Brink's Reports Third-Quarter Results

RICHMOND, Va., Oct. 30, 2014 /PRNewswire/ -- The Brink's Company (NYSE: BCO), a global leader in security-related services, today reported third-quarter earnings.

Third-Quarter Highlights

GAAP:

• EPS includes Peru divestiture gain ($.45) and Netherlands restructuring charge ($.24)    
• EPS $.38 vs. $.61; revenue down 7% (13% organic growth)
• Segment profit down 79% (58% organic decline); margin 1.9% vs. 8.1%
• Latin America $5 million loss vs. $43 million profit; margin (1.5%) vs. 10.1%
• EMEA profit $16 million vs. $32 million; margin 5.1% vs 10.7%
• North America profit $2 million vs. break-even; margin 0.7% vs 0.1%
• Asia-Pacific profit flat at $5 million; margin 13.0% vs. 13.8% 

Non-GAAP:  

• EPS $.19 vs. $.69; revenue down 7% (13% organic growth)
• Segment profit down 53% (39% organic decline); margin 4.2% vs. 8.4%
• Latin America profit break-even vs. $42 million; margin 0.1% vs. 10.0%
• EMEA profit $31 million vs. $32 million; margin 10.2% vs. 10.7%
• North America profit $2 million vs. $3 million; margin 1.0% vs. 1.4%
• Asia-Pacific profit flat at $5 million; margin 13.0% vs. 13.8% 

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Other:

• GAAP and non-GAAP results include charge of $10 million ($.13 per share) related to a robbery in Chile (see "Recent Events" on page 6); charge allocated to regional segments, consistent with other global expenses
• Negative currency impact: $194 million on revenue (GAAP and non-GAAP); $16 million on GAAP profit, $12 million on non-GAAP profit; due primarily to devaluation of Venezuela currency

Tom Schievelbein, chairman, president and chief executive officer, said: "The lower third-quarter earnings reflect relatively flat profits in all regions except Latin America, where profits declined sharply due primarily to a negative currency impact of $12 million, organic profit declines in Venezuela, Mexico and Brazil and a theft loss in Chile.  The negative currency impact was due mainly to the devaluation of the Venezuelan bolivar earlier this year.  

"We've reduced our 2014 non-GAAP segment margin rate to a range between 5.5% and 6.0% and expect full-year revenue of about $3.7 billion.  We continue to expect strong profit growth in 2015 and 2016 as operational improvements begin to take hold, particularly in the U.S. and Mexico.  Our target for 2015 is to achieve a non-GAAP segment margin rate of 6.5% to 7.0% on revenue of about $3.8 billion.  Our goal to achieve a full-year segment margin rate of 8% by the end of 2016 has not changed."      

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Non-Segment Expenses (Income)
Third-quarter GAAP results include a net benefit of $31 million from non-segment expenses, compared to net expenses of $21 million in 2013.  The benefit is primarily due to a $44 million gain on the sale of the company's equity interest in a cash-in-transit business in Peru.  On a non-GAAP basis, non-segment expenses increased to $13 million compared to $11 million in 2013 due to higher general and administrative expenses.

Capital Expenditures and Capital Leases
Year-to-date capital expenditures and capital lease additions were $90 million compared to $124 million in 2013.  Full-year fixed asset acquisitions are expected to be approximately $160 million to $170 million.

Primary U.S. Pension Plan
During the quarter, Brink's prepaid its 2015 and 2016 required contributions, totaling $61 million, to the primary U.S. pension plan in order to further de-risk the plan's investment allocation and lower its PBGC premiums.  These payments were made using available cash and existing credit facilities.

On August 29, Brink's offered certain pension plan participants the option of receiving a lump-sum payment or reduced annuity.  The company expects to incur a fourth-quarter non-cash settlement charge against GAAP earnings based on the number of respondents who choose one of these options and actuarial assumptions at the remeasurement date.

Income Taxes
On a GAAP basis, third-quarter tax expense was $23 million (effective rate 56%) versus $15 million (effective rate of 28%) in the year-ago quarter.  Due to the significant Venezuela remeasurement write-down, which is non-deductible, the resulting full-year GAAP tax expense is projected to exceed pretax income, resulting in a tax rate in excess of 100%.

