UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 5, 2020
THE BRINK’S COMPANY | ||
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
(Address and zip code of
principal executive offices)
Registrant’s telephone number, including area code: (804 ) 289-9600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule
405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 Securities Act. ☐
Item 2.02 | Results of Operations and Financial Condition. |
On May 5, 2020, The Brink's Company issued a press release regarding its results for the first quarter ended March 31, 2020. A copy of this release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific references in such a filing.
Item 7.01 | Regulation FD Disclosure. |
On May 5, 2020, The Brink's Company provided slides to accompany its earnings presentation. A copy of the slides is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific references in such a filing.
Item 9.01 | Financial Statements and Exhibits | ||
(d) | Exhibits | ||
99.1 | |||
99.2 | |||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE BRINK’S COMPANY (Registrant) | ||
Date: May 5, 2020 | By: | /s/ Ronald J. Domanico |
Ronald J. Domanico | ||
Executive Vice President and Chief Financial Officer | ||
 | Exhibit 99.1 | |
Contact: Investor Relations |  |
804.289.9709 | FOR IMMEDIATE RELEASE |
Brink's Reports First-Quarter Results
• | Operating profit: GAAP $26 million; non-GAAP $63 million |
• | Results negatively affected by COVID-19 (est. $13 million) and currency translation ($15 million GAAP and $18 million non-GAAP) |
• | EPS: GAAP $.03 vs $.27; non-GAAP $.36 vs $.81, reflecting materially higher tax rate |
• | Management reducing costs, preserving cash, expects strong recovery post-crisis |
• | Expect 2Q to be low point of 2020, with improved results in 2H as cost reductions take hold and global economies re-open |
• | Acquisition of G4S cash operations on track; available liquidity of approximately $800 million expected after completion |
• | June 1 Investor Day postponed until further notice due to health concerns related to the COVID-19 pandemic |
RICHMOND, Va., May 5, 2020 –The Brink’s Company (NYSE:BCO), the global leader in total cash management, route-based secure logistics and payment solutions, today announced results for the first quarter of 2020. Highlights include:
(In millions, except for per share amounts) | First-Quarter 2020 | ||||||||||||
GAAP | Change | Non-GAAP | Change | Constant Currency Change(b) | |||||||||
Revenue | $ | 873 | (4%) | $ | 873 | (4%) | 3% | ||||||
Operating Profit | $ | 26 | (55%) | $ | 63 | (26%) | (4%) | ||||||
Operating Margin | 3.0 | % | (350 bps) | 7.2 | % | (220 bps) | (70 bps) | ||||||
Net Income / Adjusted EBITDA(a) | $ | 2 | (87%) | $ | 101 | (23%) | (8%) | ||||||
EPS | $ | 0.03 | (89%) | $ | 0.36 | (56%) | (33%) | ||||||
(a) | The non-GAAP financial metric, adjusted EBITDA, is presented with its corresponding GAAP metric, net income attributable to Brink's. |
(b) | Constant currency represents 2020 results at 2019 exchange rates. |
Doug Pertz, president and chief executive officer, said: “The COVID-19 pandemic has made these very trying and uncertain times for everyone, as the world unites against this health and economic crisis. Given the uncertainties related to the pandemic, we are focused on three priorities-- protecting our employees and providing essential services to our customers, preserving cash and maximizing profits, and positioning Brink’s to emerge from this crisis stronger than it has ever been.
“The pandemic had a substantial impact on first-quarter results, first affecting our operations in Asia, and then in early March moving sequentially through Europe, North America and South America. Results were also affected
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significantly by unfavorable currency translation, which also began to have a material impact in early March driven, we believe, by a temporary flight from risk in key developing countries such as Mexico and Brazil.
“As we address the challenges of the pandemic, our confidence in the future is supported by our strong balance sheet, ample liquidity, and the decisive actions our global team is taking to revamp our cost structure to align with an expected near-term revenue decline of approximately 25 percent. In the second quarter, we expect to generate adjusted EBITDA of at least $45 million and positive operating cash flow for the year. We believe the second quarter will be the low point for 2020 and, as additional cost actions take hold, we expect margin improvement in the third and fourth quarters.
