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BCO > SEC Filings for BCO > Form 10-Q on 26-Jul-2012All Recent SEC Filings

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Form 10-Q for BRINKS CO


26-Jul-2012

Quarterly Report


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

The Brink's Company offers transportation and logistics management services for cash and valuables throughout the world. These services include:
ˇ armored vehicles transportation, which we refer to as cash in transit ("CIT")

ˇ automated teller machine ("ATM") - replenishment and servicing, network infrastructure services

ˇ arranging secure transportation of valuables over long distances and around the world ("Global Services")

ˇ supply chain management of cash ("Cash Management Services") including cash logistics services, deploying and servicing safes and safe control devices (e.g., our patented CompuSafeŽ service), coin sorting and wrapping, integrated check and cash processing services ("Virtual Vault Services")

ˇ providing bill payment acceptance and processing services to utility companies and other billers ("Payment Services")

ˇ security and guarding services (including airport security)

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


RESULTS OF OPERATIONS

Consolidated Review

Non-GAAP Results
Non-GAAP results described in this filing are financial measures that are not required by, or presented in accordance with U.S. generally accepted accounting principles ("GAAP"). The purpose of the non-GAAP results is to report financial information without certain income and expense items and to adjust the quarterly non-GAAP tax rates so that the non-GAAP tax rate in each of the quarters is equal to the full-year non-GAAP tax rate. For 2012, a forecasted full-year tax rate is used. The full year non-GAAP tax rate in both years excludes certain pretax and tax income and expense amounts. The non-GAAP results provide information to assist comparability and estimates of future performance. Brink's believes these measures are helpful in assessing operations and estimating future results and enable period-to-period comparability of financial performance. Non-GAAP results should not be considered as an alternative to revenue, income or earnings per share amounts determined in accordance with GAAP and should be read in conjunction with their GAAP counterparts. The adjustments are described in detail and are reconciled to our GAAP results on pages 32 - 33.

                                     Second Quarter      %            First Half          %
  (In millions, except per share
  amounts)                           2012     2011     Change      2012       2011      Change

  GAAP
  Revenues                        $  967.1    979.3       (1)   $ 1,933.9    1,892.6        2
      Segment operating profit
      (a)                             47.8     36.6       31        114.5       88.6       29
      Non-segment expense            (21.3)   (16.2)      31        (45.6)     (31.2)      46
      Operating profit                26.5     20.4       30         68.9       57.4       20
  Income from continuing
  operations (b)                      30.5      5.3       fav        47.5       24.2       96
  Diluted EPS from continuing
  operations (b)                      0.63     0.11       fav        0.98       0.50       96

  Non-GAAP (c)
  Revenues                        $  967.1    979.3       (1)   $ 1,933.9    1,892.6        2
      Segment operating profit
      (a)                             50.3     48.5        4        120.0      101.2       19
      Non-segment expense            (11.7)   (10.0)      17        (21.3)     (19.2)      11
      Operating profit                38.6     38.5        -         98.7       82.0       20
  Income from continuing
  operations (b)                      19.2     17.0       13         47.1       35.8       32
  Diluted EPS from continuing
  operations (b)                      0.40     0.35       14         0.97       0.74       31

Amounts may not add due to rounding.
(a) Segment operating profit is a non-GAAP measure when presented in any context other than prescribed by ASC Topic 280, Segment Reporting. The tables on pages 20 and 23 reconcile the measurement to operating profit, a GAAP measure. Disclosure of total segment operating profit enables investors to assess the total operating performance of Brink's excluding non-segment income and expense. Forward-looking estimates related to total segment operating profit and non-segment income (expense) for 2012 are provided on page 31.

(b) Amounts reported in this table are attributable to the shareholders of Brink's and exclude earnings related to noncontrolling interests.

(c) Non-GAAP earnings information is contained on pages 32 - 33, including reconciliation to amounts reported under GAAP.

Organic Growth
Organic growth represents the change in revenues or operating profit between the current and prior period, excluding the effect of the following items:
acquisitions and dispositions, changes in currency exchange rates and the remeasurement of net monetary assets in Venezuela under highly inflationary accounting. No remeasurement of net monetary assets in Venezuela under highly inflationary accounting was required as the exchange rate did not change.


