Document


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

For the quarterly period ended September 30, 2016

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 001-09148
 
THE BRINK’S COMPANY
 
 
(Exact name of registrant as specified in its charter)
 
Virginia
 
54-1317776
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
1801 Bayberry Court, Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)
(804) 289-9600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ý No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  ý  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):  Large Accelerated Filer  ý  Accelerated Filer  ¨  Non-Accelerated Filer  ¨  Smaller Reporting Company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨  No  ý
As of October 24, 2016, 49,887,141 shares of $1 par value common stock were outstanding.

1


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

Consolidated Balance Sheets
(Unaudited)
(In millions)
September 30, 2016
 
December 31, 2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
191.5

 
181.9

Restricted cash
46.8

 
16.4

Accounts receivable, net
512.7

 
478.1

Prepaid expenses and other
115.1

 
101.3

Total current assets
866.1

 
777.7

 
 
 
 
Property and equipment, net
534.6

 
549.0

Goodwill
193.5

 
185.3

Other intangibles
27.3

 
28.5

Deferred income taxes
318.9

 
329.8

Other
82.1

 
76.4

 
 
 
 
Total assets
$
2,022.5

 
1,946.7

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

 
 
 
 
Current liabilities:
 

 
 

Short-term borrowings
$
80.5

 
32.6

Current maturities of long-term debt
31.6

 
39.8

Accounts payable
119.5

 
155.3

Accrued liabilities
382.2

 
401.2

Restricted cash held for customers
33.3

 
12.9

Total current liabilities
647.1

 
641.8

 
 
 
 
Long-term debt
380.5

 
358.1

Accrued pension costs
203.3

 
219.4

Retirement benefits other than pensions
256.3

 
259.2

Deferred income taxes
7.7

 
8.1

Other
135.6

 
129.5

Total liabilities
1,630.5

 
1,616.1

 
 
 
 
Contingent liabilities (notes 3, 4, 11 and 12)


 


 
 
 
 
Equity:
 

 
 

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

 
 

Common stock
49.9

 
48.9

Capital in excess of par value
615.3

 
599.6

Retained earnings
568.1

 
561.3

Accumulated other comprehensive loss
(859.2
)
 
(891.9
)
Brink’s shareholders
374.1

 
317.9

 
 
 
 
Noncontrolling interests
17.9

 
12.7

 
 
 
 
Total equity
392.0

 
330.6

 
 
 
 
Total liabilities and equity
$
2,022.5

 
1,946.7

See accompanying notes to consolidated financial statements.

2


THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Operations
(Unaudited)
 
Three Months 
 Ended September 30,
 
Nine Months 
 Ended September 30,
(In millions, except for per share amounts)
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Revenues
$
755.8

 
759.2

 
$
2,217.1

 
2,295.6

 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
602.4

 
616.4

 
1,803.9

 
1,866.4

Selling, general and administrative expenses
103.9

 
111.1

 
320.9

 
343.4

Total costs and expenses
706.3

 
727.5

 
2,124.8

 
2,209.8

Other operating income (expense)
0.5

 
(6.4
)
 
(6.4
)
 
(62.2
)
 
 
 
 
 
 
 
 
Operating profit
50.0

 
25.3

 
85.9

 
23.6

 
 
 
 
 
 
 
 
Interest expense
(5.1
)
 
(4.8
)
 
(14.9
)
 
(14.4
)
Interest and other income
0.5

 
0.9

 
1.2

 
1.7

Income from continuing operations before tax
45.4

 
21.4

 
72.2

 
10.9

Provision for income taxes
19.5

 
14.1

 
43.4

 
37.2

 
 
 
 
 
 
 
 
Income (loss) from continuing operations
25.9

 
7.3

 
28.8

 
(26.3
)
 
 
 
 
 
 
 
 
Loss from discontinued operations, net of tax
—

 
(0.1
)
 
—

 
(2.4
)
 
 
 
 
 
 
 
 
Net income (loss)
25.9

 
7.2

 
28.8

 
(28.7
)
Less net income (loss) attributable to noncontrolling interests
1.4

 
(0.4
)
 