“Given the uncertainty regarding the impact of the pandemic on our customers’ operations, which currently includes shutdowns in more than 50 countries, we don’t believe that it is possible to provide guidance within a meaningful range. However, we expect to see revenue growth return as our customers-- most of which are large, stable and resilient businesses-- begin to resume operations, leading to an acceleration of earnings growth in the second half of the year. Fortunately, we have very limited exposure to dine-in restaurants and other small businesses that have been significantly affected by this pandemic and high exposure to essential services, which comprise approximately 44 percent of our retail customer base in the U.S. In addition to the substantial cost reduction actions we are taking, we are also reducing our planned cash capital expenditures by 50 percent to support achieving our target of positive free cash flow for the year.
“As we proactively address the issues related to this pandemic, we are continuing to complete the acquisition and integration of the G4S operations, which provide a new platform for accelerated growth. We have already begun to achieve the cost synergies related to the operations that have been completed to date. We are also moving quickly to introduce our new Strategy 2.0 tech-enabled cash management services that offer enhanced safety, ease-of-use and higher value-- attributes that we believe will be in even greater demand in the post-pandemic economy.
“Finally, I want to express my support and sympathy to those, both within and outside of Brink’s, who have been affected by this terrible virus. I also offer my sincere gratitude to all of our front-line employees for their dedication to ensuring that the essential services we provide remain available to our customers around the world. Together with our global operating managers, I am confident that Brink’s will emerge from this crisis as a stronger company with substantial revenue and earnings growth opportunities.”
G4S Acquisition Update
On February 26, Brink’s announced the planned acquisition of G4S cash operations in 17 markets, with closings planned in multiple phases throughout 2020. To date, the company has completed its acquisition of G4Si, a global provider of secure logistics and storage services, and G4S cash operations in nine markets including the Netherlands, Belgium, Ireland, Hong Kong, Cyprus, Romania, the Czech Republic, Malaysia and the Dominican Republic. The company expects to pay approximately $835 million for the entire transaction, including approximately $200 million to complete remaining acquisitions in eight additional markets. The acquisition is being financed with cash and debt from the company’s recently increased credit facility.
In 2019, the G4S businesses being acquired generated combined pro forma revenue of approximately $800 million and adjusted EBITDA of approximately $115 million, approximately 80 percent of which is attributable to the acquisitions completed to date. Upon completion, the entire transaction is expected to add more than $135 million in
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annualized adjusted EBITDA, including annualized cost synergies of approximately $20 million, expected to be achieved by the end of 2020.
Effective Tax Rate
The pandemic has had a substantial impact on the company’s projected 2020 non-GAAP effective income tax rate, which increased from 32 percent to 49.8 percent. The increase is due primarily to the company’s expectation that it will be unable to utilize tax attributes at the lower projected income levels as well as the relative negative effect on the rate of tax expense items not based upon income. Management expects its non-GAAP effective tax rate to return to the 30 percent range when the economic crisis subsides and the company’s earnings level improves.
Conference Call
Brink’s will host a conference call on May 5 at 4:30 p.m. ET to review first-quarter results. Interested parties can listen by calling 888-349-0094 (in the U.S.) or 412-902-0124 (international). Participants can pre-register at http://dpregister.com/10138229 to receive a direct dial-in number for the call. The call also will be accessible live via webcast on the Brink’s website (www.brinks.com). A replay of the call will be available through June 5, 2020 at 877-344-7529 (in the U.S.) or 412-317-0088 (international). The conference number is 10138229. An archived version of the webcast will be available online in the Investor Relations section of http://investors.brinks.com.
