards are sold to consumers through our direct-to-consumer marketing efforts while our payroll cards are sold to employers who use them to pay
employees electronically. Brink’s Money™ cards can be used at stores, restaurants, online retailers, and at ATMs worldwide. This product is targeted to the
millions of unbanked and under-banked Americans looking for alternative financial products.
Commercial Security Systems –
We provide commercial security system services in designated markets in Europe. Our security system design and installation services
include alarms, motion detectors, closed-circuit televisions, digital video recorders, and access control systems, including card and biometric readers, electronic locks,
and turnstiles. We may also provide monitoring services after systems have been installed.
Other
Security
Services
(7% of total revenues in 2016 )
Guarding – We protect airports, offices, warehouses, stores, and public venues with or without electronic surveillance, access control, fire prevention and trained
patrolling personnel. Other security services generated approximately $0.2 billion of revenues in 2016 .
We offer security and guarding services in France, Luxembourg, Greece and Brazil. A portion of this business involves long-term contracts related primarily to
security services at airports and embassies. Generally, guarding contracts are for a one-year period, and the majority of contracts are extended.
Industry
and
Competition
Brink’s competes with large multinational, regional and smaller companies throughout the world. Our largest multinational competitors are G4S plc (U.K.); Loomis AB
(Sweden); Prosegur, Compania de Seguridad, S.A. (Spain); and Garda World Security Corporation (Canada).
We believe the primary factors in attracting and retaining customers are security expertise, service quality, and price. Our competitive advantages include:
•
•
•
•
•
•
brand name recognition
reputation for a high level of service and security
risk management and logistics expertise
global infrastructure and customer base
proven operational excellence, and
high-quality insurance coverage and financial strength
Although we face competitive pricing pressure in many markets, we resist competing on price alone. We believe our high levels of service, security expertise and value-added
solutions differentiate us from competitors.
Insurance
Coverage
The availability of high-quality and reliable insurance coverage is an important factor in our ability to attract and retain customers and manage the risks inherent in our
business. We purchase insurance coverage for losses in excess of what we consider to be prudent levels of self-insurance. Our insurance policies cover losses from most causes,
with the exception of war, nuclear risk and certain other exclusions typical in such policies.
Insurance for security is provided by different groups of underwriters at negotiated rates and terms. Premiums fluctuate depending on market conditions. The security loss
experience of Brink’s and, to a limited extent, other armored carriers affects our premium rates.
4
Service
Mark
and
Patents
BRINKS is a registered service mark in the U.S. and certain foreign countries. The BRINKS mark, name and related marks are of material significance to our business. We
own patents for safes and related services, iDeposit and Daily Credit processes, including our integrated CompuSafe ® service, which expire between 2017 and 2032 . These
patents provide us with important advantages; however, we are not dependent on the existence of these patents.
We have licensed the Brink’s name to a limited number of companies, including a distributor of security products (padlocks, door hardware, etc.) offered for sale to consumers
through major retail chains.
Government
Regulation
Our U.S. operations are subject to regulation by the U.S. Department of Transportation with respect to safety of operations, equipment and financial responsibility. Intrastate
operations in the U.S. are subject to state regulation. Operations outside of the United States are regulated to varying degrees by the countries in which we operate.
Employee
Relations
At December 31, 2016 , our company had approximately 60,700 full-time and contract employees, including approximately 7,400 employees in the United States (of whom
approximately 380 were classified as part-time employees) and approximately 53,300 employees outside the United States. At December 31, 2016 , Brink’s was a party to
eleven collective bargaining agreements in the United States and Canada with various local unions covering approximately 1,600 employees. The agreements have various
expiration dates from 2017 to 2019 . Outside of the United States and Canada, approximately 56% of employees are represented by trade union organizations. We believe our
employee relations are satisfactory.
Business
Divestitures
Below is a summary of the significant businesses we disposed in the last three years. See Note 18 to the consolidated financial statements for more information on these
dispositions. The results of the operations below, which met the criteria for classification as discontinued operations as of or prior to December 31, 2014, have been excluded
from continuing operations and are reported as discontinued operations for the current and prior periods. The sales of the Russian cash management business and the Irish
guarding operations in 2015 as well as the shutdown of the remaining Ireland operations in 2016 did not meet the criteria for classification as discontinued operations. Operating
results for these businesses are included in continuing operations for the current and prior periods. We continue to operate our Global Services business in most of these
countries.
Cash-in-transit operations sold or shut down:
Australia (sold in October 2014)
Puerto Rico (shut down in November 2014)
Netherlands (sold in December 2014)
•
•
•
Other operations sold:
•
In February 2015, we sold a small Mexican parcel delivery business which met the criteria for classification as a discontinued operation as of December 31, 2014.
Other divestitures not classified as discontinued operations:
• We sold a noncontrolling interest in a CIT business based in Peru in 2014 for $60 million.
• We sold our 70% ownership interest in a Russian cash management business in November 2015 and recognized a $5.9 million loss on the disposition. A significant
part of the loss ( $5.0 million ) represented the reclassification of foreign currency translation adjustments from accumulated other comprehensive income (loss) into
earnings.
• We sold an Irish guarding operation in November 2015.
•
In September 2016, we shut down the remaining operations in the Republic of Ireland and Northern Ireland. At December 31, 2016, we were in the process of
finalizing the settlement of all remaining obligations of these businesses. During 2016, we incurred approximately $16 million in losses as we exited these
operations. These losses included $5 million in severance costs and $2 million in property impairment charges.
• We sold a German guarding operation in October 2016.
5
Reorganization
and
Restructuring
In the fourth quarter of 2014, we announced a reorganization and restructuring of Brink’s global organization (“2014 Reorganization and Restructuring”) to accelerate the
execution of our strategy by reducing costs and providing for a more streamlined and centralized organization. As part of this program, we reduced our total workforce by
approximately 1,700 positions. Severance costs of $21.8 million associated with these actions were recognized in 2014, with an additional $1.9 million in restructuring charges
recognized in 2015. The restructuring saved annual direct costs of approximately $50 million in 2015 compared to 2014, excluding severance, lease termination and accelerated
depreciation. The actions under this program were substantially completed by the end of 2015.
We initiated another global restructuring of our business in the third quarter of 2015 (“2015 Reorganization and Restructuring”), which included the recognition in 2015 of $11.6
million in costs related to employee severance, contract terminations and lease terminations. We recognized an additional $6.5 million in charges in 2016 related to this
restructuring. The 2015 Reorganization and Restructuring reduced the global workforce by approximately 1,100 positions and resulted in approximately $20 million in 2016 cost
savings. The actions under this program were substantially completed by the end of 2016, with cumulative pretax charges of approximately $18 million .
In the fourth quarter of 2016, management implemented restructuring actions across our global business operations and our corporate functions (“2016 Reorganization and
Restructuring”). As a result of these actions, we recognized asset-related adjustments of $16.3 million , severance costs of $7.2 million , lease restructuring charges of $0.7
million , partially offset by a $6.1 million benefit related to the termination of a benefit program. Severance actions are expected to reduce our global workforce by 700 to 800
positions. We expect that the 2016 restructuring will result in $8 to $12 million in 2017 cost savings.
Executive Leadership and Board of Directors Restructuring
In January 2016, Brink’s entered into an agreement (the "Starboard Agreement") with Starboard Value LP and its affiliates ("Starboard"). As a result, our former Chief
Executive Officer ("CEO"), Thomas C. Schievelbein, stepped down in May 2016, and two of the Company’s directors (including the Company’s independent lead director)
retired from the Board. Pursuant to the Starboard Agreement, among other things, the Board appointed three new independent directors and delegated to the Board’s Corporate
Governance and Nominating Committee the responsibility to oversee the Board's process to search for a new CEO. On June 9, 2016, the Board appointed Douglas A. Pertz as
the Company’s president and CEO and as a member of the Board. Joseph W. Dziedzic served as Chief Financial Officer ("CFO") from 2009 until he was replaced on July 14,
2016 when Brink's announced that Ronald J. Domanico had joined the Company as the new CFO. In the fourth quarter of 2015, we recognized $1.8 million in costs related to
the Executive Leadership and Board of Directors restructuring. We recognized an additional $4.3 million in charges, primarily severance costs, in 2016.
Available
Information
and
Corporate
Governance
Documents
The following items are available free of charge on our website ( www.brinks.com ) as soon as reasonably possible after filing or furnishing them with the Securities and
Exchange Commission (the “SEC”):
•
•
•
Annual reports on Form 10-K
Quarterly reports on Form 10-Q
Current reports on Form 8-K, and amendments to those reports
The following documents are also available free of charge on our website:
•
•
•
Corporate Governance Policies
Code of Ethics
The charters of the following committees of our Board of Directors (the “Board”): Audit and Ethics, Compensation and Benefits, Corporate Governance and
Nominating, and Finance and Strategy
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.
6
ITEM 1A. RISK FACTORS
We
operate
in
highly
competitive
industries.
We compete in industries that are subject to significant competition and pricing pressures in most markets. In addition, our business model requires significant fixed costs
associated with offering many of our services including costs to operate a fleet of armored vehicles and a network of secure branches. Because we believe we have competitive
advantages such as brand name recognition and a reputation for a high level of service and security, we resist competing on price alone. However, continued pricing pressure
from competitors or failure to achieve pricing based on the competitive advantages identified above could result in lost volume of business and have an adverse effect on our
business, financial condition, results of operations and cash flows. In addition, given the highly competitive nature of our industries, it is important to develop new solutions and
product and service offerings to help retain and expand our customer base. Failure to develop, sell and execute new solutions and offerings in a timely and efficient manner
could also negatively affect our ability to retain our existing customer base or pricing structure and have an adverse effect on our business, financial condition, results of
operations and cash flows.
Decreased
use
of
cash
could
have
a
negative
impact
on
our
business.
The proliferation of payment options other than cash, including credit cards, debit cards, stored-value cards, mobile payments and on-line purchase activity, could result in a
reduced need for cash in the marketplace and a decline in the need for physical bank branches and retail stores. To mitigate this risk, we are developing new lines of business
and investing in adjacent security-related markets, but there is a risk that these initiatives may not offset the risks associated with our traditional cash-based business and that our
business, financial condition, results of operations and cash flows could be negatively impacted.
Our
strategy
may
not
be
successful.
Our strategy has three pillars: accelerate profitable growth, close the gap with competitors and introduce differentiated services. We may not be successful in growing revenue in
high-margin lines of business, increasing our market share with existing customers or winning new business with smaller financial institutions and the retail market. Although
we have already begun a drive to improve productivity and optimize costs, we may not be able to achieve industry-leading margins. We also may not be successful in
strengthening and leveraging our IT capabilities to improve service levels and drive efficiencies. If we are unable to achieve our strategic objectives and anticipated operating
profit improvements, our results of operations and cash flows may be adversely affected.
We
have
significant
operations
outside
the
United
States.
We currently serve customers in more than 100 countries, including 40 countries where we operate subsidiaries. Seventy-five percent (75%) of our revenues in 2016 came from
operations outside the U.S. We expect revenues outside the U.S. to continue to represent a significant portion of total revenues. Business operations outside the U.S. are subject
to political, economic and other risks inherent in operating in foreign countries, such as:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the difficulty of enforcing agreements, collecting receivables and protecting assets through foreign legal systems;
trade protection measures and import or export licensing requirements;
difficulty in staffing and managing widespread operations;
required compliance with a variety of foreign laws and regulations;
enforcement of our global compliance program in foreign countries with a variety of laws, cultures and customs;
varying permitting and licensing requirements in different jurisdictions;
foreign ownership laws;
changes in the general political and economic conditions in the countries where we operate, particularly in emerging markets;
threat of nationalization and expropriation;
higher costs and risks of doing business in a number of foreign jurisdictions;
laws or other requirements and restrictions associated with organized labor;
limitations on the repatriation of earnings;
fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates, including measures taken by governments to devalue official currency
exchange rates;
inflation levels exceeding that of the U.S; and
inability to collect for services provided to government entities.
We are exposed to certain risks when we operate in countries that have high levels of inflation, including the risk that:
•
•
•
•
the rate of price increases for services will not keep pace with the cost of inflation;
adverse economic conditions may discourage business growth which could affect demand for our services;
the devaluation of the currency may exceed the rate of inflation and reported U.S. dollar revenues and profits may decline; and
these countries may be deemed “highly inflationary” for U.S. generally accepted accounting principles (“GAAP”) purposes.
We manage these risks by monitoring current and anticipated political and economic developments, monitoring adherence to our global compliance program and adjusting
operations as appropriate. Changes in the political or economic environments of the countries in which we operate could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
7
Our
business
success
depends
on
retaining
our
leadership
team
and
attracting
and
retaining
qualified
personnel.
Our future success depends, in part, on the continuing services and contributions of our leadership team to execute on our strategic plan and to identify and pursue new
opportunities. Our future success also depends, in part, on our continued ability to attract and retain highly skilled and qualified personnel. Any unplanned turnover in senior
management or inability to attract and retain qualified personnel could have a negative effect on our results of operations. Turnover in key leadership positions within the
Company may adversely affect our ability to manage the company efficiently and effectively, could be disruptive and distracting to management and may lead to additional
departures of current personnel, any of which could have a material adverse effect on our business and results of operations.
We
may
be
unable
to
achieve,
or
may
be
delayed
in
achieving,
our
initiatives
to
drive
efficiency
and
control
costs.
We have launched a number of initiatives, including the reorganization and restructuring actions described on page 6, to improve efficiencies and reduce operating
costs. Although we have achieved annual cost savings associated with these initiatives, we may be unable to sustain the cost savings that we have achieved. In addition, if we
are unable to achieve, or have any unexpected delays in achieving additional cost savings, our results of operations and cash flow may be adversely affected. Even if we meet
our goals as a result of these initiatives, we may not receive the expected financial benefits of these initiatives.
We
may
not
be
successful
in
pursuing
strategic
investments
or
acquisitions
or
realize
the
expected
benefits
of
those
transactions
because
of
integration
difficulties
and
other
challenges.
While we may identify opportunities for investments to support our growth strategy, as well as acquisition and divestiture opportunities, our due diligence examinations and
positions that we may take with respect to appropriate valuations for acquisitions and divestitures and other transaction terms and conditions may hinder our ability to
successfully complete business transactions to achieve our strategic goals. Our ability to realize the anticipated benefits from acquisitions will depend, in part, on successfully
integrating each business with our company as well as improving operating performance and profitability through our management efforts and capital investments. The risks to
a successful integration and improvement of operating performance and profitability include, among others, failure to implement our business plan, unanticipated issues in
integrating operations with ours, unanticipated changes in laws and regulations, labor unrest resulting from union operations, regulatory, environmental and permitting issues, the
effect on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002, and difficulties in fully identifying and evaluating
potential liabilities, risks and operating issues. The occurrence of any of these events may adversely affect our expected benefits of any acquisitions and may have a material
adverse effect on our financial condition, results of operations or cash flows.
We
have
significant
deferred
tax
assets
in
the
United
States
that
may
not
be
realized.
Deferred tax assets are future tax deductions that result primarily from the net tax effects of temporary differences between the carrying amount of assets and liabilities for
financial statement and income tax purposes. At December 31, 2016 , we have $271 million of U.S. deferred tax assets, net of valuation allowances, primarily related to our
retirement plan obligations. These future tax deductions may not be realized if tax rules change, if forecasted U.S. operational results are not realized or if any other U.S.
projected future taxable income is insufficient. Consequently, not realizing our U.S. deferred tax assets may significantly and materially affect our financial condition, results of
operations and cash flows.
It
is
possible
that
we
will
incur
restructuring
charges
in
the
future.
It is possible that we will take restructuring actions in one or more of our markets in the future to reduce expenses. These actions could result in significant restructuring charges
at these subsidiaries, including recognizing impairment charges to write down assets, and recording accruals for employee severance and the termination of operating
leases. These charges, if required, could significantly and materially affect results of operations and cash flows.
We
have
significant
retirement
obligations.
Poor
investment
performance
of
retirement
plan
holdings
and
/
or
lower
interest
rates
used
to
discount
the
obligations
could
unfavorably
affect
our
liquidity
and
results
of
operations.
We have substantial pension and retiree medical obligations, a portion of which have been funded. The amount of these obligations is significantly affected by factors that are
not in our control, including interest rates used to determine the present value of future payment streams, investment returns, medical inflation rates, participation rates and
changes in laws and regulations. The funded status of the primary U.S. pension plan was approximately 87% as of December 31, 2016 . Based on actuarial assumptions at the
end of 2016 , we do not expect to make any contributions until 2021 . A change in assumptions could result in funding obligations that could adversely affect our liquidity and
our ability to use our resources to make acquisitions and to otherwise grow our business.
We have $699 million of actuarial losses recorded in accumulated other comprehensive income (loss) at the end of 2016 . These losses relate to changes in actuarial assumptions
that have increased the net liability for benefit plans. These losses have not been recognized in earnings. These losses will be recognized in earnings in future periods to the
extent they are not offset by future actuarial gains. Our projections of future cash requirements and expenses for these plans could be adversely affected if our retirement plans
have additional actuarial losses.
8
Our
earnings
and
cash
flow
could
be
materially
affected
by
increased
losses
of
customer
valuables.
We purchase insurance coverage for losses of customer valuables for amounts in excess of what we consider prudent deductibles and/or retentions. Insurance is provided by
different groups of underwriters at negotiated rates and terms. Coverage is available to us in major insurance markets, although premiums charged are subject to fluctuations
depending on market conditions. Our loss experience and that of other companies in our industry affects premium rates. We are not insured for losses below our coverage limits
and recognize expense up to these limits for actual losses. Our insurance policies cover losses from most causes, with the exception of war, nuclear risk and various other
exclusions typical for such policies. The availability of high-quality and reliable insurance coverage is an important factor in obtaining and retaining customers and managing
the risks of our business. If our losses increase, or if we are unable to obtain adequate insurance coverage at reasonable rates, our financial condition, results of operations and
cash flows could be materially and adversely affected.
Currency
restrictions
in
Venezuela
limit
our
ability
to
use
earnings
and
cash
flows
outside
of
Venezuela
and
may
negatively
affect
ongoing
operations
in
Venezuela.
Because most of our past requests to convert bolivars to dollars have not been approved and certain past processes to obtain dollars are no longer available, we do not expect to
be able to repatriate cash from Venezuela for the foreseeable future. Therefore, we do not expect to be able to use cash held in Venezuela for any purpose outside of that
country, including reducing our U.S. debt, funding growth or business acquisitions or returning cash to shareholders.
We believe that currency exchange restrictions in Venezuela may disrupt the operation of our business in Venezuela because we may be unable to pay for goods and services
that are required to be paid in dollars. This could reduce our ability to provide services to our customers in Venezuela, or could increase the cost of delivering the services,
which would negatively affect our earnings and cash flows, and could result in a loss of control, deconsolidation, shutdown or loss of the business in Venezuela.
We
have
risks
associated
with
confidential
information.
In the normal course of business, we collect, process and retain sensitive and confidential information, including information about individuals. Despite the security measures
we have in place, our facilities and systems, and those of third-party service providers and business partners, could be vulnerable to security breaches (including cybersecurity
breaches), acts of vandalism, computer viruses, misplaced or lost data, programming or human errors or other similar events. Any security breach involving the
misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or by third-party service providers, could damage our reputation, expose us to
the risks of litigation and liability, disrupt our business or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.
Negative
publicity
to
our
name
or
brand
could
lead
to
a
loss
of
revenues
or
profitability.
We are in the security business and our success and longevity are based to a large extent on our reputation for trust and integrity. Our reputation or brand, particularly the trust
placed in us by our customers, could be negatively impacted in the event of perceived or actual breaches in our ability to conduct our business ethically, securely and
responsibly. Any damage to our brand could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failures
of
our
IT
system
could
have
a
material
adverse
effect
on
our
business.
We are heavily dependent on our information technology ("IT") infrastructure. Significant problems with our infrastructure, such as telephone or IT system failure,
cybersecurity breaches, or failure to develop new technology platforms to support new initiatives and product and service offerings, could halt or delay our ability to service our
customers, hinder our ability to conduct and expand our business and require significant remediation costs. In addition, we continue to evaluate and implement upgrades to our
IT systems. We are aware of inherent risks associated with replacing these systems, including accurately capturing data and system disruptions, and believe we are taking
appropriate action to mitigate these risks through testing, training, and staging implementation. However, there can be no assurances that we will successfully launch these
systems as planned or that they will occur without disruptions to our operations. Any of these events could have a material adverse effect on our business, financial condition,
results of operations and cash flows.
9
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 other international operations are regulated to varying degrees by the countries in which we operate. Many countries have permit requirements for
security services and prohibit foreign companies from providing different types of security services.
Changes in laws or regulations could require a change in the way we operate, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any
applicable laws or regulations could result in substantial fines or revocation of our operating permits and licenses. If laws and regulations were to change or we failed to comply,
our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Our
inability
to
access
capital
or
significant
increases
in
our
cost
of
capital
could
adversely
affect
our
business
.
Our ability to obtain adequate and cost-effective financing depends on our credit quality as well as the liquidity of financial markets. A negative change in our ratings outlook or
any downgrade in our credit ratings by the rating agencies could adversely affect our cost and/or access to sources of liquidity and capital. Additionally, such a downgrade could
increase the costs of borrowing under available credit lines. Disruptions in the capital and credit markets could adversely affect our ability to access short-term and long-term
capital. Our access to funds under current credit facilities is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able
to meet their funding commitments if they experience shortages of capital and liquidity. Longer disruptions in the capital and credit markets as a result of uncertainty, changing
or increased regulation, reduced alternatives, or failures of significant financial institutions could adversely affect our access to capital needed for our business.
We
are
subject
to
covenants
for
our
credit
facilities,
our
unsecured
notes
and
our
unsecured
term
loan.
Our credit facilities as well as our unsecured notes and our unsecured term loan are subject to 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 total amount of indebtedness we can incur, 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 effect on our liquidity and cash
flows.
Our
effective
income
tax
rate
could
change.
We operate subsidiaries in 40 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. The recent proposals to lower the U.S. corporate
income tax rate would require us to recognize a significant income tax expense to reduce the U.S. deferred tax asset, if such a proposal is enacted into law. We are subject to the
regular examination of our income tax returns by various tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine
the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these examinations will not have a material adverse effect on our business.
We
have
certain
environmental
and
other
exposures
related
to
our
former
coal
operations.
We may incur future environmental and other liabilities in connection with our former coal operations, which could materially and adversely affect our financial condition,
results of operations and cash flows.
We
may
be
exposed
to
certain
regulatory
and
financial
risks
related
to
climate
change.
Growing concerns about climate change may result in the imposition of additional environmental regulations to which we are subject. Some form of federal regulation may be
forthcoming with respect to greenhouse gas emissions (including carbon dioxide) and/or "cap and trade" legislation. The outcome of this legislation may result in new
regulation, additional charges to fund energy efficiency activities or other regulatory actions. Compliance with these actions could result in the creation of additional costs to us,
including, among other things, increased fuel prices or additional taxes or emission allowances. We may not be able to recover the cost of compliance with new or more
stringent environmental laws and regulations from our customers, which could adversely affect our business. Furthermore, the potential effects of climate change and related
regulation on our customers are highly uncertain and may adversely affect our operations.
10
Forward-Looking
Statements
This document contains both historical and forward-looking information. Words such as “anticipates,” “assumes,” “estimates,” “expects,” “projects,” “predicts,” “intends,”
“plans,” “potential,” “believes,” “may,” “should” and similar expressions may identify forward-looking information. Forward-looking information in this document includes,
but is not limited to, statements regarding future performance of The Brink’s Company and its global operations, including: execution of our business strategy; anticipated
savings from reorganization and restructuring activities; amortization expense for finite-lived intangibles; the repatriation of cash from our Venezuelan operations; restrictions on
foreign currency convention, the anticipated financial effect of pending litigation; the realization of deferred tax assets; the reinvestment of earnings on operations outside the
United States; the ability to meet liquidity needs; expenses 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; compensation cost related to certain equity awards; expected liability for and future contributions to the UMWA plans,
liability for black lung obligations; the projected impact of future excise tax on the UMWA plans, our ability to obtain U.S. dollars to operate our business in Venezuela and the
impact of future events or actions on the carrying value of long-lived assets in Venezuela and the reclassification of accumulated other comprehensive losses related to our
Venezuela operations into earnings; the performance of counterparties to hedging agreements; the recognition of unrecognized tax positions; expected future payments under
contractual obligations, and the impact of recent accounting pronouncements. Forward-looking information in this document is subject to known and unknown risks,
uncertainties, and contingencies, which are difficult to quantify and which could cause actual results, performance or achievements to differ materially from those that are
anticipated.
These risks, uncertainties and contingencies, many of which are beyond our control, include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to improve profitability in our largest five markets;
our ability to identify and execute further cost and operational improvements and efficiencies in our core businesses;
continuing market volatility and commodity price fluctuations and their impact on the demand for our services;
our ability to maintain or improve volumes at favorable pricing levels and increase cost and productivity efficiencies, particularly in the United States and Mexico;
investments in information technology and adjacent businesses and their impact on revenues and profit growth;
our ability to develop and implement solutions for our customers and gain market acceptance of those solutions;
our ability to maintain an effective IT infrastructure and safeguard confidential information;
risks customarily associated with operating in foreign countries including changing labor and economic conditions, currency restrictions and devaluations, safety
and security issues, political instability, restrictions on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive government
actions;
the strength of the U.S. dollar relative to foreign currencies and foreign currency exchange rates;
the stability of the Venezuelan economy, changes in Venezuelan policy regarding foreign-owned businesses;
regulatory and labor issues in many of our global operations, including negotiations with organized labor and the possibility of work stoppages;
our ability to integrate successfully recently acquired companies and improve their operating profit margins;
costs related to dispositions and market exits;
our ability to identify evaluate and pursue acquisitions and other strategic opportunities;
the willingness of our customers to absorb fuel surcharges and other future price increases;
our ability to obtain necessary information technology and other services at favorable pricing levels from third party service providers;
variations in costs or expenses and performance delays of any public or private sector supplier, service provider or customer;
our ability to obtain appropriate insurance coverage, positions taken by insurers with respect to claims made and the financial condition of insurers, safety and
security performance, our loss experience, and changes in insurance costs;
security threats worldwide and losses of customer valuables;
costs associated with the purchase and implementation of cash processing and security equipment;
employee, environmental and other liabilities in connection with our former coal operations, including black lung claims incidence;
the impact of the Patient Protection and Affordable Care Act on black lung liability and the Company's ongoing operations;
changes to estimated liabilities and assets in actuarial assumptions due to payments made, investment returns, interest rates and annual actuarial revaluations, the
funding requirements, accounting treatment, investment performance and costs and expenses of our pension plans, the VEBA and other employee benefits,
mandatory or voluntary pension plan contributions;
the nature of our hedging relationships;
changes in estimates and assumptions underlying our critical accounting policies;
our ability to realize deferred tax assets;
the outcome of pending and future claims, litigation, and administrative proceedings;
public perception of the Company's business and reputation;
access to the capital and credit markets;
seasonality, pricing and other competitive industry factors; and
the promulgation and adoption of new accounting standards and interpretations, new government regulations and interpretation of existing regulations.
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.
11
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
12
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, 2016 .
Largest 5 Markets
U.S.
France
Mexico
Brazil
Canada
Global Markets
Latin America
EMEA
Asia
Payment Services
Corporate Items
Venezuela
Total
Leased
Facilities
Owned
Total
Leased
Vehicles
Owned
Total
121
83
72
66
38
108
118
166
38
6
40
856
25
33
57
3
15
27
3
—
—
—
29
146
116
129
69
53
135
121
166
38
6
69
2,076
835
91
422
493
—
589
4
100
—
—
192
1,048
4,610
138
535
2,160
836
8
1,213
739
652
8
—
1,032
7,321
2,214
1,370
2,251
1,258
501
1,213
1,328
656
108
—
1,032
11,931
As of December 31, 2016 , we had approximately 22,900 units for our CompuSafe ® service installed worldwide, of which approximately 16,300 units were located in the U.S.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 22 to the consolidated financial statements, “Other Commitments and Contingencies,” in Part II, Item 8 of this 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
13
Executive Officers of the Registrant
The following is a list as of February 23, 2017 , of the names and ages of the executive officers of The Company indicating the principal positions and offices held by
each. There are no family relationships among any of the officers named.
Name
Age
Positions and Offices Held
Held Since
Douglas A. Pertz
Ronald J. Domanico
Michael F. Beech
62 Director, President and Chief Executive Officer
58 Executive Vice President, Chief Financial Officer and Treasurer
55 Executive Vice President
McAlister C. Marshall, II
47 Senior Vice President, General Counsel and Chief Administrative Officer
Rohan Pal
Amit Zukerman
51 Senior Vice President, Chief Information Officer and Chief Digital Officer
45 Executive Vice President
Executive and other officers of the Company are elected annually and serve at the pleasure of the Board.
2016
2016
2014
2008
2016
2014
Mr. Pertz was appointed President and Chief Executive Officer of the Company in June 2016. Before joining the Company, Mr. Pertz served as president and CEO of Recall
Holdings Limited, a global provider of digital and physical information management and security services, from 2013 until 2016. Prior to joining Recall, Mr. Pertz served as a
partner with Bolder Capital, LLC (a private equity firm) from 2011 to 2013.
Mr. Domanico was appointed Executive Vice President and Chief Financial Officer of the Company in July 2016 and was appointed Treasurer in January 2017. Before joining
Brink’s, Mr. Domanico served as senior vice president, strategic initiatives and capital markets at Recall Holdings Limited, a global provider of digital and physical information
management and security services. From 2010 to 2014, he was senior vice president and CFO for HD Supply, one of the largest industrial distributors in North America.
Mr. Beech was appointed Executive Vice President of the Company in December 2014. He has oversight responsibility for the Company's Brazil and Mexico operations as well
as global safety and security. From December 2014 to July 2016, Mr. Beech had oversight responsibility for the Company's operations in the Largest 5 Markets. He served as
President, Europe, Middle East and Africa for the Company’s operating subsidiary, Brink’s, Incorporated, from 2011 to December 2014, as President, Asia Pacific from 2011 to
2012 and as Vice President, Global Security from 2009 to 2011.
Mr. Marshall was appointed Vice President and General Counsel of the Company in September 2008 and was appointed Senior Vice President in July 2016 and Chief
Administrative Officer in January 2017. He also previously held the office of Secretary from June 2012 to November 2013.
Rohan Pal was appointed Senior Vice President, Chief Information Officer and Chief Digital Officer of the Company in July 2016. Before joining Brink’s, Mr. Pal served as
senior vice president and chief information officer/chief digital officer at Recall Holdings Limited, a global provider of digital and physical information management and
security services from June 2013 to June 2016. From 2008 to 2013, he served as vice president and chief information officer for Tyco Fire Protection Products.
Mr. Zukerman was appointed as the Company’s Executive Vice President in December 2014. He has oversight responsibility for the Company's operations in the Global
Markets and its Brink's Global Services Business. He served as President, Brink’s Global Services and Asia Pacific for the Company’s operating subsidiary, Brink’s,
Incorporated, from 2012 to December 2014 and as President, Brink’s Global Services from 2008 to 2012.
14
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 20, 2017 , there were 1,464 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:
2015 Quarters
2016 Quarters
1 st
2 nd
3 rd
4 th
1 st
2 nd
3 rd
4 th
Dividends declared per common share
Stock prices:
High
Low
$
$
0.1000
0.1000
0.1000
0.1000 $
0.1000
0.1000
0.1000
0.1000
28.98
22.24
33.62
25.99
31.76
25.80
33.37 $
26.87
34.13
25.87
35.35
26.86
37.92
26.96
45.10
36.24
See Note 17 to the consolidated financial statements for a description of limitations of our ability to pay dividends in the future.
15
The following graph compares the cumulative 5-year total return provided to shareholders of The Brink’s Company’s common stock compared to the cumulative total returns of
the S&P SmallCap 600 Index and the S&P 600 Commercial & Professional Services Index. The graph tracks the performance of a $100 investment in our common stock and in
each index from December 31, 2011, through December 31, 2016. The performance of The Brink’s Company’s common stock assumes that the shareholder reinvested all
dividends received during the period.
*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends
Fiscal Year ending December 31.
Source: Zacks Investment Research, Inc.
Comparison of Five-Year Cumulative Total Return (a)
2011
2012
2013
2014
2015
2016
Years Ended December 31,
The Brink's Company
S&P SmallCap 600 Index
S&P 600 Commercial & Professional Services Index
$
100.00
100.00
100.00
107.83
116.33
126.37
130.82
164.38
186.71
94.97
173.84
184.98
113.86
170.41
187.37
164.77
215.67
232.24
(a)
For the line designated as “The Brink’s Company” the graph depicts the cumulative return on $100 invested in The Brink’s Company’s common stock at December 31, 2011. The cumulative return for each index is measured
on an annual basis for the periods from December 31, 2011, through December 31, 2016, with the value of each index set to $100 on December 31, 2011. Total return assumes reinvestment of dividends. We chose the S&P
SmallCap 600 Index and the S&P 600 Commercial & Professional Services Index as appropriate comparisons. We believe that these indices broadly measure the performance of small-cap companies in the United States market
and for a smaller subset of small-cap companies in the commercial services industry, respectively.
16
ITEM 6. SELECTED FINANCIAL DATA
Five Years in Review
(In millions, except for per share amounts)
2016
2015
2014
2013
2012
GAAP Basis
Revenues
Operating profit (loss)
Income (loss) attributable to Brink’s
Continuing operations
Discontinued operations
Net income (loss) 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
Net income (loss)
Diluted:
Continuing operations
Discontinued operations
Net income (loss)
Cash dividends
Weighted-average Shares
Basic
Diluted
$
$
$
$
$
$
$
$
3,020.6
144.2
3,061.4
56.6
3,562.3
(27.5)
3,778.6
163.2
3,577.6
162.2
36.2
(1.7)
34.5
531.0
1,994.8
247.6
337.1
(9.1)
(2.8)
(11.9)
549.0
1,946.7
358.1
317.9
(54.8)
(29.1)
(83.9)
669.5
2,192.0
373.1
434.0
66.0
(9.2)
56.8
758.7
2,497.4
329.9
693.9
102.3
(13.4)
88.9
793.8
2,553.1
334.8
501.8
131.6
112.2
139.9
101.1
161.9
136.1
165.8
172.9
148.4
170.9
0.72
(0.03)
0.69
0.72
(0.03)
0.68
0.40
(0.19)
(0.06)
(0.24)
(0.19)
(0.06)
(0.24)
0.40
(1.12)
(0.59)
(1.71)
(1.12)
(0.59)
(1.71)
0.40
1.36
(0.19)
1.17
1.35
(0.19)
1.16
0.40
50.0
50.6
49.3
49.3
49.0
49.0
48.7
49.0
2.12
(0.28)
1.84
2.11
(0.28)
1.83
0.40
48.4
48.6
(In millions, except for per share amounts)
2016
2015
2014
2013
2012
Non-GAAP Basis*
Non-GAAP revenues
Non-GAAP operating profit
Amounts attributable to Brink’s
Non-GAAP income from continuing operations
Non-GAAP diluted EPS – continuing operations
*Reconciliations to GAAP results are found beginning on page 36.
2,908.4
206.5
2,976.9
156.8
3,350.5
124.2
3,331.5
147.0
3,235.0
166.7
113.1
2.24
84.2
1.69
49.4
1.01
61.1
1.25
78.1
1.61
$
$
$
17
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, 2016
TABLE OF CONTENTS
OPERATIONS
RESULTS OF OPERATIONS
Analysis of Results: 2016 versus 2015
Analysis of Results: 2015 versus 2014
Income and Expense Not Allocated to Segments
Other Operating Income and Expense
Nonoperating Income and Expense
Income Taxes
Noncontrolling Interests
Loss from Discontinued Operations
Non-GAAP Results Reconciled to GAAP
Foreign Operations
LIQUIDITY AND CAPITAL RESOURCES
Overview
Operating Activities
Investing Activities
Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Capitalization
Off Balance Sheet Arrangements
Contractual Obligations
Contingent Matters
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Deferred Tax Asset Valuation Allowance
Goodwill, Other Intangible Assets and Property and Equipment Valuations
Retirement and Postemployment Benefit Obligations
Foreign Currency Translation
RECENT ACCOUNTING PRONOUCEMENTS
18
Page
19
20
24
28
31
32
33
34
35
36
38
39
39
40
42
42
43
46
47
49
50
51
52
56
57
OPERATIONS
The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world. These services include:
•
•
•
•
•
•
•
Cash-in-Transit (“CIT”) Services – armored vehicle transportation of valuables
ATM Services – replenishing and maintaining customers’ automated teller machines; providing network infrastructure services
Global Services – secure international transportation of valuables
Cash Management Services
◦
◦
◦
◦
Currency and coin counting and sorting; deposit preparation and reconciliations; other cash management services
Safe and safe control device installation and servicing (including our patented CompuSafe ® service)
Check and cash processing services for banking customers (“Virtual Vault Services”)
Check imaging services for banking customers
Payment Services – bill payment and processing services on behalf of utility companies and other billers at any of our Brink’s or Brink’s – operated payment
locations in Latin America and Brink’s Money™ general purpose reloadable prepaid cards and payroll cards in the U.S.
Commercial Security Systems Services – design and installation of security systems in designated markets in Europe
Guarding Services – protection of airports, offices, and certain other locations in Europe and Brazil with or without electronic surveillance, access control, fire
prevention and highly trained patrolling personnel
We have nine operating segments:
•
•
•
Each of the five countries within Largest 5 Markets (U.S., France, Mexico, Brazil and Canada)
Each of the three regions within Global Markets (Latin America, EMEA and Asia)
Payment Services
We believe that Brink’s has significant competitive advantages including:
•
•
•
•
•
•
•
•
•
track record of refining our business portfolio to deliver shareholder value
medium-term growth drivers from high-value services
global footprint in a world with increasing security needs
brand name recognition
reputation for a high level of service and security
risk management and logistics expertise
value-based solutions expertise
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. Our marketing and sales efforts are enhanced by the
“Brink’s” brand, so we seek to protect and build its value. Because our services focus on handling, transporting, protecting and managing valuables, we strive to understand and
manage risk.
In order to earn an adequate return on capital, we focus on the effective and efficient use of resources in addition to our pricing discipline. We attempt to maximize the amount
of business that flows through our branches, vehicles and systems in order to obtain the lowest costs possible without compromising safety, security or service.
Operating results may vary from period to period. Because revenues are generated from charges per service performed or based on the value of goods transported, they can be
affected by both the level of economic activity and the volume of business for specific customers. We also periodically incur costs to change the scale of our operations when
volumes increase or decrease. Incremental costs incurred usually relate to increasing or decreasing the number of employees and increasing or decreasing branches or
administrative facilities. In addition, security costs can vary depending on performance, the cost of insurance coverage, and changes in crime rates (i.e., attacks and robberies).
Brink’s revenues and related operating profit are generally higher in the second half of the year, particularly in the fourth quarter, due to generally increased economic activity
associated with the holiday season.
19
RESULTS OF OPERATIONS
Analysis of Results: 2016 versus 2015
Consolidated Results
GAAP
and
Non-GAAP
Financial
Measures
We provide an analysis of our operations below on both a generally accepted accounting principles (“GAAP”) and non-GAAP
basis. The purpose of the non-GAAP information is to report our operating profit, income from continuing operations and earnings per share without certain income and
expense items that do not reflect the ordinary earnings of our operations and to reflect a constant tax rate for quarterly results equal to the full-year non-GAAP tax rate. The non-
GAAP financial measures are intended to provide information to assist comparability and estimates of future performance. The non-GAAP adjustments used to reconcile our
GAAP results are described in detail on page 36.
Definition
of
Organic
Growth
Organic growth represents the change in revenues or operating profit between the current and prior period, excluding the effect of: acquisitions
and dispositions, changes in currency exchange rates (as described on page 22) and the accounting effects of reporting Venezuela under highly inflationary accounting.
Years Ended December 31,
(In millions, except for per share amounts)
GAAP
Revenues
Cost of revenues
Selling, general and administrative expenses
Operating profit
Income (loss) from continuing operations (a)
Diluted EPS from continuing operations (a)
Non-GAAP (b)
Non-GAAP revenues
Non-GAAP operating profit
Non-GAAP income from continuing operations (a)
Non-GAAP diluted EPS from continuing operations (a)
(a)
(b)
Amounts reported in this table are attributable to the shareholders of Brink’s and exclude earnings related to noncontrolling interests.
Non-GAAP results are reconciled to the applicable GAAP results on pages 36–37.