7.1

 
(20.4
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Brink’s
24.5

 
7.6

 
21.7

 
(8.3
)
 
 
 
 
 
 
 
 
Amounts attributable to Brink’s
 
 
 
 
 
 
 
Continuing operations
24.5

 
7.7

 
21.7

 
(5.9
)
Discontinued operations
—

 
(0.1
)
 
—

 
(2.4
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Brink’s
$
24.5

 
7.6

 
$
21.7

 
(8.3
)
 
 
 
 
 
 
 
 
Income (loss) per share attributable to Brink’s common shareholders(a):
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
$
0.49

 
0.16

 
$
0.44

 
(0.12
)
Discontinued operations
—

 
—

 
—

 
(0.05
)
Net income (loss)
$
0.49

 
0.16

 
$
0.44

 
(0.17
)
 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.48

 
0.16

 
$
0.43

 
(0.12
)
Discontinued operations
—

 
—

 
—

 
(0.05
)
Net income (loss)
$
0.48

 
0.15

 
$
0.43

 
(0.17
)
 
 
 
 
 
 
 
 
Weighted-average shares
 
 
 
 
 
 
 
Basic
50.1

 
49.4

 
49.8

 
49.3

Diluted
50.7

 
49.9

 
50.4

 
49.3

 
 
 
 
 
 
 
 
Cash dividends paid per common share
$
0.10

 
0.10

 
$
0.30

 
0.30

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


3


THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
Three Months 
 Ended September 30,
 
Nine Months 
 Ended September 30,
(In millions)
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net income (loss)
$
25.9

 
7.2

 
$
28.8

 
(28.7
)
 
 
 
 
 
 
 
 
Benefit plan adjustments:
 

 
 

 
 
 
 
Benefit plan experience gains
12.4

 
14.0

 
36.7

 
41.6

Benefit plan prior service cost
(0.5
)
 
(0.4
)
 
(1.5
)
 
(3.9
)
Deferred profit sharing
—

 
(0.1
)
 
—

 
0.1

Total benefit plan adjustments
11.9

 
13.5

 
35.2

 
37.8

 
 
 
 
 
 
 
 
Foreign currency translation adjustments
(3.0
)
 
(39.8
)
 
11.3

 
(83.3
)
Unrealized net losses on available-for-sale securities
—

 
(0.4
)
 
—

 
(0.5
)
Gains (losses) on cash flow hedges
0.2

 
(0.4
)
 
(0.2
)
 
—

Other comprehensive income (loss) before tax
9.1

 
(27.1
)
 
46.3

 
(46.0
)
Provision for income taxes
4.1

 
4.5

 
12.1

 
13.0

 
 
 
 
 
 
 
 
Other comprehensive income (loss)
5.0

 
(31.6
)
 
34.2

 
(59.0
)
 
 
 
 
 
 
 
 
Comprehensive income (loss)
30.9

 
(24.4
)
 
63.0

 
(87.7
)
Less comprehensive income (loss) attributable to noncontrolling interests
1.9

 
(2.7
)
 
8.6

 
(23.6
)
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Brink's
$
29.0

 
(21.7
)
 
$
54.4

 
(64.1
)
See accompanying notes to consolidated financial statements.


4


THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statement of Equity

Nine Months ended September 30, 2016
(Unaudited)
 
Attributable to Brink’s
 
 
 
 
(In millions)
Shares
 
Common
Stock
 
Capital
in Excess
of Par
Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Attributable
to
Noncontrolling
Interests
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2015
48.9

 
$
48.9

 
599.6

 
561.3

 
(891.9
)
 
12.7

 
330.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
—

 
—

 
—

 
21.7

 
—

 
7.1

 
28.8

Other comprehensive income
—

 
—

 
—

 
—

 
32.7

 
1.5

 
34.2

Common stock issued
0.1

 
0.1

 
2.9

 
—

 
—

 
—

 
3.0

Dividends to:
 

 
 