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The Brink’s Company and subsidiaries
(In millions, except for per share amounts) (Unaudited)
First-Quarter 2020 vs. 2019
GAAP | Organic | Acquisitions / | % Change | |||||||||||||||||||
1Q'19 | Change | Dispositions(a) | Currency(b) | 1Q'20 | Total | Organic | ||||||||||||||||
Revenues: | ||||||||||||||||||||||
North America | $ | 435 | 9 | 5 | (4 | ) | 444 | 2 | 2 | |||||||||||||
South America | 230 | 17 | 1 | (51 | ) | 198 | (14 | ) | 8 | |||||||||||||
Rest of World | 240 | (8 | ) | 4 | (5 | ) | 231 | (4 | ) | (3 | ) | |||||||||||
Segment revenues(g) | $ | 905 | 18 | 10 | (60 | ) | 873 | (4 | ) | 2 | ||||||||||||
Revenues - GAAP | $ | 905 | 18 | 10 | (60 | ) | 873 | (4 | ) | 2 | ||||||||||||
Operating profit: | ||||||||||||||||||||||
North America | $ | 44 | (11 | ) | — | (1 | ) | 33 | (25 | ) | (24 | ) | ||||||||||
South America | 43 | 12 | 1 | (14 | ) | 42 | (3 | ) | 27 | |||||||||||||
Rest of World | 24 | (9 | ) | — | — | 15 | (37 | ) | (36 | ) | ||||||||||||
Segment operating profit | 111 | (8 | ) | 1 | (14 | ) | 90 | (19 | ) | (7 | ) | |||||||||||
Corporate(c) | (26 | ) | 3 | — | (4 | ) | (27 | ) | 2 | (12 | ) | |||||||||||
Operating profit - non-GAAP | $ | 85 | (4 | ) | 1 | (18 | ) | 63 | (26 | ) | (5 | ) | ||||||||||
Other items not allocated to segments(d) | (26 | ) | (12 | ) | (2 | ) | 3 | (37 | ) | 40 | 45 | |||||||||||
Operating profit - GAAP | $ | 58 | (16 | ) | (1 | ) | (15 | ) | 26 | (55 | ) | (28 | ) | |||||||||
GAAP interest expense | (23 | ) | (20 | ) | (13 | ) | ||||||||||||||||
GAAP interest and other income (expense) | (11 | ) | (16 | ) | 39 | |||||||||||||||||
GAAP provision for income taxes | 10 | (12 | ) | fav | ||||||||||||||||||
GAAP noncontrolling interests | 1 | 1 | 25 | |||||||||||||||||||
GAAP income (loss) from continuing operations(f) | 14 | 2 | (87 | ) | ||||||||||||||||||
GAAP EPS(f) | $ | 0.27 | 0.03 | (89 | ) | |||||||||||||||||
GAAP weighted-average diluted shares | 50.9 | 51.3 | 1 | |||||||||||||||||||
Non-GAAP(e) | Organic | Acquisitions / | % Change | |||||||||||||||||||
1Q'19 | Change | Dispositions(a) | Currency(b) | 1Q'20 | Total | Organic | ||||||||||||||||
Segment revenues - GAAP/non-GAAP | $ | 905 | 18 | 10 | (60 | ) | 873 | (4 | ) | 2 | ||||||||||||
Non-GAAP operating profit | 85 | (4 | ) | 1 | (18 | ) | 63 | (26 | ) | (5 | ) | |||||||||||
Non-GAAP interest expense | (22 | ) | (19 | ) | (10 | ) | ||||||||||||||||
Non-GAAP interest and other income (expense) | (2 | ) | (5 | ) | unfav | |||||||||||||||||
Non-GAAP provision for income taxes | 19 | 19 | 1 | |||||||||||||||||||
Non-GAAP noncontrolling interests | 1 | 1 | 38 | |||||||||||||||||||
Non-GAAP income from continuing operations(f) | 41 | 18 | (55 | ) | ||||||||||||||||||
Non-GAAP EPS(f) | $ | 0.81 | 0.36 | (56 | ) | |||||||||||||||||
Non-GAAP weighted-average diluted shares | 50.9 | 51.3 | 1 | |||||||||||||||||||
Amounts may not add due to rounding.