2016
2015
% Change
$
$
$
$
3,020.6
2,424.8
431.5
144.2
36.2
0.72
2,908.4
206.5
113.1
2.24
3,061.4
2,471.6
463.8
56.6
(9.1)
(0.19)
2,976.9
156.8
84.2
1.69
(1)
(2)
(7)
fav
fav
fav
(2)
32
34
33
GAAP Basis
Analysis of Consolidated Results: 2016 versus 2015
Consolidated
Revenues
Revenues decreased $40.8 million or 1% due to unfavorable changes in currency exchange rates ($399.6 million), the impact of dispositions ($34.3
million), and an organic decrease in EMEA ($9.4 million) and France ($5.6 million), partially offset by organic growth in Venezuela ($226.4 million), Latin America ($92.1
million), Brazil ($28.9 million), the U.S. ($22.2 million) and Mexico ($15.6 million). A significant portion of the reduction in revenues from currency exchange rates relates to a
devaluation of the Venezuelan bolivar after February 2016. The U.S. dollar also strengthened against the Mexican peso, Brazilian real, and most currencies in Latin
America. Revenues increased 13% on an organic basis due mainly to higher average selling prices in Venezuela and Latin America (including the effects of inflation). See
above for our definition of “organic.”
Consolidated
Costs
and
Expenses
Cost of revenues decreased 2% to $2,424.8 million as changes in currency rates more than offset higher labor costs from inflation-based
increases. Selling, general and administrative costs decreased 7% to $431.5 million due primarily to changes in currency exchange rates.
Consolidated
Operating
Profit
Operating profit increased $87.6 million due mainly to:
•
•
•
a $35.3 million charge in 2015 related to impairment of fixed assets in Venezuela, which did not reoccur in 2016,
an organic increase in Venezuela ($82.5 million), Latin America ($45.1 million), Payment Services ($9.1 million), and Brazil ($6.4 million), and
lower corporate expenses ($13.4 million on an organic basis),
partially offset by:
•
•
•
•
unfavorable changes in currency exchange rates ($73.3 million), including the effects of Venezuela devaluations,
higher reorganization and restructuring costs in 2016 ($15.0 million),
negative impact of exiting operations in Ireland ($10.5 million), and
organic decreases in the U.S. ($8.8 million).
20
Consolidated
Income
(Loss)
from
Continuing
Operations
Attributable
to
Brink’s
and
Related
Per
Share
Amounts
Income from continuing operations attributable to Brink’s
shareholders in 2016 improved $45.3 million from the prior year primarily due to the operating profit increase mentioned above, partially offset by higher income attributable to
noncontrolling interests ($26.6 million) and higher income tax expense ($12.0 million). Earnings per share from continuing operations was $0.72, up from negative $0.19 in
2015.
Non-GAAP Basis
Analysis of Consolidated Results: 2016 versus 2015
Non-GAAP
Consolidated
Revenues
Non-GAAP revenues decreased $68.5 million or 2% due to unfavorable changes in currency exchange rates ($198.1 million), the impact
of dispositions ($37.1 million), and an organic decrease in EMEA ($9.4 million) and France ($5.6 million), partially offset by organic growth in Latin America ($92.1 million),
Brazil ($28.9 million), the U.S. ($22.2 million) and Mexico ($15.6 million). The reduction in non-GAAP revenues from currency exchange rates relates to a strengthening of the
U.S. dollar against the Mexican peso, Brazilian real, and most currencies in Latin America. Non-GAAP revenues increased 6% on an organic basis due mainly to higher average
selling prices in Latin America (including the effects of inflation). See page 20 for our definition of “organic.”
Non-GAAP
Consolidated
Operating
Profit
Non-GAAP operating profit increased $49.7 million in 2016 due mainly to:
•
•
an organic increase in Latin America ($45.1 million), Payment Services ($9.1 million), and Brazil ($6.4 million), and
lower corporate expenses ($13.4 million on an organic basis),
partially offset by:
•
•
unfavorable changes in currency exchange rates ($22.4 million), and
organic decreases in the U.S. ($8.8 million).
Non-GAAP
Consolidated
Income
from
Continuing
Operations
Attributable
to
Brink’s
and
Related
Per
Share
Amounts
Non-GAAP income from continuing operations
attributable to Brink’s shareholders in 2016 increased $28.9 million to $113.1 million primarily due to the non-GAAP operating profit increase mentioned above, partially offset
by the corresponding higher non-GAAP income tax expense ($16.8 million). Non-GAAP earnings per share from continuing operations was $2.24, up from $1.69 in 2015.
21
Revenues and Operating Profit by Segment: 2016 versus 2015
2015
Organic
Change
Acquisitions /
% Change
Dispositions (a)
Currency (b)
2016
Total
Organic
(In millions)
Revenues:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Revenues - non-GAAP
Other items not allocated to segments (d)
Revenues - GAAP
Operating profit:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Corporate expenses (c)
Operating profit - non-GAAP
$
$
$
730.4
431.5
333.0
270.4
153.7
1,919.0
369.9
444.7
157.4
972.0
85.9
22.2
(5.6)
15.6
28.9
2.1
63.2
92.1
(9.4)
11.6
94.3
9.2
2,976.9
166.7
84.5
3,061.4 $
226.4
393.1
15.1
34.7
24.2
23.8
10.7
108.5
76.3
35.7
28.7
140.7
(7.2)
(85.2)
156.8
(8.8)
2.1
(0.1)
6.4
(2.2)
(2.6)
45.1
1.1
1.8
48.0
9.1
13.4
67.9
Other items not allocated to segments (d)
Operating profit (loss) - GAAP
$
(100.2)
56.6
96.6
164.5
Amounts may not add due to rounding.
—
—
—
—
—
—
—
(37.1)
—
(37.1)
—
(37.1)
2.8
(34.3)
—
—
—
—
—
—
—
4.2
—
4.2
—
—
4.2
(7.8)
(3.6)
—
(1.4)
(53.3)
(13.6)
(5.6)
(73.9)
(106.9)
(10.8)
(1.5)
(119.2)
(5.0)
752.6
424.5
295.3
285.7
150.2
1,908.3
355.1
387.4
167.5
910.0
90.1
(198.1)
2,908.4
(201.5)
(399.6)
112.2
3,020.6
—
—
(3.7)
(0.1)
(0.2)
(4.0)
(31.5)
(0.9)
—
(32.4)
0.4
13.6
(22.4)
(50.9)
(73.3)
6.3
36.8
20.4
30.1
8.3
101.9
89.9
40.1
30.5
160.5
2.3
(58.2)
206.5
(62.3)
144.2
3
(2)
(11)
6
(2)
(1)
(4)
(13)
6
(6)
5
(2)
33
(1)
(58)
6
(16)
26
(22)
(6)
18
12
6
14
fav
(32)
32
(38)
fav
3
(1)
5
11
1
3
25
(2)
7
10
11
6
fav
13
(58)
6
—
27
(21)
(2)
59
3
6
34
fav
(16)
43
(96)
fav
(a)
(b)
(c)
(d)
Includes operating results and gains/losses on acquisitions and dispositions of assets and of businesses. The 2014 divestiture of an equity interest in a business in Peru is included in “Other items not allocated to segments”.
The amounts in the “Currency” column consist of the effects of Venezuela devaluations and the sum of monthly currency changes. Monthly currency changes represent the accumulation throughout the year of the impact on
current period results of changes in foreign currency rates from the prior year period.
Corporate expenses are not allocated to segment results. Corporate expenses include salaries and other costs to manage the global business and to perform activities required by public companies.
See pages 28–30 for more information.
22
Analysis of Segment Results: 2016 versus 2015
Largest 5 Markets
U.S.
Revenues increased 3% ($22.2 million) due to organic revenue growth as a result of volume increases, driven by the increased sales of cash recyclers to a large
retailer. Operating profit decreased $8.8 million to $6.3 million due to higher fleet and insurance costs.
France
Revenues decreased 2% ($7.0 million) due to volume and pricing pressure, the loss of an airport guarding contract, and unfavorable currency ($1.4 million). Operating
profit increased 6% ($2.1 million) due to growth in cash management and a benefit recognized related to social charges.
Mexico
Revenues decreased 11% ($37.7 million) due to unfavorable currency impact ($53.3 million), partially offset by a 5% organic increase ($15.6 million) from price and
volume increases. Operating profit decreased ($3.8 million) due primarily to unfavorable currency ($3.7 million).
Brazil
Revenues increased 6% ($15.3 million) due to 11% organic growth ($28.9 million) driven by price increases, partially offset by the negative impact of currency
exchange rates ($13.6 million). Operating profit increased 26% ($6.3 million), driven by organic growth ($6.4 million) on a favorable tax ruling and productivity improvements.
Canada
Revenues decreased 2% ($3.5 million) primarily due to the negative impact of currency exchange rates ($5.6 million). Operating profit decreased 22% ($2.4 million)
driven by inflationary cost increases and low organic revenue growth.
Global Markets
Latin
America
Revenues decreased 4% ($14.8 million) as the negative impact of currency exchange rates ($106.9 million) was partially offset by organic growth of 25%
($92.1 million) driven by inflation-based price increases in Argentina. Operating profit increased 18% ($13.6 million) due to higher organic results in Argentina and Chile,
partially offset by unfavorable currency impact ($31.5 million).
EMEA
Revenues decreased 13% ($57.3 million) due to the impact of dispositions ($37.1 million), unfavorable currency ($10.8 million), and organic revenue decreases
throughout the region ($9.4 million) on lower BGS volumes. Operating profit increased 12% ($4.4 million) due to the favorable impact of dispositions ($4.2 million) and slightly
higher organic results ($1.1 million), partially offset by unfavorable currency ($0.9 million).
Asia
Revenues increased 6% ($10.1 million) due to mainly to organic growth in Hong Kong and Singapore. Operating profit increased 6% ($1.8 million) primarily due to
revenue growth.
Payment
Services
Revenues increased 5% ($4.2 million) as negative currency ($5.0 million) was more than offset by 11% organic growth ($9.2 million). Operating profit
increased $9.5 million, driven by revenue growth and lower marketing expenditures related to increasing cardholders in the U.S. Payments business.
Payment Services
23
Analysis of Results: 2015 versus 2014
Consolidated Results
Years Ended December 31,
(In millions, except for per share amounts)
GAAP
Revenues
Cost of revenues
Selling, general and administrative expenses
Operating profit (loss)
Income (loss) from continuing operations (a)
Diluted EPS from continuing operations (a)
Non-GAAP (b)
Non-GAAP revenues
Non-GAAP operating profit
Non-GAAP income from continuing operations (a)
Non-GAAP diluted EPS from continuing operations (a)
(a)
(b)
Amounts reported in this table are attributable to the shareholders of Brink’s and exclude earnings related to noncontrolling interests.
Non-GAAP results are reconciled to the applicable GAAP results on pages 36–37.
2015
2014
% Change
$
$
$
$
3,061.4
2,471.6
463.8
56.6
(9.1)
(0.19)
2,976.9
156.8
84.2
1.69
3,562.3
2,948.2
560.6
(27.5)
(54.8)
(1.12)
3,350.5
124.2
49.4
1.01
(14)
(16)
(17)
fav
(83)
(83)
(11)
26
70
67
GAAP Basis
Analysis of Consolidated Results: 2015 versus 2014
Consolidated
Revenues
Revenues decreased $500.9 million or 14 % due to unfavorable changes in currency exchange rates ($ 891.3 million ) and an organic decrease in
EMEA ($ 38.0 million ), partially offset by organic growth in Venezuela ($296.8 million), Latin America ($58.4 million), Payment Services ($ 18.9 million ), Asia ($ 18.3
million ), Brazil ($ 17.7 million ) and Mexico ($ 8.5 million ). A significant portion of the reduction in revenues from currency exchange rates relates to a devaluation of the
Venezuelan bolivar in February 2015. The U.S. dollar also strengthened against the euro, Brazilian real, Mexican peso and most currencies in Latin America. Revenues
increased 11% on an organic basis due mainly to higher average selling prices in Venezuela and Latin America (including the effects of inflation, which results in pricing
adjustments in certain countries). See page 20 for our definition of “organic.”
Consolidated
Costs
and
Expenses
Cost of revenues decreased 16% to $2,471.6 million as higher labor costs from inflation-based wage increases were more than offset by
changes in currency rates, including devaluation in Venezuela, lower U.S. retirement costs ($31.2 million) and cost cutting initiatives. Selling, general and administrative costs
decreased 17% to $463.8 million due primarily to changes in currency exchange rates, including devaluation in Venezuela, lower U.S. retirement costs ($15.3 million) and cost
cutting initiatives.
Consolidated
Operating
Profit
(Loss)
Operating profit improved from a loss of $27.5 million to a profit of $56.6 million due mainly to:
•
•
•
•
lower remeasurement loss of net monetary assets ($103.5 million) as a result of the devaluation of the Venezuelan currency (a $121.6 million charge in 2014 compared
to an $ 18.1 million charge in 2015),
lower retirement benefit cost ($46.5 million),
organic profit improvement in Latin America ($ 38.5 million ), Venezuela ($36.0 million), Mexico ($ 19.1 million ), and Asia ( $6.0 million ), and
lower corporate expenses ($ 39.4 million ) on an organic basis due to lower security costs and other cost reductions.
The positive impact of these factors was partially offset by:
•
•
•
•
unfavorable currency impact due to changes in exchange rates ($100.4 million), including devaluation in Venezuela,
a $44.3 million gain on sale of our minority interest in a CIT business in Peru in 2014,
impairment charges in Venezuela ($35.3 million), and
organic profit decreases in EMEA ($ 13.6 million ) and the U.S. ($ 7.7 million ).
Consolidated
Income
(Loss)
from
Continuing
Operations
Attributable
to
Brink’s
and
Related
Per
Share
Amounts
Loss from continuing operations attributable to Brink’s
shareholders in 2015 improved $45.7 million to a loss of $9.1 million primarily due to the operating profit increase mentioned above and lower interest expense ($4.5 million),
partially offset by higher income tax expense ($29.8 million) and a lower loss attributable to noncontrolling interests ($ 14.6 million ). Earnings per share from continuing
operations was negative $0.19 , an improvement from negative $1.12 in 2014 .
24
Non-GAAP Basis
Analysis of Consolidated Results: 2015 versus 2014
Non-GAAP
Consolidated
Revenues
Non-GAAP revenues decreased $373.6 million or 11 % due to unfavorable changes in currency exchange rates ($ 467.2 million ) and an
organic decrease in EMEA ($ 38.0 million ), partially offset by organic growth in Latin America ($ 58.4 million ), Payment Services ($ 18.9 million ), Asia ($ 18.3 million ),
Brazil ($ 17.7 million ) and Mexico ($ 8.5 million ). The reduction in non-GAAP revenues from currency exchange rates relates to a strengthening of the U.S. dollar against the
euro, Brazilian real and Mexican peso and most currencies in Latin America. Non-GAAP revenues increased 3% on an organic basis due mainly to higher average selling prices
in Latin America (including the effects of inflation and related pricing adjustments). See page 20 for our definition of “organic.”
Non-GAAP
Consolidated
Operating
Profit
Non-GAAP operating profit increased $32.6 million in 2015 due mainly to:
•
•
organic profit improvement in Latin America ($ 38.5 million ), Mexico ($ 19.1 million ) and Asia ( $6.0 million ), and
lower corporate expenses ($ 39.4 million ) on an organic basis due to lower security costs and other cost reductions.
The positive impact of these factors were partially offset by:
•
•
the negative impact of changes in currency exchange rates ($ 50.4 million ) and
organic profit decreases in EMEA ($ 13.6 million ) and the U.S. ($ 7.7 million ).
Non-GAAP
Consolidated
Income
from
Continuing
Operations
Attributable
to
Brink’s
and
Related
Per
Share
Amounts
Non-GAAP income from continuing operations
attributable to Brink’s shareholders in 2015 increased $ 34.8 million primarily due to the non-GAAP operating profit increase mentioned above and lower interest expense ($4.4
million), partially offset by the corresponding higher non-GAAP tax expense ($ 5.4 million ). Non-GAAP earnings per share from continuing operations was $1.69 , an
improvement from $1.01 in 2014 .
25
Revenues and Operating Profit by Segment: 2015 versus 2014
$
$
$
(In millions)
Revenues:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Revenues - non-GAAP
Other items not allocated to segments (d)
Revenues - GAAP
Operating profit:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Corporate expenses (c)
Operating profit - non-GAAP
Other items not allocated to segments (d)
Operating profit (loss) - GAAP
$
Amounts may not add due to rounding.
See page 22 for footnotes.
2014
Organic
Change
Acquisitions /
% Change
Dispositions (a)
Currency (b)
2015
Total
Organic
—
—
—
—
—
—
—
—
9.1
9.1
—
9.1
—
9.1
—
—
—
—
—
—
—
—
1.0
1.0
—
—
1.0
(55.4)
(54.4)
—
(85.6)
(63.7)
(111.4)
(24.4)
(285.1)
(69.1)
(73.6)
(9.8)
(152.5)
(29.6)
(467.2)
(424.1)
(891.3)
—
(6.6)
(4.5)
(10.5)
(1.8)
(23.4)
(12.6)
(3.2)
(1.4)
(17.2)
(0.9)
(8.9)
(50.4)
53.5
3.1
730.4
431.5
333.0
270.4
153.7
1,919.0
369.9
444.7
157.4
972.0
85.9
2,976.9
84.5
3,061.4
15.1
34.7
24.2
23.8
10.7
108.5
76.3
35.7
28.7
140.7
(7.2)
(85.2)
156.8
(100.2)
56.6
—
(17)
(14)
(26)
(14)
(12)
(3)
(20)
13
(10)
(11)
(11)
(60)
(14)
(34)
(12)
fav
(30)
(16)
(9)
51
(32)
24
12
47
(26)
26
(34)
fav
—
—
2
5
(1)
1
15
(7)
13
4
20
3
fav
11
(34)
5
fav
—
(2)
11
76
(26)
26
25
29
(34)
66
(35)
fav
727.8
517.4
388.2
364.1
179.7
2,177.2
380.6
556.3
139.8
1,076.7
96.6
3,350.5
2.6
(0.3)
8.5
17.7
(1.6)
26.9
58.4
(38.0)
18.3
38.7
18.9
84.5
211.8
3,562.3 $
296.8
381.3
22.8
39.4
9.6
34.2
12.8
118.8
50.4
52.5
23.1
126.0
(4.9)
(115.7)
124.2
(151.7)
(27.5)
(7.7)
1.9
19.1
0.1
(0.3)
13.1
38.5
(13.6)
6.0
30.9
(1.4)
39.4
82.0
53.4
135.4
26
Analysis of Segment Results: 2015 versus 2014
Largest 5 Markets
U.S.
Revenues increased ( $2.6 million ) due to organic revenue growth as a result of volume increases. Operating profit decreased 34% ( $7.7 million ) due to higher labor and
security costs associated with challenges managing volume increases while reducing headcount, partially offset by the impact of cost cutting and productivity initiatives and
lower health care costs.
France
Revenues decreased 17% ( $85.9 million ) due to unfavorable currency impact ( $85.6 million ). Revenues were flat organically due to volume and pricing
pressure. Operating profit decreased 12% ( $4.7 million ) due to unfavorable currency ( $6.6 million ), partially offset by the impact of cost cutting initiatives and the inclusion in
last year's results of several large unfavorable settlements that did not repeat.
Mexico
Revenues decreased 14% ( $55.2 million ) due to unfavorable currency impact ( $63.7 million ), partially offset by 2% organic growth ($8.5 million) from higher
volumes. Operating profit increased significantly ( $14.6 million ) due to a change in employee benefit structure, lower security losses and the impact of cost cutting and
productivity initiatives.
Brazil
Revenues decreased 26% ( $93.7 million ) primarily due to the negative impact of currency exchange rates ( $111.4 million ), partially offset by 5% organic growth (
$17.7 million ) from price increases. Operating profit decreased 30% ( $10.4 million ) driven by unfavorable currency ( $10.5 million ) and flat profits on an organic basis,
resulting from low volume growth, slower price growth and higher costs. partially offset by the positive impact of cost cutting initiatives.
Canada
Revenues decreased 14% ( $26.0 million ) primarily due to the negative impact of currency exchange rates ( $24.4 million ). Operating profit decreased 16% ( $2.1
million ) driven by unfavorable currency impact ( $1.8 million ) and higher pension costs from a lower discount rate, partially offset by the positive impact of cost cutting
initiatives.
Global Markets
Latin
America
Revenues decreased 3% ( $10.7 million ) as the negative impact of currency exchange rates ( $69.1 million ) was offset by organic growth of 15% ( $58.4
million ) driven by inflation-based revenue increases in Argentina. Operating profit increased 51% ( $25.9 million ) driven by higher organic results in Argentina and Chile and
the positive impact of cost cutting initiatives throughout the region, partially offset by lower organic results in Colombia and unfavorable currency impact ( $12.6 million ).
Argentina accounted for over half of Latin America’s profit in 2015 .
EMEA
Revenues decreased 20% ( $111.6 million ) primarily due to unfavorable currency ( $73.6 million ). Revenue decreased 7% ( $38.0 million ) on an organic basis as
lower revenue in Germany, Greece and Ireland was partially offset by growth in Israel, Turkey, Luxembourg and Switzerland. Operating profit decreased 32% ( $16.8 million )
due to lower profits in Ireland and Germany, as well as unfavorable currency ( $3.2 million ), partially offset by the positive impact of cost cutting initiatives.
Asia
Revenues increased 13% ( $17.6 million ) due to organic growth across the region. Operating profit increased 24% ( $5.6 million ) primarily due to the revenue growth.
Payment
Services
Revenues decreased 11% ( $10.7 million ) as negative currency ( $29.6 million ) was partially offset by 20% organic growth ( $18.9 million ). Operating
profit decreased $2.3 million , driven by unfavorable currency ( $0.9 million ) and marketing expenditures to increase cardholders in the U.S. Payments business.
Payment Services
27
Income and Expense Not Allocated to Segments
Corporate Expenses
Corporate expenses include former non-segment and regional management costs, currency transaction gains and losses, and costs related to global initiatives.
(In millions)
2016
2015
2014
2016
2015
Years Ended December 31,
% change
General, administrative and other expenses
Foreign currency transaction gains (losses)
Reconciliation of segment policies to GAAP
Corporate items
$
$
(59.8)
3.8
(2.2)
(58.2)
(81.0)
(8.8)
4.6
(85.2)
(110.8)
(2.6)
(2.3)
(115.7)
(26)
fav
unfav
(32)
(27)
unfav
fav
(26)
Corporate expenses in 2016 were $27.0 million lower than the prior year period due to lower compensation-related expenses, along with the recognition of foreign currency
transaction gains in the current year period compared to foreign currency transaction losses in the prior year period.
Corporate expenses in 2015 were $30.5 million lower than the prior year period due to cost reductions from reorganization and restructuring and lower security losses.
Other Items Not Allocated to Segments
(In millions)
Revenues:
Venezuela operations
Acquisitions and dispositions
Revenues
Operating profit:
Venezuela operations
Reorganization and Restructuring
Retirement plans
Acquisitions and dispositions
Share-based compensation adj.
Operating profit
Years Ended December 31,
% change
2016
2015
2014
2016
2015
$
$
$
$
109.4
2.8
112.2
15.8
(30.3)
(31.5)
(16.3)
—
(62.3)
84.5
—
84.5
(47.7)
(15.3)
(31.2)
(6.0)
—
211.8
—
211.8
(97.9)
(21.8)
(79.0)
49.4
(2.4)
(100.2)
(151.7)
29
fav
33
fav
98
1
unfav
—
(38)
(60)
—
(60)
(51)
(30)
(61)
unfav
fav
(34)
Venezuela operations We have excluded from our segment results all of our Venezuela operating results, including remeasurement losses on net monetary assets related to
currency devaluations ($4.8 million in 2016, $18.1 million in 2015 and $121.6 million in 2014) and charges related to the impairment of property and equipment ($35.3 million
in 2015), due to management’s inability to allocate, generate or redeploy resources in-country or globally. In light of these unique circumstances, our operations in Venezuela
are largely independent of the rest of our global operations. As a result, the Chief Executive Officer, the Company's Chief Operating Decision maker ("CODM"), assesses
segment performance and makes resource decisions by segment excluding Venezuela operating results. Additionally, management believes excluding Venezuela from segment
results makes it possible to more effectively evaluate the company’s performance between periods.
Factors considered by management in excluding Venezuela results include:
•
•
•
•
•
Continued inability to repatriate cash to redeploy to other operations or dividend to shareholders
Highly inflationary environment
Fixed exchange rate policy
Continued currency devaluations and
Difficulty raising prices and controlling costs
28
Reorganization and Restructuring
2016 Restructuring
In the fourth quarter of 2016, management implemented restructuring actions across our global business operations and our corporate functions. As a result of these actions, we
recognized asset-related adjustments of $16.3 million , severance costs of $7.2 million , lease restructuring charges of $0.7 million , partially offset by a $6.1 million benefit
related to the termination of a benefit program. Severance actions are expected to reduce our global workforce by 700 to 800 positions. We expect that the 2016 restructuring
will result in $8 to $12 million in 2017 cost savings.
Executive Leadership and Board of Directors
In 2015, we recognized $1.8 million in charges related to Executive Leadership and Board of Directors restructuring actions, which were announced in January 2016. We
recognized $4.3 million in charges in 2016 related to the Executive Leadership and Board of Directors restructuring actions.
2015 Restructuring
Brink's initiated an additional restructuring of its business in the third quarter of 2015. We recognized $11.6 million in 2015 costs related to employee severance, contract
terminations, and lease terminations associated with the 2015 restructuring, which reduced the global workforce by approximately 1,100 positions and resulted in approximately
$20 million in 2016 cost savings. We recognized charges of $6.5 million in 2016 related to this restructuring.
2014 Restructuring
Brink’s reorganized and restructured its business in December 2014, eliminating the management roles and structures in its former Latin America and EMEA regions and
implementing a plan to reduce the cost structure of various country operations by eliminating approximately 1,700 positions across its global workforce. Severance costs of
$21.8 million associated with these actions were recognized in 2014. An additional $1.9 million in costs were recognized in 2015 related to the 2014 restructuring. The
restructuring saved annual direct costs of approximately $50 million in 2015 compared to 2014, excluding charges for severance, lease termination and accelerated depreciation.
Due to the unique circumstances around these charges, they have not been allocated to segment results and are excluded from non-GAAP results. Charges related to the
employees, assets, leases and contracts impacted by these restructuring actions were excluded from the segments and corporate expenses as shown in the table below.
(In millions)
Reportable Segments:
U.S.
France
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Total reportable segments
Corporate items
Total
Years Ended December 31,
% change
2016
2015
2014
2016
2015
$
$
(4.6)
(3.8)
(1.1)
(1.4)
(10.9)
(2.9)
(2.3)
(7.1)
(12.3)
(0.6)
(23.8)
(6.5)
(30.3)
(0.9)
(1.4)
(0.8)
(0.8)
(3.9)
(0.4)
(3.1)
(2.2)
(5.7)
—
(9.6)
(5.7)
(15.3)
(2.2)
(1.5)
(1.7)
(1.7)
(7.1)
(10.5)
(1.7)
—
(12.2)
—
(19.3)
(2.5)
(21.8)
unfav
unfav
38
75
unfav
unfav
(26)
unfav
unfav
unfav
unfav
14
98
(59)
(7)
(53)
(53)
(45)
(96)
82
unfav
(53)
—
(50)
unfav
(30)
Retirement plans
U.S. Plans
Because our U.S. retirement plans are frozen, costs related to these plans have not been allocated to segment results. Brink’s primary U.S. pension plan settled a portion of its
obligation in the fourth quarter of 2014 under a lump sum buy-out offer. Approximately 4,300 terminated participants were paid about $150 million of plan assets under this
offer in lieu of receiving their pension benefit. A $56 million settlement loss was recognized as a result of the settlement.
Non-U.S. Plans
We have operations outside of the U.S. with employee benefits that are accounted for as retirement benefits under Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") Topic 715, Compensation — Retirement Benefits . Whenever settlement charges related to these retirement benefits occur, they are not allocated
to segment results. We recognized settlement charges in Mexico ( $2.2 million in 2016, $4.6 million in 2015 and $5.9 million in 2014) and Switzerland ( $0.3 million in 2016).
29
Acquisitions and dispositions Certain acquisition and disposition items that are not considered part of the ongoing activities of the business and are special in nature are
consistently excluded from non-GAAP results. These items are described below:
2016 Acquisitions and Dispositions
•
•
Due to management's decision in the first quarter of 2016 to exit the Republic of Ireland, the prospective impacts of shutting down this operation are included in
items not allocated to segments and are excluded from the operating segments effective March 1, 2016. This activity is also excluded from the consolidated non-
GAAP results. Beginning May 1, 2016, due to management's decision to also exit Northern Ireland, the results of shutting down these operations are treated
similarly to the Republic of Ireland. 2015 revenues from both Ireland operations were approximately $20 million . Charges included in our GAAP results include
$4.9 million in severance costs, $1.8 million in property impairment charges, lease restructuring charges of $0.5 million and an additional $7.0 million in operating
and other exit costs. These costs have been excluded from our segment and our consolidated non-GAAP results. International shipments to and from Ireland will
continue to be provided through BGS.
Brink's recognized a $2.0 million loss related to the sale of corporate assets in the second quarter of 2016.
2015 Acquisitions and Dispositions
•
These items related primarily to Brink's sale of its 70% interest in a cash management business in Russia in the fourth quarter of 2015 from which we recognized a
$5.9 million loss on the sale.
2014 Acquisitions and Dispositions
These items related primarily to:
•
•
Brink’s sold an equity investment in a CIT business in Peru and recognized a $44.3 million gain. Other divestiture gains were $0.6 million .
A favorable adjustment of $0.7 million to the 2010 business acquisition gain for Mexico.
Share-based compensation adjustment Accounting adjustment related to share-based compensation of $2.4 million in 2014 was not allocated to segment results. The
accounting adjustments revised the accounting for certain share-based awards from fixed to variable fair value accounting. As of July 11, 2014, all outstanding equity awards had
met the conditions for a grant date as defined in ASC Topic 718 and have since been accounted for as fixed share-based compensation expense.
2016 versus 2015
The impact of other items not allocated to segments on operating profit was a smaller loss ( $62.3 million in 2016 versus $100.2 million in the prior year period). The reduction
was primarily due to the $35.3 million of Venezuela impairment charges recognized in the prior year period as well as lower losses related to currency devaluation in Venezuela
in the current year period. The Venezuela-related items were partially offset by charges related to the shutdown of operations in Ireland, a loss on the sale of corporate assets and
higher reorganization and restructuring costs in 2016.
2015 versus 2014
Other items not allocated to segments was a lower expense in 2015 versus the prior year period primarily due to lower devaluation charges in Venezuela, a decrease in U.S.
retirement plans expense and lower restructuring charges, partially offset by the $44.3 million gain on the 2014 sale of our former equity method investment in Peru in 2014, the
2015 Venezuela impairment charges of $35.3 million and lower profits from Venezuela operations.
30
Other Operating Income and Expense
Amounts below represent consolidated other operating income and expense.
(In millions)
2016
2015
2014
2016
2015
Years Ended December 31,
% change
Foreign currency items:
Transaction gains (losses)
Foreign currency derivative instrument gains (losses)
Gains (losses) on sale of property and equity investment
Argentina conversion losses
Impairment losses
Share in earnings (losses) of equity affiliates
Royalty income
Gains (losses) on business acquisitions and dispositions
Other
$
1.4
(2.4)
(1.3)
(0.1)
(20.6)
(1.5)
2.6
0.1
1.7
Other operating income (expense)
$
(20.1)
(26.8)
2.9
0.9
(7.1)
(37.2)
0.5
2.1
(6.3)
1.6
(69.4)
(127.2)
1.4
44.9
(3.6)
(3.3)
4.3
1.5
—
1.0
(81.0)
fav
unfav
unfav
(99)
(45)
unfav
24
fav
6
(71)
(79)
fav
(98)
97
unfav
(88)
40
unfav
60
(14)
2016 versus 2015
Other operating expense decreased in 2016 primarily due to lower losses from foreign currency items, property impairments, Argentina currency conversions and business
dispositions. The reduction in foreign currency transaction losses mainly resulted from lower remeasurement losses associated with Venezuelan currency devaluation ($4.8
million in 2016 versus $18.1 million in 2015). Impairment charges declined in 2016 as the 2015 Venezuela property impairment of $35.3 million exceeded current year
impairment losses, primarily from 2016 restructuring actions. After the December 2015 devaluation of the Argentine peso, we did not incur significant losses from converting
Argentina pesos to U.S. dollars ($0.1 million in 2016 versus $7.1 million in 2015). In 2015, we recognized a $5.9 million loss on the sale of a Russian cash management
business.
2015 versus 2014
Other operating expense decreased in 2015 primarily as a result of lower remeasurement losses associated with the currency devaluation in Venezuela ($18.1 million) versus the
remeasurement charges related to the currency devaluation in the prior year ($121.6 million). The lower remeasurement charges in 2015 were partially offset by a 2014 gain on
the sale of a Peru CIT business ($44.3 million), the 2015 Venezuela property impairment charges ($35.3 million) and a $5.9 million loss on the sale of a Russian cash
management business, of which $5.0 million represented foreign currency translation adjustments reclassified from accumulated other comprehensive income (loss) into
earnings. See Note 1 to the consolidated financial statements for a description of the change in currency exchange processes and rates and the 2015 impairment of long-lived
assets in Venezuela.
31
Nonoperating Income and Expense
Interest
Expense
(In millions)
Interest expense
Years Ended December 31,
% change
2016
2015
2014
2016
2015
$
20.4
18.9
23.4
8
(19)
Interest expense was higher in 2016 due to interest recognized on a non-recourse financing liability in Mexico (see Note 19) and the impact of higher weighted-average interest
rates in 2016 versus the prior year.
Interest expense was lower in 2015 due to lower weighted-average interest rates, the impact of a stronger U.S. dollar on foreign currency-denominated debt and the redemption
of the fixed-rate Dominion Terminal Associates bonds in the third quarter of 2014.
Interest
and
Other
Income
(In millions)
Interest income
Gain on available-for-sale securities
Derivative instruments
Other
Interest and other income
Years Ended December 31,
% change
2016
2015
2014
2016
2015
$
$
2.6
0.5
(0.6)
(1.3)
1.2
3.3
1.1
(0.5)
(0.5)
3.4
3.0
0.4
(1.0)
(0.5)
1.9
(21)
(55)
20
unfav
(65)
10
fav
(50)
—
79
Interest and other income was lower in 2016 compared to 2015 primarily due to lower interest income and a decrease in gains on available-for-sale securities.
Interest and other income was higher in 2015 compared to 2014 primarily due to higher gains on available-for-sale securities and lower derivative instrument losses.
32
Income Taxes
Summary
Rate
Reconciliation
–
GAAP
(In percentages)
2016
2015
2014
U.S. federal tax rate
Increases (reductions) in taxes due to:
Venezuela devaluation
Tax on accelerated U.S. income (a)
Adjustments to valuation allowances
Foreign income taxes
French business tax
Taxes on undistributed earnings of foreign affiliates
State income taxes, net
Other
Income tax rate on continuing operations
35.0 %
35.0 %
35.0 %
2.9
—
18.2
4.2
3.0
0.7
(1.0)
(0.2)
61.3
57.3
18.9
(18.2)
8.9
(1.2)
(4.1)
3.9
(86.3)
—
(16.9)
(0.7)
(9.0)
(3.7)
5.2
1.5
62.8 %
161.8 %
(74.9)%
(a)
In the fourth quarter of 2015, we recognized a $23.5 million increase to current tax expense related to a transaction that accelerated U.S. taxable income.
Summary
Rate
Reconciliation
–
Non-GAAP
(a)
(In percentages)
2016
2015
2014
U.S. federal tax rate
Increases (reductions) in taxes due to:
Adjustments to valuation allowances
French business tax
Other
Income tax rate on Non-GAAP continuing operations
(a)
See pages 36–37 for a reconciliation of non-GAAP results to GAAP.
Overview
35.0 %
35.0 %
35.0 %
1.3
2.0
(1.4)
2.0
2.6
(2.6)
36.9 %
37.0 %
6.7
4.3
(0.3)
45.7 %
Our effective tax rate has varied in the past three years from the statutory U.S. federal rate due to various factors, including
•
•
•
•
•
•
•
•
changes in judgment about the need for valuation allowances
changes in the geographical mix of earnings
nontaxable acquisition gains and losses
changes in laws in the U.S., France and Mexico
U.S. tax on accelerated taxable income
changes in the foreign currency rate used to measure Venezuela’s tax results
timing of benefit recognition for uncertain tax positions
state income taxes
We establish or reverse valuation allowances for deferred tax assets depending on all available information including historical and expected future operating performance of our
subsidiaries. Changes in judgment about the future realization of deferred tax assets can result in significant adjustments to the valuation allowances. Based on our historical
and future expected taxable earnings, we believe it is more-likely-than-not that we will realize the benefit of the deferred tax assets, net of valuation allowances.
Continuing
Operations
2016 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2016 was greater than the 35% U.S. statutory tax rate primarily due to the significant losses related to operations in the
Republic of Ireland, for which no tax benefit can be recorded, a change in judgment resulting in a valuation allowance against certain U.S. tax attributes with a limited statutory
carryforward period that are no longer more-likely-than-not to be realized, and the non-deductible expenses resulting from the currency devaluation in Venezuela.
Excluding those items, our effective tax rate on continuing operations in 2016 was 42%. This rate is higher than the 35% U.S. statutory rate primarily due to book losses for
which no tax benefit can be recorded, non-deductible expenses in Mexico, taxes on undistributed earnings and the characterization of a French business tax as an income tax,
partially offset by the geographical mix of earnings and a French income tax credit.
33
2015 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2015 was higher than the 35% U.S. statutory tax rate primarily due to a significant Venezuela currency remeasurement
loss and impairment loss, which were largely non-deductible, and U.S. tax on accelerated taxable income. Excluding these items, the effective income tax rate was higher than
the 35% U.S. statutory tax rate due to $3.7 million of tax expense due to the characterization of a French business tax as an income tax.
2014 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2014 was lower than the 35% U.S. statutory tax rate (negative 75%) primarily due to a significant Venezuela currency
remeasurement loss, which was largely non-deductible. Excluding the remeasurement loss, the effective income tax rate was higher than the 35% U.S. statutory tax rate due to
$9.9 million of tax expense from cross border payments and $4.4 million of tax expense due to the characterization of a French business tax as an income tax, mostly offset by a
$4.6 million tax benefit due to the jurisdictional mix of earnings including the favorable Venezuela permanent inflation adjustment.
Undistributed
Foreign
Earnings
As of December 31, 2016 , we have not recorded U.S. federal deferred income taxes on approximately $229 million of undistributed earnings of foreign subsidiaries and equity
affiliates in accordance with 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 determine the income tax liability that might be incurred if all such income was remitted to the U.S. due to the inherent complexities associated with any hypothetical
calculation, which would be dependent upon the exact form of repatriation.
Noncontrolling Interests
(In millions)
2016
2015
2014
2016
2015
Years Ended December 31,
% change
Net income (loss) attributable to noncontrolling interests
$
10.3
(16.3)
(30.9)
fav
(47)
The change from a $16.3 million net loss attributable to noncontrolling interests in 2015 to $10.3 million net income attributable to noncontrolling interests in 2016 was
primarily due to improved results in our Venezuelan subsidiaries and lower currency remeasurement charges from the devaluation of Venezuelan currency.
The net loss attributable to noncontrolling interests in 2015 was primarily due to a $35.3 million impairment charge related to Venezuelan property and equipment and $18.1
million in currency remeasurement charges from the devaluation of Venezuelan currency.
The net loss attributable to noncontrolling interests in 2014 was primarily due to $121.6 million in currency remeasurement charges from the devaluation of Venezuelan
currency.
See Note 1 to the consolidated financial statements for more information about the currency remeasurement charges of our Venezuelan subsidiaries and the Venezuela
impairment charge that occurred in 2015.
34
Loss from Discontinued Operations
(In millions)
Loss from operations (a)(b)
Loss on sales
Adjustments to contingencies of former operations (c) :
Workers' compensation
Insurance recoveries related to BAX Global indemnification (d)
Other
Loss from discontinued operations before income taxes
Provision (benefit) for income taxes
Loss from discontinued operations, net of tax
Years Ended December 31,
2016
2015
2014
$
$
—
—
(2.8)
—
—
(2.8)
(1.1)
(1.7)
(2.4)
(0.8)
(0.7)
—
0.1
(3.8)
(1.0)
(2.8)
(13.3)
(18.9)
(4.4)
9.5
(1.6)
(28.7)
0.4
(29.1)
(a)
(b)
(c)
(d)
Discontinued operations include gains and losses related to businesses that we recently sold or shut down. No interest expense was included in discontinued operations in 2015 and 2014.