 
 

 
 

 
 

 
 

 
 

Brink’s common shareholders ($0.30 per share)
—

 
—

 
—

 
(14.8
)
 
—

 
—

 
(14.8
)
Noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(3.4
)
 
(3.4
)
Share-based compensation:
 

 
 

 
 

 
 

 
 

 
 

 
 

Stock awards and options:
 

 
 

 
 

 
 

 
 

 
 

 
 

Compensation expense
—

 
—

 
6.7

 
—

 
—

 
—

 
6.7

Consideration from exercise of stock options
0.4

 
0.4

 
10.5

 
—

 
—

 
—

 
10.9

Other share-based benefit programs
0.5

 
0.5

 
(4.4
)
 
(0.1
)
 
—

 
—

 
(4.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of September 30, 2016
49.9

 
$
49.9

 
615.3

 
568.1

 
(859.2
)
 
17.9

 
392.0

See accompanying notes to consolidated financial statements
 

5


THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months 
 Ended September 30,
(In millions)
2016
 
2015
Cash flows from operating activities:
 
 
 
Net income (loss)
$
28.8

 
(28.7
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Loss from discontinued operations, net of tax
—

 
2.4

Depreciation and amortization
97.5

 
106.3

Share-based compensation expense
6.7

 
11.0

Deferred income taxes
(2.7
)
 
(6.7
)
Gains and losses:
 
 
 
Marketable securities
(0.5
)
 
(0.3
)
Property and other assets
1.2

 
(0.6
)
Business acquisitions and dispositions
(0.1
)
 
—

Venezuela impairment
—

 
35.3

Other impairment losses
5.7

 
1.5

Retirement benefit funding (more) less than expense:
 
 
 
Pension
10.2

 
6.3

Other than pension
9.5

 
7.2

Remeasurement losses due to Venezuela currency devaluation
4.7

 
18.1

Other operating
1.3

 
3.3

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable and income taxes receivable
(59.2
)
 
(58.9
)
Accounts payable, income taxes payable and accrued liabilities
(23.7
)
 
1.0

Customer obligations
(14.9
)
 
5.1

Prepaid and other current assets
(4.7
)
 
(8.3
)
Other
(2.8
)
 
(1.2
)
Discontinued operations
—

 
(2.0
)
Net cash provided by operating activities
57.0

 
90.8

Cash flows from investing activities:
 

 
 

Capital expenditures
(72.4
)
 
(61.2
)
Marketable securities:
 
 
 
Purchases
(8.9
)
 
(19.0
)
Sales
8.8

 
13.3

Cash proceeds from sale of property, equipment and investments
4.4

 
0.8

Other
(0.8
)
 
0.4

Discontinued operations
—

 
1.9

Net cash used by investing activities
(68.9
)
 
(63.8
)
Cash flows from financing activities:
 

 
 

Borrowings (repayments) of debt:
 

 
 

Short-term debt
39.9

 
(1.2
)
Long-term revolving credit facilities:
 
 
 
Borrowings
406.9

 
407.2

Repayments
(381.9
)
 
(436.5
)
Other long-term debt:
 

 
 

Borrowings
1.2

 
82.4

Repayments
(31.8
)
 
(33.3
)
Debt financing costs
—

 
(2.0
)
Common stock issued
3.0

 
—

Dividends to:
 

 
 

Shareholders of Brink’s
(14.8
)
 
(14.6
)
Noncontrolling interests in subsidiaries
(3.4
)
 
(5.1
)
Proceeds from exercise of stock options
10.9

 
3.7

Minimum tax withholdings associated with share-based compensation
(5.2
)
 
(1.7
)
Other
1.8

 
0.7

Net cash provided (used) by financing activities
26.6

 
(0.4
)
Effect of exchange rate changes on cash
(5.1
)
 
(26.7
)
Cash and cash equivalents:
 

 
 

Increase (decrease)
9.6

 
(0.1
)
Balance at beginning of period
181.9

 
176.2

Balance at end of period
$
191.5

 
176.1

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 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; Europe, Middle East and Africa ("EMEA") and Asia)
•
Payment Services

Our unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, the unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2015.

