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 June 30, 2017

¨  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  ¨ Emerging Growth Company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
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 July 24, 2017, 50,481,059 shares of $1 par value common stock were outstanding.

1


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

Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
June 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
207.1

 
183.5

Restricted cash
87.7

 
55.5

Accounts receivable, net
570.4

 
501.1

Prepaid expenses and other
150.1

 
103.6

Total current assets
1,015.3

 
843.7

 
 
 
 
Property and equipment, net
583.6

 
531.0

Goodwill
227.4

 
186.2

Other intangibles
45.8

 
19.1

Deferred income taxes
326.0

 
327.9

Other
90.9

 
86.9

 
 
 
 
Total assets
$
2,289.0

 
1,994.8

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

 
 
 
 
Current liabilities:
 

 
 

Short-term borrowings
$
175.7

 
162.8

Current maturities of long-term debt
36.6

 
32.8

Accounts payable
144.9

 
139.3

Accrued liabilities
427.7

 
385.7

Restricted cash held for customers
58.2

 
33.2

Total current liabilities
843.1

 
753.8

 
 
 
 
Long-term debt
362.8

 
247.6

Accrued pension costs
206.3

 
208.8

Retirement benefits other than pensions
285.1

 
286.1

Deferred income taxes
7.6

 
7.6

Other
141.3

 
136.1

Total liabilities
1,846.2

 
1,640.0

 
 
 
 
Contingent liabilities (notes 4 and 11)


 


 
 
 
 
Equity:
 

 
 

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

 
 

Common stock, par value $1 per share:
 
 
 
Shares authorized: 100.0
 
 
 
Shares issued and outstanding: 2017 - 50.4; 2016 - 50.0
50.4

 
50.0

Capital in excess of par value
620.4

 
618.1

Retained earnings
612.3

 
576.0

Accumulated other comprehensive loss
(859.8
)
 
(907.0
)
Brink’s shareholders
423.3

 
337.1

 
 
 
 
Noncontrolling interests
19.5

 
17.7

 
 
 
 
Total equity
442.8

 
354.8

 
 
 
 
Total liabilities and equity
$
2,289.0

 
1,994.8

See accompanying notes to condensed consolidated financial statements.

2


THE BRINK’S COMPANY
and subsidiaries
 
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months 
 Ended June 30,
 
Six Months 
 Ended June 30,
(In millions, except for per share amounts)
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Revenues
$
805.9

 
739.5

 
$
1,594.3

 
1,461.3

 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
628.9

 
596.1

 
1,239.2

 
1,185.0

Selling, general and administrative expenses
122.8

 
105.0

 
229.9

 
213.7

Total costs and expenses
751.7

 
701.1

 
1,469.1

 
1,398.7

Other operating income (expense)
(5.9
)
 
(6.2
)
 
(6.0
)
 
(6.9
)
 
 
 
 
 
 
 
 
Operating profit
48.3

 
32.2

 
119.2

 
55.7

 
 
 
 
 
 
 
 
Interest expense
(6.0
)
 
(4.9
)
 
(10.8
)
 
(9.8
)
Interest and other income (expense)
(11.4
)
 
(9.4
)
 
(22.6
)
 
(19.1
)
Income from continuing operations before tax
30.9

 
17.9

 
85.8

 
26.8

Provision for income taxes
17.3

 
14.5

 
31.7

 
23.9

 
 
 
 
 
 
 
 
Income from continuing operations
13.6

 
3.4

 
54.1

 
2.9

 
 
 
 
 
 
 
 
Loss from discontinued operations, net of tax
(0.1
)
 
—

 
(0.1
)
 
—

 
 
 
 
 
 
 
 
Net income
13.5

 
3.4

 
54.0

 
2.9

Less net income (loss) attributable to noncontrolling interests
(0.7
)
 
3.1

 
5.1

 
5.7

 
 
 
 
 
 
 
 
Net income (loss) attributable to Brink’s
14.2

 
0.3

 
48.9

 
(2.8
)
 
 
 
 
 
 
 
 
Amounts attributable to Brink’s
 
 
 
 
 
 
 
Continuing operations
14.3

 
0.3

 
49.0

 
(2.8
)
Discontinued operations
(0.1
)
 