The loss from operations in 2015 included $1.0 million in pension settlement charges related to the Mexican parcel delivery business sold in February 2015. The loss from operations in 2014 included $15.6 million in non-cash
severance and impairment charges related to the Netherlands cash-in-transit operations.
Primarily related to former coal businesses and BAX Global, a former freight forwarding and logistics business.
BAX Global had been defending a claim related to the apparent diversion by a third party of goods being transported for a customer. In 2010, the Dutch Supreme Court denied the final appeal of BAX Global, letting stand the
lower court ruling that BAX Global was liable for this claim. We had contractually indemnified the purchaser of BAX Global for this contingency. Through 2010, we had recognized $11.5 million of expense related to the
payment made in satisfaction of the judgment. In 2014, we recovered $9.5 million from insurance companies related to this matter.
Cash-in-transit operations sold or shut down:
Australia (sold in October 2014)
Puerto Rico (shut down in November 2014)
Netherlands (sold in December 2014)
•
•
•
Other operations sold:
•
In February 2015, we sold a small Mexican parcel delivery business which met the criteria for classification as a discontinued operation as of December 31, 2014.
Other divestitures not classified as discontinued operations:
• We sold our 70% ownership interest in a Russian cash management business in November 2015 and recognized a $5.9 million loss on the disposition. A significant
part of the loss ( $5.0 million ) represented the reclassification of foreign currency translation adjustments from accumulated other comprehensive income (loss) into
earnings.
• We sold our Irish guarding operation in November 2015.
• We shut down our remaining Irish domestic operations in September 2016.
• We sold our German guarding operation in October 2016.
The table below shows revenues and income (loss) from operations before tax for other divestitures not classified as discontinued operations:
(In millions)
Other divestitures
Revenues
Income (loss) from operations before tax
Years Ended December 31,
2016
2015
2014
$
12.3
(16.0)
46.6
(8.2)
94.4
3.4
35
Non-GAAP Results Reconciled to GAAP
Non-GAAP results described in this filing are financial measures that are not required by or presented in accordance with GAAP. The purpose of the Non-GAAP results is to
report financial information from the primary operations of our business by excluding the effects of certain income and expenses that do not reflect the ordinary earnings of our
operations. The specific items excluded have not been allocated to segments, are described in detail on pages 28–30, and are reconciled to comparable GAAP measures below.
The full-year Non-GAAP tax rate in each year excludes certain pretax and income tax amounts. Amounts reported for prior periods have been updated in this report to present
information consistently for all periods presented.
The Non-GAAP information is intended to provide information to assist analysts and investors with comparability and estimates of future performance. Brink’s believes these
measures are helpful in assessing operations and estimating future results and enable period-to-period comparability of financial performance. In addition, Brink’s believes the
measures will help analysts and investors assess the ongoing operations of both our consolidated business and individual segments. Management uses Non-GAAP results to
evaluate our period-over-period operating performance because our management believes this provides a more comparable measure of our continuing business. Additionally,
Non-GAAP results are utilized as performance measures in certain management incentive compensation plans. Non-GAAP results should not be considered as an alternative to
revenue, income or earnings per share amounts determined in accordance with GAAP and should be read in conjunction with their GAAP counterparts.
Effective Income Tax Rate (a)
GAAP
Other items not allocated to segments (b)
Deferred tax valuation allowance (c)
U.S. tax on accelerated U.S. income (d)
Non-GAAP
Effective Income Tax Rate (a)
GAAP
Other items not allocated to segments (b)
Non-GAAP
Amounts may not add due to rounding.
Pre-tax
2016
Tax
Effective tax rate
Pre-tax
2015
Tax
Effective tax rate
$
$
125.0
62.3
—
—
187.3
78.5
5.3
(14.7)
—
69.1
62.8% $
41.1
100.2
—
—
36.9% $
141.3
66.5
9.3
—
(23.5)
52.3
161.8 %
37.0 %
Pre-tax
2014
Tax
Effective tax rate
$
$
(49.0)
151.7
102.7
36.7
10.2
46.9
(74.9)%
45.7 %
(a)
(b)
(c)
(d)
From continuing operations.
See “Other Items Not Allocated To Segments” on pages 28–30 for pre-tax amounts and details. Other Items Not Allocated To Segments for nonoperating expense, noncontrolling interests, income from continuing operations
attributable to Brink's and EPS are the effects of the same items at their respective line items of the consolidated statements of operations.
There was a change in judgment resulting in a valuation allowance against certain tax attributes with a limited statutory carryforward period that are no longer more-likely-than-not to be realized due to lower than expected U.S.
operating results, certain non-GAAP pre-tax items, and the timing of tax deductions related to executive leadership transition.
The non-GAAP tax rate excludes the U.S. tax on a transaction that accelerated U.S. taxable income because it will be offset by foreign tax benefits in future years.
36
Non-GAAP
reconciled
to
GAAP
(In millions)
Revenues:
GAAP
Other items not allocated to segments (b)
Non-GAAP
Operating profit (loss):
GAAP
Other items not allocated to segments (b)
Non-GAAP
Nonoperating expense:
GAAP
Other items not allocated to segments (b)
Non-GAAP
Provision for income taxes:
GAAP
Other items not allocated to segments (b)
Deferred tax valuation allowance (c)
U.S. tax on accelerated U.S. income (d)
Non-GAAP
Net income (loss) attributable to noncontrolling interests:
GAAP
Other items not allocated to segments (b)
Non-GAAP
Income (loss) from continuing operations attributable to Brink's:
GAAP
Other items not allocated to segments (b)
Deferred tax valuation allowance (c)
U.S. tax on accelerated U.S. income (d)
Non-GAAP
Diluted EPS
GAAP
Other items not allocated to segments (b)
Deferred tax valuation allowance (c)
U.S. tax on accelerated U.S. income (d)
Non-GAAP
Non-GAAP margin
Amounts may not add due to rounding.
See page 36 for footnote explanations.
37
Years Ended December 31,
2016
2015
2014
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,020.6
(112.2)
2,908.4
144.2
62.3
206.5
(19.2)
—
(19.2)
78.5
5.3
(14.7)
—
69.1
10.3
(5.2)
5.1
36.2
62.2
14.7
—
113.1
0.72
1.23
0.29
—
2.24
3,061.4
(84.5)
2,976.9
3,562.3
(211.8)
3,350.5
56.6
100.2
156.8
(15.5)
0.1
(15.4)
66.5
9.3
—
(23.5)
52.3
(16.3)
21.2
4.9
(9.1)
69.8
—
23.5
84.2
(0.19)
1.40
—
0.47
1.69
(27.5)
151.7
124.2
(21.5)
—
(21.5)
36.7
10.2
—
—
46.9
(30.9)
37.3
6.4
(54.8)
104.2
—
—
49.4
(1.12)
2.12
—
—
1.01
7.1%
5.3%
3.7%
Foreign Operations
We currently serve customers in more than 100 countries, including 40 countries where we operate subsidiaries.
We are subject to risks customarily associated with doing business in foreign countries, including labor and economic conditions, political instability, controls on repatriation of
earnings and capital, nationalization, expropriation and other forms of restrictive action by local governments. Changes in the political or economic environments in the
countries in which we operate could have a material adverse effect on our business, financial condition and results of operations. The future effects, if any, of these risks are
unknown.
Our international operations conduct a majority of their business in local currencies. Because our financial results are reported in U.S. dollars, they are affected by changes in the
value of various local currencies in relation to the U.S. dollar. Recent strengthening of the U.S. dollar has reduced our reported dollar revenues and operating profit, which may
continue in 2017. Our operations in Venezuela are subject to local laws and regulatory interpretations that determine the exchange rate at which repatriating dividends may be
converted. See Application of Critical Accounting Policies—Foreign Currency Translation on pages 56–57 for a description of our accounting methods and assumptions used to
include our Venezuelan operations in our consolidated financial statements, and a description of the accounting for subsidiaries operating in highly inflationary economies.
Changes in exchange rates may also affect transactions which are denominated in currencies other than the functional currency. From time to time, we use foreign currency
forward and swap contracts to hedge transactional risks associated with foreign currencies, as discussed in Item 7A on page 59. At December 31, 2016 , the notional value of
our shorter term outstanding foreign currency forward and swap contracts was $41.9 million with average contract maturities of approximately one month. These shorter term
foreign currency forward and swap contracts primarily offset exposures in the British pound and the Mexican peso. Additionally, these shorter term contracts are not designated
as hedges for accounting purposes, and accordingly, changes in their fair value are recorded immediately in earnings. We recognized losses of $2.4 million on these contracts in
2016 . At December 31, 2016 , the fair value of these outstanding foreign currency forward and swap contracts was not significant.
We also have a longer term cross currency swap contract to hedge exposure in Brazilian real which is designated as a cash flow hedge for accounting purposes. At December 31,
2016 , the notional value of this longer term contract was $7.9 million with a weighted-average maturity of 0.6 years . We recognized net losses of $1.6 million on this contract,
of which losses of $1.3 million were included in other operating income (expense) to offset transaction gains of $1.3 million and expenses of $0.3 million were included in
interest and other income (expense) in 2016 . At December 31, 2016 the fair value of the longer term cross currency swap contract was $3.1 million, of which $2.4 million is
included in prepaid expenses and other and $0.7 million is included in other assets on the consolidated balance sheet.
See Note 1 to the consolidated financial statements for a description of government currency processes and restrictions in Venezuela and Argentina, their effect on our
operations, and how we account for currency remeasurement for our Venezuelan subsidiaries.
38
LIQUIDITY AND CAPITAL RESOURCES
Overview
Over the last three years, we used cash generated from our operations, proceeds from sales of investments and borrowings to
•
•
•
invest in the infrastructure of our business (new facilities, cash sorting and other equipment for our Cash Management Services operations, armored
trucks, CompuSafe ® units, and information technology) ($349 million),
contribute funds to a U.S. pension plan ($87 million), and
pay dividends to Brink’s shareholders ($59 million).
Cash flows from operating activities decreased by $28.4 million in 2016 as compared to the prior year primarily due to higher amounts paid for income taxes. Cash used for
investing activities increased by $5.2 million in 2016 as higher capital expenditures and lower net cash inflows from marketable securities in 2016 were partially offset by a
reduction in cash outflows related to business divestitures. Cash also decreased $12.1 million in 2016 as a result of the strengthening of the U.S. dollar, primarily against
currencies in Latin America including the Venezuelan bolivar and the Argentine peso. We financed our liquidity needs in 2016 with cash flows from operations supplemented
by short-term borrowings.
Cash flows from operating activities increased by $54.6 million in 2015 as compared to the prior year primarily due to contributions made to our primary U.S. pension plan in
2014. Cash used for investing activities increased by $9.7 million in 2015 as lower capital expenditures and a decrease in cash outflows from discontinued operations were more
than offset by lower cash inflows from asset sales in 2015 as we received $60 million in 2014 from the sale of the Peru CIT business. Cash also decreased $34.0 million in 2015
as a result of the strengthening of the U.S. dollar, primarily against most currencies in Latin America including the Venezuelan bolivar, Argentine peso and Brazilian real. We
financed our liquidity needs in 2015 with cash flows from operations.
Operating Activities
(In millions)
2016
2015
2014
2016
2015
Years Ended December 31,
$ change
Cash flows from operating activities
Operating activities - GAAP
Venezuela operations
Contributions to primary U.S. pension plan
(Increase) decrease in certain customer obligations (a)
Discontinued operations
Operating activities - non-GAAP
$
$
167.5
(16.4)
—
13.2
—
164.3
195.9
(2.3)
—
(12.5)
2.0
183.1
141.3 $
(20.7)
87.2
(15.4)
(5.5)
186.9 $
(28.4)
(14.1)
—
25.7
(2.0)
(18.8)
54.6
18.4
(87.2)
2.9
7.5
(3.8)
(a)
To adjust for the change in the balance of customer obligations related to cash received and processed in certain of our secure Cash Management Services operations. The title to this cash transfers to us for a short period of time.
The cash is generally credited to customers’ accounts the following day and we do not consider it as available for general corporate purposes in the management of our liquidity and capital resources.
Non-GAAP cash flows from operating activities is a supplemental financial measure that is not required by, or presented in accordance with GAAP. The purpose of this non-
GAAP measure is to report financial information excluding cash flows from Venezuela operations, contributions to the primary U.S. pension plan, the impact of cash received
and processed in certain of our Cash Management Services operations and without cash flows from discontinued operations. We believe this measure is helpful in assessing cash
flows from operations, enables period-to-period comparability and is useful in predicting future operating cash flows. This non-GAAP measure should not be considered as an
alternative to cash flows from operating activities determined in accordance with GAAP and should be read in conjunction with our consolidated statements of cash flows.
39
2016
versus
2015
GAAP
Operating cash flows decreased by $28.4 million in 2016 compared to 2015 . The decrease was primarily due to changes in customer obligations of certain of our secure Cash
Management Services operations (cash held for customers decreased by $13.2 million in 2016 compared to an increase of $12.5 million in 2015), increases in cash paid for
income taxes in the current year, and increases in cash used for working capital, partially offset by an increase in operating profit and an increase in operating cash provided by
Venezuela operations of $14.1 million.
Non-GAAP
Non-GAAP cash flows from operating activities decreased by $18.8 million in 2016 as compared to 2015 . The decrease was primarily due to increases in cash paid for income
taxes in the current year and increases in cash used for working capital, partially offset by an increase in operating profit.
2015
versus
2014
GAAP
Operating cash flows increased by $54.6 million in 2015 compared to 2014 . The increase was primarily due to contributions made to our primary U.S. pension plan in 2014, an
increase in operating profit, and lower amounts paid for income taxes, offset by an increase in cash used for working capital and discontinued operations as well as a decrease in
cash provided by Venezuela operations.
Non-GAAP
Non-GAAP cash flows from operating activities decreased by $3.8 million in 2015 as compared to 2014 . The decrease was primarily due to an increase in cash used for
working capital partially offset by an increase in operating profit and lower amounts paid for income taxes.
Investing Activities
(In millions)
2016
2015
2014
2016
2015
Years Ended December 31,
$ change
Cash flows from investing activities
Capital expenditures
Acquisitions
Dispositions, net of cash disposed
Marketable securities:
Purchases
Sales
Proceeds from sale of property, equipment and investments
Other
Discontinued operations
Investing activities
$
(112.2)
(0.7)
(0.6)
(9.2)
9.1
4.7
—
—
(101.1)
—
(14.6)
(27.3)
33.9
1.9
1.6
1.9
(136.1) $
(4.6)
—
—
0.9
62.7
(3.6)
(13.3)
$
(108.9)
(103.7)
(94.0) $
(11.1)
(0.7)
14.0
18.1
(24.8)
2.8
(1.6)
(1.9)
(5.2)
35.0
4.6
(14.6)
(27.3)
33.0
(60.8)
5.2
15.2
(9.7)
Cash used by investing activities increased by $5.2 million in 2016 versus 2015 . The increase was due to higher capital expenditures of $11.1 million and lower net cash inflows
from purchases and sales of marketable securities. These amounts were partially offset by a reduction in cash outflows related to business divestitures.
Cash used by investing activities increased by $9.7 million in 2015 versus 2014 . The change was due to the proceeds of $59.6 million received on the 2014 sale of an equity
interest in a Peru CIT business and 2015 outflows of cash held for customers related to a business divestiture in Russia. These amounts were partially offset by lower capital
expenditures of $35.0 million, less cash used in discontinued operations of $15.2 million and higher net cash inflows from purchases and sales of marketable securities, primarily
in Argentina.
40
Capital expenditures and depreciation and amortization were as follows:
(In millions)
Property
and
Equipment
Acquired
during
the
year
Capital expenditures (a) :
Largest 5 Markets
Global Markets
Payment Services
Corporate items
Capital expenditures - non-GAAP
Venezuela
Capital expenditures - GAAP
Capital leases (b):
Largest 5 Markets
Global Markets
Payment Services
Capital leases - GAAP and non-GAAP
Total:
Largest 5 Markets
Global Markets
Payment Services
Corporate items
Total - non-GAAP
Venezuela
Total - GAAP
Depreciation
and
amortization
(a)
Largest 5 Markets
Global Markets
Payment Services
Corporate items
Years Ended December 31,
$ change
2016
2015
2014
2016
2015
$
$
$
$
$
$
$
68.2
28.6
1.4
9.0
107.2
5.0
112.2
28.0
1.4
—
29.4
96.2
30.0
1.4
9.0
136.6
5.0
141.6
91.3
25.5
2.4
10.9
59.3
28.8
1.7
7.0
96.8
4.3
83.4 $
30.0
0.8
16.5
130.7
5.4
101.1
136.1 $
18.8
—
0.1
18.9
78.1
28.8
1.8
7.0
115.7
4.3
120.0
94.6
27.2
2.9
11.3
10.6 $
0.3
1.2
12.1 $
94.0 $
30.3
2.0
16.5
142.8
5.4
148.2 $
107.7 $
31.3
3.7
9.7
8.9
(0.2)
(0.3)
2.0
10.4
0.7
11.1
9.2
1.4
(0.1)
10.5
18.1
1.2
(0.4)
2.0
20.9
0.7
21.6
(3.3)
(1.7)
(0.5)
(0.4)
(5.9)
(3.2)
0.8
(8.3)
(24.1)
(1.2)
0.9
(9.5)
(33.9)
(1.1)
(35.0)
8.2
(0.3)
(1.1)
6.8
(15.9)
(1.5)
(0.2)
(9.5)
(27.1)
(1.1)
(28.2)
(13.1)
(4.1)
(0.8)
1.6
(16.4)
(5.6)
—
(22.0)
Depreciation and amortization - non-GAAP
Venezuela
2016 Restructuring
130.1
136.0
152.4
0.7
0.8
3.9
—
9.5
—
Depreciation and amortization - GAAP
$
131.6
139.9
161.9 $
(a)
(b)
Capital expenditures as well as depreciation and amortization related to Venezuela have been excluded from Global Markets. In addition, accelerated depreciation related to 2016 Restructuring activities has been excluded from
non-GAAP amounts.
Represents the amount of property and equipment acquired using capital leases. Because the assets are acquired without using cash, the acquisitions are not reflected in the consolidated cash flow statement. Amounts are provided
here to assist in the comparison of assets acquired in the current year versus prior years. Sale leaseback transactions are excluded from “Capital leases” in this table.
We continue to focus on maximizing asset utilization and we have reduced our annual spend to a level more in line with depreciation. Our reinvestment ratio, which we define
as the annual amount of property and equipment acquired during the year divided by the annual amount of depreciation, was 1.1 in 2016 , 0.9 in 2015 , and 0.9 in 2014 .
Capital expenditures in 2016 for our operating units were primarily for machinery and equipment, armored vehicles, and information technology. Capital expenditures in 2016
were $11.1 million higher compared to 2015 . Total property and equipment acquired in 2016 was $21.6 million higher than the prior year.
Capital expenditures in 2015 for our operating units were primarily for machinery and equipment, armored vehicles, and information technology. Capital expenditures in 2015
were $35.0 million lower compared to 2014 . Total property and equipment acquired in 2015 was $28.2 million lower than the prior year.
Corporate capital expenditures in the last three years were primarily for implementing a new finance shared service center and investing in information technology.
41
Financing Activities
(In millions)
2016
2015
2014
2016
2015
Years Ended December 31,
$ change
Cash flows from financing activities
Borrowings and repayments:
Short-term borrowings
Long-term revolving credit facilities, net
Other long-term debt, net
Borrowings (repayments)
Nonrecourse financing of real estate transaction
Common stock issued
Dividends to:
Shareholders of Brink’s
Noncontrolling interests in subsidiaries
Acquisitions of noncontrolling interests
Proceeds from exercise of stock options
Other
Discontinued operations
Financing activities
$
115.0
(112.2)
(34.2)
(31.4)
—
3.0
(19.8)
(4.6)
—
12.2
(4.3)
—
(22.7)
(64.4)
44.1
(43.0)
14.5
—
(19.5)
(5.3)
(1.5)
3.8
(1.7)
0.2
(7.8) $
115.0
(73.5)
33.7
—
—
(19.4)
(8.6)
—
0.4
(2.8)
—
$
(44.9)
(52.5)
3.3 $
137.7
(47.8)
(78.3)
11.6
(14.5)
3.0
(0.3)
0.7
1.5
8.4
(2.6)
(0.2)
7.6
(14.9)
(179.4)
117.6
(76.7)
14.5
—
(0.1)
3.3
(1.5)
3.4
1.1
0.2
(55.8)
2016
versus
2015
Cash used by financing activities decreased by $7.6 million in 2016 compared to 2015 due to higher short-term borrowings and increased proceeds from stock option exercises.
These financing cash flow increases were partially offset by higher net repayments of our revolving credit facilities and other long-term debt as well as cash receipts in 2015
from the Mexico real estate transaction which did not reoccur in 2016.
2015
versus
2014
Cash used by financing activities increased by $55.8 million in 2015 compared to 2014 as net repayments of our revolving credit facilities and short-term borrowings exceeded
net borrowings of other long-term debt. Our ability to repay debt in 2015 resulted primarily from higher operating cash flows as no contributions were made to the primary U.S.
pension plan in 2015 along with lower capital expenditures. The higher cash outflows from debt repayments were partially offset by the receipt of $14.5 million in cash in 2015
related to a real estate transaction in Mexico. Due to continuing involvement, the transaction did not qualify for sale-leaseback accounting, therefore the cash proceeds are
reported as a nonrecourse financing liability.
Common
stock
issued
We received $3.0 million in 2016 when our CEO and CFO purchased a combined 100,440 shares of our common stock.
Dividends
We paid dividends to Brink’s shareholders of $0.10 per share in each of the last 12 quarters. Future dividends are dependent on our earnings, financial condition, shareholders’
equity levels, our cash flow and business requirements, as determined by the Board of Directors.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Changes in currency exchange rates reduced the amount of cash and cash equivalents by $12.1 million during 2016 , compared to a reduction of $34.0 million in 2015 and
$129.9 million in 2014 . The decrease in 2016 was caused by strengthening of the U.S. dollar, primarily against currencies in Latin America including the Venezuelan bolivar
and the Argentine peso. The decrease in 2015 was caused by the strengthening of the U.S. dollar, primarily against most currencies in Latin America including the Venezuelan
bolivar, Argentine peso and Brazilian real. Approximately $93 million of the 2014 reduction was due to a currency devaluation in Venezuela that occurred in the first quarter of
that year. See Note 1 to the consolidated financial statements for more information. The rest of the change related to the strengthening of the U.S. dollar against many of the
currencies in the countries where we operate, particularly in Russia and Latin America.
42
Capitalization
We use a combination of debt, leases and equity to capitalize our operations.
As of December 31, 2016 , debt as a percentage of capitalization (defined as total debt and equity) was 56% compared to 57% at December 31, 2015 . The ratio decreased in
2016 because our equity increased by a higher amount than the increase in our debt. Our equity in 2016 increased primarily from current year net income and proceeds from
stock option exercises. These positive changes were partially offset by dividend payments and other comprehensive losses resulting primarily from the negative impact of
foreign currency translation adjustments in 2016. Our debt increased in 2016 as higher short-term borrowings exceeded net repayments of long-term debt.
Summary
of
Debt,
Equity
and
Other
Liquidity
Information
Amount available under
credit facilities
December 31,
2016
Outstanding balance
December 31,
2016
2015
$ change (a)
(In millions)
Debt:
Short-term borrowings
Uncommitted credit facilities
Restricted cash borrowings (b)
Other
Total Short-term borrowings
Long-term debt
Revolving Facility
Private Placement Notes
Term Loan
Multi-currency revolving facilities
Unsecured committed credit facility
Letter of Credit Facilities
Other
Capital leases
Total Long-term debt
Total Debt
Total equity
$
$
$
$
$
15.7 $
—
—
15.7 $
469.2 $
—
—
11.9
—
27.8
—
—
508.9 $
108.3
22.3
32.2
162.8
55.8
85.6
65.6
3.6
—
—
2.8
67.0
280.4
—
3.5
29.1
32.6
108.3
18.8
3.1
130.2
163.3 $
(107.5)
92.8
70.9
1.1
4.1
—
6.2
59.5
397.9 $
(7.2)
(5.3)
2.5
(4.1)
—
(3.4)
7.5
(117.5)
12.7
24.2
524.6 $
443.2
430.5 $
$
354.8
330.6 $
(a)
(b)
In addition to cash borrowings and repayments, the change in the debt balance also includes changes in currency exchange rates.
These 2016 and 2015 amounts are for short-term borrowings related to cash borrowed under lending arrangements used in the process of managing customer cash supply chains, which is currently classified as restricted cash and
not available for general corporate purposes. See Note 19 for more details.
43
Reconciliation
of
Net
Debt
to
U.S.
GAAP
Measures
(In millions)
Debt:
Short-term borrowings (a)
Long-term debt
Total Debt
Less:
Cash and cash equivalents
Amounts held by Cash Management Services operations (b)
Cash and cash equivalents available for general corporate purposes
December 31,
2016
2015
$ change
$
140.5
280.4
420.9
183.5
(9.8)
173.7
29.1 $
397.9
427.0
111.4
(117.5)
(6.1)
181.9
(24.2)
157.7
1.6
14.4
16.0
Net Debt
$
247.2
269.3 $
(22.1)
(a)
(b)
Amount excludes $22.3 million at December 31, 2016 and $3.5 million at December 31, 2015 for short-term borrowings related to cash borrowed under lending arrangements used in the process of managing customer cash supply
chains, which is currently classified as restricted cash and not available for general corporate purposes. See Note 19 for more details.
Title to cash received and processed in certain of our secure Cash Management Services operations transfers to us for a short period of time. The cash is generally credited to customers’ accounts the following day and we do not
consider it as available for general corporate purposes in the management of our liquidity and capital resources and in our computation of Net Debt.
Net Debt is a supplemental non-GAAP financial measure that is not required by, or presented in accordance with GAAP. We use Net Debt as a measure of our financial
leverage. We believe that investors also may find Net Debt to be helpful in evaluating our financial leverage. Net Debt should not be considered as an alternative to Debt
determined in accordance with GAAP and should be reviewed in conjunction with our consolidated balance sheets. Set forth above is a reconciliation of Net Debt, a non-GAAP
financial measure, to Debt, which is the most directly comparable financial measure calculated and reported in accordance with GAAP, as of December 31, 2016 , and
December 31, 2015 . Net Debt excluding cash and debt in Venezuelan operations was $255 million at December 31, 2016 , and $275 million at December 31, 2015 .
Net Debt at the end of 2016 decreased by $22.1 million when compared to Net Debt at the end of 2015 primarily due to the repayments of debt from operating cash flows and
the decrease in cash amounts held by Cash Management Services operations due to the shutdown of Ireland operations. As of December 31, 2015, our former Ireland operations
had $18.5 million of cash amounts held by Cash Management Services operations.
Liquidity
Needs
Our operating liquidity needs are typically financed by cash from operations, short-term borrowings and the Revolving Facility (our debt facilities are described below). We
have certain limitations and considerations related to the cash and borrowing capacity that are reported in our consolidated financial statements. Based on our current cash on
hand, amounts available under our credit facilities and current projections of cash flows from operations, we believe that we will be able to meet our liquidity needs for more
than the next twelve months.
Limitations on dividends from foreign subsidiaries . A significant portion of our operations are outside the U.S. which may make it difficult to repatriate additional cash for use
in the U.S. See Item 1A., Risk Factors , for more information on the risks associated with having businesses outside the U.S.
Incremental taxes. Of the $184 million of cash and cash equivalents at December 31, 2016 , $159 million is held by subsidiaries that we consider to be permanently invested
and for which we do not expect to repatriate to the U.S. If we were to decide to repatriate this cash to the U.S., we may have to accrue and pay additional income taxes. Given
the number of foreign operations and the complexities of the tax law, it is not practical to estimate the potential tax liability, but the amount of taxes owed could be material
depending on how and when the repatriation occurred.
Venezuela
We have $6.8 million of cash and cash equivalents denominated in Venezuelan bolivars (as remeasured at the published DICOM rate of 674 bolivars to the U.S. dollar) at
December 31, 2016 . We believe that the DICOM process to convert bolivars (as described in Note 1 to the consolidated financial statements) is the only method for which we
could receive U.S. dollars that we need to operate our business and to repatriate earnings. The Venezuelan government has restricted conversions of bolivars into U.S. dollars in
the past and may do so in the future. We did not repatriate any U.S. dollars from Venezuela in 2016 or 2015 .
In Note 3, we are required to present projected benefit payments of our Venezuela benefit plan for the next 10 years. Because the economy in Venezuela has had significant
inflation in the last several years, we applied highly inflationary assumptions when calculating the projected benefit payments. Due to the uncertainties associated with the
significant inflation in Venezuela, there can be no assurances that these assumptions provide an accurate reflection of future payments. We assumed an inflation rate of 500% in
2017 with a gradual decline to 4% in 2032, as we expect the economy of Venezuela over time to return to inflation rates more typical for the region. When these undiscounted
44
bolivar-denominated projected benefit payments are translated into U.S. dollars at the December 31, 2016 DICOM exchange rate, the result is projected benefit payments of $4.4
billion over the next 10 years. If we applied the same inflation rate assumption to the December 31, 2016 DICOM exchange rate over the next 10 years, the projected benefit
payments would be less than our December 31, 2016 liability of $5.6 million. In 2016, we made payments in local currency of approximately $0.6 million related to this benefit
plan. In future years, we expect to continue to make these payments in bolivars with cash generated from our Venezuelan operations.
Argentina. At December 31, 2016 , we had cash denominated in Argentine pesos of $11.6 million. The government in Argentina had previously imposed limits on the exchange
of Argentine pesos into U.S. dollars. As a result, we elected in the past and may continue in the future to repatriate cash from Argentina using different markets to convert
Argentine pesos into U.S. dollars if U.S. dollars are not readily available. Prior to the December 2015 devaluation of the Argentine peso, we converted Argentine pesos into U.S.
dollars at rates less favorable than the rates at which we translated the financial statements of our subsidiary in Argentina. However, after the December 2015 devaluation of the
Argentine peso, the market rates used to convert Argentine pesos into U.S. dollars have been similar to the rates at which we translate the financial statements of our subsidiary
in Argentina.
Debt
Short-Term Borrowings
Uncommitted Credit Facilities
In October 2016, we entered into a $100 million uncommitted credit facility. Borrowings under this facility have a maximum maturity of not more than thirty days. Interest on
this facility is generally based on LIBOR plus a margin of 1.00%. As of December 31, 2016, $100 million was outstanding.
In February 2016, we entered into a $24 million uncommitted credit facility with an initial expiration date in February 2017 . The facility was amended in February 2017 , which
extended the expiration date to February 2018. Interest on this facility is based on LIBOR plus a margin of 1.00%. As of December 31, 2016 , $8 million was outstanding.
Long-Term Debt
Revolving Facility
We have a $525 million unsecured multi-currency revolving bank credit facility (the “Revolving Facility”) that matures in March 2020 . The Revolving Facility’s interest rate is
based on LIBOR plus a margin or an alternate base rate plus a margin. The Revolving Facility allows us to borrow loans or issue letters of credit (or otherwise satisfy credit
needs) on a revolving basis over the term of the facility. As of December 31, 2016 , $469 million was available under the Revolving Facility. Amounts outstanding under the
Revolving Facility, as of December 31, 2016 , were denominated primarily in U.S. dollars and to a lesser extent in euros.
The margin on LIBOR borrowings under the Revolving Facility, which can range from 1.0% to 1.70% depending on either our credit rating or leverage ratio as defined within
the Revolving Facility, was 1.30% at December 31, 2016 . The margin on alternate base rate borrowings under the Revolving Facility ranges from 0.0% to 0.70% . We also pay
an annual facility fee on the Revolving Facility based on our credit rating or the leverage ratio. The facility fee can range from 0.125% to 0.30% and was 0.20% at
December 31, 2016 .
Private Placement Notes
We have $86 million principal amount of unsecured notes outstanding, which were issued through a private placement debt transaction (the “Notes”). The Notes comprise $36
million in series A notes with a fixed interest rate of 4.57% and $50 million in series B notes with a fixed interest rate of 5.20% . Annual principal payments under the series A
notes began in January 2015 and continue through maturity. The series B notes are due in January 2021 .
Term Loan
We entered into a $75 million unsecured term loan in March 2015 . Interest on this loan is based on LIBOR plus a margin of 1.75% . Monthly principal payments began April
2015 and continue through to maturity, with the remaining balance of $34 million due in March 2022 . As of December 31, 2016 , the principal amount outstanding was $66
million .
Other Facilities
As of December 31, 2016, we have one $20 million unsecured multi-currency revolving bank credit facility, of which $4 million was outstanding. As of December 31, 2016, we
had undrawn letters of credit and guarantees of $5 million issued under the multi-currency revolving bank credit facilities. This $20 million facility expires in March 2019 .
Interest on this facility is based on LIBOR plus a margin, which ranges from 1.0% to 1.7% . We also have the ability to borrow from other banks, at the banks' discretion, under
short-term uncommitted agreements. Various foreign subsidiaries maintain other lines of credit and overdraft facilities with a number of banks.
Letter of Credit Facilities
We have a $40 million uncommitted letter of credit facility that expires in May 2017 . As of December 31, 2016 , $5 million was utilized.
We have two unsecured letter of credit facilities totaling $94 million , of which approximately $28 million was available at December 31, 2016 . At December 31, 2016 , we had
undrawn letters of credit and guarantees of $66 million issued under these letter of credit facilities. A $40 million facility expires in December 2018 and a $54 million facility
expires in December 2019 . The Revolving Facility and the multi-currency revolving credit facilities are also used for issuance of letters of credit and bank guarantees.
45
The Revolving Facility, the Notes, the unsecured multi-currency revolving bank credit facilities, the unsecured committed credit facility, the letter of credit facilities and the
unsecured term loan contain certain subsidiary guarantees and various financial and other covenants. The financial covenants, among other things, limit our total indebtedness,
restrict certain payments to shareholders, limit priority debt, limit asset sales, limit the use of proceeds from asset sales, provide for a maximum leverage ratio and provide for
minimum coverage of interest costs. These 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 financing agreements, the repayment terms could be accelerated and the commitments could be withdrawn. An acceleration of the repayment terms under
one agreement could trigger the acceleration of the repayment terms under the other financing agreements. We were in compliance with all financial covenants at December 31,
2016 .
Equity
Common Stock
At December 31, 2016 , we had 100 million shares of common stock authorized and 50.0 million shares issued and outstanding.
Preferred Stock
At December 31, 2016 , we had the authority to issue up to 2 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. We use operating leases to lower our cost of financings. We believe that
operating leases are an important component of our capital structure.
46
Contractual Obligations
The following table reflects our contractual obligations as of December 31, 2016 .
(In millions)
2017
2018
2019
2020
2021
Later Years
Total
Estimated Payments Due by Period
Contractual obligations:
Long-term debt obligations
Capital lease obligations
Operating lease obligations
Purchase obligations
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
$
14.3
18.5
59.9
19.6
13.1
14.8
74.3
2.6
16.0
11.1
40.6
1.9
69.8
9.1
30.1
1.8
65.2
7.6
19.8
1.7
35.0
5.9
41.9
1.1
213.4
67.0
266.6
28.7
—
—
—
—
13.1
43.4
56.5
—
7.5
19.2
0.8
0.8
—
6.8
12.8
—
0.8
—
7.1
8.2
—
0.8
—
6.2
5.4
—
0.8
—
5.6
4.6
—
0.8
425.6
67.0
25.5
—
7.8
425.6
100.2
75.7
0.8
11.8
$
140.6
125.2
85.7
123.2
118.4
653.2
1,246.3
U.S. primary pension plan. Pension benefits provided to eligible U.S. employees were frozen on December 31, 2005, and benefits are not provided to employees hired after
2005 or to those covered by a collective bargaining agreement. We did not make cash contributions to the primary U.S. pension plan in 2016 . There are approximately 14,800
beneficiaries in the plans.
Based on current assumptions, we do not expect to make additional contributions until 2021 .
UMWA plans. Retirement benefits related to former coal operations include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for
UMWA Represented Employees. There are approximately 3,600 beneficiaries in the UMWA plans. The company does not expect to make additional contributions to these
plans until 2027 , based on actuarial assumptions.
Black Lung plans. Under the Federal Black Lung Benefits Act of 1972, Brink’s is responsible for paying lifetime black lung benefits to miners and their dependents for claims
filed and approved after June 30, 1973. There are approximately 750 black lung beneficiaries.
Non-U.S. defined-benefit pension plans. We have various defined-benefit pension plans covering eligible current and former employees of some of our international operations.
See Note 3 for information about these non-U.S. plans' benefit obligation and estimated future benefit payments over the next 10 years.
Assumptions for U.S. Retirement Obligations
We have made various assumptions to estimate the amount of payments to be made in the future. The most significant assumptions include:
Changing discount rates and other assumptions in effect at measurement dates (normally December 31)
Investment returns of plan assets
Addition of new participants (historically immaterial due to freezing of pension benefits and exit from coal business)
•
•
•
• Mortality rates
Change in laws
•
The Contractual Obligations table above represents payments projected to be paid with our corporate funds and does not represent payments projected to be made to
beneficiaries with retirement plan assets.
47
Funded Status of U.S. Retirement Plans
(In millions)
Primary U.S. pension plan
Beginning funded status
Net periodic pension credit (a)
Payment from Brink’s
Benefit plan experience gain (loss)
Ending funded status
UMWA plans
Beginning funded status
Net periodic postretirement cost (a)
Benefit plan experience gain (loss)
Other
Ending funded status
Black lung plans
Beginning funded status
Net periodic postretirement cost (a)
Payment from Brink’s
Benefit plan experience gain (loss)
Ending funded status
$
$
$
$
$
$
Actual
2016
2017
2018
Projected
2019
2020
2021
(113.7)
(107.8)
17.9
—
(12.0)
(107.8)
(205.7)
(1.4)
(19.2)
(0.3)
(226.6)
(55.4)
(2.3)
8.1
(7.6)
(57.2)
18.3
—
(2.1)
(91.6)
(226.6)
(1.0)
—
—
(91.6)
18.7
—
(1.9)
(74.8)
(227.6)
(1.6)
—
—
(74.8)
18.6
—
(1.0)
(57.2)
(229.2)
(2.4)
—
—
(57.2)
18.3
—
—
(38.9)
(231.6)
(3.2)
—
—
(38.9)
19.6
13.1
—
(6.2)
(234.8)
(4.1)
—
—
(227.6)
(229.2)
(231.6)
(234.8)
(238.9)
(57.2)
(2.1)
6.3
—
(53.0)
(53.0)
(2.0)
5.9
—
(49.1)
(49.1)
(1.8)
5.5
—
(45.4)
(45.4)
(1.7)
5.1
—
(42.0)
(42.0)
(1.5)
4.7
—
(38.8)
(a)
Excludes amounts reclassified from accumulated other comprehensive income (loss).
Summary of Total Expenses Related to All U.S. Retirement Liabilities
This table summarizes actual and projected expense (income) related to U.S. retirement liabilities. These expenses are not allocated to segment results.
2017
2018
Projected
2019
2020
2021
(In millions)
Primary U.S. pension plan
UMWA plans
Black lung plans
Total
Actual
2016
$
$
6.8
14.8
7.3
28.9
Summary of Total Payments from U.S. Plans to Participants
This table summarizes actual and estimated payments from the plans to participants.
6.7
13.9
7.5
28.1
(In millions)
Payments from U.S. Plans to participants
Primary U.S. pension plan
UMWA plans
Black lung plans
Total
Actual
2016
2017
2018
$
$
47.1
31.7
8.1
86.9
48
49.9
31.9
6.3
88.1
4.8
13.8
6.6
25.2
50.2
31.9
5.9
88.0
4.0
13.8
4.6
22.4
3.8
13.9
4.2
21.9
Projected
2019
2020
2021
50.5
31.7
5.5
87.7
50.7
32.7
5.1
88.5
0.1
14.2
3.9
18.2
50.8
31.9
4.7
87.4
Summary of Projected Payments from Brink’s to U.S. Plans
This table summarizes estimated payments from Brink’s to U.S. retirement plans.
