form_10-q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________


Commission file number 001-09148


 
THE BRINK’S COMPANY
  
 
(Exact name of registrant as specified in its charter)
  


 
Virginia
  
54-1317776
  
 
(State or other jurisdiction of
  
(I.R.S. Employer
  
 
incorporation or organization)
  
Identification No.)
  


1801 Bayberry Court, Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)

(804) 289-9600
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):  Large Accelerated Filer  x  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  x

As of April 19, 2013, 47,956,262 shares of $1 par value common stock were outstanding.
 
 

 
1
 

Part I - Financial Information
Item 1.  Financial Statements

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Balance Sheets
(Unaudited)

   
March 31,
    
December 31,
  
(In millions)
  
2013
    
2012
  
             
ASSETS
            
             
Current assets:
            
Cash and cash equivalents
   $ 234.8       201.7  
Accounts receivable, net
     639.8       612.3  
Prepaid expenses and other
     137.3       122.1  
Deferred income taxes
     60.9       59.4  
Total current assets
     1,072.8       995.5  
                 
Property and equipment, net
     785.9       793.8  
Goodwill
     253.1       243.8  
Other intangibles
     69.1       56.1  
Deferred income taxes
     386.2       385.3  
Other
     83.9       79.4  
                 
Total assets
   $ 2,651.0       2,553.9  
                 
                 
LIABILITIES AND EQUITY
                
                 
Current liabilities:
                
Short-term borrowings
   $ 71.1       26.7  
Current maturities of long-term debt
     28.0       27.0  
Accounts payable
     177.1       172.8  
Accrued liabilities
     534.2       516.5  
Total current liabilities
     810.4       743.0  
                 
Long-term debt
     410.6       335.6  
Accrued pension costs
     390.0       397.8  
Retirement benefits other than pensions
     302.6       304.6  
Deferred income taxes
     19.7       18.7  
Other
     172.3       177.4  
Total liabilities
     2,105.6       1,977.1  
                 
Commitments and contingent liabilities (notes 3, 4 and 11)
                
                 
Equity:
                
The Brink’s Company (“Brink’s”) shareholders:
                
Common stock
     48.0       47.8  
Capital in excess of par value
     555.9       568.3  
Retained earnings
     637.6       659.1  
Accumulated other comprehensive loss
     (767.9 )     (773.4 )
Brink’s shareholders
     473.6       501.8  
                 
Noncontrolling interests
     71.8       75.0  
                 
Total equity
     545.4       576.8  
                 
Total liabilities and equity
   $ 2,651.0       2,553.9  
                 
See accompanying notes to consolidated financial statements.
  

 
2
 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Income (Loss)
(Unaudited)

         
Three Months
         
Ended March 31,
 
(In millions, except for per share amounts)
  
2013 
  
2012 
               
 
Revenues
$
 977.4 
  
 940.7 
               
 
Costs and expenses:
        
 
Cost of revenues
  
 816.0 
 760.4 
 
Selling, general and administrative expenses
  
 136.0 
  
 135.8 
   
Total costs and expenses
  
 952.0 
 896.2 
 
Other operating income (expense)
  
 (9.2)
  
 2.2 
             
   
Operating profit
  
 16.2 
 46.7 
             
 
Interest expense
  
 (6.0)
 (6.3)
 
Interest and other income (expense)
  
 0.5 
  
 3.9 
   
Income from continuing operations before tax
  
 10.7 
 44.3 
 
Provision (benefit) for income taxes
  
 4.9 
  
 16.6 
             
   
Income from continuing operations
  
 5.8 
 27.7 
             
 
Loss from discontinued operations, net of tax
  
 (18.7)
  
 (3.9)
             
   
Net income (loss)
  
 (12.9)
 23.8 
     
Less net income attributable to noncontrolling interests
  
 (3.7)
  
 (6.8)
             
   
Net income (loss) attributable to Brink’s
  
 (16.6)
  
 17.0 
             
 
Amounts attributable to Brink’s
      
   
Continuing operations
  
 2.1 
 20.9 
   
Discontinued operations
  
 (18.7)
  
 (3.9)
             
   
Net income (loss) attributable to Brink’s
$
 (16.6)
  
 17.0 
             
 
Earnings (loss) per share attributable to Brink’s common shareholders (a)
      
   
Basic:
      
     
Continuing operations
$
 0.04 
 0.44 
     
Discontinued operations
  
 (0.38)
 (0.08)
     
Net income (loss)
$
 (0.34)
  
 0.35 
             
   
Diluted:
      
     
Continuing operations
$
 0.04 
 0.43 
     
Discontinued operations
  
 (0.38)
 (0.08)
     
Net income (loss)
$
 (0.34)
  
 0.35 
             
 
Weighted-average shares
      
   
Basic
  
 48.6 
 48.1 
   
Diluted
  
 48.9 
  
 48.3 
             
 
Cash dividends paid per common share
$
 0.10 
  
 0.10 
             
 
(a)
 Amounts may not add due to rounding.
      
             
 
See accompanying notes to consolidated financial statements.