(a) | Non-GAAP amounts include the impact of prior year comparable period results for acquired and disposed businesses. GAAP results also include the impact of acquisition-related intangible amortization, restructuring and other charges, and disposition related gains/losses. |
(b) | The amounts in the “Currency” column consist of the effects of Argentina devaluations under highly inflationary accounting and the sum of monthly currency changes. Monthly currency changes represent the accumulation throughout the year of the impact on current period results from changes in foreign currency rates from the prior year period. |
(c) | Corporate expenses are not allocated to segment results. Corporate expenses include salaries and other costs to manage the global business and to perform activities required of public companies. |
(d) | See pages 7-8 for more information. |
(e) | Non-GAAP results are reconciled to applicable GAAP results on pages 9-12. |
(f) | Attributable to Brink's. |
(g) | Segment revenues equal our total reported non-GAAP revenues. |
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The Brink’s Company and subsidiaries
(In millions) (Unaudited)
Selected Items - Condensed Consolidated Balance Sheets
December 31, 2019 | March 31, 2020 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 311.0 | 274.4 | |||
Restricted cash | 158.0 | 237.7 | ||||
Accounts receivable, net | 635.6 | 643.3 | ||||
Right-of-use assets, net | 270.3 | 261.1 | ||||
Property and equipment, net | 763.3 | 704.1 | ||||
Goodwill and intangibles | 1,057.1 | 1,070.1 | ||||
Deferred income taxes | 273.5 | 255.4 | ||||
Other | 295.0 | 354.8 | ||||
Total assets | $ | 3,763.8 | 3,800.9 | |||
Liabilities and Equity | ||||||
Accounts payable | 184.5 | 151.6 | ||||
Debt | 1,643.6 | 1,844.9 | ||||
Retirement benefits | 576.7 | 558.7 | ||||
Accrued liabilities | 628.4 | 564.5 | ||||
Lease liabilities | 218.4 | 212.5 | ||||
Other | 304.6 | 386.7 | ||||
Total liabilities | 3,556.2 | 3,718.9 | ||||
Equity | 207.6 | 82.0 | ||||
Total liabilities and equity | $ | 3,763.8 | 3,800.9 | |||
Selected Items - Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, | ||||||
2019 | 2020 | |||||
Net cash provided (used) by operating activities | $ | (38.0 | ) | 13.4 | ||
Net cash used by investing activities | (164.2 | ) | (110.4 | ) | ||
Net cash provided by financing activities | 106.6 | 168.1 | ||||
Effect of exchange rate changes on cash | (3.6 | ) | (28.0 | ) | ||
Cash, cash equivalents and restricted cash: | ||||||
Increase (decrease) | (99.2 | ) | 43.1 | |||
Balance at beginning of period | 479.5 | 469.0 | ||||
Balance at end of period | $ | 380.3 | 512.1 | |||
Supplemental Cash Flow Information | ||||||
Capital expenditures | $ | (35.2 | ) | (30.2 | ) | |
Acquisitions | (129.9 | ) | (73.3 | ) | ||
Depreciation and amortization | 47.8 | 45.0 | ||||
Cash paid for income taxes, net | (11.4 | ) | (20.4 | ) | ||
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About The Brink’s Company
The Brink’s Company (NYSE:BCO) is the global leader in total cash management, route-based secure logistics and payment solutions including cash-in-transit, ATM services, cash management services (including vault outsourcing, money processing and intelligent safe services), and international transportation of valuables. Our customers include financial institutions, retailers, government agencies, mints, jewelers and other commercial operations. Our global network of operations in 47 countries serves customers in more than 100 countries. For more information, please visit our website at www.brinks.com or call 804-289-9709.
Forward-Looking Statements
This release contains forward-looking information. Words such as "anticipate," "assume," "estimate," "expect," “target” "project," "predict," "intend," "plan," "believe," "potential," "may," "should" and similar expressions may identify forward-looking information. Forward-looking information in these materials includes, but is not limited to: future results and economic conditions, available liquidity following the G4S acquisition, second-quarter 2020 adjusted EBITDA results and expected margin improvement in future quarters, 2020 free cash flow, expected purchase price for the G4S acquisition, timing and amount of contributions from and synergies related to the G4S acquisition, and future costs related to Reorganization and Restructuring. 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.