Overview
GAAP
Second Quarter
Our revenues decreased $12 million or 1% and our operating profit increased $6 million or 30% in 2012. Revenues decreased due to unfavorable changes in currency exchange rates, partially offset by organic growth in our International segment. Operating profit increased primarily due to organic profit improvement in our International segment ($15 million), partially offset by increased U.S. retirement plan expenses ($6 million) and the negative impact of changes in currency exchange rates ($5 million).

Our income from continuing operations in 2012 increased $25 million compared to 2011 primarily due to lower tax expense ($16 million) mainly resulting from a $21 million tax benefit related to a change in retiree health care funding strategy. The operating profit increase mentioned above and the decrease in income attributable to noncontrolling interests ($3 million) also contributed to higher income from continuing operations.

Our earnings per share from continuing operations was $0.63, up from $0.11 in 2011.

First Half
Our revenues increased $41 million or 2% and our operating profit increased $12 million or 20% in 2012. Revenues increased due to organic growth in our International segment, partially offset by unfavorable changes in currency exchange rates. Operating profit increased primarily due to organic profit improvement in our International segment ($33 million), partially offset by increased U.S. retirement plan expenses ($16 million) and the negative impact of changes in currency exchange rates ($7 million).

Our income from continuing operations in 2012 increased 96% compared to 2011 primarily due to lower tax expense ($11 million) mainly resulting from a $21 million tax benefit related to a change in retiree health care funding strategy. The operating profit increase mentioned above and the decrease in income attributable to noncontrolling interests ($2 million) also contributed to higher income from continuing operations.

Our earnings per share from continuing operations was $0.98, up from $0.50 in 2011.

Non-GAAP
Non-GAAP results include the following adjustments:
                                             Three Months           Six Months
                                            Ended June 30,        Ended June 30,
                                            2012     2011         2012      2011

  GAAP Diluted EPS                       $  0.63      0.11        0.98      0.50
    Exclude U.S. retirement plan
    expenses                                0.16      0.09        0.38      0.18
    Exclude Belgium settlement charge         -       0.13          -       0.13
    Exclude employee benefit settlement
    charge                                    -       0.01        0.02      0.01
    Exclude gains on acquisitions and
    dispositions                            (0.01)     -          (0.04)    (0.06)
    Exclude tax benefit from change in
    retiree health care funding strategy    (0.43)     -          (0.43)      -
    Adjust quarterly tax rate to
    full-year average rate                  0.04       -          0.06      (0.03)
  Non-GAAP Diluted EPS                   $  0.40      0.35        0.97      0.74

Amounts may not add due to rounding. Non-GAAP results are reconciled in more detail to the applicable GAAP results on pages 32 - 33.

Second Quarter
The analysis of non-GAAP revenues is the same as the analysis of GAAP revenues. Operating profit was flat in 2012 versus 2011 due to the negative impact of changes in currency exchange rates ($5 million) and higher non-segment costs ($2 million) offset by organic improvement in both our International ($4 million) and North America ($3 million) segments.

Our income from continuing operations in 2012 increased 13% primarily due to lower income attributable to noncontrolling interests ($2 million).

Our earnings per share from continuing operations was $0.40, up from $0.35 in 2011.

First Half
The analysis of non-GAAP revenues is the same as the analysis of GAAP revenues. Operating profit increased $17 million or 20% in 2012 primarily due to organic improvement in our International segment ($23 million) partially offset by the negative impact of changes in currency exchange rates ($7 million).

Our income from continuing operations in 2012 increased 32% primarily due to higher operating profit, partially offset by higher tax expense.


Our earnings per share from continuing operations was $0.97, up from $0.74 in 2011.

Outlook for full-year 2012

GAAP
Our organic revenue growth rate for 2012 is expected to be in the 5% to 8% range, and our operating segment margin is expected to be approximately 7%. Our assumptions behind the annual segment margin include continued strength in Latin America and modestly better results in Europe. Our International organic revenue growth rate for 2012 is expected to be in the 7% to 10% range, and our International segment margin is expected to be in the 7.0% to 8.0% range. Our North America organic revenue growth rate for 2012 is expected to be flat, and our North America segment margin is expected to be in the 3.6% to 4.6% range.