—

 
(0.1
)
 
—

 
 
 
 
 
 
 
 
Net income (loss) attributable to Brink’s
$
14.2

 
0.3

 
$
48.9

 
(2.8
)
 
 
 
 
 
 
 
 
Income (loss) per share attributable to Brink’s common shareholders(a):
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
$
0.28

 
0.01

 
$
0.97

 
(0.06
)
Discontinued operations
—

 
—

 
—

 
—

Net income (loss)
$
0.28

 
0.01

 
$
0.97

 
(0.06
)
 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.28

 
0.01

 
$
0.95

 
(0.06
)
Discontinued operations
—

 
—

 
—

 
—

Net income (loss)
$
0.28

 
0.01

 
$
0.95

 
(0.06
)
 
 
 
 
 
 
 
 
Weighted-average shares
 
 
 
 
 
 
 
Basic
50.7

 
49.9

 
50.6

 
49.7

Diluted
51.6

 
50.3

 
51.5

 
49.7

 
 
 
 
 
 
 
 
Cash dividends paid per common share
$
0.15

 
0.10

 
$
0.25

 
0.20

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


3


THE BRINK’S COMPANY
and subsidiaries
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
Three Months 
 Ended June 30,
 
Six Months 
 Ended June 30,
(In millions)
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income
$
13.5

 
3.4

 
$
54.0

 
2.9

 
 
 
 
 
 
 
 
Benefit plan adjustments:
 

 
 

 
 
 
 
Benefit plan experience gains
11.1

 
12.6

 
22.9

 
24.3

Benefit plan prior service cost
(0.7
)
 
(0.6
)
 
(1.2
)
 
(1.0
)
Deferred profit sharing
0.1

 
—

 
0.1

 
—

Total benefit plan adjustments
10.5

 
12.0

 
21.8

 
23.3

 
 
 
 
 
 
 
 
Foreign currency translation adjustments
5.7

 
(3.5
)
 
32.9

 
14.3

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

 
(0.2
)
 
0.7

 
—

Loss on cash flow hedges
(0.1
)
 
(0.1
)
 
(0.1
)
 
(0.4
)
Other comprehensive income before tax
16.6

 
8.2

 
55.3

 
37.2

Provision for income taxes
4.4

 
4.2

 
8.8

 
8.0

 
 
 
 
 
 
 
 
Other comprehensive income
12.2

 
4.0

 
46.5

 
29.2

 
 
 
 
 
 
 
 
Comprehensive income
25.7

 
7.4

 
100.5

 
32.1

Less comprehensive income (loss) attributable to noncontrolling interests
(2.5
)
 
3.3

 
4.4

 
6.7

 
 
 
 
 
 
 
 
Comprehensive income attributable to Brink's
$
28.2

 
4.1

 
$
96.1

 
25.4

See accompanying notes to condensed consolidated financial statements.


4


THE BRINK’S COMPANY
and subsidiaries
 
Condensed Consolidated Statements of Equity

Six Months ended June 30, 2017 and 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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cumulative effect of change in accounting principle(a)
—

 
—

 
—

 
0.2

 
—

 
—

 
0.2

Net income (loss)
—

 
—

 
—

 
(2.8
)
 
—

 
5.7

 
2.9

Other comprehensive income
—

 
—

 
—

 
—

 
28.2

 
1.0

 
29.2

Common stock issued
0.1

 
0.1

 
2.4

 
—

 
—

 
—

 
2.5

Dividends to:
 

 
 

 
 

 
 

 
 

 
 

 
 

Brink’s common shareholders ($0.20 per share)
—

 
—

 
—

 
(9.8
)
 
—

 
—

 
(9.8
)
Noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(2.1
)
 
(2.1
)
Share-based compensation:
 

 
 

 
 

 
 

 
 

 
 

 
 

Stock awards and options:
 

 
 

 
 

 
 

 
 

 
 

 
 

Compensation expense
—

 
—

 
4.9

 
—

 
—

 
—

 
4.9

Consideration from exercise of stock options
0.1

 
0.1

 
3.4

 
—

 
—

 
—

 
3.5

Other share-based benefit transactions
0.4

 
0.4

 
(3.9
)
 