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: our ability to improve profitability and execute further cost and operational improvement and efficiencies in our core businesses; our ability to improve service levels and quality in our core businesses; market volatility and commodity price fluctuations; seasonality, pricing and other competitive industry factors; investment in information technology (“IT”) and its impact on revenue and profit growth; our ability to maintain an effective IT infrastructure and safeguard confidential information; our ability to effectively develop and implement solutions for our customers; risks associated with operating in foreign countries, including changing political, labor and economic conditions, regulatory issues (including the imposition of international sanctions, including by the U.S. government), currency restrictions and devaluations, restrictions on and cost of repatriating earnings and capital, impact on the Company’s financial results as a result of jurisdictions determined to be highly inflationary, and restrictive government actions, including nationalization; labor issues, including negotiations with organized labor and work stoppages; pandemics (including the ongoing COVID-19 pandemic and related impact to and restrictions on the actions of businesses and consumers, including suppliers and customers), acts of terrorism, strikes or other extraordinary events that negatively affect global or regional cash commerce; anticipated cash needs in light of our current liquidity position and the impact of COVID-19 on our liquidity; the strength of the U.S. dollar relative to foreign currencies and foreign currency exchange rates; our ability to identify, evaluate and complete acquisitions and other strategic transactions and to successfully integrate acquired companies; costs related to dispositions and product or market exits; our ability to obtain appropriate insurance coverage, positions taken by insurers relative to claims and the financial condition of insurers; safety and security performance and loss experience; employee and environmental liabilities in connection with former coal operations, including black lung claims; the impact of the Patient Protection and Affordable Care Act on legacy liabilities and ongoing operations; funding requirements, accounting treatment, and investment performance of our pension plans, the VEBA and other employee benefits; changes to estimated liabilities and assets in actuarial assumptions; the nature of hedging relationships and counterparty risk; access to the capital and credit markets; our ability to realize deferred tax assets; the outcome of pending and future claims, litigation, and administrative proceedings; public perception of our business, reputation and brand; changes in estimates and assumptions underlying critical accounting policies; the promulgation and adoption of new accounting standards, new government regulations and interpretation of existing standards and regulations.
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, 2019, 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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7
The Brink’s Company and subsidiaries
Segment Results: 2019 and 2020 (Unaudited)
(In millions, except for percentages)
Revenues | |||||||||||||||||||
2019 | 2020 | ||||||||||||||||||
1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
Revenues: | |||||||||||||||||||
North America | $ | 434.5 | 442.5 | 446.7 | 459.1 | 1,782.8 | $ | 444.3 | |||||||||||
South America | 230.3 | 225.2 | 229.0 | 232.0 | 916.5 | 197.9 | |||||||||||||
Rest of World | 240.2 | 246.6 | 248.9 | 244.7 | 980.4 | 230.6 | |||||||||||||
Segment revenues - GAAP and Non-GAAP | 905.0 | 914.3 | 924.6 | 935.8 | 3,679.7 | 872.8 | |||||||||||||
Other items not allocated to segments(a) | |||||||||||||||||||
Acquisitions and dispositions | — | (0.3 | ) | (0.2 | ) | — | (0.5 | ) | — | ||||||||||
Internal loss | — | — | 4.0 | — | 4.0 | — | |||||||||||||
GAAP | $ | 905.0 | 914.0 | 928.4 | 935.8 | 3,683.2 | $ | 872.8 | |||||||||||
Operating Profit | |||||||||||||||||||
2019 | 2020 | ||||||||||||||||||
1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
Operating profit: | |||||||||||||||||||
North America | $ | 44.0 | 46.4 | 38.7 | 57.3 | 186.4 | $ | 33.0 | |||||||||||
South America | 43.0 | 45.0 | 59.4 | 69.7 | 217.1 | 41.6 | |||||||||||||
Rest of World | 23.8 | 26.2 | 32.2 | 33.6 | 115.8 | 15.0 | |||||||||||||
Corporate | (26.0 | ) | (28.8 | ) | (27.9 | ) | (45.0 | ) | (127.7 | ) | (26.5 | ) | |||||||
Non-GAAP | 84.8 | 88.8 | 102.4 | 115.6 | 391.6 | 63.1 | |||||||||||||
Other items not allocated to segments(a) | |||||||||||||||||||