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

Our operating segment margin is expected to be approximately 7%. Our assumptions behind the annual segment margin include continued strength in Latin America and modestly better results in North America and Europe. Our International segment margin is expected to be in the 7.0% to 8.0% range and our North America segment margin is expected to be in the 4.5% to 5.5% range.

See page 31 for a summary of our 2012 Outlook.


Segment Operating Results
                                 Segment Review
                 Second Quarter 2012 versus Second Quarter 2011
GAAP
                                Organic        Acquisitions /        Currency                             % Change
(In millions)     2Q '11         Change       Dispositions (b)         (c)          2Q '12         Total          Organic
Revenues:
International:
Latin America    $   360.5           56.0                     -          (40.6 )       375.9              4              16
EMEA                 333.5           18.5                     -          (36.9 )       315.1             (6 )             6
Asia Pacific          38.5            2.2                     -           (2.2 )        38.5              -               6
International        732.5           76.7                     -          (79.7 )       729.5              -              10
North America        246.8           (5.3 )                (1.3 )         (2.6 )       237.6             (4 )            (2 )
Total            $   979.3           71.4                  (1.3 )        (82.3 )       967.1             (1 )             7
Operating
profit:
International    $    26.2           15.1                     -           (4.9 )        36.4             39              58
North America         10.4            1.1                   0.1           (0.2 )        11.4             10              11
Segment
operating
profit                36.6           16.2                   0.1           (5.1 )        47.8             31              44
Non-segment
(a)                  (16.2 )         (5.1 )                   -              -         (21.3 )           31              31
Total            $    20.4           11.1                   0.1           (5.1 )        26.5             30              54
Segment
operating
margin:
International          3.6 %                                                             5.0 %
North America          4.2 %                                                             4.8 %
Segment
operating
margin                 3.7 %                                                             4.9 %




Non-GAAP
                                 Organic        Acquisitions /        Currency                             % Change
(In millions)      2Q '11         Change       Dispositions (b)         (c)          2Q '12         Total          Organic
Revenues:
International:
Latin America     $   360.5           56.0                     -          (40.6 )       375.9              4              16
EMEA                  333.5           18.5                     -          (36.9 )       315.1             (6 )             6
Asia Pacific           38.5            2.2                     -           (2.2 )        38.5              -               6
International         732.5           76.7                     -          (79.7 )       729.5              -              10
North America         246.8           (5.3 )                (1.3 )         (2.6 )       237.6             (4 )            (2 )
Total             $   979.3           71.4                  (1.3 )        (82.3 )       967.1             (1 )             7
Operating
profit:
International     $    37.3            4.3                     -           (4.9 )        36.7             (2 )            12
North America          11.2            2.5                   0.1           (0.2 )        13.6             21              22
Segment
operating
profit                 48.5            6.8                   0.1           (5.1 )        50.3              4              14
Non-segment (a)       (10.0 )         (1.7 )                   -              -         (11.7 )           17              17
Total             $    38.5            5.1                   0.1           (5.1 )        38.6              -              13
Segment
operating
margin:
International           5.1 %                                                             5.0 %
North America           4.5 %                                                             5.7 %
Segment
operating
margin                  5.0 %                                                             5.2 %

(a) Includes income and expense not allocated to segments (see page 26 for details).

(b) Includes operating results and gains/losses on acquisitions, sales and exits of businesses.

(c) Revenue and Segment Operating Profit: The "Currency" amount in the table is the summation of the monthly currency changes, plus (minus) the U.S. dollar amount of remeasurement currency gains (losses) of bolivar fuerte-denominated net monetary assets recorded under highly inflationary accounting rules related to the Venezuelan operations. The monthly currency change is equal to the Revenue or Operating Profit for the month in local currency, on a country-by-country basis, multiplied by the difference in rates used to translate the current period amounts to U.S. dollars versus the translation rates used in the year-ago month. The functional currency in Venezuela is the U.S. dollar under highly inflationary accounting rules. Remeasurement gains and losses under these rules are recorded in U.S. dollars but these gains and losses are not recorded in local currency. Local currency Revenue and Operating Profit used in the calculation of monthly currency change for Venezuela have been derived from the U.S. dollar results of the Venezuelan operations under U.S. GAAP (excluding remeasurement gains and losses) using current period currency exchange rates.