(0.1
)
 
—

 
—

 
(3.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2016
49.5

 
$
49.5

 
606.4

 
548.8

 
(863.7
)
 
17.3

 
358.3


 
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, 2016
50.0

 
$
50.0

 
618.1

 
576.0

 
(907.0
)
 
17.7

 
354.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
—

 
—

 
—

 
48.9

 
—

 
5.1

 
54.0

Other comprehensive income
—

 
—

 
—

 
—

 
47.2

 
(0.7
)
 
46.5

Dividends to:
 

 
 

 
 

 
 

 
 

 
 

 
 

Brink’s common shareholders ($0.25 per share)
—

 
—

 
—

 
(12.6
)
 
—

 
—

 
(12.6
)
Noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(2.6
)
 
(2.6
)
Share-based compensation:
 

 
 

 
 

 
 

 
 

 
 

 
 

Stock awards and options:
 

 
 

 
 

 
 

 
 

 
 

 
 

Compensation expense
—

 
—

 
8.5

 
—

 
—

 
—

 
8.5

Consideration from exercise of stock options
—

 
—

 
2.6

 
—

 
—

 
—

 
2.6

Other share-based benefit transactions
0.4

 
0.4

 
(8.8
)
 
—

 
—

 
—

 
(8.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2017
50.4

 
$
50.4

 
620.4

 
612.3

 
(859.8
)
 
19.5

 
442.8



(a)
We elected to early adopt the provisions of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, in the fourth quarter of 2016 resulting in a cumulative effect adjustment to Retained Earnings for previously unrecognized excess tax benefits. See Note 1 for further discussion of the impacts of this standard.

See accompanying notes to condensed consolidated financial statements
 

5


THE BRINK’S COMPANY
and subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months 
 Ended June 30,
(In millions)
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
54.0

 
2.9

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Loss from discontinued operations, net of tax
0.1

 
—

Depreciation and amortization
68.5

 
65.1

Share-based compensation expense
8.5

 
4.9

Deferred income taxes
(7.7
)
 
(2.5
)
Gains and losses:
 
 
 
Marketable securities
(0.2
)
 
(0.5
)
Property and other assets
(0.8
)
 
1.7

Business acquisitions and dispositions
(0.6
)
 
(0.1
)
Impairment losses
1.0

 
5.4

Retirement benefit funding (more) less than expense:
 
 
 
Pension
9.8

 
6.5

Other than pension
9.0

 
7.3

Remeasurement losses due to Venezuela currency devaluation
8.4

 
4.6

Other operating
3.1

 
1.9

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable and income taxes receivable
(83.0
)
 
(31.3
)
Accounts payable, income taxes payable and accrued liabilities
41.8

 
(33.9
)
Customer obligations
7.1

 
(14.7
)
Prepaid and other current assets
(17.6
)
 
(6.2
)
Other
(0.7
)
 
2.3

Discontinued operations
0.6

 
—

Net cash provided by operating activities
101.3

 
13.4

Cash flows from investing activities:
 

 
 

Capital expenditures
(71.1
)
 
(45.0
)
Acquisitions
(65.0
)
 
—

Dispositions
1.1

 
—

Marketable securities:
 
 
 
Purchases
(19.3
)
 
(8.7
)
Sales
5.4

 
8.6

Cash proceeds from sale of property and equipment
1.4

 
2.9

Other
—

 
(0.7
)
Net cash used by investing activities
(147.5
)
 
(42.9
)
Cash flows from financing activities:
 

 
 

Borrowings (repayments) of debt:
 

 
 

Short-term borrowings
5.5

 
39.1

Long-term revolving credit facilities:
 
 
 
Borrowings
398.1

 
294.9

Repayments
(290.7
)
 
(278.1
)
Other long-term debt:
 

 
 

Borrowings
6.8

 
1.3

Repayments
(22.0
)
 
(25.1
)
Common stock issued
—

 
2.5

Dividends to:
 

 
 

Shareholders of Brink’s
(12.6
)
 
(9.8
)
Noncontrolling interests in subsidiaries
(2.6
)
 
(2.1
)
Proceeds from exercise of stock options
2.6

 
3.5

Minimum tax withholdings associated with share-based compensation
(8.9
)
 