Reorganization and Restructuring | (3.5 | ) | (10.6 | ) | (6.4 | ) | (8.3 | ) | (28.8 | ) | (5.6 | ) | |||||||
Acquisitions and dispositions | (17.2 | ) | (22.6 | ) | (24.0 | ) | (24.7 | ) | (88.5 | ) | (19.1 | ) | |||||||
Argentina highly inflationary impact | (4.3 | ) | (0.1 | ) | (7.9 | ) | (2.2 | ) | (14.5 | ) | (2.4 | ) | |||||||
Internal loss | — | (2.6 | ) | (11.3 | ) | (7.0 | ) | (20.9 | ) | (9.6 | ) | ||||||||
Reporting compliance | (1.4 | ) | (0.3 | ) | (0.3 | ) | (0.1 | ) | (2.1 | ) | (0.2 | ) | |||||||
GAAP | $ | 58.4 | 52.6 | 52.5 | 73.3 | 236.8 | $ | 26.2 | |||||||||||
Margin | |||||||||||||||||||
2019 | 2020 | ||||||||||||||||||
1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
Margin: | |||||||||||||||||||
North America | 10.1 | % | 10.5 | 8.7 | 12.5 | 10.5 | 7.4 | % | |||||||||||
South America | 18.7 | 20.0 | 25.9 | 30.0 | 23.7 | 21.0 | |||||||||||||
Rest of World | 9.9 | 10.6 | 12.9 | 13.7 | 11.8 | 6.5 | |||||||||||||
Non-GAAP | 9.4 | 9.7 | 11.1 | 12.4 | 10.6 | 7.2 | |||||||||||||
Other items not allocated to segments(a) | (2.9 | ) | (3.9 | ) | (5.4 | ) | (4.6 | ) | (4.2 | ) | (4.2 | ) | |||||||
GAAP | 6.5 | % | 5.8 | 5.7 | 7.8 | 6.4 | 3.0 | % | |||||||||||
(a) | See explanation of items on page 8. |
8
The Brink’s Company and subsidiaries
Other Items Not Allocated To Segments (Unaudited)
(In millions)
Brink’s measures its segment results before income and expenses for corporate activities and for certain other items. See below for a summary of the other items not allocated to segments.
Reorganization and Restructuring
Other Restructurings
Management periodically implements restructuring actions in targeted sections of our business. As a result of these actions, we recognized a charge of $5.6 million in the first three months of 2020, primarily severance costs. We recognized charges of $28.8 million in 2019, primarily severance costs and charges related to the modification of share-based compensation awards. For the current restructuring actions, we expect to incur additional costs between $1 million and $2 million in future periods.
Due to the unique circumstances around these charges, these management-directed items have not been allocated to segment results and are excluded from non-GAAP results.
Acquisitions and dispositions Certain acquisition and disposition items that are not considered part of the ongoing activities of the
business and are special in nature are consistently excluded from non-GAAP results. These items are described below:
2020 Acquisitions and Dispositions
• | Amortization expense for acquisition-related intangible assets was $7.2 million in the first three months of 2020. |
• | We incurred $5.5 million in integration costs related to Dunbar and TVS in the first three months of 2020. |
• | Transaction costs related to business acquisitions were $5.5 million in the first three months of 2020. |
• | Restructuring costs related to acquisitions, primarily Dunbar, were $0.4 million in the first three months of 2020. |
2019 Acquisitions and Dispositions
• | We incurred $43.1 million in integration costs related to Dunbar, Rodoban, COMEF and TVS in 2019. |
• | Amortization expense for acquisition-related intangible assets was $27.8 million in 2019. |
• | Restructuring costs related to acquisitions, primarily Dunbar and Rodoban, were $5.6 million in 2019. |
• | Transaction costs related to business acquisitions were $7.9 million in 2019. |
• | Compensation expense related to the retention of key Dunbar employees was $1.5 million in 2019. |
• | In 2019, we recognized $2.2 million in net charges, primarily asset impairment and severance costs, related to the exit from our top-up prepaid mobile phone business in Brazil. |
Argentina highly inflationary impact Beginning in the third quarter of 2018, we designated Argentina's economy as highly inflationary for accounting purposes. As a result, Argentine peso-denominated monetary assets and liabilities are now remeasured at each balance sheet date to the currency exchange rate then in effect, with currency remeasurement gains and losses recognized in earnings. In addition, nonmonetary assets retain a higher historical basis when the currency is devalued. The higher historical basis results in incremental expense being recognized when the nonmonetary assets are consumed. In the first three months of 2020, we recognized $2.4 million in pretax charges related to highly inflationary accounting, including currency remeasurement losses of $1.6 million. In 2019, we recognized $14.5 million in pretax charges related to highly inflationary accounting, including currency remeasurement losses of $11.3 million. These amounts are excluded from non-GAAP results.