Non-GAAP earnings for the third quarter reflect an effective tax rate of 38.0%, which is the midpoint of the estimated non-GAAP full-year range of 36.5% to 39.5%.  The estimated range increased by 1.5% this quarter due to the exclusion of earnings related to the company's equity interest in a cash-in-transit business in Peru that was sold during the quarter.  Non-GAAP results exclude the aforementioned nondeductible remeasurement charge.

Recent Events
During the quarter, the company experienced a $10 million theft loss in Chile that had a negative impact of $0.13 per share on third-quarter earnings.    

On August 29, Brink's announced the early redemption of $43 million of bonds issued by the Peninsula Ports Authority of Virginia (and guaranteed by Brink's), which were recorded as debt on the company's balance sheet.  The bonds were redeemed on September 15 for $44 million, which includes accrued interest through the redemption date.   

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On September 26, the company sold its equity interest in a cash-in-transit business in Peru for $60 million.  The sale resulted in a third quarter pretax gain of approximately $44 million ($.45 per share after taxes).    

On October 17, Brink's announced its plan to restructure its Netherlands operations in response to a loss of business with Rabobank, its largest customer in that country.  The company incurred a third-quarter charge of $16 million ($.24 per share after taxes) against GAAP earnings related to severance, asset impairments, and other costs associated with the expected cessation of service to Rabobank on July 1, 2015.  The restructuring plan includes the potential closure of three branches and a workforce reduction of approximately 600 employees.

In 2013, the Netherlands operations generated approximately $120 million of revenue.  The restructured business is expected to generate annual revenue of approximately $40 million. 

Conference Call
Brink's will host a conference call on October 30 at 11:00 a.m. Eastern Time to review third-quarter results.  Interested parties can listen by calling (877) 870-4263 (in the U.S.) or (412) 317-0790 (international) Participants should call in at least five minutes prior to the start of the call.  Participants can pre-register at http://dpregister.com/10053127  to receive a direct dial-in number for the call.  The call also will be accessible via live webcast at www.Brinks.com.  A replay of the call will be available through November 14, 2014, at (877) 344-7529 (in the U.S.) or (412) 317-0088 (international).  The conference number is 10053127.  A webcast replay will also be available at www.Brinks.com.

About The Brink's Company
The Brink's Company (NYSE: BCO) is the world's premier provider of secure transportation and cash management services.  For more information, please visit The Brink's Company website at www.Brinks.com or call 804-289-9709.

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Non-GAAP and Adjusted Non-GAAP Results
Non-GAAP and Adjusted Non-GAAP results described in this press release 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 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.  The full year Non-GAAP tax rate in both years excludes certain pretax and tax income and expense amounts.  The purpose of Adjusted Non-GAAP results is to report historical Non-GAAP financial information assuming that our Venezuelan operations had been remeasured using a rate of 50 bolivars to the U.S. dollar.  Amounts reported for prior periods have been updated in this report to present information consistently for all periods presented.

The Non-GAAP and Adjusted Non-GAAP information provides information to assist comparability and estimates of future performance.  Brink's believes these measures are helpful in assessing operations and estimating future results and enable period-to-period comparability of financial performance.  In addition, Brink's believes the measures will help investors assess the ongoing operations.  Non-GAAP and Adjusted 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 consolidated non-GAAP segment margin target for 2016 and 2014 estimated non-segment expense are not reconciled to GAAP because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable effort.

Forward-Looking Statements
This release contains both historical and forward-looking information. Words such as "anticipates," "assumes," "estimates," "expects," "projects," "predicts," "intends," "plans," "believes," "potential," "may," "should" and similar expressions may identify forward-looking information. Forward-looking information in this release includes, but is not limited to, anticipated revenue, organic revenue growth, currency impact on revenue, segment margin, non-segment expense, interest expense, income tax rate, interest and other income, non-controlling interest expense, tax expense, fixed asset acquisitions, capital expenditures, capital leases, depreciation and amortization for 2014; profit growth in 2015 and 2016 and the impact of operational improvements, 2015 revenue, and 2015 and 2016 non-GAAP segment margin. Forward-looking information in this document is subject to known and unknown risks, uncertainties and contingencies, which are difficult to predict or quantify, and which could cause actual results, performance or achievements to differ materially from those that are anticipated.