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

The consolidated financial statements include the accounts of Brink’s and the subsidiaries it controls.  Control is determined based on ownership rights or, when applicable, based on whether we are considered to be the primary beneficiary of a variable interest entity.  Our interest in 20% to 50% owned companies that are not controlled are accounted for using the equity method, provided we sufficiently influence the management of the investee.  Other investments are accounted for as cost-method investments or as available-for-sale.  All significant intercompany accounts and transactions have been eliminated in consolidation.

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

The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary or not.  Economies with an officially reported three-year cumulative inflation rate of more than 100% are considered highly inflationary.

Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date.  Translation adjustments are recorded in other comprehensive income (loss).  Revenues and expenses are translated at rates of exchange in effect during the year.  Transaction gains and losses are recorded in earnings.

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 existed 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.


7


Remeasurement rates during 2015. In March 2014, the government initiated an exchange mechanism known as SICAD II with conversions subject to specific eligibility requirements.  Transactions were reported in a range of 49 to 52 bolivars to the U.S. dollar.  From March 2014 through December 31, 2014, we received approval to obtain a total of $1.2 million (at a weighted average exchange rate of 51 bolivars to the dollar) through the SICAD II mechanism. 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 government replaced the SICAD II process with a new process, known locally as SIMADI and we began to use the SIMADI rate to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. As a result, we recognized an $18.1 million net remeasurement loss in the first nine months of 2015. The after-tax effect of this loss attributable to noncontrolling interests was $5.7 million for the first nine months of 2015. The SIMADI rates published from mid-February 2015 through the end of 2015 ranged from 170 to 200 bolivars to the U.S. dollar. We received only minimal U.S. dollars through this exchange mechanism.

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 659 bolivars to the dollar at September 30, 2016. We have received only minimal U.S. dollars through this exchange mechanism. We recognized a $4.7 million pretax remeasurement loss in the first nine months of 2016.  However, the after-tax effect in the current period attributable to noncontrolling interest was income of $2.7 million.

Items related to our Venezuelan operations are as follows:

•
Our investment in our Venezuelan operations on an equity-method basis was $20.6 million at September 30, 2016 and $26.0 million at December 31, 2015.
•
Our Venezuelan operations had net payables to other Brink's affiliates of $9.3 million at September 30, 2016 and $18.7 million at December 31, 2015.
•
Our Venezuelan operations had net non-monetary assets of $16.7 million at September 30, 2016 and $13.5 million at December 31, 2015.
•
Our bolivar-denominated net monetary net assets were $2.4 million (including $5.8 million of cash and cash equivalents) at September 30, 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 Venezuelan operations were $112.5 million at September 30, 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 Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 360, Property, Plant and Equipment. Our asset impairment analysis included management's best estimate of associated cash flows relating to the long-lived assets and included fair value assumptions that reflect conditions that exist in a volatile economic environment. Future events or actions relative to our Venezuelan business may result in further adjustments.

As a result of our impairment analysis, we recognized a $34.5 million impairment charge in the second quarter of 2015. We recognized an additional $0.8 million in impairment charges in the third quarter of 2015. The current carrying value of the long-lived assets of our Venezuelan operations is $9.7 million at September 30, 2016.  We have not reclassified any of the $112.5 million of accumulated other comprehensive losses attributable to Brink’s shareholders related to Brink’s Venezuela into earnings.

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. 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. Revenues from both Ireland operations to be shut down in 2016 were approximately $20 million in 2015. In the first nine months of 2016, charges excluded from non-GAAP results include $4.8 million in severance costs, $2.0 million in property impairment charges, lease restructuring charges of $0.5 million and an additional $5.3 million in operating and other exit costs. International shipments to and from Ireland will continue to be provided through Brink’s Global Services ("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 10). 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

8


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.

Argentina
We use the official exchange rate to translate the Brink's Argentina balance sheet and income statement. At September 30, 2016, the official exchange rate was approximately 15.4 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 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 approximately 30% to 40% 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. See Note 10 Supplemental cash flow information for more information.