(4.8
)
Other
1.0

 
1.3

Net cash provided by financing activities
77.2

 
22.7

Effect of exchange rate changes on cash
(7.4
)
 
(5.5
)
Cash and cash equivalents:
 

 
 

Increase (decrease)
23.6

 
(12.3
)
Balance at beginning of period
183.5

 
181.9

Balance at end of period
$
207.1

 
169.6

See accompanying notes to condensed consolidated financial statements

6


THE BRINK’S COMPANY
and subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1 - Basis of presentation
 
Effective February 2017, The Brink’s Company (along with its subsidiaries, “Brink’s” or “we”) implemented changes to its organizational and management structure. As a result of these changes, we now have three operating segments:
•
North America
•
South America
•
Rest of World

Our unaudited interim condensed 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 condensed 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 condensed 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, 2016.

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 condensed 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 and deferred tax assets.

Consolidation
The condensed consolidated financial statements include our controlled subsidiaries.  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.  For controlled subsidiaries that are not wholly-owned, the noncontrolling interests are included in net income and in total equity.

Investments in businesses that we do not control, but for which we have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method and our proportionate share of income or loss is recorded in other operating income (expense).  Investments in businesses for which we do not have the ability to exercise significant influence over operating and financial policies are accounted for under the cost method or, if applicable, as available-for-sale securities.  All intercompany accounts and transactions have been eliminated in consolidation.

Foreign Currency Translation
Our condensed 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 net income (loss).

Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency.  Local currency monetary assets and liabilities are remeasured into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings.  Non-monetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar. Revenues and expenses are translated at rates of exchange in effect during the year.

Venezuela
The economy in Venezuela has had significant inflation in the last several years.  We consolidate our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies.

Since 2003, the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar, and has required that currency exchanges be made at official rates established by the government instead of allowing open markets to determine currency rates.  Different official rates exist for different industries and purposes and the government does not approve all requests to convert bolivars to other currencies.


7


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. There is a risk that official currency exchange mechanisms will be discontinued or will not be accessible when needed in the future, which may prevent us from repatriating dividends or obtaining dollars to operate our Venezuelan operations.

Remeasurement rates during 2017 and 2016.  At December 31, 2015, the SIMADI exchange rate used for remeasurement purposes was approximately 199 bolivars to the dollar. In the first quarter of 2016, the Venezuelan government replaced the SIMADI exchange mechanism with the DICOM exchange mechanism and announced that it would allow the DICOM exchange mechanism rate to float freely. At June 30, 2016, the DICOM rate was approximately 628 bolivars to the dollar. Since then, the rate has declined 76% to close at approximately 2,640 bolivars to the dollar at June 30, 2017. We have received only minimal U.S. dollars through this exchange mechanism. In the first six months of 2017, we recognized a $8.4 million pretax remeasurement loss.  The after-tax effect of this loss attributable to noncontrolling interest was $0.9 million. In the first six months of 2016, we recognized a $4.6 million pretax remeasurement loss. However, the after-tax effect of this loss attributable to noncontrolling interest was income of $2.6 million.

Items related to our Venezuelan operations are as follows:

•
Our investment in our Venezuelan operations on an equity-method basis was $20.1 million at June 30, 2017 and $19.2 million at December 31, 2016.
•
Our Venezuelan operations had net payables to other Brink's affiliates of $2.5 million at June 30, 2017 and $6.1 million at December 31, 2016.
•
Our Venezuelan operations had net non-monetary assets of $20.1 million at June 30, 2017 and $17.6 million at December 31, 2016.
•
Our bolivar-denominated net monetary net assets were $2.7 million (including $5.2 million of cash and cash equivalents) at June 30, 2017 and $1.4 million (including $6.8 million of cash and cash equivalents) at December 31, 2016.
•
Accumulated other comprehensive losses attributable to Brink’s shareholders related to our Venezuelan operations were $114.2 million at June 30, 2017 and $114.7 million at December 31, 2016.