 
3
 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

    
   
Three Months
  
   
Ended March 31,
  
(In millions)
  
2013
    
2012
  
             
Net income (loss)
   $ (12.9 )     23.8  
                 
Benefit plan adjustments:
                
     Benefit plan experience gains (losses)
     17.8       15.5  
     Benefit plan prior service cost (credit)
     1.0       0.9  
     Deferred profit sharing
     -       0.2  
     Total benefit plan adjustments
     18.8       16.6  
                 
Foreign currency translation adjustments
     (6.7 )     26.4  
Unrealized gains (losses) on available-for-sale securities
     -       (1.4 )
Losses on cash flow hedges
     (0.4 )     -  
          Other comprehensive income before tax
     11.7       41.6  
Provision (benefit) for income taxes
     6.5       5.9  
                 
     Other comprehensive income
     5.2       35.7  
                 
          Comprehensive income (loss)
     (7.7 )     59.5  
              Less comprehensive income (loss) attributable to noncontrolling interests
     3.1       8.8  
                 
          Comprehensive income (loss) attributable to Brink's
   $ (10.8 )     50.7  
                 
See accompanying notes to consolidated financial statements.
                

 
4
 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statement of Equity

Three Months ended March 31, 2013
(Unaudited)


   
Attributable to Brink’s
              
               
Capital
          
Accumulated
    
Attributable
        
               
in Excess
          
Other
    
to
        
         
Common
    
of Par
    
Retained
    
Comprehensive
    
Noncontrolling
        
(In millions)
  
Shares
    
Stock
    
Value
    
Earnings
    
Loss
    
Interests
    
Total
  
                                           
Balance as of December 31, 2012
     47.8     $ 47.8       568.3       659.1       (773.4 )     75.0       576.8  
                                                         
Net income (loss)
     -       -       -       (16.6 )     -       3.7       (12.9 )
Other comprehensive income (loss)
     -       -       -       -       5.8       (0.6 )     5.2  
Dividends to:
                                                        
   Brink’s common shareholders ($0.10 per share)
     -       -       -       (4.8 )     -       -       (4.8 )
   Noncontrolling interests
     -       -       -       -       -       (0.2 )     (0.2 )
Share-based compensation:
                                                        
   Stock options and awards:
                                                        
   Compensation expense
     -       -       0.8       -       -       -       0.8  
   Consideration from exercise of stock options
     -       -       0.2       -       -       -       0.2  
   Other share-based benefit programs
     0.2       0.2       (1.6 )     (0.1 )     -       -       (1.5 )
Acquisitions of noncontrolling interests
     -       -       (11.8 )     -       (0.3 )     (6.4 )     (18.5 )
Capital contributions from noncontrolling interest
     -       -       -       -       -       0.3       0.3  
                                                         
Balance as of March 31, 2013
     48.0     $ 48.0       555.9       637.6       (767.9 )     71.8       545.4  
                                                         
See accompanying notes to consolidated financial statements
  

 
5
 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Cash Flows
(Unaudited)

   
Three Months
  
   
Ended March 31,
  
(In millions)
  
2013
    
2012
  
             
Cash flows from operating activities:
            
Net income (loss)
   $ (12.9 )     23.8  
Adjustments to reconcile net income to net cash provided (used) by operating activities:
                
Loss from discontinued operations, net of tax
     18.7       3.9  
Depreciation and amortization
     44.5       41.0  
Share-based compensation expense
     0.8       1.4  
Deferred income taxes
     (12.8 )     (26.4 )
Gains and losses:
                
Sales of available-for-sale securities
     (0.2 )     (2.1 )
Sales of property and other assets
     (0.3 )     (0.2 )
Impairment losses
     0.4       -  
Retirement benefit funding (more) less than expense:
                
Pension
     8.5       (3.8 )
Other than pension
     3.2       5.3  
Loss on Venezuela currency devaluation
     13.4       -  
Other operating
     (1.0 )     3.2  
Changes in operating assets and liabilities, net of effects of acquisitions:
                
Accounts receivable
     (37.2 )     (32.0 )
Accounts payable, income taxes payable and accrued liabilities
     (17.2 )     5.7  
Customer obligations
     16.8       (18.8 )
Prepaid and other current assets
     (8.7 )     (13.3 )
Other
     (5.6 )     2.5  
Discontinued operations
     (7.1 )     (6.6 )
Net cash provided (used) by operating activities
     3.3       (16.4 )
                 
Cash flows from investing activities:
                
Capital expenditures
     (34.1 )     (33.5 )
Acquisitions
     (19.0 )     (16.4 )
Sales of available-for-sale securities and other investments
     9.3       11.5  
Cash proceeds from sale of property, equipment and investments
     0.3       0.4  
Other
     (0.2 )     0.2  
Discontinued operations
     (1.6 )     (0.8 )
Net cash used by investing activities
     (45.3 )     (38.6 )
                 
Cash flows from financing activities:
                
Borrowings (repayments) of debt:
                