In the first nine months of 2016, we recognized $0.1 million in losses from converting Argentine pesos into U.S. dollars. In the third quarter of 2015 and in the first nine months of 2015, we recognized $2.3 million in losses from converting Argentine pesos into U.S. dollars. These conversion losses are classified in the income statement as other operating income (expense). At September 30, 2016, we had cash denominated in Argentine pesos of $11.2 million.

New Accounting Standards
In May 2014, the FASB issued Accounting Standards Update ("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. The new standard can be applied retrospectively to each reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. We are assessing the potential impact of this new standard on financial reporting and have not yet selected a transition method.

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 will simplify how certain features related to share-based payments are accounted for and presented in the financial statements. The new standard is effective January 1, 2017 with early adoption permitted in any interim or annual period. We are assessing the potential impact of this new standard on financial reporting.

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.


9


Note 2 - Segment information

The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world.  These services include:
•
Cash-in-Transit (“CIT”) Services – armored vehicle transportation of valuables
•
ATM Services – replenishing and maintaining customers’ automated teller machines; providing network infrastructure services
•
Global Services – secure international transportation of valuables
•
Cash Management Services
◦
Currency and coin counting and sorting; deposit preparation and reconciliations; other cash management services
◦
Safe and safe control device installation and servicing (including our patented CompuSafe® service)
◦
Check and cash processing services for banking customers (“Virtual Vault Services”)
◦
Check imaging services for banking customers
•
Payment Services – bill payment and processing services on behalf of utility companies and other billers at any of our Brink’s or Brink’s-operated payment locations in Latin America and Brink’s Money™ general purpose reloadable prepaid cards and payroll cards in the U.S.
•
Guarding Services – protection of airports, offices, and certain other locations in Europe and Brazil with or without electronic surveillance, access control, fire prevention and highly trained patrolling personnel

We identify our operating segments based on how our chief operating decision maker (“CODM”) allocates resources, assesses performance and makes decisions.  Our CODM is our President and Chief Executive Officer.  Our CODM evaluates performance and allocates resources to each operating segment based on operating profit or loss, excluding income and expenses not allocated to segments.

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

10


The following table summarizes our revenues and operating profit for each of our reportable segments:
 
Revenues
 
Operating Profit
 
Three Months Ended September 30,
 
Three Months Ended September 30,
(In millions)
2016
 
2015
 
2016
 
2015
Reportable Segments:
 
 
 
 
 
 
 
U.S.
$
184.2

 
182.6

 
$
2.2

 
1.4

France
108.9

 
110.8

 
12.7

 
13.7

Mexico
71.0

 
80.4

 
3.1

 
3.4

Brazil
76.4

 
63.6

 
11.1

 
3.7

Canada
38.7

 
37.9

 
2.4

 
3.6

Largest 5 Markets
479.2

 
475.3

 
31.5

 
25.8

Latin America
90.3

 
91.7

 
22.9

 
17.6

EMEA
99.4

 
111.5

 
11.5

 
9.4

Asia
42.9

 
39.7

 
7.6

 
7.1

Global Markets
232.6

 
242.9

 
42.0

 
34.1

Payment Services
23.1

 
21.7

 
1.1

 
(2.0
)
Total reportable segments
734.9

 
739.9

 
74.6

 
57.9

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

 
—

 
(12.9
)
 
(15.5
)
Foreign currency transaction losses
—

 
—

 
(0.2
)
 
(5.1
)
Reconciliation of segment policies to GAAP
—

 
—

 
(0.8
)
 
(0.3
)
Other items not allocated to segments:
 
 
 
 
 
 
 
Venezuela operations
20.4

 
19.3

 
1.7

 
(0.8
)
Reorganization and Restructuring
—

 
—

 
(2.3
)
 
(2.9
)
U.S. and Mexican retirement plans
—

 
—

 
(7.9
)
 