Argentina
The economy in Argentina has had significant inflation in recent years. Through June 30, 2017, Argentina was not designated as a highly inflationary economy for accounting purposes. We will continue to monitor developments in Argentina at each reporting date to determine whether we should consolidate Brink's Argentina results using our accounting policy for subsidiaries operating in highly inflationary economies. We use the official exchange rate to translate the Brink's Argentina balance sheet and income statement. At June 30, 2017, the official exchange rate was approximately 16.6 Argentine pesos to the U.S. dollar. At June 30, 2017, we had cash and short-term investments denominated in Argentine pesos of $28.7 million. We expect to use a significant portion of the cash and short-term investments to fund a business acquisition in Argentina (see Note 13).

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 were included in items not allocated to segments and were excluded from the operating segments effective March 1, 2016. Beginning May 1, 2016, due to management's decision to also exit Northern Ireland, the results of shutting down these operations were treated similarly to the Republic of Ireland. International shipments to and from Ireland continue to be provided through Brink’s Global Services ("BGS").

Acquisitions
In the first six months of 2017, we completed three business acquisitions in Brazil, Chile and the U.S. which are not material to our consolidated financial statements. The aggregate purchase price, net of cash acquired, for these three acquisitions was approximately $65 million.

New Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts with Customers, a new standard related to revenue recognition, which requires an entity to recognize an amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of this new standard to January 1, 2018. Subsequently, the FASB has continued to refine the standard and has issued several amendments. The most likely effects of the new standard for us will be associated with variable consideration and capitalization of costs to obtain contracts, such as sales commissions. However, we do not expect a material impact on our future consolidated statements of operations or consolidated balance sheets. The new guidance will result in expanded disclosures regarding our various performance obligations, revenue disaggregation and contractual rights. We plan to use the modified retrospective method to adopt the new standard.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires entities to include restricted cash and restricted cash equivalent balances with cash and cash equivalent balances in the statement of cash flows. ASU 2016-18 will impact the presentation of our statement of cash flows, will be effective January 1, 2018, and requires using a retrospective transition method to adopt the standard.



8


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 and also requires expanded disclosures regarding leasing activities. ASU 2016-02 will be effective January 1, 2019 and we are required to use the modified retrospective method to adopt the new standard. We are assessing the potential impact of the standard on financial reporting.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies how certain features related to share-based payments are accounted for and presented in the financial statements. We elected to early adopt this ASU in the fourth quarter of 2016 and, per the requirements of the pronouncement, we applied the amendments to the beginning of 2016. Under ASU 2016-09, accounting changes adopted using the modified retrospective method must be calculated as of the beginning of 2016 and reported as a cumulative-effect adjustment. As a result, we recognized a $0.2 million cumulative-effect adjustment to January 1, 2016 retained earnings for previously unrecognized excess tax benefits. We have elected to continue our previous accounting policy of estimating forfeitures and, therefore, we did not recognize any cumulative-effect adjustment related to forfeitures. ASU 2016-09 requires that accounting changes adopted using the prospective method should be reported in the applicable interim periods of 2016. We did not have any material changes to previously reported interim financial information in 2016 as it relates to the recognition of excess tax benefits in the statement of operations or the classification of excess tax benefits in the statement of cash flows. In the first six months of 2017, the accounting under this ASU resulted in the recognition of $5.5 million in excess tax benefits.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. We elected to early adopt this ASU in the first quarter of 2017 using the retrospective transition method for the periods presented. As a result, the condensed consolidated statements of operations have been updated to reflect this guidance.

The adoption of this ASU resulted in a change in certain previously reported amounts in the first half of 2016 condensed consolidated statement of operations. Cost of revenues decreased $16.5 million, selling, general and administrative expenses decreased $3.3 million and operating profit as well as interest and other income (expense) increased $19.8 million compared to previously reported first half of 2016 amounts. The early adoption of this ASU had no impact on the previously reported loss from continuing operations or net loss for the prior year periods.

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 our operating segments based on a profit or loss measure which, at the reportable segment level, excludes the following:
•
Corporate expenses - former non-segment and regional management costs, currency transaction gains and losses, adjustments to reconcile segment accounting policies to U.S. GAAP, and costs related to global initiatives
•
Other items not allocated to segments - certain significant items such as reorganization and restructuring actions that are evaluated on an individual basis by management and are not considered part of the ongoing activities of the business. Results from Venezuela operations are also excluded from our segment results due to management’s inability to allocate, generate or redeploy resources in-country or globally. We also exclude certain costs, gains and losses related to acquisitions and dispositions that are special in nature. For additional information about these reconciling items see "Other Items Not Allocated to Segment" on pages 32-33.