Amounts may not add due to rounding.


Segment Review Second Quarter 2012 versus Second Quarter 2011

Consolidated Segment Review

GAAP
Revenue decreased 1% to $967 million due primarily to unfavorable changes in currency exchange rates partially offset by organic growth of 7% in our International segment.

Segment operating profit increased 31% ($11 million) reflecting improvement in our International segment.

Non-GAAP
The analysis of non-GAAP revenue is the same as the analysis of GAAP revenue.

Segment operating profit increased 4% ($2 million) reflecting improvement in our North America segment.

International Segment Review

Overview
GAAP
Revenues in the second quarter of 2012 for our International segment were flat compared to the same period of 2011 as:
ˇ revenues in Latin America were 4% higher ($15 million)

ˇ revenues in EMEA were 6% lower ($18 million), and

ˇ revenues in Asia Pacific were flat.

Operating profit in our International segment increased 39% ($10 million) due to improved profits in EMEA partially offset by a decline in Latin America.

Non-GAAP
The analysis of non-GAAP International segment revenues is the same as the analysis of GAAP International segment revenues.

Operating profit in our International segment decreased 2% ($1 million) due to lower profits in Latin America more than offsetting improvement in EMEA.

Latin America
GAAP
Revenue in Latin America increased 4% ($15 million) due to:
ˇ organic growth of 16% ($56 million) driven by inflation-based price increases across the region, partially offset by

ˇ an unfavorable currency impact ($41 million).

Latin America operating profit decreased 29% due to lower profits in Venezuela, partially offset by organic growth in Argentina and lower restructuring charges in Mexico. Latin America's profit was negatively affected by
ˇ unfavorable currency impact ($3 million), and

ˇ wage increases and changes in government regulations in certain countries.

Non-GAAP
The analysis of Latin America non-GAAP revenues is the same as the analysis of GAAP revenues.

Latin America operating profit decreased 31% due to lower profits in Venezuela, partially offset by organic growth in Argentina and lower restructuring charges in Mexico. Latin America's profit was negatively affected by
ˇ unfavorable currency impact ($3 million), and

ˇ wage increases and changes in government regulations in certain countries.

EMEA
GAAP
Revenue in EMEA decreased 6% ($18 million) due to unfavorable currency impact ($37 million), partially offset by organic revenue growth of 6% ($19 million). Organic growth was driven by:
ˇ higher volumes in France, and


ˇ a commercial settlement in the Netherlands.

EMEA operating profit increased significantly due to:
ˇ a 2011 $10 million loss from a legal dispute related to the exit of our Belgium CIT business,

ˇ organic improvement in France, and

ˇ a commercial settlement in the Netherlands.

Non-GAAP
The analysis of EMEA non-GAAP revenues is the same as the analysis of GAAP revenues.

EMEA operating profit increased significantly due to:
ˇ organic improvement in France, and

ˇ a commercial settlement in the Netherlands.

Asia Pacific
Revenue in Asia Pacific remained flat due mainly to organic growth in China and India offset by unfavorable currency ($2 million).

Operating profit decreased slightly.

North America Segment

GAAP
Revenues in North America decreased 4% ($9 million) due to a 2% organic decrease primarily in the U.S. from CIT volume and price pressure and unfavorable currency impact ($3 million).

Operating profit increased 10% ($1 million) due to cost reductions in the U.S. despite lower CIT demand and continued pricing pressure.

Non-GAAP
The analysis of North America non-GAAP revenues is the same as the analysis of North America GAAP revenues.

Operating profit increased 21% ($2 million) due to cost reductions in the U.S. despite lower CIT demand and continued pricing pressure.

Most of the armored vehicles used by our U.S. operations are accounted for as operating leases. The cost related to these leases is recognized as rental expense in the Consolidated Statements of Income. Since March 2009, we have acquired armored vehicles in the U.S. either by purchasing or by leasing under agreements that we have accounted for as capital leases. We currently expect to continue acquiring new vehicles in the U.S. with capital leases. The cost of vehicles under capital lease is recognized as depreciation and interest expense. Because of the shift in the way we acquire vehicles in the U.S., our depreciation and interest related to the U.S. fleet is higher and our rental expense is lower compared to earlier periods and we expect this trend to continue.