(8.0
)
Acquisitions and dispositions
0.5

 
—

 
(2.2
)
 
—

Total
$
755.8

 
759.2

 
$
50.0

 
25.3


 
Revenues
 
Operating Profit
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2016
 
2015
 
2016
 
2015
Reportable Segments:
 
 
 
 
 
 
 
U.S.
$
545.5

 
550.3

 
$
(1.5
)
 
16.1

France
321.6

 
323.9

 
27.3

 
24.5

Mexico
223.2

 
251.2

 
9.4

 
15.8

Brazil
203.3

 
205.1

 
19.7

 
11.9

Canada
112.8

 
116.3

 
5.6

 
7.7

Largest 5 Markets
1,406.4

 
1,446.8

 
60.5

 
76.0

Latin America
254.5

 
273.7

 
61.2

 
53.3

EMEA
291.0

 
339.5

 
28.3

 
26.7

Asia
123.4

 
117.0

 
21.0

 
19.5

Global Markets
668.9

 
730.2

 
110.5

 
99.5

Payment Services
65.0

 
66.6

 
(0.9
)
 
(5.2
)
Total reportable segments
2,140.3

 
2,243.6

 
170.1

 
170.3

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

 
—

 
(46.6
)
 
(58.4
)
Foreign currency transaction gains (losses)
—

 
—

 
2.5

 
(8.8
)
Reconciliation of segment policies to GAAP
—

 
—

 
3.7

 
5.1

Other items not allocated to segments:
 
 
 
 
 
 
 
Venezuela operations
74.0

 
52.0

 
4.4

 
(57.8
)
Reorganization and Restructuring
—

 
—

 
(10.4
)
 
(3.2
)
U.S. and Mexican retirement plans
—

 
—

 
(23.3
)
 
(23.9
)
Acquisitions and dispositions
2.8

 
—

 
(14.5
)
 
0.3

Total
$
2,217.1

 
2,295.6

 
$
85.9

 
23.6

See "Other Items Not Allocated to Segment" on pages 33–34 to the consolidated financial statements for explanations of each of the other items not allocated to segments.

11


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)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
2.6

 
2.6

 
2.6

 
2.6

Interest cost on projected benefit obligation
9.3

 
9.0

 
3.0

 
2.9

 
12.3

 
11.9

Return on assets – expected
(13.7
)
 
(13.6
)
 
(2.4
)
 
(2.4
)
 
(16.1
)
 
(16.0
)
Amortization of losses
6.4

 
7.7

 
1.2

 
1.1

 
7.6

 
8.8

Settlement loss
—

 
—

 
0.4

 
1.5

 
0.4

 
1.5

Net periodic pension cost
$
2.0

 
3.1

 
4.8

 
5.7

 
6.8

 
8.8

 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
8.1

 
8.1

 
8.1

 
8.1

Interest cost on projected benefit obligation
27.8

 
27.0

 
9.5

 
9.1

 
37.3

 
36.1

Return on assets – expected
(41.0
)
 
(40.9
)
 
(7.2
)
 
(7.2
)
 
(48.2
)
 
(48.1
)
Amortization of losses
18.7

 
23.2

 
3.6

 
3.6

 
22.3

 
26.8

Amortization of prior service cost
—

 
—

 
0.2

 
0.2

 
0.2

 
0.2

Settlement loss
—

 
—

 
1.8

 
4.9

 
1.8

 
4.9

Net periodic pension cost
$
5.5

 
9.3

 
16.0

 
18.7

 
21.5

 
28.0

 
 
 
 
 
 
 
 
 
 
 
 
Included in:
 

 
 

 
 

 
 

 
 

 
 

Continuing operations
$
5.5

 
9.3

 
16.0

 
17.6

 
21.5

 
26.9

Discontinued operations
—

 
—

 
—

 
1.1

 
—

 
1.1

Net periodic pension cost
$
5.5

 
9.3

 
16.0

 
18.7

 
21.5

 
28.0

We did not make cash contributions to the primary U.S. pension plan in 2015 or the first nine months of 2016.  Based on current assumptions, as described in our Annual Report on Form 10-K for the year ended December 31, 2015, we do not expect to make any additional contributions to the primary U.S. pension plan until 2020.


