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BCO > SEC Filings for BCO > Form 10-Q on 25-Oct-2012All Recent SEC Filings

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Form 10-Q for BRINKS CO


25-Oct-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.

                                     Third Quarter      %            Nine Months         %
  (In millions, except per share
  amounts)                          2012     2011     Change      2012       2011      Change

  GAAP
  Revenues                        $ 979.0    995.8       (2)   $ 2,912.9    2,888.4        1
      Segment operating profit
      (a)                            59.1     70.1      (16)       173.6      158.7        9
      Non-segment expense           (22.0)    (7.6)     189        (67.6)     (38.8)      74
      Operating profit               37.1     62.5      (41)       106.0      119.9      (12)
  Income from continuing
  operations (b)                     13.5     31.5      (57)        61.0       55.7       10
  Diluted EPS from continuing
  operations (b)                     0.28     0.66      (58)        1.26       1.16        9

  Non-GAAP (c)
  Revenues                        $ 979.0    995.8       (2)   $ 2,912.9    2,888.4        1
      Segment operating profit
      (a)                            60.4     71.6      (16)       180.4      172.8        4
      Non-segment expense           (10.4)   (10.7)      (3)       (31.7)     (29.9)       6
      Operating profit               50.0     60.9      (18)       148.7      142.9        4
  Income from continuing
  operations (b)                     24.5     28.7      (15)        71.6       64.5       11
  Diluted EPS from continuing
  operations (b)                     0.50     0.60      (17)        1.47       1.34       10

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
Third Quarter
Our revenues decreased $17 million or 2% and our operating profit decreased $25 million or 41% in 2012. Revenues decreased due to unfavorable changes in currency exchange rates, partially offset by organic growth in our International segment. Operating profit decreased primarily due to increased U.S. retirement plan expenses ($7 million), the 2011 gain recognized on the sale of the U.S. Document Destruction business ($7 million), the negative impact of changes in currency exchange rates ($5 million) and impairment losses related to certain operations expected to be sold in the near term ($4 million).

Our income from continuing operations in 2012 decreased $18 million compared to 2011 primarily due to the operating profit decrease mentioned above, partially offset by the positive income tax impact of the profit decrease.

Our earnings per share from continuing operations was $0.28, down from $0.66 in 2011.

Nine Months
Our revenues increased $25 million or 1% and our operating profit decreased $14 million or 12% in 2012. Revenues increased due to organic growth in our International segment, partially offset by unfavorable changes in currency exchange rates. Operating profit decreased primarily due to increased U.S. retirement plan expenses ($22 million), the negative impact of changes in currency exchange rates ($12 million), the 2011 gain recognized on the sale of the U.S. Document Destruction business ($7 million) and impairment losses related to certain operations expected to be sold in the near term ($4 million), partially offset by organic profit improvement in our International segment ($22 million) and a $10 million settlement loss in Belgium recognized in the second quarter of 2011.

Our income from continuing operations in 2012 increased 10% compared to 2011 primarily due to lower tax expense ($17 million) mainly resulting from a $21 million tax benefit related to a change in retiree health care funding strategy, partially offset by the operating profit decrease mentioned above.

Our earnings per share from continuing operations was $1.26, up from $1.16 in 2011.

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

  GAAP Diluted EPS                       $   0.28         0.66           1.26         1.16
    Exclude U.S. retirement plan
    expenses                                 0.18         0.09           0.56         0.27
    Exclude employee benefit settlement
    and acquisition-related severance        0.03         0.01           0.05         0.02
    Exclude gains and losses on
    acquisitions and asset dispositions      0.03         (0.14)         (0.01)       (0.20)
    Exclude Belgium settlement                 -            -              -          0.13
    Exclude tax benefit from change in
    retiree health care funding strategy       -            -            (0.43)         -
    Adjust quarterly tax rate to
    full-year average rate                   (0.01)       (0.02)         0.06         (0.05)
  Non-GAAP Diluted EPS                   $   0.50         0.60           1.47         1.34

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

Third Quarter
The analysis of non-GAAP revenues is the same as the analysis of GAAP revenues. Operating profit decreased $11 million or 18% in 2012 versus 2011 due to an organic decrease in our International segment ($8 million) and the negative impact of changes in currency exchange rates ($5 million).