Short-term debt
     43.6       (3.7 )
Long-term revolving credit facilities
     82.4       43.1  
Repayments of long-term debt
     (7.5 )     (6.9 )
Acquisition of noncontrolling interests in subsidiaries
     (18.5 )     -  
Payment of acquisition-related obligation
     (8.1 )     -  
Debt financing costs
     -       (1.5 )
Dividends to:
                
Shareholders of Brink’s
     (4.8 )     (4.7 )
Noncontrolling interests in subsidiaries
     (0.2 )     (4.6 )
Proceeds from exercise of stock options
     0.2       -  
Minimum tax withholdings associated with share-based compensation
     (1.6 )     (0.3 )
Discontinued operations
     -       0.8  
Net cash provided by financing activities
     85.5       22.2  
Effect of exchange rate changes on cash
     (10.4 )     5.4  
Cash and cash equivalents:
                
Increase (decrease)
     33.1       (27.4 )
Balance at beginning of period
     201.7       182.9  
Balance at end of period
   $ 234.8       155.5  
                 
See accompanying notes to consolidated financial statements
  

 
6
 

THE BRINK’S COMPANY
and subsidiaries
 
Notes to Consolidated Financial Statements
(Unaudited)

Note 1 – Basis of presentation

The Brink’s Company (along with its subsidiaries, “Brink’s” or “we”) has two reportable segments:

·             International
·             North America

Our unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, the unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2012.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. Actual results could differ materially from these estimates.  The most significant estimates are related to goodwill and other long-lived assets, pension and other retirement benefit obligations, legal contingencies, foreign currency translation and deferred tax assets.

The consolidated financial statements include all of the assets, liabilities, revenues, expenses and cash flows of Brink’s and all entities in which Brink’s has a controlling voting interest.  Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

Foreign Currency Translation
Our consolidated financial statements are reported in U.S. dollars.  Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate.

The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary or not.  Economies with 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.

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
Our Venezuelan operations accounted for $95.6 million or 9.8% of total Brink’s revenues and represented a significant component of total segment operating profit in the three months ended March 31, 2013.

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.

In June 2010, the Venezuelan government established an exchange process that required that each transaction be approved by the government’s central bank (the “SITME” rate).  The majority of SITME transactions were approved at a rate of 5.3 bolivar fuertes to the

 
7
 

dollar and we used this rate to remeasure our bolivar fuerte-denominated earnings into U.S. dollars each period, and monetary assets and liabilities into U.S. dollars from June  2010 to December 2012.

In February 2013, the Venezuelan government devalued the official exchange rate resulting in a new official rate of 6.3 bolivar fuertes to the dollar.  The government also announced the elimination of the SITME rate.  Beginning in February 2013, we began to use the official exchange rate to remeasure our bolivar-fuerte denominated earnings, monetary assets and liabilities.  For the three months ended March 31, 2013, we recognized a $13.4 million net remeasurement loss as a result of the devaluation.

At March 31, 2013, we had bolivar fuerte-denominated net monetary assets of $79.1 million, including $58.5 million of cash denominated in bolivar fuertes.  On an equity-method basis, we had investments in our Venezuelan operations of $91.1 million at March 31, 2013.

We are currently unsure whether we will be able to continue to obtain sufficient U.S. dollars to purchase imported supplies and fixed assets to operate our business in Venezuela, and as a result, we may experience business interruptions and higher operating costs in the future.

 
8
 

Note 2 – Segment information

We identify our operating segments based on how resources are allocated and operating decisions are made.  Management evaluates performance and allocates resources based on operating profit or loss, excluding non-segment expenses.  Under the criteria set forth in FASB ASC 280, Segment Reporting, we have four geographic operating segments, which are aggregated into two reportable segments: International and North America.  We currently serve customers in more than 100 countries, including approximately 50 countries where we operate subsidiaries.

The primary services of the reportable segments include:
·  
armored vehicle transportation, which we refer to as cash-in-transit (“CIT”)
·  
automated teller machine replenishment, and servicing, and network infrastructure services (“ATM Services”)
·  
secure international transportation of valuables (“Global Services”)
·  
supply chain management of cash (“Cash Management Services”) including cash logistics services, deploying and servicing safes and safe control devices (e.g., our patented CompuSafe® service), coin sorting and wrapping, integrated check and cash processing services (“Virtual Vault Services”)
·  
bill payment acceptance and processing services to utility companies and other billers (“Payment Services”)
·  
security and guarding services (including airport security)

             
   
Three Months
  
   
Ended March 31,
  
(In millions)
  
2013
    
2012
  
             
Revenues:
            
International
   $ 741.8       704.3  
North America
     235.6       236.4  
Revenues
   $ 977.4       940.7  
                 
                 
   
Three Months
  
   
Ended March 31,
  
(In millions)
     2013       2012  
                 
Operating profit:
                
International
   $ 35.6       65.2  
North America
     (2.4 )     5.8  
Segment operating profit
     33.2       71.0  
Non-segment
     (17.0 )     (24.3 )
Operating profit
   $ 16.2       46.7  
                 

 
9
 

Note 3 – Retirement benefits

Pension plans
We have various defined-benefit pension plans covering eligible current and former employees.  Benefits under most plans are based on salary and years of service.