These risks, uncertainties and contingencies, many of which are beyond our control, include, but are not limited to:

• continuing market volatility and commodity price fluctuations and their impact on the demand for our services;
• our ability to continue profit growth in Latin America;
• our ability to maintain or improve volumes at favorable pricing levels and increase cost and productivity efficiencies, particularly in the United States and Mexico;
• investments in information technology and value-added services and their impact on revenue and profit growth;
• our ability to develop and implement solutions for our customers and gain market acceptance of those solutions;
• our ability to maintain an effective IT infrastructure and safeguard confidential information;
• risks customarily associated with operating in foreign countries including changing labor and economic conditions, currency devaluations, safety and security issues, political instability, restrictions on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive government actions;
• the strength of the U.S. dollar relative to foreign currencies and foreign currency exchange rates;
• the stability of the Venezuelan economy, changes in Venezuelan policy regarding foreign-owned businesses;
• changes in currency restrictions and in foreign exchange rates, including fluctuations in value of the Venezuelan bolivar;
• regulatory and labor issues in many of our global operations, including negotiations with organized labor and the possibility of work stoppages;
• our ability to identify and execute further cost and operational improvements and efficiencies in our core businesses;
• our ability to integrate successfully recently acquired companies and improve their operating profit margins;
• costs related to dispositions and market exits;
• our ability to identify evaluate and pursue acquisitions and other strategic opportunities including those in the home security industry and emerging markets;
• the willingness of our customers to absorb fuel surcharges and other future price increases;
• our ability to obtain necessary information technology and other services at favorable pricing levels from third party service providers;
• variations in costs or expenses and performance delays of any public or private sector supplier, service provider or customer;
• our ability to obtain appropriate insurance coverage, positions taken by insurers with respect to claims made and the financial condition of insurers, safety and security performance, our loss experience, and changes in insurance costs;
• security threats worldwide and losses of customer valuables;
• costs associated with the purchase and implementation of cash processing and security equipment;
• employee and environmental liabilities in connection with our former coal operations, black lung claims incidence;
• the impact of the Patient Protection and Affordable Care Act on black lung liability and the Company's ongoing operations;
• changes to estimated liabilities and assets in actuarial assumptions due to payments made, investment returns, interest rates and annual actuarial revaluations, the funding requirements, accounting treatment, investment performance and costs and expenses of our pension plans, the VEBA and other employee benefits, mandatory or voluntary pension plan contributions;
• the nature of our hedging relationships;
• changes in estimates and assumptions underlying our critical accounting policies;
• our ability to realize deferred tax assets;
• the outcome of pending and future claims, litigation, and administrative proceedings;
• public perception of the Company's business and reputation;
• access to the capital and credit markets;
• seasonality, pricing and other competitive industry factors; and
• the promulgation and adoption of new accounting standards and interpretations, new government regulations and interpretation of existing regulations.

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This list of risks, uncertainties and contingencies is not intended to be exhaustive. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the period ended December 31, 2013, and in our other public filings with the Securities and Exchange Commission. The forward-looking information included in this document is representative only as of the date of this document and The Brink's Company undertakes no obligation to update any information contained in this document.

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Both measures of "Non-GAAP cash flows from operating activities" (before and after U.S pension contributions) are supplemental financial measures that are not required by, or presented in accordance with GAAP. The purpose of these Non-GAAP measures is to report financial information excluding the impact of cash received and processed in certain of our secure Cash Management Service operations without cash flows from discontinued operations and with and without cash flows related to the primary U.S. pension plan.  We believe these measures are helpful in assessing cash flows from operations, enable period-to-period comparability and are useful in predicting future operating cash flows. These Non-GAAP measures should not be considered as an alternative to cash flows from operating activities determined in accordance with GAAP and should be read in conjunction with our consolidated statements of cash flows.

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Contact:
Investor Relations
804.289.9709

SOURCE The Brink's Company

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