Our income from continuing operations in 2012 decreased 15% primarily due to the operating profit decrease mentioned above, partially offset by the positive income tax impact of the profit decrease ($4 million) and lower income attributable to noncontrolling interests ($2 million).

Our earnings per share from continuing operations was $0.50, down from $0.60 in 2011.

Nine Months
The analysis of non-GAAP revenues is the same as the analysis of GAAP revenues. Operating profit increased $6 million or 4% in 2012 primarily due to organic improvement in our International ($15 million) and North American ($4 million) segments, partially offset by the negative impact of changes in currency exchange rates ($12 million).


Our income from continuing operations in 2012 increased 11% primarily due to higher operating profit and lower income attributable to noncontrolling interests ($2 million), partially offset by higher tax expense.

Our earnings per share from continuing operations was $1.47, up from $1.34 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 6.7%. Our assumptions behind the annual segment margin include better results in Europe and North America and a decline in Latin America due to lower profits in Venezuela. 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 revenue is projected to decline by 2% in 2012 on an organic basis, and our North America segment margin is expected to be in the 3.6% to 4.1% 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 6.7%. Our assumptions behind the annual segment margin include better results in Europe and North America and a decline in Latin America due to lower profits in Venezuela. 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 5.0% range.

See page 31 for a summary of our 2012 Outlook.


Segment Operating Results
                                 Segment Review
                  Third Quarter 2012 versus Third Quarter 2011
  GAAP
                                        Organic    Acquisitions /    Currency                % Change
  (In millions)               3Q '11    Change    Dispositions (b)     (c)      3Q '12    Total   Organic
  Revenues:
    International:
       Latin America        $  375.1      43.6                0.6      (34.1)    385.2       3        12
       EMEA                    335.9      22.5                  -      (38.3)    320.1      (5)        7
       Asia Pacific             40.3       0.9                  -       (2.1)     39.1      (3)        2
          International        751.3      67.0                0.6      (74.5)    744.4      (1)        9
          North America        244.5      (8.9)                 -       (1.0)    234.6      (4)       (4)
             Total          $  995.8      58.1                0.6      (75.5)    979.0      (2)        6
  Operating profit:
    International           $   61.4      (1.0)              (4.7)      (4.9)     50.8     (17)       (2)
    North America                8.7      (0.3)                 -       (0.1)      8.3      (5)       (3)
       Segment operating
       profit                   70.1      (1.3)              (4.7)      (5.0)     59.1     (16)       (2)
       Non-segment (a)          (7.6)     (5.5)              (8.9)         -     (22.0)    189        72
             Total          $   62.5      (6.8)             (13.6)      (5.0)     37.1     (41)      (11)
  Segment operating margin:
    International                8.2%                                              6.8%
    North America                3.6%                                              3.5%
             Segment
             operating
             margin              7.0%                                              6.0%