The components of net periodic pension cost for our pension plans were as follows:

   
U.S. Plans
    
Non-U.S. Plans
    
Total
  
(In millions)
  
2013
    
2012
    
2013
    
2012
    
2013
    
2012
  
                                     
Three months ended March 31,
                                    
                                     
Service cost
   $ -       -       3.6       2.6       3.6       2.6  
Interest cost on projected benefit obligation
     10.6       11.0       4.8       4.1       15.4       15.1  
Return on assets – expected
     (14.2 )     (15.1 )     (3.2 )     (3.0 )     (17.4 )     (18.1 )
Amortization of losses
     11.3       10.0       1.6       1.1       12.9       11.1  
Amortization of prior service cost
     -       -       0.6       0.4       0.6       0.4  
Settlement loss
     -       4.0       0.3       0.8       0.3       4.8  
Net periodic pension cost
   $ 7.7       9.9       7.7       6.0       15.4       15.9  

In the first three months of 2013, we made a $1.1 million cash contribution to our primary U.S. pension plan.  We are required to contribute an additional $11.8 million to the primary U.S. pension plan during the remainder of 2013.

Retirement benefits other than pensions
We provide retirement healthcare benefits for eligible current and former U.S., Canadian, and Brazilian employees.  Retirement benefits related to our former U.S. coal operation include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for UMWA Represented Employees (the “UMWA plans”) as well as costs related to Black Lung obligations.

The components of net periodic postretirement cost related to retirement benefits other than pensions were as follows:

   
UMWA Plans
    
Black Lung and Other Plans
    
Total
  
(In millions)
  
2013
    
2012
    
2013
    
2012
    
2013
    
2012
  
                                     
Three months ended March 31,
                                    
                                     
Service cost
   $ -       -       0.1       -       0.1       -  
Interest cost on accumulated postretirement benefit obligations
     5.0       5.6       0.5       0.8       5.5       6.4  
Return on assets – expected
     (5.2 )     (5.3 )     -       -       (5.2 )     (5.3 )
Amortization of losses
     5.0       5.4       0.1       0.2       5.1       5.6  
Amortization of prior service cost
     -       -       0.4       0.5       0.4       0.5  
Net periodic postretirement cost
   $ 4.8       5.7       1.1       1.5       5.9       7.2  

 
10
 

Note 4 – Income taxes

   
Three Months
  
   
Ended March 31,
  
   
2013
    
2012
  
             
Continuing operations
            
Provision for income taxes (in millions)
   $ 4.9       16.6  
Effective tax rate
     45.8 %     37.5 %

2013 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first quarter of 2013 was higher than the 35% U.S. statutory tax rate primarily due to a nondeductible remeasurement charge resulting from a currency devaluation in Venezuela in the first quarter, as well as additional devaluations forecasted in the last nine months of 2013. 

2012 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first quarter of 2012 was higher than the 35% U.S. statutory tax rate largely due to withholding taxes and the characterization of a French business tax as an income tax, partially offset by the geographical mix of earnings.

Note 5 – Shares used to calculate earnings per share

       
Three Months
  
       
Ended March 31,
  
 
(In millions)
  
2013 
  
2012 
  
               
 
Weighted-average shares:
          
   
Basic  (a)
  
 48.6 
  
 48.1 
  
   
Effect of dilutive stock options and awards
  
 0.3 
  
 0.2 
  
   
Diluted
  
 48.9 
  
 48.3 
  
               
 
Antidilutive stock options and awards excluded from denominator
  
 1.7 
  
 2.6 
  

(a)  
We have deferred compensation plans for directors and certain of our employees.  Amounts owed to participants are denominated in common stock units.  Each unit represents one share of common stock.  The number of shares used to calculate basic earnings per share includes the weighted-average units credited to employees and directors under the deferred compensation plans.  Accordingly, included in basic shares are 0.7 million weighted-average units in the three months ended March 31, 2013, and 1.2 million weighted-average units in the three months ended March 31, 2012.

Note 6 – Acquisitions

We acquired 100% of the capital stock of Brazil-based Rede Transacoes Eletronicas Ltda. (Rede Trel) for approximately $26 million in cash on January 31, 2013.  On the acquisition date, Rede Trel had $10 million of cash and cash equivalents that it uses as working capital, resulting in a net cash outflow of $16 million related to the acquisition.  Rede Trel distributes electronic prepaid products, including mobile phone airtime, via a network of approximately 20,000 retail locations across Brazil.  Rede Trel’s strong distribution network supplements Brink’s existing payments business, ePago, which has operations in Brazil, Mexico, Colombia and Panama.  At the date of issuance of the financial statements, the initial purchase accounting was not completed for the Rede Trel acquisition.

We acquired the remaining 26% ownership interest in our cash logistics business in Chile for approximately $18 million in cash on January 10, 2013.  We now own 100% of this business.