During the first quarter of 2017, we implemented changes to our organizational and management structure that resulted in changes to our operating segments for financial reporting purposes. Through the fiscal year ended December 31, 2016, our business was reported in nine operating segments: U.S., France, Mexico, Brazil, Canada, Latin America, EMEA, Asia and Payment Services. Changes in our management reporting structure during the first quarter of 2017 required us to conduct an assessment in accordance with ASC Topic 280, Segment Reporting, to determine our operating segments.

As a result of this assessment, we now have the following operating segments:
•
North America
•
South America
•
Rest of World (ROW).





10


The following table summarizes our revenues and segment profit for each of our reportable segments and reconciles these amounts to consolidated revenues and operating profit:
 
Revenues
 
Operating Profit
 
Three Months Ended June 30,
 
Three Months Ended June 30,
(In millions)
2017
 
2016
 
2017
 
2016
Reportable Segments:
 
 
 
 
 
 
 
North America
$
311.0

 
300.8

 
$
16.7

 
3.8

South America
204.6

 
170.1

 
35.7

 
21.3

Rest of World
244.0

 
245.6

 
25.1

 
27.5

Total reportable segments
759.6

 
716.5

 
77.5

 
52.6

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

 
—

 
(18.3
)
 
(16.1
)
Foreign currency transaction gains (losses)
—

 
—

 
1.4

 
1.4

Reconciliation of segment policies to GAAP
—

 
—

 
(0.9
)
 
1.3

Other items not allocated to segments:
 

 
 

 
 

 
 
Venezuela operations
46.3

 
21.5

 
(4.5
)
 
1.6

Reorganization and Restructuring
—

 
—

 
(5.6
)
 
(2.1
)
Acquisitions and dispositions
—

 
1.5

 
(1.3
)
 
(6.5
)
Total
$
805.9

 
739.5

 
$
48.3

 
32.2


 
Revenues
 
Operating Profit
 
Six Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2017
 
2016
 
2017
 
2016
Reportable Segments:
 
 
 
 
 
 
 
North America
$
615.6

 
593.5

 
$
26.9

 
7.5

South America
406.8

 
327.1

 
74.4

 
45.0

Rest of World
477.5

 
484.8

 
50.4

 
45.9

Total reportable segments
1,499.9

 
1,405.4

 
151.7

 
98.4

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

 
—

 
(37.5
)
 
(33.7
)
Foreign currency transaction gains (losses)
—

 
—

 
0.2

 
2.7

Reconciliation of segment policies to GAAP
—

 
—

 
(1.8
)
 
4.5

Other items not allocated to segments:
 
 
 
 
 
 
 
Venezuela operations
94.4

 
53.6

 
16.6

 
4.3

Reorganization and Restructuring
—

 
—

 
(9.7
)
 
(8.1
)
Acquisitions and dispositions
—

 
2.3

 
(0.3
)
 
(12.4
)
Total
$
1,594.3

 
1,461.3

 
$
119.2

 
55.7

See "Other Items Not Allocated to Segment" on pages 32–33 for explanations of each of the other items not allocated to segments.

11


 
Six Months Ended June 30,
(In millions)
2017
 
2016
 
 
 
 
Capital Expenditures by Reportable Segment
 
 
 
North America
$
39.0

 
20.1

South America
15.3

 
7.3

Rest of World
10.1

 
12.4

Total reportable segments
64.4

 
39.8

Corporate items
5.5

 
2.7

Venezuela
1.2

 
2.5

Total
$
71.1

 
45.0

 
 
 
 
Depreciation and Amortization by Reportable Segment
 
 
 
Depreciation and amortization of property and equipment:
 
 
 
North America
$
33.6

 
33.6

South America
10.6

 
9.0

Rest of World
14.6

 
15.0

Total reportable segments
58.8

 
57.6

Corporate items
5.7

 
5.4

Venezuela
0.8

 
0.3

Reorganization and Restructuring
1.5

 
—

Depreciation and amortization of property and equipment
66.8

 
63.3

 
 