  Non-GAAP
                                        Organic    Acquisitions /    Currency                % Change
  (In millions)               3Q '11    Change    Dispositions (b)     (c)      3Q '12    Total   Organic
  Revenues:
    International:
       Latin America        $  375.1      43.6                0.6      (34.1)    385.2       3        12
       EMEA                    335.9      22.5                  -      (38.3)    320.1      (5)        7
       Asia Pacific             40.3       0.9                  -       (2.1)     39.1      (3)        2
          International        751.3      67.0                0.6      (74.5)    744.4      (1)        9
          North America        244.5      (8.9)                 -       (1.0)    234.6      (4)       (4)
             Total          $  995.8      58.1                0.6      (75.5)    979.0      (2)        6
  Operating profit:
    International           $   62.1      (7.5)               0.2       (4.9)     49.9     (20)      (12)
    North America                9.5       1.1                  -       (0.1)     10.5      11        12
       Segment operating
       profit                   71.6      (6.4)               0.2       (5.0)     60.4     (16)       (9)
       Non-segment (a)         (10.7)      0.3                  -          -     (10.4)     (3)       (3)
             Total          $   60.9      (6.1)               0.2       (5.0)     50.0     (18)      (10)
  Segment operating margin:
    International                8.3%                                              6.7%
    North America                3.9%                                              4.5%
             Segment
             operating
             margin              7.2%                                              6.2%

(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. Also includes impairment charges related to businesses that we expect to dispose of in the near term.

(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 Third Quarter 2012 versus Third Quarter 2011

Consolidated Segment Review

GAAP
Revenue decreased 2% to $979 million due primarily to unfavorable changes in currency exchange rates partially offset by organic growth of 9% in our International segment.

Segment operating profit decreased 16% ($11 million) reflecting lower profits in our International segment.

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

Segment operating profit decreased 16% ($11 million) reflecting lower profits in our International segment.

International Segment Review

Overview
GAAP
Revenues in the third quarter of 2012 for our International segment decreased 1% compared to the same period of 2011 as:
ˇ revenues in Latin America were 3% higher ($10 million)

ˇ revenues in EMEA were 5% lower ($16 million), and

ˇ revenues in Asia Pacific were 3% lower ($1 million).

Operating profit in our International segment decreased 17% ($11 million) due to lower profits 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 20% ($12 million) due to lower profits in Latin America more than offsetting improvement in EMEA.

Latin America
GAAP
Revenue in Latin America increased 3% ($10 million) due to organic growth of 12% ($44 million) driven by inflation-based price increases across the region, partially offset by an unfavorable currency impact ($34 million).

Latin America operating profit decreased 32% due to lower profits across the region, partially offset by organic growth in Mexico. Latin America's profit was negatively affected by
ˇ write-offs of government receivables in Argentina ($4 million),

ˇ unfavorable currency impact ($2 million), and

ˇ increased severance charges,

partially offset by higher profits in Venezuela, where a gain on a building sale ($7 million) more than offset continued pressure.

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

Latin America operating profit decreased 49% due to lower profits across the region, partially offset by organic growth in Mexico. Latin America's profit was negatively affected by
ˇ write-offs of government receivables in Argentina ($4 million),

ˇ reduced profits in Venezuela, where we expect pressure to continue,

ˇ unfavorable currency impact ($2 million), and

ˇ increased severance charges.


EMEA
GAAP
Revenue in EMEA decreased 5% ($16 million) due to unfavorable currency impact ($38 million), partially offset by organic revenue growth of 7% ($23 million). Organic growth was driven by higher volumes in France, the United Kingdom, and the Netherlands.

EMEA operating profit decreased 3% due to:
ˇ impairment losses related to certain operations expected to be sold in the near term ($4 million), and

ˇ unfavorable currency impact ($3 million),

partially offset by organic growth in the Netherlands, France, and Russia.

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

EMEA operating profit increased 20% due to organic growth in the Netherlands, France, and Russia, partially offset by unfavorable currency impact ($3 million).

Asia Pacific
Revenue in Asia Pacific decreased 3% ($1 million) due mainly to unfavorable currency ($2 million).

Operating profit decreased about $2 million due to lower profits across the region.

North America Segment

GAAP
Revenues in North America decreased 4% ($10 million) due to a 4% organic decrease primarily in the U.S. from CIT volume and price pressure and unfavorable currency impact ($1 million).

Operating profit decreased 5% due to increased U.S. retirement plan expenses ($1 million), lower CIT demand, and continued pricing pressure, which more than offset cost reductions.