(In millions)
Projected payments
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031 and thereafter
Total projected payments
Projected Payments to Plans from Brink's
Primary U.S. Pension
Plan
UMWA Plans
Black Lung Plans
Total
$
—
—
—
—
13.1
21.1
17.1
5.2
—
—
—
—
—
—
—
$
56.5
—
—
—
—
—
—
—
—
—
—
11.4
24.8
23.9
23.2
342.3
425.6
6.3
5.9
5.5
5.1
4.7
4.4
4.0
3.7
3.3
3.1
2.9
2.8
2.6
2.4
25.7
82.4
6.3
5.9
5.5
5.1
17.8
25.5
21.1
8.9
3.3
3.1
14.3
27.6
26.5
25.6
368.0
564.5
The amounts in the tables above are based on a variety of estimates, including actuarial assumptions as of December 31, 2016 . The estimated amounts will change in the future
to reflect payments made, investment returns, actuarial revaluations, and other changes in estimates. Actual amounts could differ materially from the estimated amounts.
Contingent Matters
During the fourth quarter of 2015, we became aware of an investigation initiated by COFECE (the Mexican antitrust agency) related to potential anti-competitive practices
among competitors in the cash logistics industry in Mexico (the industry in which Brink’s Mexican subsidiary, SERPAPROSA, is active). Because no legal proceedings have
been initiated against SERPAPROSA, we cannot estimate the probability of loss or any range of estimate of possible loss at this time. It is possible that SERPAPROSA could
become the subject of legal or administrative claims or proceedings, however, that could result in a loss that could be material to the Company’s results in a future period.
On March 21, 2016, The Bruce McDonald Holding Company, et al., filed a lawsuit in Circuit Court of Logan County, West Virginia against Addington, Inc. (“Addington”) and
The Brink’s Company related to an Agreement of Lease dated September 19, 1978, between the Plaintiffs and Addington. Plaintiffs seek declaratory judgment and unspecified
damages related to allegations that Addington failed to mine coal on the property leased from the Plaintiffs and failed to pay correct minimum royalties to the Plaintiffs. The
Company denies the allegations asserted by the Plaintiffs, is vigorously defending itself in this matter, and has filed a counterclaim against the Plaintiffs related to Plaintiffs’
failure to consent to the assignment and subleasing the leasehold to others. Due to numerous uncertain and unresolved factors presented in this case, it is not possible to estimate
a range of loss at this time and, accordingly, no accrual has been recorded in the Company’s financial statements.
In addition, we are involved in various other lawsuits and claims in the ordinary course of business. We are not able to estimate the loss or range of losses for some of these
matters. We have recorded accruals for losses that are considered probable and reasonably estimable. Other than the matters noted above, we do not believe that the ultimate
disposition of any of the lawsuits currently pending against the Company should have a material adverse effect on our liquidity, financial position or results of operations.
49
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The application of accounting principles requires the use of assumptions, estimates and judgments. We make assumptions, estimates and judgments based on, among other
things, knowledge of operations, markets, historical trends and likely future changes, similarly situated businesses and, when appropriate, the opinions of advisors with relevant
knowledge and experience. Reported results could have been materially different had we used a different set of assumptions, estimates and judgments.
Deferred Tax Asset Valuation Allowance
Deferred tax assets result primarily from net operating losses, tax credit carryforwards, and the net tax effects of temporary differences between the carrying amount of assets
and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates.
Accounting Policy
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 positive and negative evidence including historical earnings and future taxable income
that incorporates prudent, feasible tax-planning strategies. We assess deferred tax assets on an individual jurisdiction basis. Changes in tax statutes, the timing of deductibility
of expenses or expectations for future performance could result in material adjustments to our valuation allowances, which would increase or decrease tax expense. Our
valuation allowances are as follows.
Valuation
Allowances
(In millions)
U.S.
Non-U.S.
Total
Application of Accounting Policy
December 31,
2016
2015
$
$
38.1
24.7
62.8
20.4
25.3
45.7
U.S. Deferred Tax Assets
We had $320 million of net deferred tax assets at December 31, 2016 , of which $271 million related to U.S. jurisdictions. In 2016, we changed our judgment about the need for
valuation allowances for certain U.S. tax attributes with a limited statutory carryforward period that were no longer more-likely-than-not to be realized due to lower than
expected U.S. operating results, certain pre-tax items, and other timing of tax deductions related to executive leadership transition. As a result, we recognized a $14.7 million
valuation allowance in 2016 through income from continuing operations.
We used various estimates and assumptions to evaluate the need for the valuation allowance in the U.S. These included
•
•
•
•
projected revenues and operating income for our U.S. entities,
projected royalties and management fees paid to U.S. entities from subsidiaries outside the U.S.,
estimated required contributions to our U.S. retirement plans, and
interest rates on projected U.S. borrowings.
Our projections assumed continued growth of our revenues and operating profit both in the U.S. and outside the U.S. Had we used different assumptions, we might have made
different conclusions about the need for valuation allowances. For example, using different assumptions we might have concluded that we require a full valuation allowance
offsetting our U.S. deferred tax assets.
Non-U.S. Deferred Tax Assets
In 2015, we changed our judgment about the need for valuation allowances for deferred tax assets in certain non-U.S. jurisdictions as a result of changes in operating results and
the outlook about the future operating performance in those jurisdictions. As a result, we recognized $1.5 million of valuation allowances in 2015 through continuing operations.
50
Goodwill, Other Intangible Assets and Property and Equipment Valuations
Accounting Policy
At December 31, 2016 , we had property and equipment of $531.0 million , goodwill of $186.2 million and other intangible assets of $19.1 million , net of accumulated
depreciation and amortization. We review these assets for possible impairment using the guidance in FASB ASC Topic 350, Intangibles - Goodwill and Other , for goodwill
and other intangible assets and FASB ASC Topic 360, Property, Plant and Equipment , for property and equipment. Our review for impairment requires the use of significant
judgments about the future performance of our operating subsidiaries. Due to the many variables inherent in the estimates of the fair value of these assets, differences in
assumptions could have a material effect on the impairment analyses.
Application of Accounting Policy
Goodwill
We review goodwill for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. Application of the
goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to
reporting units, and determination of the fair value of each reporting unit.
Under U.S. GAAP, the annual impairment test may be either a quantitative test or a qualitative assessment. The qualitative assessment can be performed in order to determine
whether facts and circumstances support a determination that reporting unit fair values are greater than their carrying values.
For 2016 , we elected to bypass the optional qualitative assessment and we performed a quantitative goodwill impairment test instead. We estimated the fair value of each
reporting unit using projections of cash flows and compared to its carrying value. We completed the annual goodwill impairment test as of October 1, 2016 and concluded that
the fair value of each reporting unit substantially exceeded its carrying value ranging from 30% to 215%.
Finite-lived Intangible Assets and Property and Equipment
We review finite-lived intangible assets and property and equipment for impairment whenever events or changes in circumstances indicate that the related carrying amounts may
not be recoverable. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of the
cash flows of other groups of assets. To determine whether impairment has occurred, we compare estimates of the future undiscounted net cash flows of groups of assets to their
carrying value.
Estimates of Future Cash Flows
We made significant assumptions when preparing financial projections of cash flow used in our impairment analyses, including assumptions of future results of operations,
capital requirements, income taxes, long-term growth rates for determining terminal value, and discount rates. Our projections assumed continued growth of our revenues and
operating profit both in the U.S. and outside the U.S. Our conclusions regarding asset impairment may have been different if we had used different assumptions.
51
Retirement and Postemployment Benefit Obligations
We provide benefits through defined benefit pension plans and retiree medical benefit plans and under statutory requirements.
Accounting Policy
We account for pension and other retirement benefit obligations under FASB Accounting Standards Update (“ASU”) Topic 715, Compensation – Retirement Benefits. We
account for postemployment benefit obligations, including workers’ compensation obligations, under FASB ASC Topic 712, Compensation – Nonretirement Postemployment
Benefits .
To account for these benefits, we make assumptions of expected return on assets, discount rates, inflation, demographic factors and changes in the laws and regulations covering
the benefit obligations. Because of the inherent volatility of these items and because the obligations are significant, changes in the assumptions could have a material effect on
our liabilities and expenses related to these benefits.
Our most significant retirement plans include our primary U.S. pension plan and the retiree medical plans of our former coal business that were collectively bargained with the
United Mine Workers of America (the “UMWA”). The critical accounting estimates that determine the carrying values of liabilities and the resulting annual expense are
discussed below.
Application of Accounting Policy
Discount
Rate
Assumptions
For plans accounted under FASB ASC Topic 715, we discount estimated future payments using discount rates based on market conditions at the end of the year. In general, our
liability changes in an inverse relationship to interest rates. That is, the lower the discount rate, the higher the associated plan obligation.
U.S. Plans
For our largest retirement plans, including the primary U.S. pension and UMWA plans and black lung obligations, we derive the discount rates used to measure the present value
of benefit obligations using the cash flow matching method. Under this method, we compare the plan’s projected payment obligations by year with the corresponding yields on
a Mercer yield curve. Each year’s projected cash flows are then discounted back to their present value at the measurement date and an overall discount rate is determined. The
overall discount rate is then rounded to the nearest tenth of a percentage point.
We used Mercer’s Above-Mean Curve to determine the discount rates for retirement cost and the year-end benefit obligation.
To derive the Above-Mean Curve, Mercer uses only those bonds with a yield higher than the mean yield of the same portfolio of high quality bonds. The Above-Mean Curve
reflects the way an active investment manager would select high-quality bonds to match the cash flows of the plan.
Non-U.S. Plans
We use the same cash flow matching method to derive the discount rates of our major non-U.S. retirement plans. Where the cash flow matching method is not possible, rates of
local high-quality long-term government bonds are used to estimate the discount rate.
The discount rates for the primary U.S. pension plan, UMWA retiree medical plans and black lung obligations were:
Primary U.S. Plan
UMWA Plans
Black Lung
2016
2015
2014
2016
2015
2014
2016
2015
2014
Discount rate:
Retirement cost
Benefit obligation at year end
4.5%
4.3%
4.1%
4.5%
5.0%
4.1%
4.4%
4.1%
4.0%
4.4%
4.7%
4.0%
4.2%
3.9%
3.7%
4.2%
4.4%
3.7%
Sensitivity Analysis
The discount rate we select at year end materially 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, 2016 , actual expenses for 2016 and projected expenses for 2017 assuming
we had used discount rates that were one percentage point lower or higher.
Plan Obligations at December 31, 2016
(In millions)
Primary U.S. pension plan
UMWA plans
Hypothetical
1% lower
$
944.5
498.2
Actual
836.3
444.2
Hypothetical
1% higher
747.8
399.4
52
Actual 2016 and Projected 2017 Expense (Income)
(In millions, except for percentages)
Years Ending December 31,
Primary U.S. pension plan
Discount rate assumption
Retirement cost
UMWA plans
Discount rate assumption
Retirement cost
Hypothetical sensitivity analysis
for discount rate assumption
1% lower
2016
1% higher
2016
Actual
2016
Projected
2017
Hypothetical sensitivity analysis
for discount rate assumption
1% lower
2017
1% higher
2017
$
$
4.5%
6.8
4.4%
14.8
3.5%
13.8
3.4%
15.9
5.5%
0.8
$
5.4%
13.8
$
4.3%
6.7
4.1%
13.9
3.3%
14.0
3.1%
15.3
5.3%
0.2
5.1%
12.8
Expected-Return-on-Assets
Assumption
Our expected-return-on-assets assumption, which materially affects our net periodic benefit cost, reflects the long-term average rate of return we expect the plan assets to
earn. We select the expected-return-on-assets assumption using advice from our investment advisor considering each plan’s asset allocation targets and expected overall
investment manager performance and a review of the most recent long-term historical average compounded rates of return, as applicable. We selected 7.50% as the expected-
return-on-assets assumption for our primary U.S. plan and 8.25% for our UMWA retiree medical plans for actual 2016 expense. We selected 7.25% as the expected-return-on-
assets assumption for our primary U.S. plan and 8.25% for our UMWA retiree medical plans for projected 2017 expense.
The twenty to thirty year compound annual return of our primary U.S. pension plan has averaged from 7.2% to 8.8%.
Sensitivity Analysis
Effect of using different expected-rate-of-return assumptions. Our 2016 and projected 2017 expense would have been different if we had used different expected-rate-of-return
assumptions. For every hypothetical change of one percentage point in the assumed long-term rate of return on plan assets (and holding other assumptions constant), our actual
2016 and projected 2017 expense would be as follows:
(In millions, except for percentages)
Years Ending December 31,
Actual
2016
Expected-return-on-asset assumption
Primary U.S. pension plan
UMWA plans
Primary U.S. pension plan
$
UMWA plans
7.50%
8.25%
6.8
14.8
Hypothetical sensitivity analysis
for expected-return-on asset
assumption
1% lower
2016
1% higher
2016
Projected
2017
Hypothetical sensitivity analysis
for expected-return-on asset
assumption
1% lower
2017
1% higher
2017
8.50%
9.25%
(0.5) $
12.7
7.25%
8.25%
6.7
13.9
6.25%
7.25%
14.0
15.9
8.25%
9.25%
(0.6)
11.9
6.50%
7.25%
14.1
16.9
53
Effect of improving or deteriorating actual future market returns. Our funded status at December 31, 2017 , and our 2018 expense will be different from currently projected
amounts if our projected 2017 returns are better or worse than the returns we have assumed for each plan.
(In millions, except for percentages)
Years Ending December 31,
Return on investments in 2017
Primary U.S. pension plan
UMWA plans
Projected Funded Status at December 31, 2017
Primary U.S. pension plan
UMWA plans
2018 Expense (a)
Primary U.S. pension plan
UMWA plans
Hypothetical sensitivity analysis of 2017 asset
return
better or worse than expected
Projected
Better return
Worse return
7.25%
8.25%
(92)
(228)
5
14
$
$
14.50%
16.50%
(41)
(211)
3
11
—%
—%
(143)
(244)
7
17
(a)
Actual future returns on investments will not affect our earnings until 2018 since the earnings in 2017 will be based on the "expected return on assets" assumption.
Effect of using fair market value of assets to determine expense. For our defined-benefit pension plans, we calculate expected investment returns by applying the expected long-
term rate of return to the market-related value of plan assets. In addition, our plan asset actuarial gains and losses that are subject to amortization are based on the market-related
value.
The market-related value of the plan assets is different from the actual or fair market value of the assets. The actual or fair market value is, at a point in time, the value of the
assets that is available to make payments to pensioners and to cover any transaction costs. The market-related value recognizes changes in fair value from the expected value on
a straight-line basis over five years. This recognition method spreads the effects of year-over-year volatility in the financial markets over several years.
Our expenses related to our primary U.S. pension plan would have been different if our accounting policy were to use the fair market value of plan assets instead of the market-
related value to recognize investment gains and losses.
(In millions)
Based on market-related value of assets
Hypothetical (a)
Years Ending December 31,
Actual
2016
Projected
Projected
2017
2018
2016
2017
2018
Primary U.S. pension plan expense
$
6.8
6.7
4.8 $
12.7
11.9
8.3
(a)
Assumes that our accounting policy was to use the fair market value of assets instead of the market-related value of assets to determine our expense related to our primary U.S. pension plan.
For our UMWA plans, we calculate expected investment returns by applying the expected long-term rate of return to the fair market value of the assets at the beginning of the
year. This method is likely to cause the expected return on assets, which is recorded in earnings, to fluctuate more than had we used the accounting methodology of our defined-
benefit pension plans.
Medical
Inflation
Assumption
We estimate the trend in healthcare cost inflation to predict future cash flows related to our retiree medical plans. Our assumption is based on recent plan experience and industry
trends.
For the UMWA plans, our largest retiree medical plans, we have assumed a medical inflation rate of 7% for 2017 , and we project this rate to decline to 5% in 2023 and hold at
5% thereafter. Our medical inflation rate assumption (including the assumption that medical inflation rates will gradually decline over the next seven years and hold at 5%) is
based on macroeconomic assumptions of gross domestic growth rates, the excess of national health expenditures over other goods and services, and population growth. The
average annual medical inflation rate of the company over the last five to ten years ranged from 6.0% to 6.6%.
If we had assumed that medical inflation rates were one percentage point higher in each future year, the plan obligation for these plans at December 31, 2016 , would have been
approximately $50.1 million higher and the expense for 2016 would have been $2.1 million higher. If we had assumed that the medical inflation rates were one percentage point
lower, the plan obligation at December 31, 2016 , would have been approximately $42.6 million lower and the related 2016 expenses would have been $1.7 million lower.
54
If we had projected medical inflation rates to decline from 6.7% to 4.5% by 2028, instead of our projected decline from 7% to 5% by 2023 , the plan obligation for the UMWA
retiree medical benefit plan would have been $0.4 million lower for 2016 and our expense would be $0.1 million lower for 2017 .
Excise
Tax
on
Administrators
by
Patient
Protection
and
Affordable
Care
Act
A 40% excise tax is expected to be imposed on high-cost health plans (“Cadillac plans”) beginning in 2020. The tax will apply to plan costs that exceed a certain threshold level
for individuals and for families, which will be indexed to inflation. Even though the tax is not assessed directly to an employer but rather to the benefits plan administrator, the
cost is expected to be passed through to plan sponsors as higher premiums or higher claims administration fees, increasing the plan sponsor’s obligations. We project that we
will have to pay the benefits plan administrator this excise tax beginning in 2020, and our plan obligations at December 31, 2016 , include $19.4 million related to this tax. We
are currently unable to reduce the benefit levels of our UMWA medical plans to avoid this excise tax because these benefit levels are required by the Coal Industry Retiree
Health Benefit Act of 1992.
Workers’
Compensation
Besides the effects of changes in medical costs, worker’s compensation costs are affected by the severity and types of injuries, changes in state and federal regulations and their
application and the quality of programs which assist an employee’s return to work. Our liability for future payments for workers’ compensation claims is evaluated annually
with the assistance of an actuary.
Numbers
of
Participants
Mortality tables. We use the Mercer modified RP-2014 base table and Mercer modified MP-2016 projection scale, with Blue Collar adjustments for majority of our U.S.
retirement plans and White Collar adjustment for our nonqualified U.S. pension plan.
Lump sum offer to participants in 2014. In August 2014, we offered approximately 9,000 terminated participants that had not yet retired the option of receiving the value of
their pension benefit in a lump-sum payment, or as a reduced annuity that would begin earlier. The lump-sum elections were accepted by approximately 4,300 terminated
participants resulting in payments by the plan of about $150 million. This action helped reduce the premiums paid to the Pension Benefit Guaranty Corporation (“PBGC”) as a
portion of the premiums is based on the number of participants in the plan. We recognized a settlement loss in the fourth quarter of 2014 related to the lump-sum payment of
$56 million.
Number of participants . The number of participants by major plan in the past five years is as follows:
Plan
UMWA plans
Black Lung
U.S. pension
Number of participants
2016
2015
2014
2013
2012
3,600
750
14,800
3,700
700
15,000
3,900
700
15,200
4,100
710
19,800
4,300
780
20,100
Because we are no longer operating in the coal industry, we anticipate that the number of participants in the UMWA retirement medical plan will decline over time due to
mortality. Because the U.S. pension plan has been frozen, the number of its participants will also decline over time.
55
Foreign Currency Translation
The majority of our subsidiaries outside the U.S. conduct business in their local currencies. Our financial results are reported in U.S. dollars, which include the results of these
subsidiaries.
Accounting Policy
Our accounting policy for foreign currency translation is different depending on whether the economy in which our foreign subsidiary operates has been designated as highly
inflationary. Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary. Subsequent reductions in cumulative inflation rates
below 100% do not change the method of translation unless the reduction is deemed to be other than temporary.
Non-Highly Inflationary Economies
Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation
adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and
losses are recorded in net income (loss).
Highly Inflationary Economies
Foreign subsidiaries that operate in highly inflationary countries must use the reporting currency (the U.S. dollar) as the functional currency. Local-currency monetary assets
and liabilities are remeasured into dollars each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Non-monetary
assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.
Application of Accounting Policy
Venezuela
The economy in Venezuela has had significant inflation in the last several years. We consolidate our Venezuelan results using our accounting policy for subsidiaries operating
in highly inflationary economies.
Since 2003, the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar, and has required that currency exchanges
be made at official rates established by the government instead of allowing open markets to determine currency rates. Different official rates exist for different industries and
purposes and the government does not approve all requests to convert bolivars to other currencies.
As a result of the restrictions on currency exchange, we have in the past been unable to obtain sufficient U.S. dollars to purchase certain imported supplies and fixed assets to
fully operate our business in Venezuela. Consequently, we have occasionally purchased more expensive, bolivar-denominated supplies and fixed assets. Furthermore, there is a
risk that official currency exchange mechanisms will be discontinued or will not be accessible when needed in the future, which may prevent us from repatriating dividends or
obtaining dollars to operate our Venezuelan operations. Since the end of 2013, we have only obtained $1.2 million dollars through official exchange mechanisms and these
amounts were used in Venezuela operations.
Remeasurement
rates
during
2014
. Through March 23, 2014, we used an official rate of 6.3 bolivars to the dollar to remeasure our bolivar-denominated monetary assets and
liabilities into U.S. dollars and to translate our revenues and expenses. Effective March 24, 2014, the government initiated another exchange mechanism known as SICAD II
and we began to use this exchange rate to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenues and expenses. During 2014, the SICAD II
rate averaged approximately 50 bolivars to the dollar and, at December 31, 2014, the rate was approximately 50 bolivars to the dollar.
We recognized a $121.6 million net remeasurement loss in 2014 when we changed from the official rate of 6.3 to the SICAD II exchange rate. The after-tax effect of these losses
attributable to noncontrolling interests was $39.7 million in 2014. While the SICAD II process existed, we received approval to obtain $1.2 million (weighted-average exchange
rate of 51 ) through this exchange mechanism.
Remeasurement
rates
during
2015
. Through February 11, 2015, we used the SICAD II rates to remeasure our bolivar-denominated monetary assets and liabilities into U.S.
dollars and to translate our revenue and expenses. Effective February 12, 2015, the SICAD II exchange mechanism was disbanded and we began to use the rate under the new
exchange mechanism, known as SIMADI, to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. The SIMADI rate ranged
from 170 to 200 bolivars to the dollar since it was first published through the end of 2015. At December 31, 2015, it was 199 bolivars to the dollar. We recognized an $18.1
million net remeasurement loss in 2015. The after-tax effect of this loss attributable to noncontrolling interests was $5.6 million . We received minimal U.S. dollars using the
SIMADI process.
Remeasurement
rates
during
2016
. In the first quarter of 2016, the Venezuelan government announced that they would replace the SIMADI exchange mechanism with the
DICOM exchange mechanism and would allow the DICOM exchange mechanism rate to float freely. At March 31, 2016, the DICOM rate was approximately 273 bolivars to
the dollar. Since March 31, 2016, the rate has declined 59% to close at approximately 674 bolivars to the dollar at December 31, 2016 . We have received only minimal U.S.
dollars through this exchange mechanism. We recognized a $4.8 million pretax remeasurement loss in 2016. However, the after-tax effect in the current period attributable to
noncontrolling interest was income of $2.7 million .
56
Items related to our Venezuelan operations are as follows:
•
•
•
•
•
Our investment in our Venezuelan operations on an equity-method basis was $19.2 million at December 31, 2016 , and $26.0 million at December 31, 2015 .
Our Venezuelan operations had net payables to other Brink's affiliates of $6.1 million at December 31, 2016 and $18.7 million at December 31, 2015 .
Our Venezuelan operations had net nonmonetary assets of $17.6 million at December 31, 2016 , and $13.5 million at December 31, 2015 .
Our bolivar-denominated net monetary net assets were $1.4 million (including $6.8 million of cash and cash equivalents) at December 31, 2016 , and $9.5 million
(including $6.2 million of cash and cash equivalents) at December 31, 2015 .
Accumulated other comprehensive losses attributable to Brink’s shareholders related to our operations in Venezuela were approximately $114.7 million at
December 31, 2016 and $113.0 million at December 31, 2015 .
Argentina
We use the official exchange rate to translate the Brink's Argentina balance sheet and income statement. During 2015, the official exchange rate ranged from 8.5 to 9.8 local
pesos to the U.S. dollar until December 17, 2015 when the currency was devalued. At December 31, 2016 , the official exchange rate was 15.9 Argentine pesos to the U.S.
dollar.
The government in Argentina had previously imposed limits on the exchange of Argentine pesos into U.S. dollars. As a result, we elected in the past and may continue in the
future to repatriate cash from Argentina using different markets to convert Argentine pesos into U.S. dollars if U.S. dollars are not readily available. Conversions prior to the
December 17, 2015 devaluation had settled at rates approximately 30% to 40% less favorable than the rates at which we translated the financial statements of our subsidiary in
Argentina. After the December 2015 devaluation of the Argentine peso, the market rates used to convert Argentine pesos into U.S. dollars have been similar to the rates at which
we translate the financial statements of our subsidiary in Argentina. See Note 19 for more information.
We recognized losses from converting Argentine pesos into U.S. dollars of $0.1 million in 2016 , $7.1 million in 2015 and $3.6 million in 2014. These conversion losses are
classified in the consolidated statements of operations as other operating income (expense). At December 31, 2016 , we had cash denominated in Argentine pesos of $11.6
million .
The economy in Argentina has had significant inflation in recent years. As of December 31, 2016, Argentina was not designated as a highly inflationary economy for accounting
purposes. We will continue to monitor developments in Argentina at each reporting date to determine whether we should consolidate Brink's Argentina results using our
accounting policy for subsidiaries operating in highly inflationary economies.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which will require the recognition of assets and liabilities by lessees for certain leases classified as
operating leases under current accounting guidance. The new standard also requires expanded disclosures regarding leasing activities. ASU 2016-02 will be effective January 1,
2019 and we are assessing the potential impact of the standard on financial reporting.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which simplifies how certain features related to share-based
payments are accounted for and presented in the financial statements. We elected to early adopt this ASU in the fourth quarter of 2016 and, per the requirements of the
pronouncement, we applied the amendments to the beginning of 2016. Under ASU 2016-09, accounting changes adopted using the modified retrospective method must be
calculated as of the beginning of 2016 and reported as a cumulative-effect adjustment. As a result, we recognized a $0.2 million cumulative-effect adjustment to January 1, 2016
retained earnings for previously unrecognized excess tax benefits. We have elected to continue our previous accounting policy of estimating forfeitures and, therefore, we did not
recognize any cumulative-effect adjustment related to forfeitures. ASU 2016-09 requires that accounting changes adopted using the prospective method should be reported in the
applicable interim periods of 2016. We did not have any material changes to previously reported interim financial information in 2016 as it relates to the recognition of excess
tax benefits in the statement of operations or the classification of excess tax benefits in the statement of cash flows.
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments , which significantly changes the way entities recognize impairment of
many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. ASU 2016-13 is effective January 1, 2020, with
early adoption permitted January 1, 2019. We are assessing the potential impact of this new standard on financial reporting.
In November 2016, the FASB issues ASU 2016-18, Statement of Cash Flows: Restricted Cash , which requires entities to include restricted cash and restricted cash equivalent
balances with cash and cash equivalent balances in the statement of cash flows. ASU 2016-18 will be effective January 1, 2018 and will impact the presentation of our statement
of cash flows.
In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts with Customers, a new standard related to revenue recognition which requires an entity to recognize an
amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The new standard will replace most of the existing revenue
recognition standards in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of this new standard to January 1, 2018. Subsequently, the
FASB has continued to refine
57
the standard and has issued several amendments. We have not yet completed our final review of the impact of this guidance but we believe that the most likely effects will be
related to variable consideration and capitalization of costs to obtain contracts. We are also continuing to review potential disclosures and our method of adoption in order to
complete our evaluation. Based on our preliminary assessment, we do not expect a material impact on our financial reporting.
58
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We currently serve customers in more than 100 countries, including 40 countries where we operate subsidiaries. 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 our 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, 2016 . 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 unsecured notes, are subject to fluctuations in fair values as a result of changes in
interest rates.
Our floating rate debt typically is based on an underlying floating rate component as well as a fixed rate margin component. Based on the contractual interest rates on our
floating rate debt at December 31, 2016 , a hypothetical 10% increase in rates would increase cash outflows by approximately $0.5 million over a twelve-month period. In other
words, the weighted-average interest rate on our floating rate instruments (including any fixed rate margin component) was 2.8% per annum at December 31, 2016 . If the
underlying floating rate component were to increase by 10%, our average rate on this debt would increase by 0.2 percentage points to 3.0%. The effect on the fair values on our
unsecured notes for a hypothetical 10% decrease in the yield curve from year-end 2016 levels would result in a $1.2 million increase for our unsecured notes in the fair values of
the debt.
Foreign Currency Risk
We have exposure to the effects of foreign currency exchange rate fluctuations on the results of all of our foreign operations. Our foreign operations generally use local
currencies to conduct business but their results are reported in U.S. dollars.
We are also exposed periodically to the foreign currency rate fluctuations that affect transactions not denominated in the functional currency of domestic and foreign
operations. To mitigate these exposures, we, from time to time, enter into foreign currency forward and swap contracts. At December 31, 2016 , the notional value of our
shorter term outstanding foreign currency forward and swap contracts was $41.9 million with average contract maturities of approximately one month. These shorter term
contracts primarily offset exposures in the British pound and the Mexican peso. Additionally, these shorter term contracts are not designated as hedges for accounting purposes,
and accordingly, changes in their fair value are recorded immediately in earnings. We also have a longer term cross currency swap contract to hedge exposure in the Brazilian
real which is designated as a cash flow hedge for accounting purposes. At December 31, 2016 , the notional value of that longer term contract was $7.9 million with a weighted-
average maturity of 0.6 years. We do not use derivative financial instruments to hedge investments in foreign subsidiaries since such investments are long-term in nature.
The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from the 2016 levels against all other currencies of countries in which we have continuing
operations are as follows:
(In millions)
Effect on Earnings:
Translation of 2016 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)
$
(13.6)
0.4
(70.0)
The hypothetical foreign currency effects above detail the consolidated effect attributable to Brink’s of a simultaneous change in the value of a large number of foreign
currencies relative to the U. S. dollar. The foreign currency exposure effect related to a change in an individual currency could be significantly different.
59
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THE BRINK’S COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2016
TABLE OF CONTENTS
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies
Note 2 – Segment Information
Note 3 – Retirement Benefits
Note 4 – Income Taxes
Note 5 – Property and Equipment
Note 6 – Goodwill and Other Intangible Assets
Note 7 – Prepaid Expenses and Other
Note 8 – Other Assets
Note 9 – Accumulated Other Comprehensive Income (Loss)
Note 10 – Fair Value of Financial Instruments
Note 11 – Accrued Liabilities
Note 12 – Other Liabilities
Note 13 – Debt
Note 14 – Accounts Receivable
Note 15 – Operating Leases
Note 16 – Share-Based Compensation Plans
Note 17 – Capital Stock
Note 18 – Loss from Discontinued Operations
Note 19 – Supplemental Cash Flow Information
Note 20 – Other Operating Income (Expense)
Note 21 – Interest and Other Nonoperating Income (Expense)
Note 22 – Other Commitments and Contingencies
Note 23 – Reorganization and Restructuring
Note 24 – Selected Quarterly Financial Data (unaudited)
60
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64
65
66
67
68
69
74
79
91
94
94
95
95
96
99
100
100
101
103
104
105
111
112
114
114
115
115
116
117
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, 2016 . 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 (2013).”
Based on this assessment, our management believes that, as of December 31, 2016 , our internal control over financial reporting is effective based on the COSO 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 62.
61
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
The Brink’s Company:
We have audited The Brink’s Company’s (the Company) internal control over financial reporting as of December 31, 2016 , based on criteria established in Internal Control -
Integrated Framework (2013) 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, 2016 , based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
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, 2016 and 2015 , and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for
each of the years in the three-year period ended December 31, 2016 , and our report dated February 23, 2017 , expressed an unqualified opinion on those consolidated financial
statements.
/s/ KPMG LLP
Richmond, Virginia
February 23, 2017
62
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
The Brink’s Company:
We have audited the accompanying consolidated balance sheets of The Brink’s Company and subsidiaries as of December 31, 2016 and 2015 , and the related consolidated
statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three‑year period ended December 31, 2016 . These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Brink’s Company and subsidiaries as
of December 31, 2016 and 2015 , and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2016 , in conformity
with U.S. generally accepted accounting principles.
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, 2016 , based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 23, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
/s/ KPMG LLP
Richmond, Virginia
February 23, 2017
63
THE BRINK’S COMPANY
and subsidiaries
Consolidated Balance Sheets
December 31,
2016
2015
(In millions, except for per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable (net of allowance: 2016 - $8.3; 2015 - $9.1)
LIABILITIES AND EQUITY
Prepaid expenses and other
Total current assets
Property and equipment, net
Goodwill
Other intangibles
Deferred income taxes
Other
Total assets
Current liabilities:
Short-term borrowings
Current maturities of long-term debt
Accounts payable
Accrued liabilities
Restricted cash held for customers
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, 13, 15, 18, 22 and 23)
Equity:
The Brink’s Company (“Brink’s”) shareholders:
Common stock, par value $1 per share:
Shares authorized: 100.0
Shares issued and outstanding: 2016 - 50.0; 2015 - 48.9
Capital in excess of par value
Retained earnings
Accumulated other comprehensive income (loss):
Benefit plan adjustments
Foreign currency translation
Unrealized gains on available-for-sale securities
Gains on cash flow hedges
$
$
$
183.5
55.5
501.1
103.6
843.7
531.0
186.2
19.1
327.9
86.9
181.9
16.4
478.1
101.3
777.7
549.0
185.3
28.5
329.8
76.4
1,994.8
1,946.7
162.8
32.8
139.3
385.7
33.2
753.8
247.6
208.8
286.1
7.6
136.1
32.6
39.8
155.3
401.2
12.9
641.8
358.1
219.4
259.2
8.1
129.5
1,640.0
1,616.1
50.0
618.1
576.0
(559.6)
(349.1)
1.0
0.7
48.9
599.6
561.3
(570.5)
(322.6)
1.1
0.1
Accumulated other comprehensive loss
(907.0)
(891.9)
Brink’s shareholders
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
64
337.1
17.7
354.8
317.9
12.7
330.6
$
1,994.8
1,946.7
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Operations
(In millions, except for per share amounts)
2016
2015
2014
Years Ended December 31,
Revenues
Costs and expenses:
Cost of revenues
Selling, general and administrative expenses
Total costs and expenses
Other operating expense
Operating profit (loss)
Interest expense
Interest and other income
Income (loss) from continuing operations before tax
Provision for income taxes
Income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)
Less net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Brink’s
Amounts attributable to Brink’s:
Continuing operations
Discontinued operations
Net income (loss) attributable to Brink’s
Earnings (loss) per share attributable to Brink’s common shareholders (a) :
Basic:
Continuing operations
Discontinued operations
Net income (loss)
Diluted:
Continuing operations
Discontinued operations
Net income (loss)
Weighted-average shares
Basic
Diluted
(a) Amounts may not add due to rounding.
See accompanying notes to consolidated financial statements.
65
$
3,020.6
3,061.4
3,562.3
2,424.8
431.5
2,856.3
(20.1)
144.2
(20.4)
1.2
125.0
78.5
46.5
(1.7)
44.8
10.3
34.5
36.2
(1.7)
34.5
0.72
(0.03)
0.69
0.72
(0.03)
0.68
50.0
50.6
$
$
$
$
$
2,471.6
463.8
2,935.4
(69.4)
56.6
(18.9)
3.4
41.1
66.5
(25.4)
(2.8)
(28.2)
(16.3)
(11.9)
(9.1)
(2.8)
(11.9)
(0.19)
(0.06)
(0.24)
(0.19)
(0.06)
(0.24)
49.3
49.3
2,948.2
560.6
3,508.8
(81.0)
(27.5)
(23.4)
1.9
(49.0)
36.7
(85.7)
(29.1)
(114.8)
(30.9)
(83.9)
(54.8)
(29.1)
(83.9)
(1.12)
(0.59)
(1.71)
(1.12)
(0.59)
(1.71)
49.0
49.0
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31,
2016
2015
2014
$
44.8
(28.2)
(114.8)
(In millions)
Net income (loss)
Benefit plan adjustments:
Benefit plan experience gains (losses)
Benefit plan prior service costs
Deferred profit sharing
Total benefit plan adjustments
Foreign currency translation adjustments
Unrealized net losses on available-for-sale securities
Gains (loss) on cash flow hedges
Other comprehensive loss before tax
Provision (benefit) for income taxes
Other comprehensive loss
Comprehensive income (loss)
Less comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income (loss) attributable to Brink’s
$
See accompanying notes to consolidated financial statements.
66
12.6
(1.6)
(0.3)
10.7
(26.3)
(0.1)
0.8
(14.9)
0.9
(15.8)
29.0
9.6
19.4
4.4
(3.6)
—
0.8
(104.1)
(0.5)
(0.3)
(104.1)
(0.7)
(103.4)
(131.6)
(20.1)
(111.5)
(134.3)
(2.9)
0.3
(136.9)
(87.0)
(0.4)
(0.2)
(224.5)
(43.0)
(181.5)
(296.3)
(37.7)
(258.6)
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Equity
Years Ended December 31, 2016 , 2015 and 2014
Shares
Common
Stock
Capital in
Excess of Par
Value
Retained
Earnings
Accumulated Other
Comprehensive Loss
Attributable to
Noncontrolling
Interests
(In millions)
Balance as of December 31, 2013
Net loss
Other comprehensive loss
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
Reduction in excess tax benefit of stock compensation
Other share-based benefit transactions
Capital contributions from noncontrolling interest
Balance as of December 31, 2014
Net loss
Other comprehensive loss
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
Reduction in excess tax benefit of stock compensation
Other share-based benefit transactions
Business dispositions
Acquisitions of noncontrolling interests
Balance as of December 31, 2015
Cumulative effect of change in accounting principle (a)
Net income
Other comprehensive loss
Common stock issued
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
Other share-based benefit transactions
48.4 $
—
—
—
—
—
—
—
0.2
—
48.6
—
—
—
—
—
0.2
—
0.1
—
—
48.9
—
—
—
0.1
—
—
—
0.5
0.5
48.4
—
—
—
—
—
—
—
0.2
—
48.6
—
—
—
—
—
0.2
—
0.1
—
—
48.9
—
—
—
0.1
—
—
—
0.5
0.5
50.0
566.4
—
—
—
—
17.3
0.4
(0.6)
1.0
—
584.5
—
—
—
—
14.1
3.6
(1.8)
0.6
—
(1.4)
599.6
—
—
—
2.9
—
—
9.5
11.7
(5.6)
618.1
696.4
(83.9)
—
(19.4)
—
—
—
—
(0.2)
—
592.9
(11.9)
—
(19.5)
—
—
—
—
(0.2)
—
—
561.3
0.2
34.5
—
—
(19.8)
—
—
—
(0.2)
576.0
(617.3)
—
(174.7)
—
—
—
—
—
—
—
(792.0)
—
(99.6)
—
—
—
—
—
—
—
(0.3)
(891.9)
—
—
(15.1)
—
—
—
—
—
—
85.6
(30.9)
(6.8)
—
(8.6)
—
—
—
—
0.5
39.8
(16.3)
(3.8)
—
(5.3)
—
—
—
—
(1.9)
0.2
12.7
—
10.3
(0.7)
—
—
(4.6)
—
—
—
Total
779.5
(114.8)
(181.5)
(19.4)
(8.6)
17.3
0.4
(0.6)
1.0
0.5
473.8
(28.2)
(103.4)
(19.5)
(5.3)
14.1
3.8
(1.8)
0.5
(1.9)
(1.5)
330.6
0.2
44.8
(15.8)
3.0
(19.8)
(4.6)
9.5
12.2
(5.3)
Balance as of December 31, 2016
50.0 $
(907.0)
17.7
354.8
(a) We elected to early adopt the provisions of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , in the fourth quarter of 2016 resulting in a cumulative effect adjustment to Retained Earnings for
previously unrecognized excess tax benefits. See Note 1 for further discussion of the impacts of this standard.
See accompanying notes to consolidated financial statements.