 
 
Amortization of intangible assets:
 
 
 
North America
0.1


—

South America
1.2

 
1.1

Rest of World
0.4

 
0.7

Amortization of intangible assets
1.7

 
1.8

Total
$
68.5

 
65.1




June 30,
 
December 31,
(In millions)
2017
 
2016
 
 
 
 
Assets held by Reportable Segment
 
 
 
North America
$
726.1

 
629.4

South America
462.3

 
371.4

Rest of World
721.4

 
621.8

Total reportable segments
1,909.8

 
1,622.6

Corporate items
335.7

 
321.3

Venezuela
43.5

 
50.9

Total
$
2,289.0

 
1,994.8



12


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)
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
2.8

 
2.7

 
2.8

 
2.7

Interest cost on projected benefit obligation
8.8

 
9.3

 
4.3

 
3.1

 
13.1

 
12.4

Return on assets – expected
(13.3
)
 
(13.6
)
 
(2.4
)
 
(2.5
)
 
(15.7
)
 
(16.1
)
Amortization of losses
6.1

 
6.2

 
1.3

 
1.2

 
7.4

 
7.4

Amortization of prior service cost
—

 
—

 
0.2

 
0.2

 
0.2

 
0.2

Settlement loss
—

 
—

 
0.5

 
0.6

 
0.5

 
0.6

Net periodic pension cost
$
1.6

 
1.9

 
6.7

 
5.3

 
8.3

 
7.2

 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
5.7

 
5.5

 
5.7

 
5.5

Interest cost on projected benefit obligation
17.6

 
18.5

 
9.1

 
6.5

 
26.7

 
25.0

Return on assets – expected
(26.6
)
 
(27.3
)
 
(4.8
)
 
(4.8
)
 
(31.4
)
 
(32.1
)
Amortization of losses
12.4

 
12.3

 
2.6

 
2.4

 
15.0

 
14.7

Amortization of prior service cost
—

 
—

 
0.4

 
0.2

 
0.4

 
0.2

Settlement loss
—

 
—

 
0.8

 
1.4

 
0.8

 
1.4

Net periodic pension cost
$
3.4

 
3.5

 
13.8

 
11.2

 
17.2

 
14.7

We did not make cash contributions to the primary U.S. pension plan in 2016 or the first six months of 2017.  Based on current assumptions, as described in our Annual Report on Form 10-K for the year ended December 31, 2016, we do not expect to make any additional contributions to the primary U.S. pension plan until 2021.


13


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)
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
0.1

 
—

 
0.1

 
—

Interest cost on accumulated postretirement benefit obligations
4.7

 
4.8

 
0.8

 
0.7

 
5.5

 
5.5

Return on assets – expected
(4.1
)
 
(4.3
)
 
—

 
—

 
(4.1
)
 
(4.3
)
Amortization of losses
5.0

 
4.5

 
1.1

 
0.7

 
6.1

 
5.2

Amortization of prior service (credit) cost
(1.2
)
 
(1.2
)
 
0.3

 
0.4

 
(0.9
)
 
(0.8
)
Net periodic postretirement cost
$
4.4

 
3.8

 
2.3

 
1.8

 
6.7

 
5.6

 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
—

 
—

 
0.1

 
—

 
0.1

 
—

Interest cost on accumulated postretirement benefit obligations
9.1

 
9.4

 
1.5

 
1.3

 
10.6

 
10.7

Return on assets – expected
(8.3
)
 
(8.7
)
 
—

 
—

 
(8.3
)
 
(8.7
)
Amortization of losses
9.4

 
8.8

 
2.0

 
1.2

 
11.4

 
10.0

Amortization of prior service (credit) cost
(2.3
)
 
(2.3
)
 
0.8

 
0.9

 
(1.5
)
 
(1.4
)
Net periodic postretirement cost
$
7.9

 
7.2

 
4.4

 
3.4

 
12.3

 
10.6

The components of net periodic pension cost and net periodic postretirement cost other than the service cost component are included in interest and other income (expense) in the condensed consolidated statements of operations.