 
11
 

Note 7 – Supplemental cash flow information

   
Three Months
  
   
Ended March 31,
  
(In millions)
  
2013
    
2012
  
             
Cash paid for:
            
Interest
   $ 6.1       6.1  
Income taxes
     20.5       18.9  

Non-cash Investing and Financing Activities
 
We did not acquire any armored vehicles, CompuSafe® units or other equipment under capital lease arrangements in the first three months of 2013, as compared to $5.1 million in the first three months of 2012.
 

 
12
 

Note 8 – Accumulated other comprehensive income (loss)

Other comprehensive income (loss), including the amounts reclassified from accumulated other comprehensive income (loss) into earnings, was as follows:

   
Amounts Arising During
    
Amounts Reclassified to
        
   
the Current Period
    
Net Income (Loss)
        
                           
Total Other
  
         
Income
          
Income
    
Comprehensive
  
(In millions)
  
Pretax
    
Tax
    
Pretax
    
Tax
    
Income (Loss)
  
                               
Three months ended March 31, 2013
                              
                               
Amounts attributable to Brink's:
                              
Benefit plan adjustments
   $ (0.5 )     0.1       19.2       (6.7 )     12.1  
Foreign currency translation adjustments
     (5.9 )     -       (0.1 )     0.1       (5.9 )
Unrealized gains (losses) on available-for-sale securities
     0.2       (0.1 )     (0.2 )     0.1       -  
Gains (losses) on cash flow hedges
     (0.2 )     -       (0.2 )     -       (0.4 )
      (6.4 )     -       18.7       (6.5 )     5.8  
                                         
Amounts attributable to noncontrolling interests:
                                        
Benefit plan adjustments
     -       -       0.1       -       0.1  
Foreign currency translation adjustments
     (0.7 )     -       -       -       (0.7 )
Unrealized gains (losses) on available-for-sale securities
     -       -       -       -       -  
Gains (losses) on cash flow hedges
     -       -       -       -       -  
      (0.7 )     -       0.1       -       (0.6 )
                                         
Total
                                        
Benefit plan adjustments (a)
     (0.5 )     0.1       19.3       (6.7 )     12.2  
Foreign currency translation adjustments (b)
     (6.6 )     -       (0.1 )     0.1       (6.6 )
Unrealized gains (losses) on available-for-sale securities (c)
     0.2       (0.1 )     (0.2 )     0.1       -  
Gains (losses) on cash flow hedges (d)
     (0.2 )     -       (0.2 )     -       (0.4 )
    $ (7.1 )     -       18.8       (6.5 )     5.2  
                                         
Three months ended March 31, 2012
                                        
                                         
Amounts attributable to Brink's:
                                        
Benefit plan adjustments
   $ (5.8 )     1.7       22.4       (8.2 )     10.1  
Foreign currency translation adjustments
     24.4       -       -       -       24.4  
Unrealized gains (losses) on available-for-sale securities
     0.7       (0.2 )     (2.1 )     0.8       (0.8 )
      19.3       1.5       20.3       (7.4 )     33.7  
                                         
Amounts attributable to noncontrolling interests:
                                        
Benefit plan adjustments
     -       -       -       -       -  
Foreign currency translation adjustments
     2.0       -       -       -       2.0  
Unrealized gains (losses) on available-for-sale securities
     -       -       -       -       -  
      2.0       -       -       -       2.0  
                                         
Total
                                        
Benefit plan adjustments (a)
     (5.8 )     1.7       22.4       (8.2 )     10.1  
Foreign currency translation adjustments
     26.4       -       -       -       26.4  
Unrealized gains (losses) on available-for-sale securities (c)
     0.7       (0.2 )     (2.1 )     0.8       (0.8 )
    $ 21.3       1.5       20.3       (7.4 )     35.7  

(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.  Net periodic retirement benefit cost also includes service costs, interest costs, 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 the first three months of 2013, cost of revenues included $17.0 million and selling, general and administrative expenses included $4.3 million of total net periodic retirement benefit cost.  In the first three months of 2012, cost of revenues included $15.7 million and selling, general and administrative expenses included $7.4 million of total net periodic retirement benefit cost.
(b)  
Pretax foreign currency translation adjustments reclassified to the income statement in 2013 relate to the sale of operations in Poland.  The amounts are included in loss from discontinued operations in the income statement.
(c)  
Gains and losses on sales of available-for-sale securities are reclassified from accumulated other comprehensive loss to the income statement when the gains or losses are realized.  Pretax amounts are classified in the income statement as interest and other income (expense).
(d)  
Pretax gains and losses on cash flow hedges are classified in the income statement as
·  
other operating income ($0.4 million in the three months ended March 31, 2013), and
·  
interest and other income (expense) (($0.2) million in the three months ended March 31, 2013).