Segment Review First Half 2012 versus First Half 2011

First Half
GAAP
                                  Organic         Acquisitions /        Currency                                % Change
(In millions)     YTD '11         Change         Dispositions (b)          (c)          YTD '12          Total          Organic
Revenues:
International:
Latin America    $    692.8           124.8                      -           (55.4 )        762.2              10               18
EMEA                  640.6            30.4                    0.3           (49.7 )        621.6              (3 )              5
Asia Pacific           73.4             5.3                      -            (2.6 )         76.1               4                7
International       1,406.8           160.5                    0.3          (107.7 )      1,459.9               4               11
North America         485.8            (5.7 )                 (2.6 )          (3.5 )        474.0              (2 )             (1 )
Total            $  1,892.6           154.8                   (2.3 )        (111.2 )      1,933.9               2                8
Operating
profit:
International    $     71.4            32.7                      -            (6.8 )         97.3              36               46
North America          17.2               -                    0.2            (0.2 )         17.2               -                -
Segment
operating
profit                 88.6            32.7                    0.2            (7.0 )        114.5              29               37
Non-segment
(a)                   (31.2 )         (14.4 )                    -               -          (45.6 )            46               46
Total            $     57.4            18.3                    0.2            (7.0 )         68.9              20               32
Segment
operating
margin:
International           5.1 %                                                                 6.7 %
North America           3.5 %                                                                 3.6 %
Segment
operating
margin                  4.7 %                                                                 5.9 %

Non-GAAP
                                  Organic         Acquisitions /        Currency                                % Change
(In millions)     YTD '11         Change         Dispositions (b)          (c)          YTD '12          Total          Organic
Revenues:
International:
Latin America    $    692.8           124.8                      -           (55.4 )        762.2              10               18
EMEA                  640.6            30.4                    0.3           (49.7 )        621.6              (3 )              5
Asia Pacific           73.4             5.3                      -            (2.6 )         76.1               4                7
International       1,406.8           160.5                    0.3          (107.7 )      1,459.9               4               11
North America         485.8            (5.7 )                 (2.6 )          (3.5 )        474.0              (2 )             (1 )
Total            $  1,892.6           154.8                   (2.3 )        (111.2 )      1,933.9               2                8
Operating
profit:
International    $     82.5            22.7                      -            (6.8 )         98.4              19               28
North America          18.7             2.9                    0.2            (0.2 )         21.6              16               16
Segment
operating
profit                101.2            25.6                    0.2            (7.0 )        120.0              19               25
Non-segment
(a)                   (19.2 )          (2.1 )                    -               -          (21.3 )            11               11
Total            $     82.0            23.5                    0.2            (7.0 )         98.7              20               29
Segment
operating
margin:
International           5.9 %                                                                 6.7 %
North America           3.8 %                                                                 4.6 %
Segment
operating
margin                  5.3 %                                                                 6.2 %

Amounts may not add due to rounding.

See page 20 for footnote explanations.


Segment Review First Half 2012 versus First Half 2011

Consolidated Segment Review

GAAP
Revenue increased 2% to $1,934 million due primarily to organic growth of 8% in our International segment partially offset by unfavorable changes in currency exchange rates.

Segment operating profit increased 29% ($26 million) reflecting improvement in our International segment.

Non-GAAP
The analysis of non-GAAP revenue is the same as the analysis of GAAP revenue.

Segment operating profit increased 19% ($19 million) reflecting improvement in both our International and North America segments.

International Segment Review

Overview
GAAP
Revenues in the first half of 2012 for our International segment were 4% higher ($53 million) than the same period of 2011 as:
ˇ revenues in Latin America were 10% higher ($69 million)

ˇ revenues in EMEA were down 3% ($19 million), and

ˇ revenues in Asia Pacific were 4% higher ($3 million).

Operating profit in our International segment increased 36% ($26 million) due to improved profits in EMEA and Latin America.

Non-GAAP . . .

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