14


Note 4 - Income taxes

Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Continuing operations
 
 
 
 
 
 
 
Provision for income taxes (in millions)
$
17.3

 
14.5

 
$
31.7

 
23.9

Effective tax rate
56.0
%
 
81.0
%
 
36.9
%
 
89.2
%

2017 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first six months of 2017 was greater than the 35% U.S. statutory tax rate primarily due to the impact of Venezuela’s earnings and related tax expense, including the nondeductible expenses resulting from the currency devaluation, partially offset by the significant tax benefits related to the distribution of share-based payments.  The other items that cause the rate to be higher than the U.S. statutory rate include the seasonality of book losses for which no tax benefit can be recorded, nondeductible expenses in Mexico, taxes on cross border payments 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.
2016 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first six 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 six months.  The other items that cause the rate to be higher than the U.S. statutory rate include the seasonality of 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.

15


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 June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
$
(2.8
)
 
0.2

 
13.2

 
(4.5
)
 
6.1

Foreign currency translation adjustments
7.6

 
—

 
—

 
—

 
7.6

Unrealized gains (losses) on available-for-sale securities
0.7

 
(0.2
)
 
(0.2
)
 
0.1

 
0.4

Gains (losses) on cash flow hedges
—

 
—

 
(0.1
)
 
—

 
(0.1
)
 
5.5

 
—

 
12.9

 
(4.4
)
 
14.0

 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
—

 
—

 
0.1

 
—

 
0.1

Foreign currency translation adjustments
(1.9
)
 
—

 
—

 
—

 
(1.9
)
 
(1.9
)
 
—

 
0.1

 
—

 
(1.8
)
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
Benefit plan adjustments(a)
(2.8
)
 
0.2

 
13.3

 
(4.5
)
 
6.2

Foreign currency translation adjustments
5.7

 
—

 
—

 
—

 
5.7

Unrealized gains (losses) on available-for-sale securities(b)
0.7

 
(0.2
)
 
(0.2
)
 
0.1

 
0.4

Gains (losses) on cash flow hedges(c)
—

 
—

 
(0.1
)
 
—

 
(0.1
)
 
$
3.6

 
—

 
13.0

 
(4.4
)
 
12.2

 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2016
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
$
(0.8
)
 
0.2

 
12.6

 
(4.5
)
 
7.5

Foreign currency translation adjustments
(3.5
)
 
—

 
—

 
—

 
(3.5
)
Unrealized gains (losses) on available-for-sale securities
0.3

 
(0.2
)
 
(0.5
)
 
0.2

 
(0.2
)
Gains (losses) on cash flow hedges
(1.2
)
 
0.4

 
1.1

 
(0.3
)
 
—

 
(5.2
)
 
0.4

 
13.2

 
(4.6
)
 
3.8

 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
—

 
—

 
0.2

 
—

 
0.2

Foreign currency translation adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
0.2

 
—

 
0.2

 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
Benefit plan adjustments(a)
(0.8
)
 
0.2

 
12.8

 
(4.5
)
 
7.7

Foreign currency translation adjustments
(3.5
)
 
—

 
—

 
—

 
(3.5
)
Unrealized gains (losses) on available-for-sale securities(b)
0.3

 
(0.2
)
 
(0.5
)
 
0.2

 
(0.2
)
Gains (losses) on cash flow hedges(c)
(1.2
)
 
0.4

 
1.1

 
(0.3
)
 
—

 
$
(5.2
)
 
0.4

 
13.4

 
(4.6
)
 
4.0



16


 
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)
Six months ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
$
(4.3
)
 
0.4

 
25.8

 
(9.0
)
 
12.9

Foreign currency translation adjustments
33.9

 
—

 
—

 
—

 
33.9

Unrealized gains (losses) on available-for-sale securities
0.9

 
(0.3
)
 
(0.2
)
 
0.1

 
0.5

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

 
0.1

 
—

 
(0.1
)
 
30.3

 
0.1

 
25.7

 
(8.9
)
 
47.2

 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
—

 
—

 
0.3

 
—

 
0.3

Foreign currency translation adjustments
(1.0
)
 
—

 
—

 
—

 
(1.0
)
 
(1.0
)
 
—

 
0.3

 
—

 
(0.7
)