 
13
 

The changes in accumulated other comprehensive loss attributable to Brink’s are as follows:

(In millions)
    
Benefit Plan Adjustments
        
Foreign Currency Translation Adjustments
        
Unrealized Gains (Losses) on Available-for-Sale Securities
        
Gains (Losses) on Cash Flow Hedges
        
Total
  
 
Balance as of December 31, 2012
   $ (665.1 )       (109.9 )       1.6         -         (773.4 )  
Other comprehensive income (loss) before reclassifications
     (0.4 )       (5.9 )       0.1         (0.2 )       (6.4 )  
Amounts reclassified from accumulated other comprehensive loss
     12.5         -         (0.1 )       (0.2 )       12.2    
Other comprehensive income (loss) attributable to Brink's
     12.1         (5.9 )       -         (0.4 )       5.8    
Acquisitions of noncontrolling interests
     -         (0.3 )       -         -         (0.3 )  
Balance as of March 31, 2013
   $ (653.0 )       (116.1 )       1.6         (0.4 )       (767.9 )  

Note 9 – Fair value of financial instruments

Investments in Available-for-sale Securities
We have investments in mutual funds designated 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.  Valuation levels were defined in our 2012 Form 10-K.

   
March 31,
    
December 31,
  
(In millions)
  
2013
    
2012
  
             
Mutual Funds
            
Cost
   $ 3.7       4.3  
Gross unrealized gains
     1.2       1.0  
Fair value
   $ 4.9       5.3  

Fixed-Rate Debt
The fair value and carrying value of our fixed-rate debts are as follows:

   
March 31,
    
December 31,
  
(In millions)
  
2013
    
2012
  
             
DTA bonds
            
Carrying value
   $ 43.2       43.2  
Fair value
     43.1       43.4  
                 
Unsecured notes issued in a private placement
                
Carrying value
     100.0       100.0  
Fair value
     109.6       110.5  

The fair value estimate of our obligation related to the fixed-rate Dominion Terminal Associates (“DTA”) bonds is based on price information observed in a less-active market, which we have categorized as a Level 2 valuation.

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.

Other Financial Instruments
Other financial instruments include cash and cash equivalents, short-term fixed rate deposits, accounts receivable, floating rate debt, accounts payable and accrued liabilities.  The financial statement carrying amounts of these items approximate the fair value.

The fair value of outstanding foreign currency contracts was not significant.  There were no transfers in or out of any of the levels of the valuation hierarchy in the first three months of 2013.







 
14
 

Note 10 – Loss from discontinued operations

   
Three Months
  
   
Ended March 31,
  
(In millions)
  
2013
    
2012
  
             
Discontinued European operations (a):
            
Loss from operations (b)
   $ (18.1 )     (4.3 )
Loss on sale
     (0.5 )     -  
Adjustments to contingencies of former operations
     -       0.1  
Loss from discontinued operations before income taxes
     (18.6 )     (4.2 )
Provision (credit) for income taxes
     0.1       (0.3 )
Loss from discontinued operations, net of tax
   $ (18.7 )     (3.9 )

(a)  
Discontinued operations include cash-in-transit operations in Germany and Poland, and guarding operations in France and Morocco.  Revenues from these European operations were $18.2 million in the three months ended March 31, 2013 and $26.1 million in the three months ended March 31, 2012.  No interest expense was included in discontinued operations in the three months ended March 31, 2013 and 2012.
(b)  
Loss from operations includes $15.3 million of accrued severance expenses which will be required to be paid to terminate certain employees of the German operations after the sale of the business is completed.  We intend to contribute a portion of the cost to fund the severance payments to the business prior to the execution of the sales transaction.

Discontinued European Operations
In 2012, we agreed to sell our cash-in-transit operations in Germany and Poland as well as event security operations in France.  The divestiture in France closed in January 2013 ($0.1 million loss on sale), the divestiture in Poland closed in March 2013 ($0.4 million loss on sale), and the divestiture in Germany is expected to be completed in the second quarter of 2013.  We completed the divestiture of guarding operations in Morocco in December 2012 and recognized a loss on the sale of $0.3 million.

The results of European operations in Germany, Poland, France, and Morocco have been excluded from continuing operations and are reported as discontinued operations for the current and prior periods.

The table below shows revenues and losses from operations before tax for the German cash-in-transit operation to be sold in 2013:

   
Three Months
  
   
Ended March 31,
  
(In millions)
  
2013
    
2012
  
             
German CIT Operation:
            
Revenues
   $ 15.0       14.0  
Losses from operations before tax
     18.2       2.9  

Note 11 – Commitments and contingent matters

Operating leases
We have made residual value guarantees of approximately $15.5 million at March 31, 2013, related to operating leases, principally for trucks and other vehicles.

Other
We are involved in various other lawsuits and claims in the ordinary course of business.  We are not able to estimate the range of losses for some of these matters.  We have recorded accruals for losses that are considered probable and reasonably estimable.  We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our liquidity, financial position or results of operations.