67
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Cash Flows
(In millions)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Years Ended December 31,
2016
2015
2014
$
44.8
(28.2)
(114.8)
Loss from discontinued operations, net of tax
Depreciation and amortization
Share-based compensation expense
Deferred income taxes
Gains and losses:
Marketable securities
Property and other assets
Business acquisitions and dispositions
Venezuela impairment
Other impairment losses
Retirement benefit funding (more) less than expense:
Pension
Other than pension
Remeasurement losses due to Venezuela currency devaluations
Other operating
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable and income taxes receivable
Accounts payable, income taxes payable and accrued liabilities
Customer obligations
Prepaid and other current assets
Other
Discontinued operations
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Acquisitions
Dispositions, net of cash disposed
Marketable securities:
Purchases
Sales
Cash proceeds from sale of property, equipment and investments
Other
Discontinued operations
Net cash used by investing activities
Cash flows from financing activities:
Borrowings (repayments) of debt:
Short-term borrowings
Long-term revolving credit facilities:
Borrowings
Repayments
Other long-term debt:
Borrowings
Repayments
Acquisitions of noncontrolling interests
Nonrecourse financing of real estate transaction
1.7
131.6
9.5
(2.9)
(0.5)
1.3
(0.1)
—
20.6
13.6
13.7
4.8
3.7
(53.2)
13.9
(13.2)
(10.0)
(11.8)
—
167.5
(112.2)
(0.7)
(0.6)
(9.2)
9.1
4.7
—
—
2.8
139.9
14.1
7.1
(1.1)
(0.9)
6.3
35.3
1.9
10.8
9.2
18.1
2.6
(44.8)
20.1
12.5
(3.4)
(4.4)
(2.0)
195.9
(101.1)
—
(14.6)
(27.3)
33.9
1.9
1.6
1.9
(108.9)
(103.7)
115.0
494.0
(606.2)
4.8
(39.0)
—
—
(22.7)
569.5
(633.9)
86.1
(42.0)
(1.5)
14.5
29.1
161.9
17.3
(28.4)
(0.4)
(44.9)
—
—
3.3
(23.6)
1.5
121.6
7.6
(90.7)
105.5
15.4
(9.9)
(14.7)
5.5
141.3
(136.1)
(4.6)
—
—
0.9
62.7
(3.6)
(13.3)
(94.0)
(7.8)
703.8
(588.8)
7.5
(81.0)
—
—
Common stock issued
Dividends to:
Shareholders of Brink’s
Noncontrolling interests in subsidiaries
Proceeds from exercise of stock options
Minimum tax withholdings associated with share-based compensation
Other
Discontinued operations
Net cash (used) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents:
Increase (decrease)
Balance at beginning of period
Balance at end of period
See accompanying notes to consolidated financial statements.
3.0
(19.8)
(4.6)
12.2
(6.6)
2.3
—
(44.9)
(12.1)
1.6
181.9
183.5
—
(19.5)
(5.3)
3.8
(2.0)
0.3
0.2
(52.5)
(34.0)
5.7
176.2
181.9
—
(19.4)
(8.6)
0.4
(1.2)
(1.6)
—
3.3
(129.9)
(79.3)
255.5
176.2
$
68
Note
1
-
Summary
of
Significant
Accounting
Policies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE BRINK’S COMPANY
and subsidiaries
Basis
of
Presentation
The Brink’s Company (along with its subsidiaries, “we,” “our,” “Brink’s” or the “Company”), based in Richmond, Virginia, is a leading provider of secure transportation, cash
management services and other security-related services to banks and financial institutions, retailers, government agencies, mints, jewelers and other commercial operations
around the world. Brink’s is the oldest and largest secure transportation and cash management services company in the U.S., and a market leader in many other countries.
Principles
of
Consolidation
The consolidated financial statements include 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 investments. All significant intercompany accounts and transactions have been eliminated in consolidation.
Revenue
Recognition
Revenue is recognized when services related to armored vehicle transportation, ATM services, Cash Management Services, payment services, guarding and the secure
international transportation of valuables are performed. Customer contracts have prices that are fixed and determinable and we assess the customer’s ability to meet the
contractual terms, including payment terms, before entering into contracts. Taxes collected from customers and remitted to governmental authorities are not included in
revenues in the consolidated statements of operations.
Cash
and
Cash
Equivalents
Cash and cash equivalents include cash on hand, demand deposits and investments with original maturities of three months or less. Cash and cash equivalents include amounts
held by certain of our secure Cash Management Services operations for customers for which, under local regulations, the title transfers to us for a short period of time. The cash
is generally credited to customers’ accounts the following day and we do not consider it as available for general corporate purposes in the management of our liquidity and
capital resources. We record a liability for the amounts owed to customers (see Note 11).
Trade
Accounts
Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable
credit losses on our existing accounts receivable. We determine the allowance based on historical write-off experience. We review our allowance for doubtful accounts
quarterly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Property
and
Equipment
Property and equipment are recorded at cost. Depreciation is calculated principally on the straight-line method based on the estimated useful lives of individual assets or classes
of assets.
Leased property and equipment meeting capital lease criteria are capitalized at the lower of the present value of the related lease payments or the fair value of the leased asset at
the inception of the lease. Amortization is calculated on the straight-line method based on the lease term.
Leasehold improvements are recorded at cost. Amortization is calculated principally on the straight-line method over the lesser of the estimated useful life of the leasehold
improvement or the lease term. Renewal periods are included in the lease term when the renewal is determined to be reasonably assured.
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
Years
16 to 25
3 to 10
3 to 10
3 to 5
3 to 10
Expenditures for routine maintenance and repairs on property and equipment are charged to expense. Major renewals, betterments and modifications are capitalized and
depreciated over the lesser of the remaining life of the asset or, if applicable, the lease term.
69
Goodwill
and
Other
Intangible
Assets
Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Intangible assets arising
from business acquisitions include customer lists, customer relationships, covenants not to compete, trademarks and other identifiable intangibles. At December 31, 2016 ,
finite-lived intangible assets have remaining useful lives ranging from 1 to 11 years and are amortized based on the pattern in which the economic benefits are used or on a
straight-line basis.
Impairment
of
Goodwill
and
Long-Lived
Assets
Goodwill is not amortized but is tested at least annually for impairment at the reporting unit level, which is at the operating segment level or one level below an operating
segment. Goodwill is assigned to one or more reporting units at the date of acquisition.
We have ten reporting units which are comprised of:
•
•
•
•
each of the five countries within Largest 5 Markets (U.S., France, Mexico, Brazil and Canada),
each of the three regions within Global Markets (Latin America, EMEA and Asia),
the Latin American Payment Services businesses, and
the U.S. Payment Services business
We performed goodwill impairment tests on the reporting units that had goodwill as of October 1, 2016. We performed a quantitative analysis to determine whether reporting
unit fair values exceeded their carrying amounts. We based our estimates of fair value on projected future cash flows and completed these impairment tests, as well as the tests in
the previous two years, with no impairment charges required.
Indefinite-lived intangibles are also tested for impairment at least annually by comparing their carrying values to their estimated fair values. We have had no significant
impairments of indefinite-lived intangibles in the last three years.
Long-lived assets other than goodwill and other indefinite-lived intangibles are reviewed for impairment when events or changes in circumstances indicate the carrying value of
an asset may not be recoverable.
For long-lived assets other than goodwill that are to be held and used in operations, an impairment is indicated when the estimated total undiscounted cash flow associated with
the asset or group of assets is less than carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the
difference between the carrying value and fair value.
Retirement
Benefit
Plans
We account for retirement benefit obligations under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 715, Compensation –
Retirement Benefits . For U.S. and certain non-U.S. retirement plans, we derive the discount rates used to measure the present value of benefit obligations using the cash flow
matching method. Under this method, we compare the plan’s projected payment obligations by year with the corresponding yields on a Mercer yield curve. Each year’s
projected cash flows are then discounted back to their present value at the measurement date and an overall discount rate is determined. The overall discount rate is then rounded
to the nearest tenth of a percentage point. In non-U.S. locations where the cash flow matching method is not possible, rates of local high-quality long-term government bonds
are used to select the discount rate.
We used Mercer’s Above-Mean Curve to determine the discount rates for the year-end benefit obligations and retirement cost of our U.S. retirement plans.
We select the expected long-term rate of return assumption for our U.S. pension plan and retiree medical plans using advice from our investment advisor. The selected rate
considers plan asset allocation targets, expected overall investment manager performance and long-term historical average compounded rates of return.
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. We recognize tax benefits related to uncertain tax positions if we believe it is
more likely than not the benefit will be realized. We review our deferred tax assets to determine if it is more-likely-than-not that they will be realized. If we determine it is not
more-likely-than-not that a deferred tax asset will be realized, we record a valuation allowance to reverse the previously recognized tax benefit.
70
Foreign
Currency
Translation
Our consolidated financial statements are reported in U.S. dollars. Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate.
The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated
as highly inflationary or not. Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary.
Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation
adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and
losses are recorded in net income (loss).
Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency. Local currency monetary assets and liabilities are remeasured
into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Non-
monetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.
Venezuela
The economy in Venezuela has had significant inflation in the last several years. We consolidate our Venezuelan results using our accounting policy for subsidiaries operating
in highly inflationary economies.
Since 2003, the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar, and has required that currency exchanges
be made at official rates established by the government instead of allowing open markets to determine currency rates. Different official rates exist for different industries and
purposes and the government does not approve all requests to convert bolivars to other currencies.
As a result of the restrictions on currency exchange, we have in the past been unable to obtain sufficient U.S. dollars to purchase certain imported supplies and fixed assets to
fully operate our business in Venezuela. Consequently, we have occasionally purchased more expensive, bolivar-denominated supplies and fixed assets. Furthermore, there is a
risk that official currency exchange mechanisms will be discontinued or will not be accessible when needed in the future, which may prevent us from repatriating dividends or
obtaining dollars to operate our Venezuelan operations.
Remeasurement rates during 2014. Through March 23, 2014, we used the official rate of 6.3 bolivars to the dollar to remeasure our bolivar-denominated monetary assets and
liabilities into U.S. dollars and to translate our revenues and expenses. Effective March 24, 2014, the government initiated another exchange mechanism known as SICAD II
and we began to use this exchange rate to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenues and expenses. During 2014, the SICAD II
rate averaged approximately 50 bolivars to the dollar and, at December 31, 2014, the rate was approximately 50 bolivars to the dollar.
We recognized a $121.6 million net remeasurement loss in 2014 when we changed from the 6.3 rate to the SICAD II exchange rate. The after-tax effect of these losses
attributable to noncontrolling interests was $39.7 million in 2014.
While the SICAD II process existed, we received approval to obtain $1.2 million (weighted-average exchange rate of 51 ) through this exchange mechanism.
Remeasurement rates during 2015. Through February 11, 2015, we used the SICAD II rates to remeasure our bolivar-denominated monetary assets and liabilities into U.S.
dollars and to translate our revenue and expenses. Effective February 12, 2015, the SICAD II exchange mechanism was disbanded and we began to use the rate under the new
exchange mechanism, known as SIMADI, to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. The SIMADI rate ranged
from 170 to 200 bolivars to the dollar and, at December 31, 2015, it was 199 bolivars to the dollar. We recognized an $18.1 million net remeasurement loss in 2015. The after-
tax effect of this loss attributable to noncontrolling interests was $5.6 million . We have received only minimal U.S. dollars using the SIMADI process.
Remeasurement rates during 2016 . In the first quarter of 2016, the Venezuelan government announced that they would replace the SIMADI exchange mechanism with the
DICOM exchange mechanism and would allow the DICOM exchange mechanism rate to float freely. At March 31, 2016, the DICOM rate was approximately 273 bolivars to
the dollar. Since March 31, 2016, the rate declined 59% to close at approximately 674 bolivars to the dollar at December 31, 2016. We have received only minimal U.S. dollars
through this exchange mechanism. We recognized a $4.8 million pretax remeasurement loss in 2016. However, the after-tax effect in the current period attributable to
noncontrolling interest was income of $2.7 million .
71
Items related to our Venezuelan operations are as follows:
•
•
•
•
•
Our investment in our Venezuelan operations on an equity-method basis was $19.2 million at December 31, 2016 , and $26.0 million at December 31, 2015 .
Our Venezuelan operations had net payables to other Brink's affiliates of $6.1 million at December 31, 2016 and $18.7 million at December 31, 2015 .
Our Venezuelan operations had net nonmonetary assets of $17.6 million at December 31, 2016 , and $13.5 million at December 31, 2015 .
Our bolivar-denominated net monetary net assets were $1.4 million (including $6.8 million of cash and cash equivalents) at December 31, 2016 , and $9.5 million
(including $6.2 million of cash and cash equivalents) at December 31, 2015 .
Accumulated other comprehensive losses attributable to Brink’s shareholders related to our operations in Venezuela were approximately $114.7 million at
December 31, 2016 and $113.0 million at December 31, 2015 .
Impairment
of
Long-lived
Assets
in
Venezuela
During the second quarter of 2015, Brink's elected to evaluate and pursue strategic options for the Venezuelan business, which required us to perform an impairment review of
the carrying values of our Venezuelan long-lived assets in accordance with FASB ASC Topic 360, Property, Plant and Equipment . Our asset impairment analysis included
management's best estimate of associated cash flows relating to the long-lived assets and included fair value assumptions that reflect conditions that exist in a volatile economic
environment. Future events or actions relative to our Venezuelan business may result in further adjustments.
As a result of our impairment analysis, we recognized a $35.3 million impairment charge in 2015. The current carrying value of the long-lived assets of our Venezuelan
operations is $10.1 million at December 31, 2016 . We have not reclassified any of the $114.7 million of accumulated other comprehensive losses attributable to Brink’s
shareholders related to our operations in Venezuela into earnings.
Argentina
We use the official exchange rate to translate the Brink's Argentina balance sheet and income statement. During 2015, the official exchange rate ranged from 8.5 to 9.8 local
pesos to the U.S. dollar until December 17, 2015 when the currency was devalued. At December 31, 2016 , the official exchange rate was 15.9 Argentine pesos to the U.S.
dollar.
The government in Argentina had previously imposed limits on the exchange of Argentine pesos into U.S. dollars. As a result, we elected in the past and may continue in the
future to repatriate cash from Argentina using different markets to convert Argentine pesos into U.S. dollars if U.S. dollars are not readily available. Conversions prior to the
December 17, 2015 devaluation had settled at rates approximately 30% to 40% less favorable than the rates at which we translated the financial statements of our subsidiary in
Argentina. After the December 2015 devaluation of the Argentine peso, the market rates used to convert Argentine pesos into U.S. dollars have been similar to the rates at which
we translate the financial statements of our subsidiary in Argentina. See Note 19 for more information.
We recognized losses from converting Argentine pesos into U.S. dollars of $0.1 million in 2016 , $7.1 million in 2015 and $3.6 million in 2014. These conversion losses are
classified in the consolidated statements of operations as other operating income (expense). At December 31, 2016 , we had cash denominated in Argentine pesos of $11.6
million .
Ireland
Due to management's decision in the first quarter of 2016 to exit the Republic of Ireland, the prospective impacts of shutting down this operation are included in items not
allocated to segments and are excluded from the operating segments effective March 1, 2016. Beginning May 1, 2016, due to management's decision to also exit Northern
Ireland, the results of shutting down these operations are treated similarly to the Republic of Ireland. Revenues from both Ireland operations shut down in 2016 were
approximately $20 million in 2015. International shipments to and from Ireland will continue to be provided through BGS.
Restricted
Cash
In France, we offer services to certain of our customers where we manage some or all of their cash supply chains. In connection with this offering, we take temporary title to
certain customers' cash, which is included as restricted cash in our financial statements due to customer agreement or regulation (see Note 19). During the second quarter of
2016, we identified a misclassification in our December 31, 2015 consolidated balance sheet included in our 2015 Annual Report on Form 10-K. This misclassification, which
was corrected on our December 31, 2015 condensed consolidated balance sheet included on our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016,
decreased our December 31, 2015 cash and cash equivalents balance and increased restricted cash by $16.4 million , increased restricted cash held for customers and decreased
accrued liabilities by $12.9 million , increased short-term borrowings and decreased current maturities of long-term debt by $3.5 million . This misclassification had no impact
on our December 31, 2015 current assets and current liabilities and it did not impact our consolidated statement of operations, but impacts the December 31, 2015 consolidated
statement of cash flows by reducing net cash provided by operating activities from $208.8 million to $195.9 million and increasing net cash used by financing activities from
$49.0 million to $52.5 million . Neither of these changes affect comparability to the previous period. Accordingly, we do not consider this correction to be material to our
consolidated balance sheet or statement of cash flows.
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
72
subject us to concentrations of credit risks are principally cash and cash equivalents and accounts receivables. Cash and cash equivalents are held by major financial institutions.
Use
of
Estimates
In accordance with U.S. generally accepted accounting principles (“GAAP”), we have made a number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. Actual results could differ materially from those
estimates. The most significant estimates are related to goodwill, intangibles and other long-lived assets, pension and other retirement benefit assets and obligations, legal
contingencies, deferred tax assets, purchase price allocations and foreign currency translation.
Fair-value estimates. We have various financial instruments included in our financial statements. Financial instruments are carried in our financial statements at either cost or
fair value. We estimate fair value of assets using the following hierarchy using the highest level possible:
Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.
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.
New
Accounting
Standards
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which will require the recognition of assets and liabilities by lessees for certain leases classified as
operating leases under current accounting guidance. The new standard also requires expanded disclosures regarding leasing activities. ASU 2016-02 will be effective January 1,
2019 and we are assessing the potential impact of the standard on financial reporting.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which simplifies how certain features related to share-based
payments are accounted for and presented in the financial statements. We elected to early adopt this ASU in the fourth quarter of 2016 and, per the requirements of the
pronouncement, we applied the amendments to the beginning of 2016. Under ASU 2016-09, accounting changes adopted using the modified retrospective method must be
calculated as of the beginning of 2016 and reported as a cumulative-effect adjustment. As a result, we recognized a $0.2 million cumulative-effect adjustment to January 1, 2016
retained earnings for previously unrecognized excess tax benefits. We have elected to continue our previous accounting policy of estimating forfeitures and, therefore, we did not
recognize any cumulative-effect adjustment related to forfeitures. ASU 2016-09 requires that accounting changes adopted using the prospective method should be reported in the
applicable interim periods of 2016. We did not have any material changes to previously reported interim financial information in 2016 as it relates to the recognition of excess
tax benefits in the statement of operations or the classification of excess tax benefits in the statement of cash flows.
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments , which significantly changes the way entities recognize impairment of
many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. ASU 2016-13 is effective January 1, 2020, with
early adoption permitted January 1, 2019. We are assessing the potential impact of this new standard on financial reporting.
In November 2016, the FASB issues ASU 2016-18, Statement of Cash Flows: Restricted Cash , which requires entities to include restricted cash and restricted cash equivalent
balances with cash and cash equivalent balances in the statement of cash flows. ASU 2016-18 will be effective January 1, 2018 and will impact the presentation of our statement
of cash flows.
In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts with Customers, a new standard related to revenue recognition which requires an entity to recognize an
amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The new standard will replace most of the existing revenue
recognition standards in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of this new standard to January 1, 2018. Subsequently, the
FASB has continued to refine the standard and has issued several amendments. We have not yet completed our final review of the impact of this guidance but we believe that the
most likely effects will be related to variable consideration and capitalization of costs to obtain contracts. We are also continuing to review potential disclosures and our method
of adoption in order to complete our evaluation. Based on our preliminary assessment, we do not expect a material impact on our financial reporting.
73
Note
2
-
Segment
Information
The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world. These services include:
•
•
•
•
•
•
•
Currency and coin counting and sorting; deposit preparation and reconciliations; other cash management services
Safe and safe control device installation and servicing (including our patented CompuSafe ® service)
Check and cash processing services for banking customers (“Virtual Vault Services”)
Check imaging services for banking customers
CIT Services – armored vehicle transportation of valuables
ATM Services – replenishing and maintaining customers’ automated teller machines; providing network infrastructure services
Global Services – secure international transportation of valuables
Cash Management Services
◦
◦
◦
◦
Payment Services – bill payment and processing services on behalf of utility companies and other billers at any of our Brink’s or Brink’s operated payment locations
in Latin America and Brink’s Money™ general purpose reloadable prepaid cards and payroll cards in the U.S.
Commercial Security Systems – design and installation of security systems in designated markets in Europe.
Guarding Services – protection of airports, offices, and certain other locations in Europe and Brazil with or without electronic surveillance, access control, fire
prevention and highly trained patrolling personnel
We identify our operating segments based on how our chief operating decision maker (“CODM”) allocates resources, assesses performance and makes decisions. Our CODM
is our President and Chief Executive Officer. Our CODM evaluates performance and allocates resources to each operating segment based on operating profit or loss, excluding
income and expenses not allocated to segments.
We currently serve customers in more than 100 countries, including 40 countries where we operate subsidiaries.
We have nine operating segments:
•
•
•
Each of the five countries within Largest 5 Markets (U.S., France, Mexico, Brazil and Canada)
Each of the three regions within Global Markets (Latin America, EMEA and Asia)
Payment Services
74
Total reportable segments
2,908.4
2,976.9
(In millions)
Reportable Segments:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Reconciling Items:
Corporate items:
General, administrative and other expenses
Foreign currency transaction losses
Reconciliation of segment policies to GAAP
Other items not allocated to segments:
Venezuela operations
Reorganization and Restructuring
U.S. and Mexican retirement plans
Acquisitions and dispositions
Share-based compensation adj.
Revenues
Years Ended December 31,
Operating Profit (Loss)
Years Ended December 31,
2016
2015
2014
2016
2015
2014
$
752.6
424.5
295.3
285.7
150.2
730.4
431.5
333.0
270.4
153.7
727.8 $
517.4
388.2
364.1
179.7
1,908.3
1,919.0
2,177.2
355.1
387.4
167.5
910.0
90.1
369.9
444.7
157.4
972.0
85.9
—
—
—
—
—
—
380.6
556.3
139.8
1,076.7
96.6
3,350.5
—
—
—
109.4
84.5
211.8
—
—
2.8
—
—
—
—
—
—
—
—
—
6.3
36.8
20.4
30.1
8.3
101.9
89.9
40.1
30.5
160.5
2.3
264.7
(59.8)
3.8
(2.2)
15.8
(30.3)
(31.5)
(16.3)
—
144.2
15.1
34.7
24.2
23.8
10.7
108.5
76.3
35.7
28.7
140.7
(7.2)
242.0
(81.0)
(8.8)
4.6
(47.7)
(15.3)
(31.2)
(6.0)
—
56.6
22.8
39.4
9.6
34.2
12.8
118.8
50.4
52.5
23.1
126.0
(4.9)
239.9
(110.8)
(2.6)
(2.3)
(97.9)
(21.8)
(79.0)
49.4
(2.4)
(27.5)
Total
$
3,020.6
3,061.4
3,562.3 $
See "Other Items Not Allocated to Segment" on pages 28–30 to the consolidated financial statements for explanations of each of the other items not allocated to segments.
75
(In millions)
Capital Expenditures by Business Segment
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Segments
Corporate items
Venezuela
Total
Depreciation and Amortization by Business Segment
Depreciation and amortization of property and equipment:
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Segments
Corporate items
Venezuela
2016 Restructuring
Depreciation and amortization of property and equipment
Amortization of intangible assets:
France
Brazil
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Amortization of intangible assets
Total
Years Ended December 31,
2016
2015
2014
$
$
$
19.9
17.3
12.6
8.9
9.5
68.2
13.7
9.9
5.0
28.6
1.4
98.2
9.0
5.0
21.7
16.0
9.3
6.2
6.1
59.3
13.5
11.1
4.2
28.8
1.7
89.8
7.0
4.3
112.2
101.1
45.6
15.4
11.6
7.8
9.6
90.0
9.7
10.8
3.6
24.1
1.5
115.6
10.9
0.7
0.8
128.0
0.2
1.1
1.3
0.2
0.4
0.8
1.4
0.9
3.6
47.6
15.5
14.4
7.6
8.1
93.2
10.0
11.5
3.9
25.4
1.9
120.5
11.3
3.9
—
135.7
0.2
1.2
1.4
0.3
0.6
0.9
1.8
1.0
4.2
31.1
17.9
13.3
14.7
6.4
83.4
17.0
9.4
3.6
30.0
0.8
114.2
16.5
5.4
136.1
49.8
19.3
19.6
8.8
8.5
106.0
12.2
13.6
3.2
29.0
2.2
137.2
9.7
9.5
—
156.4
0.3
1.4
1.7
0.3
1.1
0.9
2.3
1.5
5.5
$
131.6
139.9
161.9
76
(In millions)
Assets held by Segment
U.S.
France
Mexico
Brazil
Canada
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Payment Services
Segments
Corporate items
Venezuela
Total
Long-Lived Assets by Geographic Area (a)
Non-U.S.:
France
Mexico
Brazil
Canada
Other
Subtotal
U.S.
Total
(a)
Long-lived assets include only property and equipment.
(In millions)
Revenues by Geographic Area (a)
Outside the U.S.:
France
Mexico
Brazil
Canada
Other
Subtotal
U.S.
Total
December 31,
2016
2015
2014
338.0
286.7
201.4
145.6
87.0
1,058.7
172.8
238.9
96.2
507.9
56.0
325.0
239.6
229.0
109.7
81.3
984.6
155.3
274.6
99.8
529.7
53.1
1,622.6
1,567.4
321.3
50.9
332.4
46.9
1,994.8
1,946.7
67.5
78.1
45.3
42.4
127.2
360.5
170.5
531.0
68.1
93.2
34.0
38.9
122.7
356.9
192.1
549.0
327.4
244.7
258.9
165.0
92.3
1,088.3
189.8
308.0
109.2
607.0
63.7
1,759.0
326.8
106.2
2,192.0
75.7
114.4
47.9
47.9
175.5
461.4
208.1
669.5
Years Ended December 31,
2016
2015
2014
$
$
$
$
$
424.5
296.3
344.9
150.2
1,040.9
2,256.8
763.8
$
3,020.6
431.5
333.7
336.4
153.7
1,069.6
2,324.9
736.5
3,061.4
517.4
388.5
442.3
179.7
1,305.8
2,833.7
728.6
3,562.3
(a)
Revenues are recorded in the country where service is initiated or performed. No single customer represents more than 10% of total revenue. Geographic disclosures of country revenues include the Payments Services segment in
Mexico, Brazil, Colombia and the U.S.
77
(In millions)
Net assets outside the U.S.
France
Other EMEA countries
Mexico
Brazil
Other Latin American countries
Asian countries
Canada
Total
(In millions)
Information about Unconsolidated Equity Affiliates held by Global Markets:
Carrying value of investments and advances at December 31
Undistributed earnings at December 31
Share of equity earnings (loss)
December 31,
2016
2015
2014
102.1
133.8
86.1
106.3
127.0
71.2
57.6
684.1
87.1
147.5
86.1
87.9
115.2
73.7
50.3
647.8
96.3
146.1
88.4
111.1
182.4
69.2
53.4
746.9
2016
2015
2014
3.5
2.5
(1.5)
4.9
2.2
0.5
2.7
1.1
0.5
$
$
$
In 2016, Brink's recorded an impairment charge of $1.8 million related to an equity investment in a BGS business in Belgium. In 2014, Brink’s sold an equity investment in a
CIT business in Peru. The equity earnings from this investment in Peru were $3.8 million in 2014.
78
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. Pension benefits provided to eligible U.S. employees were frozen on December 31, 2005.
Components
of
Net
Periodic
Pension
Cost
(In millions)
U.S. Plans
Non-U.S. Plans
Years Ended December 31,
2016
2015
2014
2016
2015
2014
2016
Total
2015
2014
Service cost
$
—
—
— $
10.5
10.4
12.5 $
10.5
10.4
12.5
Interest cost on projected benefit
obligation
Return on assets – expected
Amortization of losses
Amortization of prior service cost
Settlement loss (a)
Net periodic pension cost
Included in:
Continuing operations
Discontinued operations
Net periodic pension cost
$
$
$
37.1
(54.6)
24.9
—
—
7.4
36.0
(54.6)
31.2
—
—
45.3
(63.9)
28.2
—
56.1
11.5
(9.5)
5.1
1.0
3.1
11.2
(9.5)
5.0
0.9
5.7
18.4
(14.4)
2.3
1.0
6.3
48.6
(64.1)
30.0
1.0
3.1
12.6
65.7 $
21.7
23.7
26.1 $
29.1
7.4
—
7.4
12.6
—
12.6
65.7 $
—
65.7 $
21.7
—
21.7
22.6
1.1
23.7
24.4 $
1.7
26.1 $
29.1
—
29.1
47.2
(64.1)
36.2
0.9
5.7
36.3
35.2
1.1
36.3
63.7
(78.3)
30.5
1.0
62.4
91.8
90.1
1.7
91.8
(a)
Settlement losses recognized in the U.S. in 2014 relate to a lump-sum buy-out of 4,300 participants. Settlement losses outside the U.S. relate primarily to terminated employees that participate in a Mexican severance indemnity
program that is accounted for as a defined benefit plan.
79
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,
U.S. Plans
Non-U.S. Plans
Total
2016
2015
2016
2015
2016
2015
Benefit obligation at beginning of year
Service cost
Interest cost
Participant contributions
Plan amendments
Plan combinations
Settlements
Benefits paid
Actuarial (gains) losses
Foreign currency exchange effects
Benefit obligation at end of year
Fair value of plan assets at beginning of year
Return on assets – actual
Participant contributions
Plan combinations
Employer contributions
Settlements
Benefits paid
Foreign currency exchange effects
Fair value of plan assets at end of year
Funded status
Included in:
Current liability, included in accrued liabilities
Noncurrent liability
Net pension liability
$
$
$
$
$
$
$
844.8
—
37.1
—
—
—
—
(47.8)
11.8
—
845.9
721.4
54.3
—
—
0.6
—
(47.8)
—
728.5
904.1
—
36.0
—
—
—
—
(51.0)
(44.3)
—
844.8
786.3
(14.2)
—
—
0.3
—
(51.0)
—
721.4
262.8
10.5
11.5
0.2
(0.2)
0.4
(9.3)
(12.7)
17.7
(13.6)
267.3
164.8
18.2
0.2
0.4
14.9
(9.3)
(12.7)
(3.1)
173.4
283.1
10.4
11.2
0.4
2.4
1.2
—
(19.5)
14.8
(41.2)
262.8
179.3
4.3
0.4
1.2
24.1
—
(19.5)
(25.0)
164.8
1,107.6
1,187.2
10.5
48.6
0.2
(0.2)
0.4
(9.3)
(60.5)
29.5
(13.6)
10.4
47.2
0.4
2.4
1.2
—
(70.5)
(29.5)
(41.2)
1,113.2
1,107.6
886.2
72.5
0.2
0.4
15.5
(9.3)
(60.5)
(3.1)
901.9
965.6
(9.9)
0.4
1.2
24.4
—
(70.5)
(25.0)
886.2
(117.4)
(123.4)
(93.9)
(98.0)
(211.3)
(221.4)
0.9
116.5
117.4
0.6
122.8
123.4
1.6
92.3
93.9
1.4
96.6
98.0
2.5
208.8
211.3
2.0
219.4
221.4
80
Other
Changes
in
Plan
Assets
and
Benefit
Recognized
in
Other
Comprehensive
Income
(Loss)
(In millions)
Years Ended December 31,
U.S. Plans
Non-U.S. Plans
Total
2016
2015
2016
2015
2016
2015
Benefit plan net experience losses recognized in accumulated
other comprehensive income (loss):
Beginning of year
Net experience gains (losses) arising during the year
Reclassification adjustment for amortization of prior
experience losses included in net income (loss)
Foreign currency exchange effects
End of year
Benefit plan prior service cost recognized in accumulated
other comprehensive income (loss):
Beginning of year
Prior service credit (cost) from plan amendments during
the year
Reclassification adjustment for amortization of prior
service cost included in net income (loss)
Foreign currency exchange effects
End of year
$
$
$
$
(333.7)
(12.1)
24.9
—
(340.4)
(24.5)
31.2
—
(320.9)
(333.7)
—
—
—
—
—
—
—
—
—
—
(95.0)
(9.0)
8.2
12.9
(82.9)
(10.8)
0.2
1.0
0.4
(9.2)
(85.7)
(20.0)
10.7
—
(95.0)
(9.3)
(2.4)
0.9
—
(10.8)
(428.7)
(21.1)
33.1
12.9
(426.1)
(44.5)
41.9
—
(403.8)
(428.7)
(10.8)
0.2
1.0
0.4
(9.2)
(9.3)
(2.4)
0.9
—
(10.8)
Approximately $29.9 million of experience loss and $0.1 million of prior service cost are expected to be amortized from accumulated other comprehensive income (loss) into net
periodic pension cost during 2017 .
The net experience losses in 2016 were primarily due to the lower discount rates at the end of the year compared to the prior year, partially offset by actual return on assets being
higher than expected. The net experience losses in 2015 were primarily due to actual return on assets being lower than expected, partially offset by a higher U.S. plans discount
rate at the end of the year compared to the prior year.
Information
Comparing
Plan
Assets
to
Plan
Obligations
Information comparing plan assets to plan obligations as of December 31, 2016 and 2015 are aggregated below. The accumulated benefit obligation (“ABO”) differs from the
PBO in that the ABO is based on the benefit earned through the date noted. The PBO includes assumptions about future compensation levels for plans that have not been
frozen. The total ABO for our U.S. pension plans was $845.9 million in 2016 and $844.8 million in 2015 . The total ABO for our Non-U.S. pension plans was $232.3 million in
2016 and $226.5 million in 2015 .
(In millions)
December 31,
U.S. Plans
Non-U.S. Plans
Total
2016
2015
2016
2015
2016
2015
Information for pension plans with an ABO in excess of plan
assets:
Fair value of plan assets
Accumulated benefit obligation
Projected benefit obligation
$
728.5
845.9
845.9
721.4
844.8
844.8
41.3
107.3
127.9
47.7
111.9
135.2
769.8
953.2
973.8
769.1
956.7
980.0
81
Assumptions
The weighted-average assumptions used in determining the net pension cost and benefit obligations for our pension plans were as follows:
2016
U.S. Plans
2015
2014
2016
2015
2014
Non-U.S. Plans (b)
Discount rate:
Pension cost
Benefit obligation at year end
4.5%
4.3%
4.1%
4.5%
5.0%
4.1%
5.1%
3.7%
5.1%
5.1%
6.3%
5.1%
Expected return on assets – pension cost
7.50%
7.50%
8.00%
5.65%
5.58%
5.83%
Average rate of increase in salaries (a):
Pension cost
Benefit obligation at year end
N/A
N/A
N/A
N/A
N/A
N/A
3.8%
2.7%
3.9%
3.8%
3.9%
3.9%
(a)
(b)
Salary scale assumptions are determined through historical experience and vary by age and industry. The U.S. plan benefits are frozen. Pension benefits will not increase due to future salary increases.
The discount and salary increase rates of our Venezuela benefit plan are not adjusted for inflation. See the separate section below for more details.
Mortality Tables for our U.S. Retirement Benefits
We use the Mercer modified RP-2014 base table and Mercer modified MP-2016 projection scale, with Blue Collar adjustments for the majority of our U.S. retirement plans and
a White Collar adjustment for our nonqualified U.S. pension plan.
Estimated
Future
Cash
Flows
Estimated Future Contributions from the Company into Plan Assets
Our policy is to fund at least the minimum actuarially determined amounts required by applicable regulations. We do not expect to make contributions to our primary U.S.
pension plan in 2017 . We expect to contribute $10.9 million to our non-U.S. pension plans and $0.9 million to our nonqualified U.S. pension plan in 2017 .
Estimated Future Benefit Payments from Plan Assets to Beneficiaries
Projected benefit payments of the plans in the next 10 years using assumptions in effect at December 31, 2016 , are as follows:
(In millions)
2017
2018
2019
2020
2021
2022 through 2026
(a)
Excludes projected benefit payments related to our Venezuela benefit plan, which are presented in the separate section below.
82
U.S. Plans
Non-U.S. Plans
(a)
Total
$
50.8
50.9
51.8
51.5
51.4
257.6
9.8
9.9
10.5
12.3
12.4
75.9
60.6
60.8
62.3
63.8
63.8
333.5
Venezuela
Our non-U.S. net pension liability includes projected benefit obligations related to Venezuela of $5.6 million , $4.1 million , and $6.6 million in 2016, 2015 and 2014,
respectively. The net periodic pension cost related to these benefit obligations was $2.9 million , $2.5 million , and $3.7 million in 2016, 2015 and 2014, respectively.
As discussed in Note 1, the economy in Venezuela has had significant inflation in the last several years and we consolidate our Venezuelan results using highly inflationary
accounting rules. In determining the projected benefit obligation and net periodic pension cost, we project our bolivar-denominated expected cash outflows using expected salary
increases and discount the expected cash outflows to present value. Our discount rate for Venezuela was 4% and was determined using government bonds within the region.
There are no salary increases expected other than inflationary increases. The discount rate and salary scale are adjusted for expected inflation.
The assumption for inflation in Venezuela was made considering the current economic situation in Venezuela and an analysis of regional economic performances during
hyperinflationary cycles. Over the long term, we expect the economy of Venezuela will return to inflation rates more typical for the region. Based on these considerations, we
assumed an inflation rate of 500% in 2017 with a gradual decline to 4% in 2032. For 2016, this inflation adjustment has been excluded from the non-U.S. assumptions table
above.
As the projected salary increases and discount rate are both adjusted for inflation, there is not a significant impact to our current year projected benefit obligation as a result of
increasing expected inflation. However, the inflation adjustment for Venezuela results in significant expected bolivar-denominated cash outflows in the next 10 years. When
these undiscounted bolivar-denominated cash outflows are translated into U.S dollars at the December 31, 2016 DICOM exchange rate of approximately 674 bolivars to the
dollar for purposes of U.S. GAAP reporting, the result is projected cash outflows of $4.4 billion as presented in the table below. These amounts have been excluded from the
estimated future non-U.S. projected benefit payments table above. We expect to make these payments in bolivars with cash generated from our Venezuelan operations.
Venezuela Estimated Future Benefit Payments to Beneficiaries
Projected benefit payments of our Venezuela benefit plan in the next 10 years using assumptions in effect at December 31, 2016 , are as follows:
(In millions)
2017
2018
2019
2020
2021
2022 through 2026
83
Venezuela
0.9
2.4
6.9
17.4
43.5
4,327.8
Retirement Benefits Other than Pensions
Summary
We provide retirement healthcare benefits for eligible current and former U.S., Canadian, and Brazilian employees. Retirement benefits related to our former U.S. coal operation
include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for UMWA Represented Employees (the “UMWA plans”) as well as costs
related to black lung obligations.
Components
of
Net
Periodic
Postretirement
Cost
The components of net periodic postretirement cost related to retirement benefits other than pensions were as follows:
(In millions)
UMWA Plans
Black Lung and Other Plans
Years Ended December 31,
2016
2015
2014
2016
2015
2014
2016
Total
2015
2014
Service cost
Interest cost on APBO
Return on assets – expected
Amortization of losses
Amortization of prior service cost (credit)
Curtailment (gain)
$
—
18.9
(17.5)
18.0
(4.6)
—
Net periodic postretirement cost
$
14.8
—
17.1
(20.6)
15.5
(4.6)
—
7.4
— $
17.9
(22.2)
12.3
(4.6)
—
3.4 $
—
2.7
—
2.5
1.7
—
6.9
0.2
2.8
—
3.1
1.8
(0.1)
7.8
0.1 $
—
2.3
—
0.6
1.7
—
21.6
(17.5)
20.5
(2.9)
—
4.7 $
21.7
0.2
19.9
(20.6)
18.6
(2.8)
(0.1)
15.2
0.1
20.2
(22.2)
12.9
(2.9)
—
8.1
Obligations
and
Funded
Status
Changes in the accumulated postretirement benefit obligation (“APBO’) and plan assets related to retirement healthcare benefits are as follows:
(In millions)
Years Ended December 31,
APBO at beginning of year
Service cost
Interest cost
Plan amendments
Curtailment
Benefits paid
Actuarial (gains) losses, net
Foreign currency exchange effects
APBO at end of year
Fair value of plan assets at beginning of year
Return on assets – actual
Employer contributions
Benefits paid
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
Black Lung and Other Plans
Total
2016
2015
2016
2015
2016
2015
433.1
—
18.9
—
—
(31.7)
23.9
—
444.2
227.4
22.2
(0.3)
(31.7)
217.6
461.8
—
17.1
—
—
(36.0)
(9.8)
—
433.1
264.6
(0.9)
(0.3)
(36.0)
227.4
59.8
—
2.7
—
—
(8.3)
11.2
0.7
66.1
—
—
8.3
(8.3)
—
66.2
0.2
2.8
(0.7)
(0.5)
(6.3)
0.4
(2.3)
59.8
—
—
6.3
(6.3)
—
492.9
—
21.6
—
—
(40.0)
35.1
0.7
510.3
227.4
22.2
8.0
(40.0)
217.6
528.0
0.2
19.9
(0.7)
(0.5)
(42.3)
(9.4)
(2.3)
492.9
264.6
(0.9)
6.0
(42.3)
227.4
(226.6)
(205.7)
(66.1)
(59.8)
(292.7)
(265.5)
—
226.6
226.6
—
205.7
205.7
6.6
59.5
66.1
6.3
53.5
59.8
6.6
286.1
292.7
6.3
259.2
265.5
84
$
$
$
$
$
$
$
Other
Changes
in
Plan
Assets
and
Benefit
Recognized
in
Other
Comprehensive
Income
(Loss)
Changes in accumulated other comprehensive income (loss) of our retirement benefit plans other than pensions are as follows:
(In millions)
Years Ended December 31,
UMWA Plans
Black Lung and Other Plans
Total
2016
2015
2016
2015
2016
2015
Benefit plan net 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 prior
experience losses included in net income (loss)
Foreign currency exchange effects
End of year
Benefit plan prior service (cost) 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 of prior service cost included in net income
(loss)
Foreign currency exchange effects
End of year
$
$
$
$
(261.8)
(19.2)
18.0
(265.6)
(11.7)
15.5
—
(263.0)
(261.8)
46.5
51.1
—
—
(4.6)
—
41.9
(4.6)
—
46.5
(25.8)
(11.2)
2.5
2.3
(32.2)
(3.5)
—
1.7
(0.3)
(2.1)
(29.0)
0.1
3.1
—
(287.6)
(30.4)
20.5
2.3
(294.6)
(11.6)
18.6
—
(25.8)
(295.2)
(287.6)
(6.0)
0.7
1.8
—
(3.5)
43.0
—
(2.9)
(0.3)
39.8
45.1
0.7
(2.8)
—
43.0
We estimate that $21.2 million of experience loss and $2.9 million of prior service credit will be amortized from accumulated other comprehensive income (loss) into net
periodic postretirement cost during 2017 .