12


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 United Mine Workers of America 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)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest cost on accumulated postretirement benefit obligations
$
4.7

 
4.2

 
0.7

 
0.7

 
5.4

 
4.9

Return on assets – expected
(4.4
)
 
(5.1
)
 
—

 
—

 
(4.4
)
 
(5.1
)
Amortization of losses
4.7

 
3.7

 
0.6

 
0.8

 
5.3

 
4.5

Amortization of prior service (credit) cost
(1.2
)
 
(1.1
)
 
0.4

 
0.5

 
(0.8
)
 
(0.6
)
Net periodic postretirement cost
$
3.8

 
1.7

 
1.7

 
2.0

 
5.5

 
3.7

 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
—

 
0.1

 
—

 
0.1

Interest cost on accumulated postretirement benefit obligations
14.1

 
12.9

 
2.0

 
2.1

 
16.1

 
15.0

Return on assets – expected
(13.1
)
 
(15.4
)
 
—

 
—

 
(13.1
)
 
(15.4
)
Amortization of losses
13.5

 
11.7

 
1.8

 
2.3

 
15.3

 
14.0

Amortization of prior service (credit) cost
(3.5
)
 
(3.4
)
 
1.3

 
1.4

 
(2.2
)
 
(2.0
)
Net periodic postretirement cost
$
11.0

 
5.8

 
5.1

 
5.9

 
16.1

 
11.7


13


Note 4 - Income taxes

Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Continuing operations
 
 
 
 
 
 
 
Provision for income taxes (in millions)
$
19.5

 
14.1

 
$
43.4

 
37.2

Effective tax rate
43.0
%
 
65.9
%
 
60.1
%
 
341.3
%

2016 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first nine months of 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, and the nondeductible expenses resulting from the currency devaluation in Venezuela in the first nine months.

Excluding those items, our effective tax rate on continuing operations in the first nine months of 2016 is 48%.  The rate is higher than 35% primarily due to book losses for which no tax benefit can be recorded, nondeductible 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.

2015 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first nine months of 2015 was greater than the 35% U.S. statutory tax rate primarily due to the significant nondeductible expenses resulting from the currency devaluation in Venezuela in the first quarter and from the Venezuela impairment recorded in the second quarter. 

Excluding these nondeductible expenses, our effective tax rate on continuing operations in the first nine months is 48%. The rate was higher than 35% primarily due to cross border payments, nondeductible expenses in Mexico and the characterization of a French business tax as an income tax, partially offset by the geographical mix of earnings and a French income tax credit.
 

14


Note 5 - Accumulated other comprehensive income (loss)

Other comprehensive income (loss), including the amounts reclassified from accumulated other comprehensive loss into earnings, was as follows:
 
Amounts Arising During
the Current Period
 
Amounts Reclassified to
Net Income (Loss)
 
 
(In millions)
Pretax
 
Income
Tax
 
Pretax
 
Income
Tax
 
Total Other
Comprehensive
Income (Loss)
Three months ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
$
(0.7
)
 
0.1

 
12.5

 
(4.1
)
 
7.8

Foreign currency translation adjustments
(3.4
)
 
—

 
—

 
—

 
(3.4
)
Gains (losses) on cash flow hedges
0.1

 
—

 
0.1

 
(0.1
)
 
0.1

 
(4.0
)
 
0.1

 
12.6

 
(4.2
)
 
4.5

 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
—

 
—

 
0.1

 
—

 
0.1

Foreign currency translation adjustments
0.4

 
—

 
—

 
—

 
0.4

 
0.4

 
—

 
0.1

 
—

 
0.5

 
 
 
 
 
 
 
 
 
 
Total
 

 
 

 
 

 
 

 
 

Benefit plan adjustments(a)
(0.7
)
 
0.1

 
12.6

 
(4.1
)
 
7.9

Foreign currency translation adjustments
(3.0
)
 