 
15
 


THE BRINK’S COMPANY
and subsidiaries

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world.  These services include:
·  
armored vehicle transportation, which we refer to as cash-in-transit (“CIT”)
·  
automated teller machine replenishment, and servicing, and network infrastructure services (“ATM Services”)
·  
secure international transportation of valuables (“Global Services”)
·  
supply chain management of cash (“Cash Management Services”) including cash logistics services, deploying and servicing safes and safe control devices (e.g., our patented CompuSafe® service), coin sorting and wrapping, integrated check and cash processing services (“Virtual Vault Services”)
·  
bill payment acceptance and processing services to utility companies and other billers (“Payment Services”)
·  
security and guarding services (including airport security)

We have four geographic operating segments:  Latin America; Europe, Middle East, and Africa (“EMEA”); Asia Pacific; and North America, which are aggregated into two reportable segments: International and North America.

 
16
 

RESULTS OF OPERATIONS

Consolidated Review

Non-GAAP Results
Non-GAAP results described in this filing are financial measures that are not required by, or presented in accordance with U.S. generally accepted accounting principles (“GAAP”).  The purpose of the non-GAAP results is to report financial information without certain income and expense items and to adjust the quarterly non-GAAP tax rates so that the non-GAAP tax rate in each of the quarters is equal to the full-year non-GAAP tax rate.  For 2013, a forecasted full-year tax rate is used.  The full year non-GAAP tax rate in both years excludes certain pretax and tax income and expense amounts.  The non-GAAP results provide information to assist comparability and estimates of future performance.  Brink’s believes these measures are helpful in assessing operations and estimating future results and enable period-to-period comparability of financial performance.  Non-GAAP results should not be considered as an alternative to revenue, income or earnings per share amounts determined in accordance with GAAP and should be read in conjunction with their GAAP counterparts.  The adjustments are described in detail and are reconciled to our GAAP results on pages 28 – 30.

   
Three months
        
   
Ended March 31,
    
%
  
(In millions, except for per share amounts)
  
2013
    
2012
    
Change
  
                   
GAAP
                  
Revenues
   $ 977.4       940.7       4  
Segment operating profit (a)
     33.2       71.0       (53 )
Non-segment expense
     (17.0 )     (24.3 )     (30 )
Operating profit
     16.2       46.7       (65 )
Income from continuing operations (b)
     2.1       20.9       (90 )
Diluted EPS from continuing operations (b)
     0.04       0.43       (91 )
                         
Non-GAAP (d)
                        
Revenues
   $ 973.5       936.9       4  
Segment operating profit (a)
     51.0       75.2       (32 )
Non-segment expense
     (7.6 )     (9.6 )     (21 )
Operating profit
     43.4       65.6       (34 )
Income from continuing operations (b)
     17.1       32.6       (48 )
Diluted EPS from continuing operations (b) (c)
     0.35       0.67       (48 )

Amounts may not add due to rounding.
(a)  
Segment operating profit is a non-GAAP measure when presented in any context other than prescribed by ASC Topic 280, Segment Reporting.  The tables on page 20 reconcile the measurement to operating profit, a GAAP measure.  Disclosure of total segment operating profit enables investors to assess the total operating performance of Brink’s excluding non-segment income and expense.  Forward-looking estimates related to total segment operating profit and non-segment income (expense) for 2013 are provided on page 27.
(b)  
Amounts reported in this table are attributable to the shareholders of Brink’s and exclude earnings related to noncontrolling interests.
(c)  
Non-GAAP diluted EPS for the first quarter of 2012 as reported in the fourth quarter of 2012 was $0.01 per share lower, or $0.66 per share.  The updated presentation reflects additional European operations that we expect to exit during 2013.
(d)  
Non-GAAP earnings information is contained on pages 28 – 30, including reconciliation to amounts reported under GAAP.

Organic Growth
Organic growth represents the change in revenues or operating profit between the current and prior period, excluding the effect of the following items: acquisitions and dispositions, changes in currency exchange rates and the remeasurement of net monetary assets in Venezuela under highly inflationary accounting.

 
17
 


Overview

GAAP
Our revenues increased $36.7 million or 4% and our operating profit decreased $30.5 million or 65% in the first quarter of 2013.  Revenues increased due to organic growth in our International segment, partially offset by unfavorable changes in currency exchange rates.  Operating profit decreased primarily due to the $18.7 million loss related to the February 2013 robbery in Brussels, Belgium, a charge related to the remeasurement of net monetary assets as a result of the devaluation of Venezuela currency ($13.4 million) and a profit decrease in North America.

Our income from continuing operations in 2013 decreased $18.8 million compared to 2012 primarily due to the operating profit decrease mentioned above, partially offset by the positive income tax and noncontrolling interest impacts of the profit decrease.

Our earnings per share from continuing operations was $0.04, down from $0.43 in 2012.

We conformed the method we used in 2012 to allocate certain international overhead expenses to Latin America, EMEA and Asia Pacific to the method we are using in 2013.  The 2012 amounts were not materially affected.