We recognized net experience losses in 2016 associated with the UMWA obligations primarily due to a lower discount rate, partially offset by return on assets being higher than
expected. We recognized net experience losses in 2016 associated with the black lung and other plans primarily related to a lower discount rate.
We recognized net experience losses in 2015 associated with the UMWA obligations primarily due to the return on assets being lower than expected, partially offset by a higher
discount rate. We recognized net experience gains in 2015 associated with the black lung and other plans primarily related to a higher discount rate.
Assumptions
See Mortality Tables for our U.S. Retirement Benefits on page 82 for a description of the mortality assumptions.
The APBO for each of the plans was determined using the unit credit method and assumed rates as follows:
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
2016
2015
2014
4.4%
4.2%
4.4%
4.1%
3.9%
4.2%
8.25%
4.0%
3.7%
4.1%
4.4%
4.2%
4.4%
8.25%
4.7%
4.4%
4.7%
4.0%
3.7%
4.1%
8.25%
85
Healthcare Cost Trend Rates
For UMWA plans, the assumed healthcare cost trend rate used to compute the 2016 APBO is 7.0% for 2017 , declining to 5.0% in 2023 and thereafter (in 2015 : 7.0% for 2016
declining to 5.0% in 2022 and thereafter). For the black lung obligation, the assumed healthcare cost trend rate used to compute the 2016 APBO was 5.0% . Other plans in the
U.S. provide for fixed-dollar value coverage for eligible participants and, accordingly, are not adjusted for inflation.
For the Canadian plan, the assumed healthcare cost trend rate used to compute the 2016 APBO is 7.0% for 2017 , declining to 5.0% in 2023 . For the Brazilian plan, the
assumed healthcare cost trend rate used to compute the 2016 APBO is 3.0% .
The table below shows the estimated effects of a one percentage-point change in the assumed healthcare cost trend rates for each future year.
(In millions)
Higher (lower):
Service and interest cost in 2017
APBO at December 31, 2017
Effect of Change in Assumed Healthcare
Trend Rates
Increase 1%
Decrease 1%
$
2.2
53.5
(1.9)
(45.6)
We provide healthcare benefits to our UMWA retirees who are eligible for the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act”)
subsidy reimbursement under an employer group waiver plan (“EGWP”). Under this arrangement, a government approved health insurance provider receives the Medicare Act
subsidy reimbursement on our behalf and passes these savings to us. Additionally, by providing healthcare benefits under an EGWP, we are able to benefit from the mandatory
50% discount that pharmaceutical companies must provide for Medicare Act-eligible prescription drugs.
Excise Tax on Administrators by Patient Protection and Affordable Care Act of 2010
A 40% excise tax on third-party benefit plan administrators by the Patient Protection and Affordable Care Act will be imposed on high-cost health plans (“Cadillac plans”)
beginning in 2020. We are currently unable to reduce the benefit levels of our UMWA medical plans to avoid this excise tax because these benefit levels are required by the
Coal Industry Retiree Health Benefit Act of 1992. We have assumed that the cost of the excise tax paid by administrators will be passed through to us in the form of higher
premiums or higher claims administration fees, increasing our obligations. We project that we will have to pay the benefits plan administrator this excise tax beginning in 2020,
and our plan obligations at December 31, 2016 , include $19.4 million related to this tax ( $15.1 million at December 31, 2015 ).
Cash
Flows
Estimated Contributions from the Company to Plan Assets
Based on the funded status and assumptions at December 31, 2016 , we expect the Company to contribute $6.6 million in cash to the plans to pay 2017 beneficiary payments for
black lung and other plans. We do not expect to contribute cash to our UMWA plans in 2017 since we believe these plans have sufficient amounts held in trust to pay for
beneficiary payments until 2027 based on actuarial assumptions. Our UMWA plans are not covered by ERISA or other funding laws or regulations that require these plans to
meet funding ratios.
Estimated Future Benefit Payments from Plan Assets to Beneficiaries
Projected benefit payments of the plans in the next 10 years using assumptions in effect at December 31, 2016 , are as follows:
(In millions)
2017
2018
2019
2020
2021
2022 through 2026
UMWA Plans
Black Lung and
Other Plans
Total
$
31.9
31.9
31.7
32.7
31.9
141.9
6.6
6.2
5.8
5.4
5.0
20.4
38.5
38.1
37.5
38.1
36.9
162.3
86
Retirement Plan Assets
U.S.
Plans
(In millions, except for percentages)
U.S.
Pension
Plans
December 31, 2016
December 31, 2015
Fair Value
Level
Total Fair
Value
% Actual
Allocation
% Target
Allocation
Total Fair
Value
% Actual
Allocation
% Target
Allocation
Cash, cash equivalents and receivables
$
4.0
Equity securities:
U.S. large-cap (a)
U.S. small/mid-cap (a)
International (a)
Emerging markets (b)
Dynamic asset allocation (c)
U.S. managed volatility equities (n)
Fixed-income securities:
Long duration - mutual fund (d)
Long duration - Treasury strips (d)
High yield (e)
Emerging markets (f)
Other types of investments:
Hedge fund of funds (g) (m)
Core property (h) (m)
Structured credit (i) (m)
Total
UMWA
Plans
Cash, cash equivalents and receivables
Equity securities:
U.S. large-cap (a)
U.S. small/mid-cap (a)
International (a)
Emerging markets (b)
Dynamic asset allocation (c)
Fixed-income securities:
High yield (e)
Emerging markets (f)
Multi asset real return (j)
Other types of investments:
Hedge fund of funds (g) (m)
Core property (h) (m)
Structured credit (i) (m)
Global private equity (k) (m)
Energy debt (l) (m)
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
94.1
40.6
80.1
9.9
26.6
—
282.6
65.3
10.5
9.7
—
56.9
48.2
$
728.5
$
—
45.5
19.9
40.1
8.2
14.9
4.4
8.1
10.6
—
24.9
16.1
8.6
16.3
—
13
6
11
1
4
—
48
1
1
—
8
7
100
—
21
9
19
4
7
2
4
5
—
11
7
4
7
—
14
6
12
2
4
—
48
2
2
—
5
5
100
—
22
10
19
4
7
2
4
5
—
10
5
7
5
4.2
80.1
30.0
66.1
8.6
23.9
—
290.0
71.7
9.0
9.0
36.6
51.5
40.7
721.4
1.6
47.5
20.2
40.5
9.0
15.9
6.9
9.0
14.7
6.4
32.9
13.6
3.2
6.0
1
11
4
9
1
4
—
50
1
1
5
7
6
—
12
5
10
2
4
5
48
2
2
—
5
5
100
100
1
21
9
18
4
7
3
4
6
3
14
6
1
3
—
22
10
19
4
7
2
4
5
—
10
5
7
5
Total
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
$
100
100
217.6
100
These categories include passively managed U.S. large-cap mutual funds and actively managed U.S. small/mid-cap and international mutual funds that track various indices such as the S&P 500 Index, the Russell 2500 Index and
the MSCI All Country World Ex-U.S. Index.
This category represents an actively managed mutual fund that invests primarily in equity securities of emerging market issuers. Emerging market countries are those countries that are characterized as developing or emerging by
any of the World Bank, the United Nations, the International Finance Corporation, or the European Bank for Reconstruction and Development or included in an emerging markets index by a recognized index provider.
This category represents an actively managed mutual fund that seeks to generate total return over time by selecting investments from among a broad range of asset classes. The fund’s allocations among asset classes may be
adjusted over short periods and can vary from multiple to a single asset class.
This category represents actively managed mutual funds that seek to duplicate the risk and return characteristics of a long-term fixed-income security portfolio with approximate duration of 10 years and longer by using a long
duration bond portfolio. This category also includes Treasury future contracts and zero -coupon securities created by the U.S. Treasury.
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.
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.
This category represents an actively managed hedge fund of funds. The fund holds approximately 30 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.
This category represents an actively managed real estate fund of funds that seeks both current income and long-term capital appreciation through investing in underlying funds that acquire, manage, and dispose of commercial real
estate properties. These properties are high-quality, low-leveraged, income-generating office, industrial, retail, and multi-family properties, generally fully-leased to creditworthy companies and governmental entities.
This category invests primarily in a diversified portfolio comprised primarily of collateralized loan obligations and other structured credit investments backed primarily by bank loans.
This category represents an actively managed mutual fund that invests primarily in fixed income and equity securities and commodity linked instruments. The category seeks total returns that exceed the rate of inflation over a full
market cycle regardless of market conditions.
227.4
100
(k)
This category will offer exposure to a diversified pool of global private assets fund investments. Further, the category will seek to shorten the duration of the typical private assets fund of funds through a dedicated focus on
secondary strategies (i.e. funds whose investment strategy is to purchase interests in other private market investments/funds as a way
87
to provide the original investors liquidity prior to the end of those investments’/funds’ contracted end date), income-producing investment strategies (e.g. debt, real estate, and to a lesser extent, real assets), and underlying funds
(l)
(m)
(n)
whose stated life is five to seven years, as opposed to the more typical 10 -year life of private assets funds.
This category invests in credit securities of commodity oriented companies affected by the dislocation in the commodity markets with the investment objective of producing an equity like return with less downside risk than equity
or commodity investments.
In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value
amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
The U.S. managed volatility fund seeks capital appreciation with lower volatility than the broad U.S. equity market. The Fund will typically invest in equity securities of U.S. companies of all capitalization ranges that exhibit low
relative volatility. Over the long term, the Fund is expected to achieve a return similar to that of the Russell 3000 Index with a lower level of volatility.
Assets of our U.S. plans are invested with an objective of maximizing the total return, taking into consideration the liabilities of the plan, and minimizing the risks that could
create the need for excessive contributions. Plan assets are invested primarily using actively managed accounts with asset allocation targets listed in the tables above. Our
policy does not permit the purchase of Brink’s common stock if immediately after any such purchase the aggregate fair market value of the plan assets invested in Brink’s
common stock exceeds 10% of the aggregate fair market value of the assets of the plan, except as permitted by an exemption under ERISA. The plans rebalance their assets on a
quarterly basis if actual allocations of assets are outside predetermined ranges. Among other factors, the performance of asset groups and investment managers will affect the
long-term rate of return.
The pension plan acquired the structured-credit investment in 2013. The investment is subject to a two -year lockup provision, which expired in 2015.
The UMWA plans acquired the structured-credit investment in 2014. The investment is subject to a two -year lockup provision, which expired in 2016. The UMWA plans also
acquired the energy debt investment in 2015, which is subject to a three -year lockup provision, which will expire in 2018.
The global private equity investment cannot be redeemed due to the nature of the underlying investments. As the global private equity investment matures and becomes fully
invested, liquidating distributions will be provided back to investors. We expect to receive liquidating distributions over the stated life of the underlying investments. We have
$14 million in unfunded commitments related to the global private equity investment.
Most of the investments of our U.S. retirement plans can be redeemed daily. The core-property and structured-credit investments can be redeemed quarterly with 65 days’ notice.
The hedge fund of funds investment can be redeemed quarterly with 95 days’ notice. The energy debt investment can be redeemed semi-annually with 95 days' notice.
We believe all plans have sufficient liquidity to meet the needs of the plans' beneficiaries in all market scenarios.
88
Non-U.S.
Plans
(In millions, except for 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)
European fixed-income funds (c)
High-yield (d)
Emerging markets (e)
Long-duration (f)
Total fixed-income securities
Other types of investments:
Other
Total other types of investments
Total
December 31, 2016
December 31, 2015
Total Fair
Value
% Actual
Allocation
% Target
Allocation
Total Fair
Value
% Actual
Allocation
% Target
Allocation
$
0.9
—
—
0.8
—
—
25.5
33.9
4.5
—
4.6
22.7
91.2
—
14.1
1.2
1.4
63.1
79.8
1.5
1.5
$
173.4
24.5
28.6
9.5
1.8
4.5
17.2
86.1
0.4
13.0
1.2
1.2
60.8
76.6
1.3
1.3
164.8
53
53
46
46
1
100
1
100
52
60
47
38
1
100
2
100
(a)
(b)
(c)
(d)
(e)
(f)
These categories are comprised of equity index actively and passively managed funds that track various indices such as S&P 500 Composite Total Return Index, Russell 1000 and 2000 Indices, MSCI Europe Ex-UK Index,
S&P/TSX Total Return Index, MSCI EAFE Index and others. Some of these funds use a dynamic asset allocation investment strategy seeking to generate total return over time by selecting investments from among a broad range
of asset classes, investing primarily through the use of derivatives.
This category represents investment-grade fixed income debt securities of European issuers from diverse industries.
This category is primarily designed to generate income and exhibit volatility similar to that of the Sterling denominated bond market. This category primarily invests in investment grade or better securities.
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.
This category consists of a diversified portfolio of debt securities issued by governments, financial institutions, companies or other entities domiciled in emerging market countries.
This category is designed to achieve a return consistent with holding longer term debt instruments. This category invests in interest rate and inflation derivatives, government-issued bonds, real-return bonds, and futures contracts.
Asset allocation strategies for our non-U.S. plans are designed to accumulate a diversified portfolio among markets and asset classes in order to reduce market risk and increase
the likelihood that pension assets are available to pay benefits as they are due. Assets of non-U.S. pension plans are invested primarily using actively managed accounts. The
weighted-average asset allocation targets are listed in the table above, and reflect limitations on types of investments held and allocations among assets classes, as required by
local regulation or market practice of the country where the assets are invested. Most of the investments of our non-U.S. retirement plans can be redeemed at least monthly,
except for a portion of “Other” in the above table, which can be redeemed quarterly.
Non-U.S.
Plans
-
Fair
Value
Measurements
(In millions)
Quoted prices in active markets for identical assets (Level 1)
Net asset value per share practical expedient (a)
Total fair value
(a)
December 31, 2016
December 31, 2015
$
$
156.0
17.4
173.4
149.1
15.7
164.8
In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value
amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
89
Savings Plans
We sponsor various defined contribution plans to help eligible employees provide for retirement. We record expense for amounts that we contribute on behalf of employees,
usually in the form of matching contributions. Prior to April 1, 2015, we matched the first 1% of employees’ eligible contributions to our U.S. 401(k) plan. In April 2015, we
increased the matching contribution to the first 1.5% of employees' eligible contributions. Our matching contribution expense is as follows:
(In millions)
Years Ended December 31,
U.S. 401(K)
Other plans
Total
2016
2015
2014
$
$
3.4
4.5
7.9
3.6
0.3
3.9
2.2
2.3
4.5
90
Note
4
-
Income
Taxes
(In millions)
Income (loss) from continuing operations before income taxes
U.S.
Foreign
Income (loss) from continuing operations before income taxes
Provision (benefit) for income taxes from continuing operations
Current
tax
expense
(benefit)
U.S. federal
State
Foreign
Current tax expense
Deferred
tax
expense
(benefit)
U.S. federal
State
Foreign
Deferred tax benefit
Provision (benefit) for income taxes of continuing operations
(In millions)
Comprehensive provision (benefit) for income taxes allocable to
Continuing operations
Discontinued operations
Other comprehensive income (loss)
Equity
Comprehensive provision (benefit) for income taxes
Years Ended December 31,
2016
2015
2014
(28.3)
153.3
125.0
(23.2)
64.3
41.1
(3.3)
0.5
84.2
81.4
0.6
(0.1)
(3.4)
(2.9)
78.5
(1.0)
(0.2)
60.6
59.4
7.7
—
(0.6)
7.1
66.5
(79.4)
30.4
(49.0)
(3.8)
(0.8)
69.7
65.1
(7.6)
(1.9)
(18.9)
(28.4)
36.7
Years Ended December 31,
2016
2015
2014
78.5
(1.1)
0.9
(0.2)
78.1
66.5
(1.0)
(0.7)
1.8
66.6
36.7
0.4
(43.0)
0.6
(5.3)
$
$
$
$
$
$
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 percentages)
U.S. federal tax rate
Increases (reductions) in taxes due to:
Venezuela devaluation
Tax on accelerated U.S. income (a)
Adjustments to valuation allowances
Foreign income taxes
French business tax
Taxes on undistributed earnings of foreign affiliates
State income taxes, net
Other
Years Ended December 31,
2016
2015
2014
35.0 %
35.0 %
35.0 %
2.9
—
18.2
4.2
3.0
0.7
(1.0)
(0.2)
61.3
57.3
18.9
(18.2)
8.9
(1.2)
(4.1)
3.9
(86.3)
—
(16.9)
(0.7)
(9.0)
(3.7)
5.2
1.5
Actual income tax rate on continuing operations
62.8 %
161.8 %
(74.9)%
(a)
In the fourth quarter of 2015, we recognized a $23.5 million increase to current tax expense related to a transaction that accelerated U.S. taxable income.
91
Components
of
Deferred
Tax
Assets
and
Liabilities
(In millions)
Deferred tax assets
Pension liabilities
Retirement benefits other than pensions
Workers’ compensation and other claims
Property and equipment, net
Other assets and liabilities
Net operating loss carryforwards
Alternative minimum and other tax credits (a)
Subtotal
Valuation allowances
Total deferred tax assets
Deferred tax liabilities
Retirement benefits other than pensions
Other assets and miscellaneous
Deferred tax liabilities
Net deferred tax asset
Included in:
Noncurrent assets
Noncurrent liabilities
Net deferred tax asset
December 31,
2016
2015
$
$
$
74.5
87.2
41.7
6.6
107.3
42.4
62.0
421.7
(62.8)
358.9
2.1
36.5
38.6
320.3
327.9
(7.6)
320.3
76.4
79.4
41.2
2.5
120.6
37.1
47.5
404.7
(45.7)
359.0
1.0
36.3
37.3
321.7
329.8
(8.1)
321.7
(a)
U.S. alternative minimum tax credits of $32.6 million have an unlimited carryforward period, U.S. foreign tax credits of $26.2 million have a 10 year carryforward period and the remaining credits of $3.2 million have various
carryforward periods. The U.S. foreign tax credits have a $26.2 million valuation allowance.
Valuation
Allowances
Valuation allowances relate to deferred tax assets for certain federal credit carryforwards, certain state and non-U.S. jurisdictions. Based on our analysis of positive and negative
evidence including historical and expected future taxable earnings, and a consideration of available tax-planning strategies, we believe it is more-likely-than-not that we will
realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2016 .
In 2016 , we changed our judgment about the need for valuation allowances for certain U.S. tax attributes with a limited statutory carryforward period that are no longer more-
likely-than-not to be realized due to lower than expected U.S. operating results, certain pre-tax items, and other timing of tax deductions related to executive leadership
transition. As a result, we recognized a $14.7 million valuation allowance in 2016 through income from continuing operations.
(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)
Retained earnings (b)
Foreign currency exchange effects
End of year
Years Ended December 31,
2016
2015
2014
$
$
45.7
(0.4)
(0.3)
2.6
20.5
—
0.7
2.5
(8.5)
62.8
40.1
(0.3)
—
1.5
8.4
—
0.3
—
(4.3)
45.7
32.4
(0.5)
(1.0)
1.9
6.3
3.3
0.6
—
(2.9)
40.1
(a)
Changes in judgment about valuation allowances are based on a recognition threshold of “more-likely-than-not” of realizing beginning-of-year balances of deferred tax assets. Amounts are recognized in income from continuing
operations.
(b) We recognized $2.5 million in retained earnings as a result of the early adoption of ASU 2016-09.
92
Undistributed
Foreign
Earnings
As of December 31, 2016 , we have not recorded U.S. federal deferred income taxes on approximately $229 million of undistributed earnings of foreign subsidiaries and equity
affiliates. We expect that these earnings will be permanently reinvested in operations outside the U.S. It is not practical to determine the income tax liability that might be
incurred if all such income was remitted to the U.S. due to the inherent complexities associated with any hypothetical calculation, which would be dependent upon the exact
form of repatriation.
Net
Operating
Losses
The gross amount of the net operating loss carryforwards as of December 31, 2016 , was $373.8 million . The tax benefit of net operating loss carryforwards, before valuation
allowances, as of December 31, 2016 , was $42.4 million , and expires as follows:
(In millions)
Years of expiration
2016-2020
2021-2025
2026 and thereafter
No expiration
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
Decrease related to dispositions
Foreign currency exchange effects
End of year
Federal
State
Foreign
Total
$
$
—
—
—
—
—
0.2
0.1
15.0
—
15.3
3.7
11.1
0.4
11.9
27.1
Years Ended December 31,
2016
2015
2014
$
$
6.9
0.6
(0.4)
1.2
(0.8)
(0.8)
—
(0.3)
6.4
7.2
—
(0.3)
1.1
—
(0.7)
—
(0.4)
6.9
3.9
11.2
15.4
11.9
42.4
10.8
0.4
—
1.1
—
(1.3)
(1.0)
(2.8)
7.2
Included in the balance of unrecognized tax benefits at December 31, 2016 , are potential benefits of approximately $5.7 million that, if recognized, will reduce the effective tax
rate on income from continuing operations.
We recognize accrued interest and penalties related to unrecognized tax benefits in provision (benefit) for income taxes. We reverse interest and penalties accruals when a statute
of limitation lapses or when we otherwise conclude the amounts should not be accrued. Net increase (reversal) included in provision (benefit) for income taxes were $0.1
million in 2016 , ($0.1) million in 2015 , and ($0.6) million in 2014 . We had accrued interest and penalties of $0.9 million at December 31, 2016 , and $1.0 million at
December 31, 2015 .
We file income tax returns in the U.S. federal and various state and foreign jurisdictions. With a few exceptions, as of December 31, 2016 , 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 2013 . Additionally, due to statute of limitations expirations and audit
settlements, it is reasonably possible that approximately $0.8 million of currently remaining unrecognized tax positions may be recognized by the end of 2017.
93
Note
5
-
Property
and
Equipment
The following table presents our property and equipment that is classified as held and used:
(In millions)
Land
Buildings
Leasehold improvements
Vehicles
Capitalized software (a)
Other machinery and equipment
Accumulated depreciation and amortization
Property and equipment, net
(a)
Amortization of capitalized software costs included in continuing operations was $19.6 million in 2016 , $20.7 million in 2015 and $20.3 million in 2014 .
Note
6
-
Goodwill
and
Other
Intangible
Assets
Goodwill
The changes in the carrying amount of goodwill by operating segment for the years ended December 31, 2016 and 2015 are as follows:
December 31,
2016
2015
$
51.4
196.4
187.5
394.5
179.1
549.6
1,558.5
(1,027.5)
$
531.0
56.3
192.8
181.3
369.4
183.6
572.1
1,555.5
(1,006.5)
549.0
(In millions)
Goodwill:
Largest 5 Markets:
U.S.
France
Mexico
Brazil
Canada
Global Markets:
Latin America
EMEA
Asia
Payment Services
Total Goodwill
(In millions)
Goodwill:
Largest 5 Markets:
U.S.
France
Mexico
Brazil
Canada
Global Markets:
Latin America
EMEA
Asia
$
$
$
Beginning Balance
Acquisitions/
Dispositions
Currency
Ending Balance
December 31, 2016
11.6
41.6
7.5
10.4
3.2
11.7
75.0
23.4
0.9
185.3
—
—
—
—
—
—
(0.2)
—
—
(0.2)
0.1
(1.3)
1.4
2.2
0.1
1.7
(2.7)
(0.6)
0.2
1.1
11.7
40.3
8.9
12.6
3.3
13.4
72.1
22.8
1.1
186.2
Beginning Balance
Acquisitions/
Dispositions
Currency
Ending Balance
December 31, 2015
12.5
46.3
11.3
15.5
3.8
16.0
84.4
24.5
—
—
(0.1)
—
—
—
(1.8)
—
(0.9)
(4.7)
(3.7)
(5.1)
(0.6)
(4.3)
(7.6)
(1.1)
11.6
41.6
7.5
10.4
3.2
11.7
75.0
23.4
Payment Services
Total Goodwill
$
1.4
215.7
—
(1.9)
(0.5)
(28.5)
0.9
185.3
94
Intangible
Assets
The following table summarizes our other intangible assets by category:
(In millions)
Customer relationships
Indefinite-lived trade names
Finite-lived trade names
Other contract-related assets
Other
Total
December 31, 2016
December 31, 2015
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
50.2
7.5
1.3
6.7
3.7
69.4
(43.5)
—
(1.2)
(2.4)
(3.2)
(50.3)
$
6.7
7.5
0.1
4.3
0.5
19.1 $
54.4
9.0
1.1
5.6
3.7
73.8
(40.0)
—
(0.9)
(1.5)
(2.9)
(45.3)
14.4
9.0
0.2
4.1
0.8
28.5
In 2016, we recognized a $6.5 million impairment charge related to a customer relationship intangible asset in our Brink's India operations, which is included in other operating
expense. Total amortization expense for our finite-lived intangible assets was $3.6 million in 2016 . Our estimated aggregate amortization expense for finite-lived intangibles
recorded at December 31, 2016 , for the next five years is as follows:
(In millions)
Amortization expense
Note
7
-
Prepaid
Expenses
and
Other
2017
2018
2019
2020
2021
$
2.4
2.1
1.8
1.7
1.4
(In millions)
Prepaid expenses
Mobile airtime inventory
Income tax receivable
Other
Prepaid expenses and other
Note
8
-
Other
Assets
(In millions)
Deposits
Deferred profit sharing asset
Income tax receivable
Derivative instruments
Equity method investment in unconsolidated entities
Marketable securities
Other
Other assets
95
December 31,
2016
2015
60.3
10.9
16.5
15.9
103.6
53.4
13.3
19.7
14.9
101.3
December 31,
2016
2015
12.4
11.3
31.9
1.6
3.5
4.1
22.1
86.9
12.1
12.4
22.9
4.2
4.9
3.5
16.4
76.4
$
$
$
$
Note
9
-
Accumulated
Other
Comprehensive
Income
(Loss)
The following tables provide the components of other comprehensive income (loss), including the amounts reclassified from accumulated other comprehensive income (loss)
into earnings:
(In millions)
2016
Amounts attributable to Brink's:
Benefit plan adjustments
Foreign currency translation adjustments
Unrealized gains (losses) on available-for-sale securities
Gains (losses) on cash flow hedges
Amounts attributable to noncontrolling interests:
Benefit plan adjustments
Foreign currency translation adjustments
Total
Benefit plan adjustments (a)
Foreign currency translation adjustments (b)
Unrealized gains (losses) on available-for-sale securities (c)
Gains (losses) on cash flow hedges (d)
2015
Amounts attributable to Brink's:
Benefit plan adjustments
Foreign currency translation adjustments
Unrealized gains (losses) on available-for-sale securities
Gains (losses) on cash flow hedges
Amounts attributable to noncontrolling interests:
Benefit plan adjustments
Foreign currency translation adjustments
Total
Benefit plan adjustments (a)(b)
Foreign currency translation adjustments (b)
Unrealized gains (losses) on available-for-sale securities (c)
Gains (losses) on cash flow hedges (d)
Amounts Arising During the
Current Period
Amounts Reclassified to Net
Income (Loss)
Pretax
Income Tax
Pretax
Income Tax
Total Other
Comprehensive
Income (Loss)
$
$
$
(39.5)
(26.6)
0.4
(1.2)
(66.9)
(1.5)
0.4
(1.1)
(41.0)
(26.2)
0.4
(1.2)
(68.0)
(57.1)
(106.2)
0.6
3.3
(159.4)
(0.7)
(3.6)
(4.3)
(57.8)
(109.8)
0.6
3.3
$
(163.7)
96
16.7
0.2
(0.2)
—
16.7
—
—
—
16.7
0.2
(0.2)
—
16.7
20.4
0.3
(0.2)
—
20.5
—
—
—
20.4
0.3
(0.2)
—
20.5
51.3
(0.1)
(0.5)
2.0
52.7
0.4
—
0.4
51.7
(0.1)
(0.5)
2.0
53.1
58.1
5.7
(1.1)
(3.6)
59.1
0.5
—
0.5
58.6
5.7
(1.1)
(3.6)
59.6
(17.6)
—
0.2
(0.2)
(17.6)
—
—
—
(17.6)
—
0.2
(0.2)
(17.6)
(20.2)
—
0.4
—
(19.8)
—
—
—
(20.2)
—
0.4
—
(19.8)
10.9
(26.5)
(0.1)
0.6
(15.1)
(1.1)
0.4
(0.7)
9.8
(26.1)
(0.1)
0.6
(15.8)
1.2
(100.2)
(0.3)
(0.3)
(99.6)
(0.2)
(3.6)
(3.8)
1.0
(103.8)
(0.3)
(0.3)
(103.4)
Amounts Arising During the
Current Period
Amounts Reclassified to Net
Income (Loss)
Pretax
Income Tax
Pretax
Income Tax
Total Other
Comprehensive
Income (Loss)
(In millions)
2014
Amounts attributable to Brink's:
Benefit plan adjustments
$
Foreign currency translation adjustments
Unrealized gains (losses) on available-for-sale securities
Gains (losses) on cash flow hedges
Amounts attributable to noncontrolling interests:
Benefit plan adjustments
Foreign currency translation adjustments
Total
Benefit plan adjustments (a)
Foreign currency translation adjustments (b)
Unrealized gains (losses) on available-for-sale securities (c)
Gains (losses) on cash flow hedges (d)
(231.2)
(82.2)
0.1
0.7
(312.6)
(1.4)
(6.1)
(7.5)
(232.6)
(88.3)
0.1
0.7
$
(320.1)
78.1
—
—
—
78.1
0.4
—
0.4
78.5
—
—
—
78.5
95.3
1.3
(0.5)
(0.9)
95.2
0.4
—
0.4
95.7
1.3
(0.5)
(0.9)
95.6
(35.9)
0.3
0.2
—
(35.4)
(0.1)
—
(0.1)
(36.0)
0.3
0.2
—
(35.5)
(93.7)
(80.6)
(0.2)
(0.2)
(174.7)
(0.7)
(6.1)
(6.8)
(94.4)
(86.7)
(0.2)
(0.2)
(181.5)
(a)
The amortization of prior experience losses and prior service cost is part of total net periodic retirement benefit cost when reclassified to net income (loss). Net periodic retirement benefit cost also includes service cost, interest
cost, expected returns on assets, and settlement costs. The total pretax expense is allocated between cost of revenues and selling, general and administrative expenses on a plan-by-plan basis:
(In millions)
Total net periodic retirement benefit cost included in:
Cost of revenues
Selling, general and administrative expenses
December 31,
2016
2015
2014
$
42.0
8.8
36.1
14.3
68.0
29.5
(b)
(c)
(d)
Reclassification of foreign currency translation amounts in 2015 relate primarily to the sale of our Russian cash management operations. These amounts are included in other operating income (expense). Pretax benefit plan
adjustments of $8 million (including related deferred tax component) and foreign currency translation adjustments reclassified to the consolidated statements of operations in 2014 relate to the sale of CIT operations in the
Netherlands. The 2014 amounts are included in loss from discontinued operations in the consolidated statements of operations.
Gains and losses on sales of available-for-sale securities are reclassified from accumulated other comprehensive loss to the consolidated statements of operations when the gains or losses are realized. Pretax amounts are classified
in the consolidated statements of operations as interest and other income (expense).
Pretax gains and losses on cash flow hedges are classified in the consolidated statements of operations as
•
•
other operating income (expense) ( $1.3 million losses in 2016 , $4.1 million gains in 2015 and $1.9 million gains in 2014 )
interest and other income (expense) ( $0.3 million losses in 2016 , $0.5 million losses in 2015 and $1.0 million in 2014 .)
97
The changes in accumulated other comprehensive loss attributable to Brink’s are as follows:
(In millions)
Balance as of December 31, 2013
$
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Other comprehensive income (loss) attributable to Brink's
Balance as of December 31, 2014
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Other comprehensive income (loss) attributable to Brink's
Acquisitions of noncontrolling interests
Balance as of December 31, 2015
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Other comprehensive income (loss) attributable to Brink's
(478.0)
(153.1)
59.4
(93.7)
(571.7)
(36.7)
37.9
1.2
—
(570.5)
(22.8)
33.7
10.9
Balance as of December 31, 2016
$
(559.6)
98
Benefit Plan
Adjustments
Foreign Currency
Translation
Adjustments
Unrealized Gains
(Losses) on
Available-for-Sale
Securities
Gains (Losses) on
Cash Flow Hedges
Total
(141.5)
(82.2)
1.6
(80.6)
(222.1)
(105.9)
5.7
(100.2)
(0.3)
(322.6)
(26.4)
(0.1)
(26.5)
(349.1)
1.6
0.1
(0.3)
(0.2)
1.4
0.4
(0.7)
(0.3)
0.6
0.7
(0.9)
(0.2)
0.4
3.3
(3.6)
(0.3)
—
—
1.1
0.2
(0.3)
(0.1)
1.0
0.1
(1.2)
1.8
0.6
0.7
(617.3)
(234.5)
59.8
(174.7)
(792.0)
(138.9)
39.3
(99.6)
(0.3)
(891.9)
(50.2)
35.1
(15.1)
(907.0)
Note
10
-
Fair
Value
of
Financial
Instruments
Investments
in
Trading
Securities
and
Available-for-sale
Securities
We have investments in mutual funds designated as trading securities and as available-for-sale securities that are carried at fair value in the financial statements. For these
investments, fair value was estimated based on quoted prices categorized as a Level 1 valuation.
Fixed-Rate
Debt
The fair value and carrying value of our fixed-rate debt are as follows:
(In millions)
Unsecured notes issued in a private placement
Carrying value
Fair value
December 31,
2016
2015
$
85.7
88.2
92.9
95.7
The fair value estimate of our unsecured private-placement notes is based on the present value of future cash flows, discounted at rates for similar instruments at the respective
measurement dates, which we have categorized as a Level 3 valuation.
Forward
and
Swap
Contracts
We have outstanding foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies. At December 31, 2016 , the notional value of
our shorter term outstanding foreign currency forward and swap contracts was $41.9 million , with average maturities of approximately one month. These shorter term foreign
currency forward and swap contracts primarily offset exposures in the British pound and the Mexican peso and are not designated as hedges for accounting purposes. At
December 31, 2016 , the fair value of these shorter term foreign currency contracts was not significant.
In 2013, we entered into a longer term cross-currency swap to hedge against the change in value of a long-term intercompany loan denominated in Brazilian real. This longer
term contract is designated as a cash flow hedge for accounting purposes. At December 31, 2016 , the notional value of this contract was $7.9 million with a weighted-average
maturity of 0.6 years . At December 31, 2016 , the fair value of this longer term swap contract was a net asset of $3.1 million , of which $2.4 million is included in prepaid
expenses and other and $0.7 million is included in other assets on the consolidated balance sheet.
In the first quarter of 2016, we entered into two interest rate swaps with a total notional value of $40 million with a weighted-average maturity of 1.9 years . These swaps were
entered into to hedge cash flow risk associated with changes in variable interest rates and are designated as cash flow hedges for accounting purposes. At December 31, 2016 ,
the fair value of these interest rate swaps was a net asset of $0.8 million , of which $0.9 million in included in other assets and $0.1 million was included in accrued liabilities.
The fair values of these forward and swap contracts are determined using Level 2 valuation techniques and are based on the present value of net future cash payments and
receipts.
Other
Financial
Instruments
Other financial instruments include cash and cash equivalents, accounts receivable, floating rate debt, accounts payable and accrued liabilities. The financial statement carrying
amounts of these items approximate the fair value.
There were no transfers in or out of any of the levels of the valuation hierarchy in 2016 .
99
Note
11
-
Accrued
Liabilities
(In millions)
Payroll and other employee liabilities
Taxes, except income taxes
Cash held by Cash Management Services operations (a)
Workers’ compensation and other claims
Retirement benefits (see Note 3)
Income taxes payable
Other
Accrued liabilities
December 31,
2016
2015
$
123.2
120.3
80.8
9.8
19.2
9.1
23.2
120.4
385.7
$
89.4
24.2
24.2
8.3
16.8
118.0
401.2
(a)
Title to cash received and processed in certain of our secure Cash Management Services operations transfers to us for a short period of time. The cash is generally credited to customers’ accounts the following day and we record a
liability while the cash is in our possession.
Note
12
-
Other
Liabilities
(In millions)
Workers’ compensation and other claims
Non-recourse financing liability (a)
Post-employment benefits
Asset retirement and remediation obligations
Employee-related liabilities
Noncurrent tax liabilities
Other
Other liabilities
December 31,
2016
2015
$
$
56.5
12.6
11.5
14.3
1.2
5.3
34.7
136.1
46.3
14.4
12.0
12.9
4.2
5.7
34.0
129.5
(a) Our Brink's Mexico operations entered into a transaction in 2015 to sell its headquarters building in Mexico City and lease the property back for two years. The transaction did not qualify for sale-leaseback accounting due to
continuing involvement with the property. Therefore, proceeds received are recorded as a financing liability.
100
Note
13
-
Debt
(In millions)
Debt:
Short-term borrowings
Uncommitted credit facilities (year-end weighted-average interest rate of 1.7% in 2016)
Restricted cash borrowings (year-end weighted-average interest rate of 0.5% in 2016 and 0.1% in 2015) (a)
Other (year-end weighted-average interest rate of 8.1% in 2016 and 8.7% in 2015)
Total short-term borrowings
Long-term debt
Bank credit facilities:
Revolving Facility (year-end weighted-average interest
rate of 1.8% in 2016 and 1.8% in 2015)
Private Placement Notes (Series A effective interest rate of 4.6%, Series B effective interest
rate of 5.2%), due 2021, less unamortized debt costs of $0.1 million in 2016 and $0.1 million in 2015
Term loan (year-end effective interest rate of 2.5% in 2016 and 2.2% in 2015)
less unamortized debt costs of $0.2 million in 2016 and $0.2 million in 2015
Other primarily non-U.S. dollar-denominated facilities (year-end weighted-
average interest rate of 6.9% in 2016 and 5.1% in 2015)
Capital leases (year-end weighted-average interest rate of 4.2% in 2016 and 3.6% in 2015)
Total long-term debt
Total Debt
Included in:
Current liabilities
Noncurrent liabilities
Total debt
December 31,
2016
2015
$
$
108.3
22.3
32.2
162.8
—
3.5
29.1
32.6
$
55.8
163.3
85.6
65.6
6.4
67.0
280.4
92.8
70.9
11.4
59.5
397.9
443.2
430.5
195.6
247.6
443.2
72.4
358.1
430.5
$
$
$
$
(a)
These 2016 and 2015 amounts are for short-term borrowings related to cash borrowed under lending arrangements used in the process of managing customer cash supply chains, which is currently classified as restricted cash and
not available for general corporate purposes. See Note 19 for more details.
Short-Term Borrowings
Uncommitted
Credit
Facilities
In October 2016, we entered into a $100 million uncommitted credit facility. Borrowings under this facility have a maximum maturity of not more than thirty days. Interest on
this facility is generally based on LIBOR plus a margin of 1.00% . As of December 31, 2016, $100 million was outstanding.
In February 2016, we entered into a $24 million uncommitted credit facility with an initial expiration date in February 2017 . The facility was amended in February 2017 , which
extended the expiration date to February 2018. Interest on this facility is currently based on LIBOR plus a margin of 1.00% . As of December 31, 2016 , $8 million was
outstanding.
Long-Term Debt
Revolving
Facility
We have a $525 million unsecured multi-currency revolving bank credit facility (the “Revolving Facility”) that matures in March 2020 . The Revolving Facility’s interest rate is
based on LIBOR plus a margin or an alternate base rate plus a margin. The Revolving Facility allows us to borrow loans or issue letters of credit (or otherwise satisfy credit
needs) on a revolving basis over the term of the facility. As of December 31, 2016 , $469 million was available under the Revolving Facility. Amounts outstanding under the
Revolving Facility, as of December 31, 2016 , were denominated primarily in U.S. dollars and to a lesser extent in euros.