—

 
—

 
—

 
(3.0
)
Gains (losses) on cash flow hedges(c)
0.1

 
—

 
0.1

 
(0.1
)
 
0.1

 
$
(3.6
)
 
0.1

 
12.7

 
(4.2
)
 
5.0

 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2015
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
$
(1.1
)
 
0.2

 
14.4

 
(4.9
)
 
8.6

Foreign currency translation adjustments
(37.3
)
 
—

 
—

 
—

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

 
(0.2
)
 
0.1

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

 
—

 
(2.2
)
 
—

 
(0.4
)
 
(36.8
)
 
0.3

 
12.0

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

 
 

 
 

 
 

 
 

Benefit plan adjustments
—

 
—

 
0.2

 
—

 
0.2

Foreign currency translation adjustments
(2.5
)
 
—

 
—

 
—

 
(2.5
)
 
(2.5
)
 
—

 
0.2

 
—

 
(2.3
)
 
 
 
 
 
 
 
 
 
 
Total
 

 
 

 
 

 
 

 
 

Benefit plan adjustments(a)
(1.1
)
 
0.2

 
14.6

 
(4.9
)
 
8.8

Foreign currency translation adjustments
(39.8
)
 
—

 
—

 
—

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

 
(0.2
)
 
0.1

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

 
—

 
(2.2
)
 
—

 
(0.4
)
 
$
(39.3
)
 
0.3

 
12.2

 
(4.8
)
 
(31.6
)


15


 
Amounts Arising During
the Current Period
 
Amounts Reclassified to
Net Income (Loss)
 
 
(In millions)
Pretax
 
Income
Tax
 
Pretax
 
Income
Tax
 
Total Other
Comprehensive
Income (Loss)
Nine months ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
$
(2.6
)
 
0.6

 
37.4

 
(12.8
)
 
22.6

Foreign currency translation adjustments
10.2

 
—

 
—

 
—

 
10.2

Unrealized gains (losses) on available-for-sale securities
0.5

 
(0.2
)
 
(0.5
)
 
0.2

 
—

Gains (losses) on cash flow hedges
(2.1
)
 
0.5

 
1.9

 
(0.4
)
 
(0.1
)
 
6.0

 
0.9

 
38.8

 
(13.0
)
 
32.7

 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
—

 
—

 
0.4

 
—

 
0.4

Foreign currency translation adjustments
1.1

 
—

 
—

 
—

 
1.1

 
1.1

 
—

 
0.4

 
—

 
1.5

 
 
 
 
 
 
 
 
 
 
Total
 

 
 

 
 

 
 

 
 

Benefit plan adjustments(a)
(2.6
)
 
0.6

 
37.8

 
(12.8
)
 
23.0

Foreign currency translation adjustments
11.3

 
—

 
—

 
—

 
11.3

Unrealized gains (losses) on available-for-sale securities(b)
0.5

 
(0.2
)
 
(0.5
)
 
0.2

 
—

Gains (losses) on cash flow hedges(c)
(2.1
)
 
0.5

 
1.9

 
(0.4
)
 
(0.1
)
 
$
7.1

 
0.9

 
39.2

 
(13.0
)
 
34.2

 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
$
(6.8
)
 
1.7

 
44.2

 
(14.9
)
 
24.2

Foreign currency translation adjustments
(79.7
)
 
—

 
—

 
—

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

 
(0.3
)
 
0.1

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

 
—

 
(3.7
)
 
—

 
—

 
(83.0
)
 
1.8

 
40.2

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

 
 

 
 

 
 

 
 

Benefit plan adjustments
—

 
—

 
0.4

 
—

 
0.4

Foreign currency translation adjustments
(3.6
)
 
—

 
—

 
—

 
(3.6
)
 
(3.6
)
 
—

 
0.4

 
—

 
(3.2
)
 
 
 
 
 
 
 
 
 
 
Total
 

 
 

 
 

 
 

 
 

Benefit plan adjustments(a)
(6.8
)
 
1.7

 
44.6