Non-GAAP
Non-GAAP results include the following adjustments:
   
Three Months
  
   
Ended March 31,
  
   
2013
    
2012
  
             
GAAP Diluted EPS
   $ 0.04       0.43  
     Exclude Venezuela monetary asset remeasurement losses
     0.17       -  
     Exclude U.S. retirement plan expenses
     0.17       0.21  
     Exclude employee benefit settlement and severance losses
     -       0.01  
     Exclude additional European operations to be exited
     0.02       0.02  
     Exclude gains and losses on acquisitions and dispositions
     (0.02 )     (0.02 )
     Adjust quarterly tax rate to full-year average rate
     (0.04 )     0.02  
Non-GAAP Diluted EPS
   $ 0.35       0.67  

Amounts may not add due to rounding.  Non-GAAP results are reconciled in more detail to the applicable GAAP results on pages 28 – 30.

Our revenues increased $36.6 million or 4% and our operating profit decreased $22.2 million or 34% in 2013.  Revenues increased due to organic growth in our International segment, partially offset by unfavorable changes in currency exchange rates.  Operating profit decreased primarily due to the $18.7 million loss related to the February 2013 robbery in Brussels, Belgium and a profit decrease in North America.

Our income from continuing operations in 2013 decreased 48% primarily due to lower operating profit, partially offset by the positive income tax impact of the profit decrease.

Our earnings per share from continuing operations was $0.35, down from $0.67 in 2012.

Outlook for 2013

GAAP
Our organic revenue growth rate for 2013 is expected to be in the 5% to 8% range, and our estimate of the impact of changes in currency exchange rates on revenue is in the negative 2% to negative 4% range.  Our operating segment margin is expected to be in the 5.0% to 5.5% range. Our International organic revenue growth rate for 2013 is expected to be in the 7% to 9% range, and our estimate of the impact of changes in currency exchange rates on International revenue is in the negative 3% to negative 5% range.  Our International segment margin is expected to be in the 6.0% to 7.0% range.  Our North America organic revenue growth rate for 2013 is expected to be in the 0% to 2% range, and we do not expect changes in currency exchange rates to affect North America revenue compared to last year.  Our North America segment margin is expected to be in the 1% to 2% range.  On February 8, 2013, the Venezuelan government announced a 16% devaluation from the rate we previously used to remeasure our earnings. Our full-year outlook assumes a total devaluation of about 40% - the total impact of which is estimated to be a reduction of $130 million in revenue.  See page 24 for more information regarding Venezuela.

Non-GAAP
Our outlook for non-GAAP revenues is the same as our outlook for GAAP revenues.

 
18
 


Our operating segment margin is expected to be in the 6.0% to 6.5% range. Our International segment margin is expected to be in the 7.0% to 8.0% range and our North America segment margin is expected to be in the 2% to 3% range.

See page 27 for a summary of our 2013 Outlook.

 
19
 

Segment Operating Results
Segment Review
First Quarter 2013 versus First Quarter 2012

GAAP
               
Acquisitions /
                          
         
Organic
    
Dispositions
    
Currency
          
% Change
  
(In millions)
  
1Q '12
    
Change
    
(b)
    
(c)
    
1Q '13
    
Total
    
Organic
  
Revenues:
                                          
International:
                                          
Latin America
   $ 386.3       45.9       3.0       (22.3 )     412.9       7       12  
EMEA
     280.4       5.6       -       -       286.0       2       2  
Asia Pacific
     37.6       6.6       -       (1.3 )     42.9       14       18  
International
     704.3       58.1       3.0       (23.6 )     741.8       5       8  
North America
     236.4       (0.4 )     -       (0.4 )     235.6       -       -  
Total
   $ 940.7       57.7       3.0       (24.0 )     977.4       4       6  
Operating profit:
                                                        
International
   $ 65.2       (13.2 )     0.4       (16.8 )     35.6       (45 )     (20 )
North America
     5.8       (8.2 )     -       -       (2.4 )  
NM
    
NM
  
Segment operating profit
     71.0       (21.4 )     0.4       (16.8 )     33.2       (53 )     (30 )
Non-segment (a)
     (24.3 )     6.2       1.1       -       (17.0 )     (30 )     (26 )
Total
   $ 46.7       (15.2 )     1.5       (16.8 )     16.2       (65 )     (33 )
Segment operating margin:
                                                        
International
     9.3 %                             4.8 %                
North America
     2.5 %                             (1.0 %)                
Segment operating margin
     7.5 %                             3.4 %                
                                                         

Non-GAAP
                                          
               
Acquisitions /
                          
         
Organic
    
Dispositions
    
Currency
          
% Change
  
(In millions)
  
1Q '12
    
Change
    
(b)
    
(c)
    
1Q '13
    
Total
    
Organic
  
Revenues:
                                          
International:
                                          
Latin America
   $ 386.3       45.9       3.0       (22.3 )     412.9       7       12  
EMEA
     276.6       5.5       -       -       282.1       2       2  
Asia Pacific
     37.6       6.6       -       (1.3 )     42.9       14       18  
International
     700.5       58.0       3.0       (23.6 )     737.9       5       8  
North America
     236.4       (0.4 )     -       (0.4 )     235.6       -       -  
Total
   $ 936.9       57.6       3.0       (24.0 )     973.5       4       6  
Operating profit:
                                                        
International