The margin on LIBOR borrowings under the Revolving Facility, which can range from 1.0% to 1.70% depending on either our credit rating or leverage ratio as defined within
the Revolving Facility, was 1.30% at December 31, 2016 . The margin on alternate base rate borrowings under the Revolving Facility ranges from 0.0% to 0.70% . We also pay
an annual facility fee on the Revolving Facility based on our credit rating or the leverage ratio. The facility fee can range from 0.125% to 0.30% and was 0.20% at
December 31, 2016 .
101
Private
Placement
Notes
We have $86 million principal amount of unsecured notes outstanding, which were issued through a private placement debt transaction (the “Notes”). The Notes comprise $36
million in series A notes with a fixed interest rate of 4.57% and $50 million in series B notes with a fixed interest rate of 5.20% . Annual principal payments under the series A
notes began in January 2015 and continue through maturity. The series B notes are due in January 2021 .
Term
Loan
We entered into a $75 million unsecured term loan in March 2015 . Interest on this loan is based on LIBOR plus a margin of 1.75% . Monthly principal payments began April
2015 and continue through to maturity, with the remaining balance of $34 million due in March 2022 . As of December 31, 2016 , the principal amount outstanding was $66
million .
Other
Facilities
As of December 31, 2016, we have one $20 million unsecured multi-currency revolving bank credit facility, of which $ 4 million was outstanding. As of December 31, 2016 ,
we had undrawn letters of credit and guarantees of $66 million issued under the letter of credit facilities and $5 million issued under the multi-currency revolving bank credit
facilities. This $20 million facility expires in March 2019 . Interest on this facility is based on LIBOR plus a margin, which ranges from 1.0% to 1.7% . We also have the ability
to borrow from other banks, at the banks' discretion, under short-term uncommitted agreements. Various foreign subsidiaries maintain other lines of credit and overdraft facilities
with a number of banks.
Letter of Credit Facilities
We have a $40 million uncommitted letter of credit facility that expires in May 2017 . As of December 31, 2016 , $5 million was utilized.
We have two unsecured letter of credit facilities totaling $94 million , of which approximately $28 million was available at December 31, 2016 . At December 31, 2016 , we had
undrawn letters of credit and guarantees of $66 million issued under these letter of credit facilities. A $40 million facility expires in December 2018 and a $54 million facility
expires in December 2019 . The Revolving Facility and the multi-currency revolving credit facilities are also used for issuance of letters of credit and bank guarantees.
Minimum repayments of long-term debt are as follows:
(In millions)
2017
2018
2019
2020
2021
Later years
Total
Capital leases
Other long-term debt
Total
$
$
18.5
14.8
11.1
9.1
7.6
5.9
67.0
14.3
13.1
16.0
69.8
65.2
35.0
213.4
32.8
27.9
27.1
78.9
72.8
40.9
280.4
The Revolving Facility, the Notes, the unsecured multi-currency revolving bank credit facilities, the unsecured committed credit facility, the letter of credit facilities and the
unsecured term loan contain certain subsidiary guarantees and various financial and other covenants. The financial covenants, among other things, limit our total indebtedness,
restrict certain payments to shareholders, limit priority debt, limit asset sales, limit the use of proceeds from asset sales, provide for a maximum leverage ratio and provide for
minimum coverage of interest costs. These 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 financing agreements, the repayment terms could be accelerated and the commitments could be withdrawn. An acceleration of the repayment terms under
one agreement could trigger the acceleration of the repayment terms under the other financing agreements. We were in compliance with all financial covenants at December 31,
2016 .
102
Capital
Leases
Property and equipment acquired under capital leases are included in property and equipment as follows:
(In millions)
Asset class:
Buildings
Vehicles
Machinery and equipment
Less: accumulated amortization
Total
Note
14
-
Accounts
Receivable
(In millions)
Trade
Other
Total accounts receivable
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
Foreign currency exchange effects
End of year
December 31,
2016
2015
2.0
131.8
1.4
135.2
(63.5)
71.7
2.0
114.1
13.6
129.7
(66.0)
63.7
December 31,
2016
2015
485.9
23.5
509.4
(8.3)
501.1
468.2
19.0
487.2
(9.1)
478.1
$
$
$
$
Years Ended December 31,
2016
2015
2014
$
$
9.1
10.0
2.8
—
(3.0)
(0.6)
8.3
2.9
(0.2)
(0.9)
(2.7)
9.1
8.2
7.5
(0.5)
(2.6)
(2.6)
10.0
103
Note
15
-
Operating
Leases
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, 2016 , future minimum lease payments under noncancellable operating leases with initial or remaining lease terms in excess of one year are included below.
(In millions)
2017
2018
2019
2020
2021
Later years
Facilities
Vehicles
Other
Total
$
$
39.0
37.0
24.6
19.9
15.5
40.2
176.2
5.8
4.5
3.1
1.4
0.9
1.7
17.4
15.1
32.8
12.9
8.8
3.4
—
73.0
59.9
74.3
40.6
30.1
19.8
41.9
266.6
The cost related to operating leases is recognized as rental expense. Net rent expense included in continuing operations amounted to $96.0 million in 2016 , $92.5 million in
2015 and $101.7 million in 2014 .
104
Note
16
-
Share-Based
Compensation
Plans
We have share-based compensation plans to attract and retain employees and nonemployee directors and to more closely align their interests with those of our shareholders.
We have granted share-based awards to employees under the 2005 Equity Incentive Plan ("2005 Plan") and the 2013 Equity Incentive Plan ("2013 Plan"). These plans permit
grants of restricted stock, restricted stock units, performance stock, performance units, stock appreciation rights, stock options, as well as other share-based awards to eligible
employees. The 2013 Plan also permits cash awards to eligible employees. The 2005 Plan was replaced by the 2013 Plan effective February 2013. No further grants of awards
will be made under the 2005 Plan.
We have granted deferred stock units to directors through the Non-Employee Directors’ Equity Plan. Share-based awards were granted to directors and remain outstanding
under the Non-Employee Directors’ Stock Option Plan and the Directors’ Stock Accumulation Plan, both of which have expired.
There are 2.4 million shares underlying share-based plans that are authorized, but not yet granted. Outstanding awards at December 31, 2016 , include performance share units,
market share units, restricted stock units, deferred stock units, performance-based stock options and time-based vesting stock options.
Compensation
Expense
Compensation expense is measured using the fair-value-based method. For employee and director awards considered equity grants, compensation expense is recognized from the
award or grant date to the earlier of the retirement-eligible date or the vesting date.
The grant date for accounting purposes may be different than the date the award is granted to the employee. To establish a grant date for accounting purposes, the employee and
the employer must have a mutual understanding of the important terms and conditions of the award. For awards considered liabilities and for equity awards that have not had a
grant date established because a mutual understanding does not exist, compensation cost is based on the change in the fair value of the instrument for each reporting period and
the percentage of the requisite service that has been rendered.
For certain awards granted since 2010, we concluded in the second quarter of 2014 that the employee and employer did not have a mutual understanding related to the
application of a compensation recoupment policy that was established in 2010. As a result, we concluded that the service inception date preceded the grant date for equity
awards outstanding at that time. Our recoupment policy was revised in July 2014 and, as a result, we concluded that certain outstanding awards have grant dates that reflect the
date of the revision of the policy on July 11, 2014. Approximately 130 employees who received share-based awards were affected by the change in policy. As a result, we
recognized $4.2 million of expense during the second quarter of 2014 for the cumulative effect of this accounting error.
Compensation expenses are classified as selling, general and administrative expenses in the consolidated statements of operations. Compensation expenses for the last three
years and the amount of unrecognized expense for awards outstanding at December 31, 2016 , were as follows:
Compensation Expense
Unrecognized Expense
for Nonvested Awards at
Years Ended December 31,
Dec 31, 2016
Weighted-average No.
of Years Unrecognized
Expense to be
Recognized
(in millions except years)
2016
2015
2014
Performance Share Units
Market Share Units
Restricted Stock Units
Deferred Stock Units
Performance-based Options
Options
Share-based payment expense
Income tax benefit
Share-based payment expense, net of tax
$
$
8.1
2.3
3.2
0.5
—
—
14.1
(4.6)
9.5
4.1
0.1
3.8
0.9
0.6
—
9.5
(3.0)
6.5
105
6.8 $
1.6
6.0
0.6
—
2.3
17.3
(5.6)
11.7
9.2
0.3
3.7
0.3
2.9
—
2.0
1.1
1.8
0.3
2.5
0.0
Fair
Value
of
Distributed
or
Exercised
Awards
The fair value of shares distributed or options exercised in the last three years is as follows:
(in millions)
Performance Share Units (b)
Market Share Units (b)
Restricted Stock Units
Deferred Stock Units
Options
Total
Fair Value of Shares Distributed or Exercised (a)
Years Ended December 31,
2016
2015
2014
$
$
8.2
2.7
4.1
1.9
5.3
22.2
—
—
5.3
0.2
1.1
6.6
—
—
4.1
0.3
0.1
4.5
(a)
(b)
Intrinsic value for Options.
No Performance Share Units or Market Share Units had vested as of December 31, 2015 .
Restricted
Stock
Units
(“RSUs”)
We granted RSUs to senior executives and select employees in the last three years that contain only a service condition. RSUs are paid out in shares of Brink’s stock when the
awards vest. For RSUs granted during the last three years, the units generally vest ratably in three equal annual installments. We measure the fair value of RSUs based on the
price of Brink’s stock at the grant date, adjusted for a discount for dividends not received or accrued during the vesting period. The weighted-average fair value per share at
issuance date was $29.06 in 2016 , $27.09 in 2015 and $27.91 in 2014 . The weighted-average discount was approximately 3% in 2016 , 2015 and 2014 .
The following table summarizes RSU activity during 2016 :
Nonvested balance as of December 31, 2015
Activity from January 1 to December 31, 2016:
Granted
Forfeited
Vested
Nonvested balance as of December 31, 2016
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
273.0 $
211.3
(56.4)
(131.4)
296.5 $
26.16
29.06
27.62
26.39
27.84
Performance
Share
Units
(“PSUs”)
Prior to 2016, we granted PSUs which contained a performance condition, a market condition and a service condition. In 2016, we granted Internal Metric PSUs ("IM PSUs")
and Total Shareholder Return PSUs ("TSR PSUs").
IM PSUs contain a performance condition as well as a service condition. We measure the fair value of these PSUs based on the price of Brink’s stock at the grant date, adjusted
for a discount for dividends not received or accrued during the vesting period. For the majority of the IM PSUs granted in 2016, the performance period is from January 1, 2016
to December 31, 2017, with an additional year of service required.
Other IM PSUs granted in 2016 have a performance period from July 1, 2016 to June 30, 2017, with an additional two years of service required.
TSR PSUs contain a market condition as well as a service condition. We measure the fair value of PSUs containing a market condition at the grant date using a Monte Carlo
simulation model. For the TSR PSUs granted in 2016, the performance period is from January 1, 2016 to December 1, 2018.
PSUs granted to senior executives and select employees in 2016 , 2015 and 2014 typically vest over three years and are paid out in shares of Brink’s stock. The number of
shares paid out ranges from 0% to 200% of an employee’s award, depending on the achievement of pre-established financial goals over the performance period, which can be
three years , two years or one year, depending on the underlying award. Shares are not paid out if the financial results do not meet a pre-established threshold level of
performance.
For PSUs granted before 2016, the number of shares paid out is also affected by Brink’s total shareholder return relative to the total return of a pre-established stock index over
the performance period. The number of shares paid out is increased by 25% if Brink’s total shareholder return is at or above the 75th percentile of the index’s total return. The
number of shares paid out is reduced by 25% if Brink’s performance is at or below the 25th percentile. The number of shares is not adjusted if Brink’s performance is between
the 25th and 75th percentile.
Changes to Performance Goals for the 2013, 2014 and 2015 PSU Grants. The performance goals for the 2013, 2014 and 2015 PSU grants were or are based on consolidated
operating profit over the performance period, which were or are adjusted for various items including
106
corporate items, acquisition and dispositions, unusual or infrequently occurring events and foreign currency. In 2014, the Compensation and Benefits Committee of the Board of
Directors approved a second performance goal for the PSU awards granted in 2013 and 2014 to reflect the change in currency exchange rate used to report the results of
Venezuela because the rate had changed significantly. Additionally, in February 2016, the Compensation and Benefits Committee of the Board of Directors modified the terms
of performance share units originally awarded or granted in 2013, 2014 and 2015 to reflect the impact of removing Venezuela operations from the Company’s segment results
beginning in 2015. For each of the affected performance share units, consolidated results for 2015 and each subsequent year within the respective performance period was or will
be adjusted to reflect Venezuela results at the amount originally projected in the applicable performance target. After the conclusion of each performance period, the payout will
be equal to the lower of the calculated payout under the adjusted performance goals and the original performance goals. Approximately 100 employees who received PSUs in
2013, 2014 and 2015 were affected by the change. No incremental compensation cost associated with the modifications was recognized or is expected to be recognized as the
additional goals were or are expected to be more difficult to achieve and, in accordance with FASB ASC Topic 718, Compensation - Stock Compensation , we continue to
recognize expense as calculated using the original performance goals.
The following table summarizes all PSU activity during 2016 :
Nonvested balance as of December 31, 2015
Activity from January 1 to December 31, 2016:
Granted
Forfeited
Vested (a)
Nonvested balance as of December 31, 2016
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
503.4 $
375.2
(112.5)
(162.9)
603.2 $
25.93
29.19
28.78
23.73
28.02
(a)
The vested PSUs presented are based on the target amount of the award. Pursuant to the actual performance for the period ended December 31, 2015, the actual shares earned and distributed were 277.1 , representing 171% of
target or, for a smaller award, 125% of target.
The following table provides the terms and weighted-average assumptions used in the Monte Carlo simulation model for the TSR PSUs granted in 2016:
Terms and Assumptions Used to Estimate Fair Value of TSR PSUs
Terms of awards:
Performance period
Weighted-average assumptions used to estimate fair value:
Expected dividend yield (a)
Expected stock price volatility (b)
Risk-free interest rate (c)
Contractual term in years
Weighted-average fair value estimates at grant date:
In millions
Fair value per share
Jan. 1, 2016 to
Dec. 31, 2018
1.4%
29.1%
0.8%
2.7
2.3
31.64
$
$
(a)
(b)
(c)
TSR is determined assuming that dividends are reinvested. The stock price projection in the Monte Carlo simulation model assumed a 0% dividend yield, which is mathematically equivalent to reinvesting dividends over the
performance period. For the valuation of the TSR PSU awards, because the holders of the TSR PSU awards have no rights to any dividend paid during the vesting period, we applied a dividend yield in the Monte Carlo simulation
model to reduce the projected stock price as of the grant date.
The expected stock price volatility was calculated on the grant date for the most recent term equivalent to the contractual term in years.
The risk-free interest rate on each date of grant is the rate for a zero-coupon U.S. Treasury bill that was commensurate with the grant date contractual term.
107
Market
Share
Units
(“MSUs”)
Prior to 2016, we granted MSUs, which contain a market condition as well as a service condition. We measure the fair value of MSUs using a Monte Carlo simulation model.
We granted MSUs to senior executives in 2015 and 2014. MSUs are paid out in shares of Brink’s stock when an award vests. MSUs reward the achievement of the appreciation
of Brink’s stock over the performance period (generally three years) at a rate of 0% to 150% of the initial target number of shares awarded. The multiplier to the initial target
number of MSUs awarded is calculated as the ratio of the price of Brink’s stock at the end of the performance period divided by the price of Brink’s stock at the beginning of the
performance period. If the price of Brink’s stock at the end of the performance period is less than 50% of the initial price, no payout for MSUs will occur.
The following table summarizes all MSU activity during 2016 :
Nonvested balance as of December 31, 2015
Activity from January 1 to December 31, 2016:
Granted
Forfeited
Vested (a)
Nonvested balance as of December 31, 2016
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
258.8 $
—
(32.8)
(84.3)
141.7 $
27.40
—
29.30
27.30
27.02
(a)
The vested MSUs presented are based on the target amount of the award. Pursuant to the actual performance for the period ended December 31, 2015, the actual shares earned and distributed were 91.1 , or 108% of target. No
additional compensation expense was required, as the market condition was included in the $27.30 grant date fair value.
Options
In 2016, we granted performance-based stock options that have a service condition as well as a market condition. In addition, some of the awards granted contain a non-financial
performance condition. We measure the fair value of these options at the grant date using a Monte Carlo simulation model. No performance-based options were granted in 2015
and 2014. Prior to 2013, we granted time-based vesting stock options to select senior executives and select employees. When vested, options entitle the holder to purchase a
specified number of shares of Brink’s stock at a price set at the date the options were granted. The option price for Brink’s options was equal to the market price of Brink’s stock
on the award date. Options granted to employees have a maximum term of six years and options previously granted to directors have a maximum term of ten years .
Performance-Based Option Activity
The table below summarizes the activity associated with grants of performance-based options:
Outstanding balance as of December 31, 2015
Activity from January 1 to December 31, 2016:
Granted
Forfeited or expired
Exercised
Outstanding balance as of December 31, 2016
108
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
— $
580.9
—
—
580.9 $
—
6.01
—
—
6.01
The table below summarizes additional information related to grants of performance-based options:
Outstanding at December 31, 2015
Granted
Forfeited or expired
Exercised
Outstanding at December 31, 2016
Of the above, as of December 31, 2016:
Exercisable
Expected to vest in future periods (b)
Shares
(in thousands)
Weighted- Average
Exercise Price Per
Share
Weighted- Average
Remaining Contractual
Term (in years)
Aggregate Intrinsic
Value (a)
(in millions)
— $
580.9
—
—
580.9
— $
580.9 $
—
30.33
—
—
30.33
—
30.33
5.5 $
0 $
5.5 $
6.3
—
6.3
(a)
(b)
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 30, 2016 was $41.25 .
The number of options expected to vest takes into account an estimate of expected forfeitures. We currently have applied a 0% expected forfeiture rate to these options.
The following table provides the term of the performance period and the weighted-average assumptions used in the Monte Carlo simulation model for the performance-based
options:
Terms and Assumptions Used to Estimate Fair Value of Performance-Based Options
Terms of awards:
Performance period for achieving stock price hurdles
Assumptions used to estimate fair value:
Expected dividend yield (a)
Expected stock price volatility (b)
Risk-free interest rate (c)
Expected term in years (d)
Weighted-average fair value estimates at grant date:
In millions
Fair value per share
Three years from date
of grant
1.3%
30.9%
1.1%
4.5
3.5
6.01
$
$
(a)
(b)
(c)
(d)
Since the holders of the awards have no rights to any dividend paid during the vesting period, we applied a dividend yield in the Monte Carlo simulation model. At each grant date, the dividend yield was calculated based on the
most recent annualized dividend payment of $0.40 and Brink's stock price at the date of grant.
The expected stock price volatility was calculated on each grant date for the most recent 4.5 year term.
The risk-free interest rate on each grant date is the rate for a zero-coupon U.S. Treasury bill that was commensurate with the expected life of 4.5 years.
Because we did not have historical exercise behavior for instruments with premiums, we assumed that the exercise of vested options occurred at the mid-point between the three -year vesting date and the six -year contractual term.
In the Monte Carlo simulation, at each iteration of forecasted Brink's stock prices, the option was assumed to be exercised at the mid-point of 4.5 years if the stock price hurdle had been achieved. When the hurdle is achieved, the
exercise price was then subtracted from the projected stock price, and discounted back to the grant date. In situations where the projected price had not met the hurdle, no value was attributed.
Time-based Vesting Option Activity
The table below summarizes the activity associated with previous grants of time-based vesting options:
Outstanding balance as of December 31, 2015
Activity from January 1 to December 31, 2016:
Granted
Forfeited or expired
Exercised
Outstanding balance as of December 31, 2016
109
Shares
(in thousands)
Weighted-Average
Grant Date Fair Value
688.3 $
—
(31.1)
(535.7)
121.5 $
6.28
—
13.39
5.95
5.90
The table below summarizes additional information related to previous grants of time-based vesting stock options:
Outstanding at December 31, 2015
Granted
Forfeited or expired
Exercised
Outstanding at December 31, 2016 (b)
Of the above, as of December 31, 2016:
Exercisable
Shares
(in thousands)
Weighted- Average
Exercise Price Per
Share
Weighted- Average
Remaining Contractual
Term (in years)
Aggregate Intrinsic
Value (a)
(in millions)
688.3 $
—
(31.1)
(535.7)
121.5 $
26.01
—
30.81
25.10
28.80
0.9 $
121.5 $
28.80
0.9 $
1.5
1.5
(a)
(b)
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 30, 2016 was $41.25 .
There were 0.7 million shares of exercisable options with a weighted-average exercise price of $26.01 per share at December 31, 2015 and 0.7 million shares of exercisable options with a weighted-average exercise price of $26.44
per share at December 31, 2014 .
Deferred
Stock
Units
(“DSUs”)
We granted DSUs to our independent directors in 2016 and prior years. We measure the fair value of DSUs at the grant date, based on the price of Brink's stock.
In 2016 and 2015, our independent directors received grants of DSUs that vest and will be paid out in shares of Brink's stock on the first anniversary of the grant date, provided
that the director has not elected to defer the distribution of shares until a later date. DSUs are forfeited if a director leaves before the vesting date. However, in connection with
the retirement of two directors in January 2016, our Board of Directors waived the one -year vesting provision for those DSUs granted in 2015. The impact of this modification
was recorded in the first quarter of 2016 and was not significant.
DSUs granted prior to 2015, in general, will be paid out in shares of stock following separation from service.
The following table summarizes all DSU activity during 2016 :
Nonvested balance as of December 31, 2015
Granted
Vested
Nonvested balance as of December 31, 2016
Shares
(in thousands)
Weighted-Average
Grant-Date Fair Value
$
21.4
29.7
(21.4)
29.7
$
32.79
29.41
31.72
29.41
The weighted-average grant-date fair value estimate per share for DSUs granted was $29.41 in 2016 , $32.79 in 2015 and $24.70 in 2014 .
Other
Share-Based
Compensation
We have a deferred compensation plan that allows participants to defer a portion of their compensation into stock units. Units may be redeemed by employees for an equal
number of shares of Brink’s stock. Employee accounts held 234,426 units at December 31, 2016 , and 302,041 units at December 31, 2015 .
We have a stock accumulation plan for our non-employee directors that, prior to 2014, provided for awards of stock units. Directors’ accounts held 34,200 units at
December 31, 2016 , and 54,050 units at December 31, 2015 .
110
Note
17
-
Capital
Stock
Common
Stock
At December 31, 2016 , we had 100 million shares of common stock authorized and 50.0 million shares issued and outstanding.
Dividends
We paid regular quarterly dividends on our common stock during the last three years. On January 20, 2017 , the Board declared a regular quarterly dividend of 10 cents per
share payable on March 1, 2017 . The payment of future dividends is at the discretion of the Board of Directors and is dependent on our future earnings, financial condition,
shareholder equity levels, cash flow, business requirements and other factors.
Preferred
Stock
At December 31, 2016 , we had the authority to issue up to 2.0 million shares of preferred stock with a par value of $10 per share.
Shares
Used
to
Calculate
Earnings
per
Share
(In millions)
Weighted-average shares
Basic (a)
Effect of dilutive stock awards
Diluted (a)
Antidilutive stock awards excluded from denominator
Years Ended December 31,
2016
2015
2014
50.0
0.6
50.6
49.3
—
49.3
0.1
1.7
49.0
—
49.0
1.7
(a) We have deferred compensation plans for directors and certain of our employees. Some amounts owed to participants are denominated in common stock units. Each unit represents one share of common stock. The number of
shares used to calculate basic earnings per share includes the weighted-average common stock units credited to employees and directors under the deferred compensation plans. Additionally, nonvested units are also included in
the computation of basic weighted-average shares when the requisite service period has been completed. Accordingly, basic and diluted shares include weighted-average units of 0.5 million in 2016 , 0.5 million in 2015 and 0.5
million in 2014 .
111
Note
18
-
Loss
from
Discontinued
Operations
(In millions)
Loss from operations (a)(b)
Loss on sales
Adjustments to contingencies of former operations (c) :
Workers' compensation
Insurance recoveries related to BAX Global indemnification (d)
Other
Loss from discontinued operations before income taxes
Provision (benefit) for income taxes
Loss from discontinued operations, net of tax
Years Ended December 31,
2016
2015
2014
$
$
—
—
(2.8)
—
—
(2.8)
(1.1)
(1.7)
(2.4)
(0.8)
(0.7)
—
0.1
(3.8)
(1.0)
(2.8)
(13.3)
(18.9)
(4.4)
9.5
(1.6)
(28.7)
0.4
(29.1)
(a)
(b)
(c)
(d)
Discontinued operations include gains and losses related to businesses that we recently sold or shut down. No interest expense was included in discontinued operations in 2015 and 2014.
The loss from operations in 2015 included $1.0 million in pension settlement charges related to the Mexican parcel delivery business sold in February 2015. The loss from operations in 2014 included $15.6 million in non-cash
severance and impairment charges related to the Netherlands cash-in-transit operations.
Primarily related to former coal businesses and BAX Global, a former freight forwarding and logistics business.
BAX Global had been defending a claim related to the apparent diversion by a third party of goods being transported for a customer. In 2010, the Dutch Supreme Court denied the final appeal of BAX Global, letting stand the
lower court ruling that BAX Global was liable for this claim. We had contractually indemnified the purchaser of BAX Global for this contingency. Through 2010, we had recognized $11.5 million of expense related to the
payment made in satisfaction of the judgment. In 2014, we recovered $9.5 million from insurance companies related to this matter.
Cash-in-transit operations sold or shut down:
Australia (sold in October 2014)
Puerto Rico (shut down in November 2014)
Netherlands (sold in December 2014)
•
•
•
Other operations sold:
•
In February 2015, we sold a small Mexican parcel delivery business which met the criteria for classification as a discontinued operation as of December 31, 2014.
The results of the above operations have been excluded from continuing operations and are reported as discontinued operations for the prior periods. The table below shows
revenues by operating segment which have been reclassified to discontinued operations:
(In millions)
Mexico
Largest 5 Markets
Latin America
EMEA
Asia
Global Markets
Total
December 31,
2016
2015
2014
$
$
—
—
—
—
—
—
—
4.6
4.6
—
—
—
—
4.6
21.2
21.2
4.9
126.0
7.6
138.5
159.7
112
The table below shows revenues and loss from operations before tax for the Netherlands cash-in-transit operations sold in 2014:
(In millions)
Netherlands CIT operations:
Revenues
Loss from operations before tax
Years Ended December 31,
2016
2015
2014
$
—
—
—
—
126.0
(2.0)
Other
divestitures
not
classified
as
discontinued
operations:
• We sold our 70% ownership interest in a Russian cash management business in November 2015 and recognized a $5.9 million loss on the disposition. A significant
part of the loss ( $5.0 million ) represented the reclassification of foreign currency translation adjustments from accumulated other comprehensive income (loss) into
earnings.
• We sold our Irish guarding operation in November 2015.
• We shut down our remaining Irish domestic operations in September 2016.
• We sold our German guarding operation in October 2016.
The table below shows revenues and income (loss) from operations before tax for these other divestitures:
(In millions)
Other divestitures
Revenues
Income (loss) from operations before tax
Years Ended December 31,
2016
2015
2014
$
12.3
(16.0)
46.6
(8.2)
94.4
3.4
113
Note
19
-
Supplemental
Cash
Flow
Information
(In millions)
Cash paid for:
Interest
Income taxes, net
Years Ended December 31,
2016
2015
2014
$
20.1
64.3
18.6
45.4
22.9
68.6
Argentina
Debt
Security
Transactions
We have elected in the past and could continue in the future to repatriate cash from Brink's Argentina using different means to convert Argentine pesos into U.S. dollars. In
2016, cash outflows from the purchase of debt securities totaled $2.1 million and cash inflows from the sale of these securities totaled $2.0 million . In 2015, cash outflows from
the purchase of debt securities totaled $25.8 million and cash inflows from the sale of these securities totaled $18.7 million . In 2014, cash outflows from the purchase of debt
securities totaled $11.0 million and cash inflows from the sale of these securities totaled $7.4 million . The net cash flows from these transactions are treated as operating cash
flows as the debt securities are purchased specifically for resale and are generally sold within a short period of time from the date of purchase.
Mexico
Real
Estate
Transaction
Brink's Mexico entered into a transaction in 2015 to sell its headquarters building in Mexico City and lease the property back for two years. The transaction did not qualify for
sale-leaseback accounting due to continuing involvement with the property. Transaction proceeds of $14.5 million in 2015 are reported as cash inflows from financing activities.
Non-cash
Investing
and
Financing
Activities
We acquired armored vehicles, CompuSafe ® units and other equipment under capital lease arrangements in the last three years including $29.4 million in 2016 , $18.9 million in
2015 and $12.1 million in 2014 .
Cash
Supply
Chain
Services
In France, we offer services to certain of our customers where we manage some or all of their cash supply chains. Providing this service requires our French subsidiary to take
temporary title to the cash received from the management of our customers' cash supply chains until the cash is returned to the customers. As part of this service offering, we
have entered into lending arrangements with some of our customers. Cash borrowed under these lending arrangements is used in the process of managing these customers' cash
supply chains. The cash for which we have temporary title and the cash borrowed under these customer lending arrangements is restricted and cannot be used for any other
purpose other than to service our customers who participate in this service offering.
At December 31, 2016 , we held $55.5 million of restricted cash ( $22.3 million represented short-term borrowings and $33.2 million represented restricted cash held for
customers). At December 31, 2015 , we held $16.4 million of restricted cash ( $3.5 million represented short-term borrowings and $12.9 million represented restricted cash held
for customers).
Note
20
-
Other
Operating
Income
(Expense)
(In millions)
Foreign currency items:
Transaction gains (losses) (a)
Foreign currency derivative instrument gains (losses)
Gains (losses) on sale of property and equity investment (b)
Argentina conversion losses
Impairment losses (c)
Share in earnings (losses) of equity affiliates
Royalty income
Gains (losses) on business acquisitions and dispositions
Other
Other operating income (expense)
Years Ended December 31,
2016
2015
2014
$
1.4
(2.4)
(1.3)
(0.1)
(20.6)
(1.5)
2.6
0.1
1.7
$
(20.1)
(26.8)
2.9
0.9
(7.1)
(37.2)
0.5
2.1
(6.3)
1.6
(69.4)
(127.2)
1.4
44.9
(3.6)
(3.3)
4.3
1.5
—
1.0
(81.0)
(a)
(b)
(c)
Includes losses from devaluations in Venezuela of $4.8 million in 2016 , $18.1 million in 2015 , and $121.6 million in 2014 .
Includes a $44.3 million gain on the sale of a noncontrolling interest in a Peruvian cash-in-transit business in 2014.
Includes $13.6 million of impairment losses related to the 2016 Reorganization and Restructuring and $35.3 million of impairment losses in 2015 related to property and equipment in Venezuela.
114
Note
21
-
Interest
and
Other
Nonoperating
Income
(Expense)
(In millions)
Interest income
Gain on marketable securities
Derivative instruments
Other
Total
Years Ended December 31,
2016
2015
2014
$
$
2.6
0.5
(0.6)
(1.3)
1.2
3.3
1.1
(0.5)
(0.5)
3.4
3.0
0.4
(1.0)
(0.5)
1.9
Note
22
-
Other
Commitments
and
Contingencies
During the fourth quarter of 2015, we became aware of an investigation initiated by COFECE (the Mexican antitrust agency) related to potential anti-competitive practices
among competitors in the cash logistics industry in Mexico (the industry in which Brink’s Mexican subsidiary, SERPAPROSA, is active). Because no legal proceedings have
been initiated against SERPAPROSA, we cannot estimate the probability of loss or any range of estimate of possible loss at this time. It is possible that SERPAPROSA could
become the subject of legal or administrative claims or proceedings, however, that could result in a loss that could be material to the Company’s results in a future period.
On March 21, 2016, The Bruce McDonald Holding Company, et al., filed a lawsuit in Circuit Court of Logan County, West Virginia against Addington, Inc. (“Addington”) and
The Brink’s Company related to an Agreement of Lease dated September 19, 1978, between the Plaintiffs and Addington. Plaintiffs seek declaratory judgment and unspecified
damages related to allegations that Addington failed to mine coal on the property leased from the Plaintiffs and failed to pay correct minimum royalties to the Plaintiffs. The
Company denies the allegations asserted by the Plaintiffs, is vigorously defending itself in this matter, and has filed a counterclaim against the Plaintiffs related to Plaintiffs’
failure to consent to the assignment and subleasing the leasehold to others. Due to numerous uncertain and unresolved factors presented in this case, it is not possible to estimate
a range of loss at this time and, accordingly, no accrual has been recorded in the Company’s financial statements.
In addition, we are involved in various other lawsuits and claims in the ordinary course of business. We are not able to estimate the loss or range of losses for some of these
matters. We have recorded accruals for losses that are considered probable and reasonably estimable. Other than the matters noted above, we do not believe that the ultimate
disposition of any of the lawsuits currently pending against the Company should have a material adverse effect on our liquidity, financial position or results of operations.
At December 31, 2016 , we had noncancellable commitments for $28.7 million in equipment purchases, and information technology and other services.
115
Note
23
-
Reorganization
and
Restructuring
2016
Reorganization
and
Restructuring
In the fourth quarter of 2016, management implemented restructuring actions across our global business operations and our corporate functions. As a result of these actions, we
recognized asset-related adjustments of $16.3 million , severance costs of $7.2 million , lease restructuring charges of $0.7 million , partially offset by a $6.1 million benefit
related to the termination of a benefit program. Severance actions are expected to reduce our global workforce by 700 to 800 positions. We expect that the 2016 restructuring
will result in $8 to $12 million in 2017 cost savings. We expect to incur additional costs between $15 million and $20 million in 2017, primarily severance costs.
The following table summarizes the costs incurred, payments and utilization, and foreign currency exchange effects of the 2016 Reorganization and Restructuring:
(In millions)
Balance as of January 1, 2016
Expense (benefit)
Payments and utilization
Balance as of December 31, 2016
Asset Related
Adjustments
Severance Costs
Lease Terminations
Benefit Program
Termination
Total
$
$
—
16.3
(16.3)
—
—
—
7.2
(0.2)
7.0
0.7
(0.1)
0.6
—
(6.1)
6.1
—
—
18.1
(10.5)
7.6
Executive
Leadership
and
Board
of
Directors
Restructuring
In the fourth quarter of 2015, we recognized $1.8 million in costs related to the restructuring of Executive Leadership and Board of Directors, which was announced in January
2016. We also recognized an additional $4.3 million in charges, primarily severance costs, in 2016.
2015
Reorganization
and
Restructuring
Brink's initiated a global restructuring of its business in the third quarter of 2015. We recognized $11.6 million in 2015 costs related to employee severance, contract
terminations, and property impairment. We recognized an additional $6.5 million in 2016 related to this restructuring for additional severance costs, contract terminations and
lease terminations. The 2015 Reorganization and Restructuring reduced the global workforce by approximately 1,100 positions and resulted in approximately $20 million in
2016 savings. The actions under this program were substantially completed by the end of 2016, with cumulative pretax charges of approximately $18 million .
The following table summarizes the costs incurred, payments and utilization, and foreign currency exchange effects of the 2015 Reorganization and Restructuring:
(In millions)
Balance as of January 1, 2016
Expense
Payments and utilization
Balance as of December 31, 2016
Severance Costs
Contract
Terminations
Lease Terminations
Total
$
$
6.3
3.6
(8.1)
1.8
—
0.8
(0.8)
—
—
2.1
(1.5)
0.6
6.3
6.5
(10.4)
2.4
2014
Reorganization
and
Restructuring
In the fourth quarter of 2014, we announced a reorganization and restructuring of Brink’s global organization to accelerate the execution of our strategy by reducing costs and
providing for a more streamlined and centralized organization. As part of this program, we reduced our total workforce by approximately 1,700 positions. The restructuring
saved annual direct costs of approximately $50 million in 2015 compared to 2014, excluding charges for severance, lease termination and accelerated depreciation. We recorded
total pretax charges of $21.8 million in 2014 and an additional $1.9 million of pretax charges in 2015 related to the 2014 Reorganization and Restructuring. The actions under
this program were substantially completed by the end of 2015 with cumulative pretax charges of approximately $24 million , primarily severance costs.
116
Note
24
-
Selected
Quarterly
Financial
Data
(unaudited)
(In millions, except for per share
amounts)
Revenues
Operating profit
Amounts attributable to Brink’s:
Income (loss) from:
Continuing operations
Discontinued operations
Net income (loss) attributable to
Brink’s
Depreciation and amortization
Capital expenditures
$
$
$
$
2016 Quarters
2015 Quarters
1 st
2 nd
3 rd
4 th
1 st
2 nd
3 rd
721.8
13.8
739.5
22.1
755.8
50.0
803.5 $
58.3
776.1
12.9
760.3
(14.6)
759.2
25.3
(3.1)
—
(3.1)
32.2
20.8
0.3
—
0.3
32.9
24.2
24.5
—
14.5 $
(1.7)
(0.6)
(2.4)
(13.0)
0.1
7.7
(0.1)
24.5
12.8 $
(3.0)
(12.9)
7.6
32.4
27.4
34.1 $
39.8
36.7
14.3
36.5
20.9
33.1
26.0
Earnings (loss) per share attributable to Brink’s common shareholders:
Basic
Continuing operations
Discontinued operations
Net income (loss)
Diluted
Continuing operations
Discontinued operations
Net income (loss)
$
$
$
$
(0.06)
—
(0.06)
(0.06)
—
(0.06)
0.01
—
0.01
0.01
—
0.01
0.49
—
0.49
0.48
—
0.48
0.29 $
(0.03)
0.25 $
0.28 $
(0.03)
0.25 $
(0.01)
(0.05)
(0.06)
(0.01)
(0.05)
(0.06)
(0.26)
—
(0.26)
(0.26)
—
(0.26)
0.16
—
0.16
0.16
—
0.15
4 th
765.8
33.0
(3.2)
(0.4)
(3.6)
33.6
39.9
(0.07)
(0.01)
(0.07)
(0.07)
(0.01)
(0.07)
Earnings
per
share
. Earnings per share amounts for each quarter are required to be computed independently. As a result, their sum may not equal the annual earnings per
share.
Discontinued
operations.
In early 2015, we sold a small Mexican parcel delivery business which met the criteria for classification as a discontinued operation as of December
31, 2014. The results of this operation have been excluded from continuing operations and are reported as discontinued operations.
Significant
pretax
items
in
a
quarter.
First quarter of 2016 We decided to exit operations in the Republic of Ireland and, as a result, we recognized $4.2 million in severance costs and another $1.7 million in
operating and other exit costs. In addition, we recognized $3.2 million in charges related to the Executive Leadership and Board of Directors restructuring. We also recognized a
$2.8 million net currency remeasurement loss when the Venezuelan government announced that they would replace the SIMADI exchange mechanism with the DICOM
exchange mechanism.
Second quarter of 2016 We decided to exit operations in Northern Ireland and recognized another $4.5 million in exit-related charges related to our Ireland businesses. We also
recognized a $2.0 million loss related to the sale of corporate assets.
Fourth quarter of 2016 Management implemented restructuring actions across our global operations and our corporate functions. As a result of these actions, we recognized
asset-related adjustments of $16.3 million , severance costs of $7.2 million , lease restructuring charges of $0.7 million , partially offset by a $6.1 million benefit related to the
termination of a benefit program.
First quarter of 2015 We recognized an $18.0 million remeasurement loss related to our change in February 2015 from the SICAD II exchange mechanism to the SIMADI.
Second quarter of 2015 We recognized a $34.5 million impairment of the Venezuela property and equipment (and another $0.8 million in the third quarter).
Third quarter of 2015 We initiated a restructuring of our business and recognized a $2.0 million charge related to contract terminations, employee severance and property
impairment (and another $9.6 million in the fourth quarter).
Fourth quarter of 2015 We recognized a $5.9 million loss on the sale of our interest in a cash management business in Russia.
Significant
after-tax
items
in
a
quarter.
In the fourth quarter of 2015, we recognized a $23.5 million increase to current tax expense related to a transaction that accelerated U.S.
taxable income. In the fourth quarter of 2016, we recognized a $14.7 million valuation allowance on U.S. deferred tax assets.