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

Operating profit increased 11% ($1 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 Nine Months 2012 versus Nine Months 2011

  GAAP
                                           Organic    Acquisitions /    Currency                  % Change
  (In millions)                 YTD '11    Change    Dispositions (b)     (c)       YTD '12    Total   Organic
  Revenues:
    International:
       Latin America         $  1,067.9     168.4                0.6      (89.5)    1,147.4       7        16
       EMEA                       976.5      52.9                0.3      (88.0)      941.7      (4)        5
       Asia Pacific               113.7       6.2                  -       (4.7)      115.2       1         5
          International         2,158.1     227.5                0.9     (182.2)    2,204.3       2        11
          North America           730.3     (14.6)              (2.6)      (4.5)      708.6      (3)       (2)
             Total           $  2,888.4     212.9               (1.7)    (186.7)    2,912.9       1         7
  Operating profit:
    International            $    132.8      21.6                5.4      (11.7)      148.1      12        16
    North America                  25.9      (0.3)               0.2       (0.3)       25.5      (2)       (1)
       Segment operating
       profit                     158.7      21.3                5.6      (12.0)      173.6       9        13
       Non-segment (a)            (38.8)    (20.4)              (8.4)         -       (67.6)     74        53
             Total           $    119.9       0.9               (2.8)     (12.0)      106.0     (12)        1
  Segment operating margin:
    International                   6.2%                                                6.7%
    North America                   3.5%                                                3.6%
             Segment
             operating
             margin                 5.5%                                                6.0%

  Non-GAAP
                                           Organic    Acquisitions /    Currency                  % Change
  (In millions)                 YTD '11    Change    Dispositions (b)     (c)       YTD '12    Total   Organic
  Revenues:
    International:
       Latin America         $  1,067.9     168.4                0.6      (89.5)    1,147.4       7        16
       EMEA                       976.5      52.9                0.3      (88.0)      941.7      (4)        5
       Asia Pacific               113.7       6.2                  -       (4.7)      115.2       1         5
          International         2,158.1     227.5                0.9     (182.2)    2,204.3       2        11
          North America           730.3     (14.6)              (2.6)      (4.5)      708.6      (3)       (2)
             Total           $  2,888.4     212.9               (1.7)    (186.7)    2,912.9       1         7
  Operating profit:
    International            $    144.6      15.2                0.2      (11.7)      148.3       3        11
    North America                  28.2       4.0                0.2       (0.3)       32.1      14        14
       Segment operating
       profit                     172.8      19.2                0.4      (12.0)      180.4       4        11
       Non-segment (a)            (29.9)     (1.8)                 -          -       (31.7)      6         6
             Total           $    142.9      17.4                0.4      (12.0)      148.7       4        12
  Segment operating margin:
    International                   6.7%                                                6.7%
    North America                   3.9%                                                4.5%
             Segment
             operating
             margin                 6.0%                                                6.2%

Amounts may not add due to rounding.

See page 20 for footnote explanations.


Segment Review Nine Months 2012 versus Nine Months 2011

Consolidated Segment Review

GAAP
Revenue increased 1% to $2,913 million due primarily to organic growth of 11% in our International segment partially offset by unfavorable changes in currency exchange rates.

Segment operating profit increased 9% ($15 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% ($8 million) reflecting improvement in both our International and North America segments.

International Segment Review

Overview
GAAP
Revenues in the first nine months of 2012 for our International segment were 2% higher ($46 million) than the same period of 2011 as:
ˇ revenues in Latin America were 7% higher ($80 million)

ˇ revenues in EMEA were down 4% ($35 million), and

ˇ revenues in Asia Pacific were 1% higher ($2 million).

Operating profit in our International segment increased 12% ($15 million) due to improved profits in EMEA.

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 increased 3% ($4 million) due to improved profits in EMEA, partially offset by lower profits in Latin America and Asia Pacific.

Latin America
GAAP . . .

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