117
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Disclosure 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 Executive 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 Executive 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 Executive Vice President and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
(b) Internal Controls over Financial Reporting
See pages 61 and 62 for Management’s Annual Report on Internal Control over Financial Reporting and the Attestation Report of the Registered Public Accounting Firm.
(c) Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2016 , that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Subsequent Event
As a result of recent changes in our organizational structure, which took effect in the first quarter of 2017, we have changed our reportable operating segments. We
expect to present financial statements for our report on Form 10-Q for the quarter ended March 31, 2017 on the basis of these new reportable operating segments.
118
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We have adopted a Code of Ethics that applies to all of the directors, officers and employees (including the Chief Executive Officer, Chief Financial Officer and Controller) and
have posted the Code of Ethics on our website. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any
provision of the Code of Ethics applicable to the Chief Executive Officer, Chief Financial Officer or Controller by posting this information on the website. The internet address
is www.brinks.com .
Our Chief Executive Officer is required to make, and he has made, an annual certification to the New York Stock Exchange (“NYSE”) stating that he was not aware of any
violation by us of the corporate governance listing standards of the NYSE. Our Chief Executive Officer made his annual certification to that effect to the NYSE as of May 11,
2016. 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, 2016 .
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,
2016 .
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,
2016 .
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,
2016 .
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,
2016 .
119
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
1.
2.
3.
All financial statements – see pages 60–117.
Financial statement schedules – not applicable.
Exhibits – see exhibit index.
ITEM 16. FORM 10-K SUMMARY
None.
120
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 23, 2017 .
By
The Brink’s Company
(Registrant)
/s/ Douglas A. Pertz
Douglas A. Pertz
(President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities
indicated, on February 23, 2017 .
Signature
Title
/s/ Douglas A. Pertz
Douglas A. Pertz
/s/ Ronald J. Domanico
Ronald J. Domanico
/s/ Thomas R. Colan
Thomas R. Colan
*
Paul G. Boynton
*
Ian D. Clough
*
Susan E. Docherty
*
Peter A. Feld
*
Reginald D. Hedgebeth
*
Michael J. Herling
*
George I. Stoeckert
Director, President
and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
* By:
/s/ Douglas A. Pertz
Douglas A. Pertz, Attorney-in-Fact
121
Exhibit Index
Each exhibit listed as a previously filed document is hereby incorporated by reference to such document.
Exhibit
Number
Description
3(i)
3(ii)
10(a)*
10(b)*
10(c)*
10(d)*
10(e)*
Second Amended and Restated Articles of Incorporation of the Registrant. Exhibit 3(i) to the Registrant's Quarterly Report on Form 10-Q filed July 31, 2015.
Bylaws of the Registrant. Exhibit 3(ii) to the Registrant’s Current Report on Form 8-K filed January 25, 2017.
Amended and Restated Key Employees Incentive Plan, amended and restated as of May 6, 2011. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed May 10, 2011.
Key Employees’ Deferred Compensation Program, as amended and restated as of July 10, 2014. Exhibit 10.1 to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2014.
Pension Equalization Plan, as amended and restated as of July 23, 2012. Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2012 (the “Second Quarter 2012 Form 10-Q”).
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”).
2005 Equity Incentive Plan, as amended and restated as of February 19, 2010. Exhibit 10(f) to the Registrant’s Form 10-K for the year ended December 31,
2009 (the “2009 Form 10-K”).
10(f)*
2013 Equity Incentive Plan, effective as of February 22, 2013. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 9, 2013.
10(g)*
(i)
(ii)
Form of Option Agreement for options granted before July 8, 2010 under 2005 Equity Incentive Plan. Exhibit 99 to the Registrant’s Current Report on
Form 8-K filed July 13, 2005.
Form of Option Agreement for options granted under 2005 Equity Incentive Plan, effective July 8, 2010. Exhibit 10.2 to the Registrant’s Current
Report on Form 8-K filed July 12, 2010.
(iii)
Terms and Conditions for options granted under 2005 Equity Incentive Plan, effective July 7, 2011. Exhibit 10.1 to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2011 (the “Second Quarter 2011 Form 10-Q”).
(iv)
Terms and Conditions for options granted under 2005 Equity Incentive Plan, effective July 11, 2012. Exhibit 10.3 to the Registrant’s Second Quarter
2012 Form 10-Q.
(v)
Form of Inducement Stock Option Award Agreement, effective July 14, 2016. Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2016.
(vi)
Form of Promotion Stock Option Award Agreement, effective July 28, 2016. Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2016.
10(h)*
(i)
(ii)
Form of Restricted Stock Units Award Agreement, effective November 13, 2014. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed
February 25, 2015.
Form of Inducement Restricted Stock Unit Award Agreement, effective July 14, 2016. Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2016.
(iii)
Form of Promotion Restricted Stock Unit Award Agreement, effective July 28, 2016. Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2016.
122
10(i)*
10(j)*
Form of Market Share Units Award Agreement, effective November 13, 2014. Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed February
25, 2015.
(i)
(ii)
Form of Performance Share Units Award Agreement, effective November 13, 2014. Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed
February 25, 2015.
Form of Internal Metric Performance Share Units Award Agreement, effective February 24, 2016. Exhibit 10.1 to the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2016.
(iii)
Form of Relative Total Shareholder Return Performance Share Units Award Agreement, effective February 24, 2016. Exhibit 10.2 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.
10(k)*
Form of Change in Control Agreement. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 16, 2015.
10(l)*
Form of Indemnification Agreement entered into by the Registrant with its directors and officers. Exhibit 10(l) to the 1991 Form 10-K.
10(m)*
Offer Letter, dated June 9, 2016, between The Brink’s Company and Douglas A. Pertz. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June
10, 2016.
10(n)*
10(o)*
10(p)*
10(q)*
10(r)*
10(s)*
Change in Control Agreement, dated June 9, 2016, between The Brink’s Company and Douglas A. Pertz. Exhibit 10.2 to the Registrant’s Current Report on
Form 8-K filed June 10, 2016.
Inducement Restricted Stock Unit Award Agreement with Douglas A. Pertz, effective June 9, 2016. Exhibit 10.1 to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2016.
Inducement Stock Option Award Agreement with Douglas A. Pertz, effective June 9, 2016. Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2016.
Offer Letter, dated July 14, 2016, between The Brink’s Company and Ronald J. Domanico. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed
July 15, 2016.
Offer Letter, dated July 28, 2016, between The Brink’s Company and Amit Zukerman. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed July
29, 2016.
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.
10(t)*
Non-Employee Directors’ Equity Plan, as amended and restated as of July 12, 2012. Exhibit 10.9 to the Registrant’s Second Quarter 2012 Form 10-Q.
10(u)*
(i)
(ii)
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.
Form of Award Agreement for deferred stock units granted in 2009, 2010, 2011, 2012, 2013 and 2014 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.
(iii)
Form of Award Agreement for deferred stock units granted in 2014 and 2015 to be distributed upon vesting under the Non-Employee Directors’ Equity
Plan. Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “Second Quarter 2014 Form 10-Q”).
10(v)*
Plan for Deferral of Directors’ Fees, as amended and restated as of November 11, 2016.
10(w)
Amendment and Restatement of The Brink’s Company Employee Welfare Benefit Trust. Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2013.
123
10(x)
10(y)
10(z)
10(aa)
10(bb)
10(cc)
10(dd)
10(ee)
10(ff)*
10(gg)*
21
23
24
31.1
31.2
32.1
32.2
$525,000,000 Credit Agreement, dated as of March 10, 2015, among The Brink’s Company, as Parent Borrower and as a Guarantor, the subsidiary borrowers
referred to therein, as Subsidiary Borrowers, certain of Parent Borrower’s subsidiaries, as Guarantors, Wells Fargo Bank, National Association, as
Administrative Agent, an Issuing Lender and Swingline Lender, and various other Lenders named therein. Exhibit 10.1 to the Registrant's Current Report on
Form 8-K filed March 13, 2015.
$75,000,000 Credit Agreement, dated as of March 12, 2015, among The Brink’s Company, as Parent Borrower, certain of Parent Borrower’s subsidiaries, as
Guarantors, and PNC Bank, National Association, as Lender. Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed March 13, 2015.
$100,000,000 Uncommitted Facility Agreement, dated as of October 31, 2016, by and among The Brink’s Company, certain of its subsidiaries, and Banco
Santander, S.A. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 4, 2016.
Note Purchase Agreement, dated as of January 24, 2011, among the Registrant, Pittston Services Group Inc., Brink’s Holding Company, Brink’s,
Incorporated, and the purchasers party thereto. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed January 26, 2011.
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.
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.
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.
Severance Pay Plan of The Brink's Company effective November 13, 2015. Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed November 16,
2015.
Succession Agreement by and between the Registrant and Thomas C. Schievelbein dated January 3, 2016. Exhibit 10.2 to the Registrant's Current Report on
form 8-K filed January 5, 2016.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney.
Certification of Chief Executive Officer of the Brink's Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Certification of Chief Financial Officer of the Brink's Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Certification of Chief Executive Officer of the Brink's Company pursuant to Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350.
Certification of Chief Financial Officer of the Brink's Company pursuant to Rule 13a-14(a) or Rule 15d-14(b) and 18 U.S.C. 1350.
124
99(a)*
99(b)*
99(c)*
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
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.
Subscription Agreement, dated June 9, 2016, between The Brink’s Company and Douglas A. Pertz. Exhibit 99.2 to the Registrant’s Current Report on Form 8-
K filed June 10, 2016.
Subscription Agreement, dated July 14, 2016, between The Brink’s Company and Ronald J. Domanico. Exhibit 99.2 to the Registrant’s Current Report on
Form 8-K filed July 15, 2016.
101
Interactive Data File (Annual Report on Form 10-K, for the year ended December 31, 2016, furnished in XBRL (eXtensible Business Reporting Language)).
Attached as Exhibit 101 to this report are the following documents formatted in XBRL: (i) the Consolidated Balance Sheets at December 31, 2016, and
December 31, 2015, (ii) the Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014, (iii) the Consolidated Statements
of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014, (iv) the Consolidated Statements of Equity for the years ended
December 31, 2016, 2015 and 2014, (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014, and (vi) the Notes
to Consolidated Financial Statements, tagged as blocks of text. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data
file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for
purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
*Management contract or compensatory plan or arrangement.
125
EXHIBIT 10(v)
The Brink’s Company
Richmond, Virginia
Plan for Deferral of
Directors’ Fees
as Amended and Restated as of November 11, 2016
THE BRINK’S COMPANY
PLAN FOR DEFERRAL OF DIRECTORS’ FEES
(Amended and Restated as of November 11, 2016)
1. Election to Participate .
(a) Any director of The Brink’s Company (the “Company”) who is entitled to receive fees for services
(including, without limitation, (i) retainer fees that the Company elects to pay in the form of awards of common stock of
the Company (“Common Stock” and, such awards, “Deferred Stock Unit Awards”), (ii) cash retainer fees that such
director elects to receive in the form of Common Stock (“Stock Retainer Fee Awards”) and other equity awards
(collectively, with Deferred Stock Unit Awards and Stock Retainer Fee Awards, the “Equity Awards”) granted under the
Company Non-Employee Directors’ Equity Plan or any successor plan thereto (each, a “Company Equity Plan”) or cash
dividend equivalent payments under Equity Awards granted under a Company Equity Plan) as hereinafter provided may
become a participant (“Participant”) in this Plan for Deferral of Directors’ Fees (the “Plan”) by giving to the Company a
written election in accordance with this paragraph 1. Except as set forth in paragraph 1(c) and subject to paragraph 7,
participation in the Plan shall be effective and irrevocable as of the last day of the calendar year in which the election is
made, and the Company shall thereupon establish for such Participant a deferred compensation account or accounts,
as applicable (each an “Account”), to which amounts shall be credited as hereinafter provided. Effective January 1,
2005, the Company shall maintain a Pre-2005 Cash Account and a Post-2004 Cash Account for each Participant. A
Participant’s Pre-2005 Cash Account shall document any cash amounts deferred under the Plan by the Participant and
any other cash amounts credited hereunder which were earned and vested prior to January 1, 2005. A Participant’s
Post-2004 Cash Account shall document any cash amounts deferred under the Plan by the Participant and any other
cash amounts credited hereunder on and after January 1, 2005 (including any cash dividend equivalent payments under
Equity Awards deferred in accordance with the Plan), plus any cash amounts deferred or credited prior to January 1,
2005, which were not earned or vested as of December 31, 2004. Effective May 2, 2014, the Company shall maintain an
Equity Account for each Participant. A Participant’s Equity Account shall document any Equity Awards (but not cash
dividend equivalent payments thereon, which shall be documented in the Participant’s Post-2004 Cash Account)
deferred under the Plan by the Participant.
(b) Each election made by a Participant in any calendar year shall, at the Participant’s election, state the following
amounts, if any, that shall, in each applicable case, be deferred and credited to such Participant’s Account(s) on the
respective dates on which such amounts would otherwise become payable or, in the case of Equity Awards, payable or
settled (whichever is later), absent such deferral election:
(i) the amount, expressed as a percentage (in whole numbers only) from 10% to 100%, of the portion of the
annual retainer fee that the Participant elects to receive in cash for serving as a member of the Board of Directors of the
Company (the “Board”) for the following calendar year, and/or
(ii) the amount, expressed as a percentage (in whole numbers only) from 10% to 100%, of cash
fees, if any, for performing Committee or other services for the Company or any other services at the request of the
Chairman of the Board for the following calendar year, and/or
calendar year, and/or
(iii) the entire amount of Deferred Stock Unit Awards, granted to such Participant in the following
calendar year; and/or
(iv) the entire amount of the Stock Retainer Fee Awards payable to such Participant in the following
equivalent payments in respect of Equity Awards which are granted to such Participant in the following calendar year.
(v) the entire amount of cash payments payable to such Participant at any time as dividend
(c) Notwithstanding the foregoing, in the event that a Participant first becomes eligible to participate in the
Plan after January 1 of a calendar year, any election pursuant to this paragraph 1 made by such Participant may be
made within 30 days of such Participant becoming eligible to participate in the Plan (and shall become irrevocable on
such 30th day or such earlier date specified in the election), and as otherwise required to comply with Treasury
Regulation Sections 1.409A-2(a)(7)(i) and 1.409A-2(a)(7)(ii).
(d) Each election made by a Participant shall also contain a payment election providing for the manner in
which the amounts deferred pursuant to such election (and any amounts credited or debited thereto) shall be paid from
such Account(s) in accordance with paragraph 3 below. In the case of cash deferrals only (including, if applicable, cash
amounts credited in accordance with paragraph 2(c) below), each such election may also contain an investment election
providing for the manner in which such amounts shall be notionally invested in accordance with paragraph 2(a) below.
2. Investment Elections; Crediting/Debiting of Account Balances .
(a)
(i) Each Participant, in connection with amounts credited to his or her Post-2004 Cash Account and
Pre-2005 Cash Account in accordance with paragraph 1 above, may, in a manner compliant with Treasury Regulation
Section 1.409A-1(o) and, with respect to the Participant’s Pre-2005 Cash Account, provided that such investment
options qualify as “predetermined actual investments” within the meaning of Treasury Regulation Section 31.3121(v)(2)–
1(d)(2), elect one or more investment
2
options selected by the Company, in its sole discretion, for the purpose of crediting or debiting additional amounts to his
or her Post-2004 Cash Account and Pre-2005 Cash Account (each such investment option, an “Eligible Investment
Option”) and the portion of such deferred amounts to be allocated to each such Eligible Investment Option as specified
by the Participant in the applicable elections made pursuant to paragraph 1 above.
(ii) Notwithstanding anything to the contrary herein, nothing in the Plan shall require the Company to
offer or continue to offer any particular investment option. In the event that the Company ceases to offer a particular
investment option, each Participant will be permitted to allocate amounts previously allocated to such discontinued
investment option to one or more remaining Eligible Investment Options.
(iii) Notwithstanding anything to the contrary herein, a Participant shall not be permitted at any time
to allocate amounts deferred into the Participant’s Post-2004 Cash Account or Pre-2005 Cash Account to the
Participant’s Equity Account or allocate Equity Awards deferred into the Participant’s Equity Account to the Participant’s
Post-2004 Cash Account or Pre-2005 Cash Account.
(b) If a Participant does not make an investment election as described in paragraphs 2(a)(i) or 2(a)(ii)
above with respect to any deferred amount credited to the Participant’s Post-2004 Cash Account and/or Pre-2005 Cash
Account, then such amount for any calendar quarter shall be increased by the Plan Rate (as hereinafter defined),
compounded quarterly, from and after the applicable date of credit until the date of payment from such Account. The
“Plan Rate” for any calendar quarter shall be the prime commercial lending rate of J.P. Morgan Chase & Co. in effect on
the last day of the preceding calendar quarter, or such other rate as the Company may establish for the purpose of the
Plan.
(c) With respect to Equity Awards credited to a Participant’s Equity Account, if a Participant is entitled, in
accordance with the terms of the applicable Company Equity Plan, to receive cash dividend or dividend equivalent
payments, such payments shall be credited to such Participant’s Post-2004 Cash Account. In addition, Equity Awards
credited to a Participant’s Equity Account are subject to adjustment under any applicable provision of the applicable
Company Equity Plan under which they were granted.
3. Payments from Accounts .
(a) Each election by a Participant made pursuant to paragraph 1 above in connection with such
Participant’s Post-2004 Cash Account shall also provide that distributions from such account shall be made in one lump
sum or in two or more annual payments (not exceeding ten), where the amount of each payment shall be equal to a
fraction, the numerator of which is equal to the applicable portion of the Participant’s remaining Account balances
subject to such election (i.e., the original amounts deferred
3
under such election together with the amounts credited or debited to such Account in respect of such deferral, as
provided in paragraph 2 above, including since the date of the last preceding installment payment, reduced by the
amount of any prior installment payments) and the denominator of which is equal to the number of remaining installment
payments (including the current installment payment).
(b) Distributions from each Participant’s Equity Account shall be made in one lump sum, with Equity
Awards allocated to such account distributed in actual shares of Company common stock, par value $1.00 per share.
For purposes of determining the number of shares of Company common stock to be distributed pursuant to this
paragraph 3(b), the value of Equity Awards shall be considered equal to the closing price per share of Company
common stock as reported on the New York Stock Exchange on the last business day prior to the day the distribution is
made ; provided that any fractional Equity Awards shall be converted to cash based on the closing price per share of
Company common stock as reported on the New York Stock Exchange, on the last trading day of the month preceding
the month of distribution and shall be paid in cash.
(c) Each election by a Participant made pursuant to paragraph 1 above shall also, in a manner compliant
with Treasury Regulation Section 1.409A-3, specify whether the distributions provided for in this Paragraph 3 shall
commence on (i) a nondiscretionary and objectively determinable calendar date (within the meaning of Treasury
Regulation Section 1.409A-3(i)(1)) selected by the Participant, (ii) the Participant’s Separation from Service as a director
of the Company (within the meaning of Section 409A) or (iii) the earlier of such dates or a nondiscretionary and
objectively determinable calendar date following such Participant’s Separation from Service as a director of the
Company and, if applicable, shall specify the total number of any such installment payments. Payment of any such
installments and/or lump sum distributions shall commence on the first business day of the month following the date or
event selected by the Participant in such election; provided , that the first such payment date elected by the Participant
shall not be earlier than January 1 of the year next following the year with respect to which the related deferral election is
made. In the event that a Participant fails to timely and properly elect a time and/or form of distribution under this
paragraph 3 in respect of all or a portion of amounts and/or Equity Awards pertaining to an election pursuant to
paragraph 1 above made by such Participant on or after May 2, 2014, such Participant will be deemed to have elected
to receive one lump sum distribution of the applicable deferred amount upon such Participant’s Separation from Service
as a director of the Company. Notwithstanding the foregoing, the payment of Pre-2005 Cash Account balances shall be
made in accordance with elections in effect as of May 2, 2014.
4. Death of a Participant . Notwithstanding the provisions of paragraph 3, upon a Participant’s death, the
Company shall within 75 days thereafter pay and/or distribute, as the case may be, to such Participant’s estate, or to
such beneficiary as such Participant may have designated by written notice to the Company, the entire
4
amount in such Participant’s Accounts at the date of such payment and distribution, including any adjustments provided
for in paragraph 2 above. A Participant may, by like notice, cancel such designation, and may make a new designation
as provided in the Plan.
5. Disability . Notwithstanding the provisions of paragraph 3, upon a Participant’s becoming disabled, the
Company shall within 75 days thereafter pay and/or distribute, as the case may be, to such Participant the entire amount
in such Participant’s Accounts at the date of such payment and distribution, including any adjustments provided for in
paragraph 2 above. For purposes of this Plan, unless otherwise required by Code Section 409A and the regulations or
guidance thereunder, a Participant shall be deemed to be disabled if the Participant meets at least one of the following
requirements: (a) the Participant is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (b) the Participant is, by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a period of not less than three months under a disability
benefit plan covering employees of the Company.
6. Change in Control .
(a) In the event of a 409A Change in Control, as defined in paragraph 6(c) below, the Company shall pay
and/or distribute, as the case may be, to each Participant the entire amount in such Participant’s Accounts at the date of
such payment and distribution, including any adjustments provided for in paragraph 2 above.
(b) Notwithstanding the foregoing, in the event that the first scheduled payment date under paragraph 3 of
any amount deferred under this Plan occurs prior to a 409A Change in Control, the provisions of paragraph 3 shall apply
instead of this paragraph 6.
(c) For purposes of this Plan, a 409A Change in Control shall mean the occurrence of Change of Control
(within the meaning of the Company Non-Employee Directors’ Equity Plan”) that also constitutes a “change in the
ownership of the Company”, “change in the effective control of the Company”, and/or a “change in the ownership of a
substantial portion of the Company’s assets”, in each case, within the meaning of Treasury Regulation Section 1.409A-
3(i)(5) or such other regulation or guidance issued under Code Section 409A.
7. Changes in Election .
(a) A Participant who has a Post-2004 Cash Account and/or Equity Account may, by like notice in any
year, cancel any payment election under paragraph 3
5
with respect to amounts deferred to the Participant’s Post-2004 Cash Account and/or Equity Account, and any such
cancelation shall be accompanied by a new payment election, pursuant to which payment cannot commence earlier
than the first day of the month next following the fifth anniversary of the date such amounts otherwise would have been
paid, which new payment election shall become effective on the 12-month anniversary of the date the election is made
and shall otherwise comply with Treasury Regulation Section 1.409A-2(b).
(b) All elections under the Plan shall be irrevocable; provided , however , that the Company may, in
compliance with Treasury Regulation Sections 1.409A-3(j)(4)(viii) or 1.409A-3(j)(4)(xii), cancel any deferral election.
8. Status of Accounts . Accounts established pursuant to the Plan shall represent unsecured obligations of the
Company to pay to the respective Participants the amounts in such Accounts in accordance with the Plan. The
Company shall have no obligation to actually invest any funds or hold any property in respect of the notional investments
described in paragraph 2. In no event shall any trust be created in favor of any Participant, nor shall any Participant have
any property interest in any Account or in any other assets of the Company. Accounts shall not be assignable by
Participants except as and to the extent provided in paragraph 4 above.
9. Plan Amendment or Termination . The Plan may be amended from time to time, and may be terminated at
any time, by resolution of the Board. No such amendments shall alter the date or dates for making payments in respect
of amounts theretofore credited to Accounts, and in case of such termination, the Plan shall continue in full force and
effect with respect to all amounts in Accounts at the date of termination.
10. Effective Date . The Plan initially became effective with respect to annual retainer fees and attendance fees
payable to directors for services on and after January 1, 1985. The Plan as hereby amended and restated on November
11, 2016, shall be effective with respect to annual retainer fees and fees for other services payable to directors for
services on and after January 1, 2017.
Effective January 1, 2005, the Plan was amended to comply with the provisions of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and the Proposed Treasury Regulations issued thereunder. Effective
November 16, 2007, the Plan was further amended to clarify certain provisions in compliance with Code Section 409A
and the Final Treasury Regulations issued thereunder. Each provision and term of such amendments should be
interpreted accordingly, but if any provision or term of such amendments would be prohibited by or be inconsistent with
Code Section 409A or would constitute a material modification to the Plan, then such provision or term shall be deemed
to be reformed to comply with Code Section 409A or be ineffective to the extent it results in a material modification to the
Plan, without affecting the remainder of such amendments. The amendments apply solely to amounts deferred on
6
and after January 1, 2005, plus any amounts deferred prior to January 1, 2005, that are not earned and vested as of
such date (plus earnings on such amounts deferred). Amounts deferred prior to January 1, 2005, that are earned and
vested as of December 31, 2004, including any earnings on such amounts credited prior to, and on or after January 1,
2005, shall remain subject to the terms of the Plan as in effect prior to January 1, 2005.
Effective November 14, 2008, the Plan was amended to permit deferrals of cash dividend equivalent payments
under Deferred Equity Units Awards (or similar awards) granted under the Company’s Non-Employee Directors’ Equity
Plan.
Effective November 9, 2012, the Plan was amended to remove certain inoperative provisions and to amend the
Plan’s deferral election procedures, including permitting annual deferral elections relative to dividend equivalent
payments.
Effective May 2, 2014, the Plan was amended to permit (i) deferrals of Equity Awards, (ii) deferral of cash fees
and dividend equivalent payments into multiple investment options and (iii) deferral of fees in amounts between 10%
and 100%, inclusive.
Effective November 11, 2016, the Plan was amended to (i) remove certain inoperative provisions and (ii) permit
the deferral of annual retainer fees that a Participant elects to receive in the form of Common Stock.
7
SUBSIDIARIES OF THE BRINK’S COMPANY
AS OF DECEMBER 31, 2016
(The subsidiaries listed below are owned 100%, directly or indirectly, by The Brink’s Company unless otherwise noted.)
EXHIBIT 21
Company
The Pittston Company
Glen Allen Development, Inc.
Liberty National Development Company, LLC (32.5%)
New Liberty Residential Urban Renewal Company, LLC (17.5%)
Pittston Services Group Inc.
Brink’s Holding Company
Brink’s, Incorporated (“BI”)
Brink’s Delaware, LLC
Brink’s Express Company
Brink’s Global Payments, LLC
Brink’s St. Lucia Ltd. (26%)
Security Services (Brink’s Jordan) Company Ltd (95%)
Servicio Pan Americano de Protección S.A. de C.V. (“Serpaprosa”) (by Trust,
BI is Settlor of Trust) (99.75%)
Inmobiliaria, A.J., S.A. de C.V. (99.75%)
Operadora Especializada de Transportes, S.A. de C.V. (99.75%)
Procesos Integrales en Distribución y Logística, S.A. de C.V. (99.75%)
Brink’s Security International, Inc. (“BSI”)
Brink’s Brokerage Company, Incorporated
Brink’s C.l.S., Inc.
Brink’s Cambodia, Inc.
Brink’s Global Services International, Inc.
Brink’s Global Services KL, Inc.
Brink’s Global Services USA, Inc.
Brink’s International Management Group, Inc.
Brink’s Network, Incorporated
Brink’s Ukraine, Inc.
Brink’s Vietnam, Incorporated
Brink’s Asia Pacific Limited
Brink’s Australia Pty Ltd
Brink’s Belgium S.A.
Cavalier Insurance Company Ltd.
Brink’s Global Services FZE
Brink’s Diamond Title DMCC
Brink’s Gulf LLC (49%)
Brink’s Beteiligungsgesellschaft mbH
Brink’s Global Services Deutschland GmbH
Brink’s Far East Limited
Brink’s Ireland Limited
Jurisdiction
of Incorporation
Delaware
Delaware
Delaware
New Jersey
Virginia
Delaware
Delaware
Delaware
Illinois
Delaware
St. Lucia
Jordan
Mexico
Mexico
Mexico
Mexico
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Hong Kong
Australia
Belgium
Bermuda
Dubai (UAE)
Dubai (UAE)
Dubai (UAE)
Germany
Germany
Hong Kong
Ireland
Brink’s Holdings Limited
Brink’s (Israel) Limited (70%)
Brink’s Global Services S.r.L.
Brink’s Japan Limited
Brink’s Luxembourg S.A.
Brink’s Security Luxembourg S.A.
BK Services S.a.r.l.
Brink’s Alarm & Security Technologies
Brink’s Global Services
Brink’s International, C.V. (“BICV”, BSI is General Partner)
Inversiones Brink’s Chile Limitada (BICV is beneficial owner)
Brink’s Chile, S.A. (BICV is beneficial owner)
Organismo Tecnico de Capacitacion Brink’s SpA
Brink’s de Colombia S.A. (58%, BICV is beneficial owner)
Domesa de Colombia S.A. (70%)
Procesos & Canje S.A. (58%)
Sistema Integrado Multiple de Pago Electronicos S.A.
(“SIMPLE S.A.”)(14.5%)
Brink’s Canada Holdings, B.V. (BICV is beneficial owner)
Brink’s Canada Limited
Brink’s Security Services B.V.
Brink’s Dutch Holdings, B.V. (BICV is beneficial owner)
Brink’s Hellenic Holdings, B.V. (“BHH”)
Athena Marathon Holdings, B.V. (“AMH”)
Apollo Acropolis Holdings, B.V. (“AAH”)
Brink’s Bolivia S.A.
Hermes Delphi Holdings, B.V, (“HDH”)
Zeus Oedipus Holdings, B.V. (“ZOH”)
Brink’s Hellas Commercial S.A. - Information Technology Services
(“Brink’s Hellas SA”) (14.3% each BHH, AMH, AAH, HDH, ZOH,
Brink’s Dutch Holdings, B.V., Brink’s Canada Holdings, B.V.)
Brink’s Hermes Cash & Valuable Services S.A.
(“Brink’s Cash & Valuable Services SA”)
Brink’s Hermes Security Services SA (“Brink’s Security
Services SA”)
Brink’s Hermes Aviation Security Services S.A.
(“Brink’s Aviation Security Services S.A.”) (70%)
Hellenic Central Station SA - Reception & Processing
Centre of Electronic Signals (“Hellenic Central Station”)
(10%)
BHM Human Resources Mexico Holding, S.A. de C.V.
Servicios Administrativos Consolidados BM de Mexico, S.A. de C.V.
BM Control y Administracion de Personal, S.A. de C.V.
Brink’s Argentina S.A.
Brink’s Seguridad Corporativa S.A. (99.6%)
Brink’s India Private Limited
Brinks Mongolia LLC (51%)
Brink’s RUS Holding B.V.
Israel
Israel
Italy
Japan
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Mexico
Netherlands
Chile
Chile
Chile
Colombia
Colombia
Colombia
Colombia
Netherlands
Canada
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Bolivia
Netherlands
Netherlands
Greece
Greece
Greece
Greece
Greece
Mexico
Mexico
Mexico
Argentina
Argentina
India
Mongolia
Netherlands
Limited Liability Company Brink’s Management
Russian Federation
2
Limited Liability Company Brink’s
San Rafael Representaciones S.A.C.
Servicio Pan Americano de Proteccion C.A. (61%, BICV is beneficial owner)
Aeropanamericano, C.A. (61%)
Aero Sky Panama, S.A. (61%)
Artes Graficas Avanzadas 98, C.A. (61%)
Blindados de Zulia Occidente, C.A. (61%)
Blindados de Oriente, S.A. (61%)
Blindados Panamericanos, S.A. (61%)
Blindados Centro Occidente, S.A. (61%)
Documentos Mercantiles, S.A. (61%)
Instituto Panamericano, C.A. (61%)
Intergraficas Panama, S.A. (61%)
Panamericana de Vigilancia, S.A. (61%)
Transportes Expresos, C.A. (61%)
Tepuy Inmobiliaria VII, C.A.
Brink’s Panama S.A.
Business Process Intelligence Inc.
Brink’s Global Services Poland Sp.zo.o.
Brink’s Puerto Rico, Inc.
Brink’s International Holdings AG
Bolivar Business S.A.
Domesa Courier Corporation
Panamerican Protective Service Sint Maarten, N.V.
Radio Llamadas Panamá, S.A.
Servicio Panamericano de Protección (Curacao), N.V.
Domesa Curacao, N.V.
Domesa Servicio Pan Americano de Proteccion
Brink’s Aruba, N.V.
Servicio Panamericano de Vigilancia (Curacao), N.V.
Brink’s France SAS
Brink’s (Mauritius) Ltd
Brink’s Antilles S.A.R.L.
Brink’s Contrôle Sécurité Réunion S.A.R.L.
Brink’s Évolution S.A.R.L.
Est Valeurs SAS
Brink’s Formation S.A.R.L.
Brink’s France Finance SAS
Brink’s Madagascar S.A. (60%)
Brink’s Maroc S.A.S.
Brink’s Réunion S.A.R.L.
Brink’s Security Services SAS
Brink’s Teleservices SAS
Brink’s Software Services et Solutions SAS
Cyrasa Servicios de Control SA
Maartenval NV
Protecval S.A.R.L.
Security & Risk Management Training Centre Ltd
VDH Gold SARL
3
Russian Federation
Peru
Venezuela
Venezuela
Panama
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Panama
Venezuela
Venezuela
Venezuela
Panama
Panama
Poland
Puerto Rico
Switzerland
Panama
Florida
Sint Maarten
Panama
Curacao
Curacao
Aruba
Curacao
France
Mauritius
Guadeloupe
St. Denis
France
France
France
France
Madagascar
Morocco
St. Denis
France
France
France
Spain
Sint Maarten
France
Mauritius
France
Brink’s Global Holdings B.V.
A.G.S. Groep B.V.
AGS Freight Watch B.V.
AGS-SecuTrans B.V.
Brink’s Regional Services B.V.
Brink’s Trading Ltd.
DDX Trading NV (25.25%)
Brink’s Global Services Antwerp
Brink’s Global Services Pte. Ltd.
Brink’s Kenya Limited
Brink’s Switzerland Ltd.
Brink’s Diamond & Jewelry Services BVBA
Transpar - Brink’s ATM Ltda.
BGS - Agenciamento de Carga e Despacho Aduaneiro Ltda.
BSL - Brink’s Solucoes Logisticas Ltda.
Brink’s-Seguranca e Transporte de Valores Ltda.
BVA-Brink’s Valores Agregados Ltda.
Brink’s Hong Kong Limited
Brink’s (Shanghai) Finance Equipment Technology Services Co. Ltd.
Brink’s Diamond (Shanghai) Company Limited
Brink’s Jewellery Trading (Shanghai) Company Limited
Brink’s Security Transportation (Shanghai) Company Limited
Brink’s Global Services Korea Limited - Yunan Hoesa Brink’s Global (80%)
Brink’s Singapore Pte Ltd
BVC Brink’s Diamond & Jewellery Services LLP (51%)
Brinks (Southern Africa) (Proprietary) Limited
Brinks Armoured Security Services (Proprietary) Limited
Brink’s e-Pago Tecnologia Ltda.
Redetrel - Rede Transacoes Eletronicas Ltda.
ePago International Inc.
e-Pago de Colombia S.A. (75%)
Brink’s ePago S.A. de C.V.
Brink’s Global Services (BGS) Botswana (Proprietary) Limited
Brink’s Macau Limited
Brink’s Trading (Taiwan) Co., Ltd.
Brink’s Taiwan Security Limited
Brink’s (Thailand) Limited (40%)
Brink’s Global Technology Limited
Brink’s Guvenlik Hizmetleri Anonim Sirketi
Brink’s (UK) Limited
Brink’s Limited
Brink’s (Scotland) Limited
Brink’s Limited (Bahrain) EC
Brink’s Security Limited
Quarrycast Commercial Limited
Brink’s Global Services, Ltd.
BAX Holding Company
Brink’s Administrative Services Inc.
Pittston Minerals Group Inc.
4
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Israel
Belgium
Belgium
Singapore
Kenya
Switzerland
Belgium
Brazil
Brazil
Brazil
Brazil
Brazil
Hong Kong
China
China
China
China
Korea
Singapore
India
South Africa
South Africa
Brazil
Brazil
Panama
Colombia
Mexico
Botswana
Macao
Taiwan
Taiwan
Thailand
Thailand
Turkey
U.K.
U.K.
U.K.
Bahrain
U.K.
U.K.
U.K.
Virginia
Delaware
Virginia
Pittston Coal Company
Heartland Coal Company
Maxxim Rebuild Company, Inc.
Pittston Forest Products, Inc.
Addington, Inc.
Appalachian Mining, Inc.
Molloy Mining, Inc.
Vandalia Resources, Inc.
Pittston Coal Management Company
Pittston Coal Terminal Corporation
Pyxis Resources Company
HICA Corporation
Holston Mining, Inc.
Motivation Coal Company
Paramont Coal Corporation
Sheridan-Wyoming Coal Company, Incorporated
Thames Development Ltd.
Buffalo Mining Company
Clinchfield Coal Company
Dante Coal Company
Eastern Coal Corporation
Elkay Mining Company
Jewell Ridge Coal Corporation
Kentland-Elkhorn Coal Corporation
Meadow River Coal Company
Pittston Coal Group, Inc.
Ranger Fuel Corporation
Sea “B” Mining Company
Pittston Mineral Ventures Company
PMV Gold Company
Pittston Mineral Ventures International Ltd.
Mineral Ventures of Australia Pty Ltd.
Delaware
Delaware
Delaware
Virginia
Kentucky
West Virginia
West Virginia
West Virginia
Virginia
Virginia
Virginia
Kentucky
West Virginia
Virginia
Delaware
Delaware
Virginia
West Virginia
Virginia
Virginia
West Virginia
West Virginia
Virginia
Kentucky
Kentucky
Virginia
West Virginia
Virginia
Delaware
Delaware
Delaware
Australia
NOTE: Subsidiaries that are not majority owned do not constitute “Subsidiaries” for the purposes of this Schedule. They have been left on the Schedule so as to
make the ownership structure clear.
5
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
The Board of Directors
The Brink’s Company:
We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 33-21393, 33-53565, 333-78631, 333-70758, 333-70772, 333-
146673, 333-152552, 333-133073, 333-158285, 333-165567 and 333-188342) of The Brink’s Company of our reports dated February 23, 2017 , with respect to the
consolidated balance sheets of The Brink’s Company as of December 31, 2016 and 2015 , and the related consolidated statements of operations, comprehensive
income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2016 , and the effectiveness of internal control over
financial reporting as of December 31, 2016 , which reports appear in the December 31, 2016 annual report on Form 10-K of The Brink’s Company.
/s/ KPMG LLP
Richmond, Virginia
February 23, 2017
POWER OF ATTORNEY
EXHIBIT 24
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), his true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign his name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ Paul G. Boynton
Paul G. Boynton
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), his true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign his name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ Ian D. Clough
Ian D. Clough
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), her true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign her name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ Susan E. Docherty
Susan E. Docherty
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), his true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign his name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ Peter A. Feld
Peter A. Feld
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), his true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign his name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ Reginald D. Hedgebeth
Reginald D. Hedgebeth
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), his true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign his name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ Michael J. Herling
Michael J. Herling
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Douglas A. Pertz, Ronald J. Domanico and McAlister C.
Marshall, II, and each of them (with full power of substitution), his true and lawful attorney-in-fact and agent to do any and all acts and things and to execute any
and all instruments which, with the advice of counsel, any of said attorneys and agents may deem necessary or advisable to enable The Brink’s Company, a
Virginia corporation (the “Company”), to comply with the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, in connection with the preparation and filing of the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Form 10-K”), including specifically, but without limitation, power and authority to
sign his name as an officer and/or director of the Company, as the case may be, to the Form 10-K or any amendments thereto; and the undersigned does hereby
ratify and confirm all that said attorneys shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of February, 2017.
/s/ George I. Stoeckert
George I. Stoeckert
EXHIBIT 31
I, Douglas A. Pertz, President and Chief Executive Officer (Principal Executive Officer) of The Brink’s Company, certify that:
1. I have reviewed this Annual Report on Form 10-K of The Brink’s Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: February 23, 2017
/s/ Douglas A. Pertz
Douglas A. Pertz
President and
Chief Executive Officer
(Principal Executive Officer)
I, Ronald J. Domanico, Executive Vice President and Chief Financial Officer (Principal Financial Officer) of The Brink’s Company, certify that:
1. I have reviewed this Annual Report on Form 10-K of The Brink’s Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, 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;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: February 23, 2017
/s/ Ronald J. Domanico
Ronald J. Domanico
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32
In connection with the Annual Report on Form 10-K of The Brink’s Company (the “Company”) for the period ending December 31, 2016 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas A. Pertz, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Douglas A. Pertz
Douglas A. Pertz
President and Chief Executive Officer
(Principal Executive Officer)
February 23, 2017
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of The Brink’s Company (the “Company”) for the period ending December 31, 2016 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald J. Domanico, Executive Vice President and Chief Financial Officer (Principal
Financial Officer) of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Ronald J. Domanico
Ronald J. Domanico
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
February 23, 2017
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.