Internal loss A former non-management employee in our U.S. global services operations embezzled funds from Brink's in prior years. Except for a small deductible amount, the amount of the internal loss related to the embezzlement was covered by our insurance. In an effort to cover up the embezzlement, the former employee intentionally misstated the underlying accounts receivable subledger data. In 2019, we incurred $4.5 million in costs (primarily third party expenses) to reconstruct the accounts receivables subledger. In the first quarter of 2020, we incurred an additional $0.2 million in costs related to this activity. In the third quarter of 2019, we were able to identify $4.0 million of revenues billed and collected in prior periods which had never been recorded in the general ledger. We also identified and recorded $0.3 million in bank fees, which had been incurred in prior periods. The rebuild of the subledger was substantially completed during the third quarter of 2019. Based on the reconstructed subledger, we were able to analyze and quantify the uncollected receivables from prior periods. Although we plan to attempt to collect these receivables, we estimated an increase to bad debt expense of $13.7 million in the third quarter of 2019. The estimate of the allowance for doubtful accounts was adjusted in the fourth quarter of 2019 for an additional $6.4 million and again in the first quarter of 2020 for an additional $9.4 million. This estimate will be adjusted in future periods, if needed, as assumptions related to the collectability of these accounts receivable change. At March 31, 2020, we have recorded $23.0 million allowance on $30.2 million of accounts receivable, or 76%. Due to the unusual nature of this internal loss and the related errors in the subledger data, along with the fact that management has excluded these amounts when evaluating internal performance, we have excluded these net charges from segment and non-GAAP results.
Reporting compliance Certain compliance costs (primarily third party expenses) are excluded from 2019 and the first three months of 2020 non-GAAP results. These costs relate to the implementation and January 1, 2019 adoption of the new lease accounting standard ($0.2 million in the first three months of 2020 and $1.8 million in 2019). We also incurred $0.3 million in costs related to mitigation of material weaknesses in 2019. We did not incur any such costs in the first three months of 2020.
9
The Brink’s Company and subsidiaries
Non-GAAP Results Reconciled to GAAP (Unaudited)
(In millions, except for percentages and per share amounts)
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 from the primary operations of our business by excluding the effects of certain income and expenses that do not reflect the ordinary earnings of our operations. The specific items excluded have not been allocated to segments, are described on page 8 and in more detail in our Form 10-Q, and are reconciled to comparable GAAP measures below. In addition, we refer to non-GAAP constant currency amounts, which represent current period results and forecasts at prior period exchange rates.
Non-GAAP results 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 estimated Non-GAAP tax rate. The full-year Non-GAAP tax rate in both years excludes certain pretax and income tax amounts. Amounts reported for prior periods have been updated in this report to present information consistently for all periods presented.
The 2019 Non-GAAP outlook amounts for provision for income taxes, income (loss) from continuing operations, EPS from continuing operations, effective income tax rate and Adjusted EBITDA cannot be reconciled to GAAP without unreasonable effort. We cannot reconcile these amounts to GAAP because we are unable to accurately forecast the impact of highly inflationary accounting on our Argentina operations or other potential Non-GAAP adjusting items for which the timing and amounts are currently under review, such as future restructuring actions. The impact of highly inflationary accounting and other potential Non-GAAP adjusting items could be significant to our GAAP results.
The Non-GAAP financial measures are intended to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. Additionally, Non-GAAP results are utilized as performance measures in certain management incentive compensation plans.
Non-GAAP Results Reconciled to GAAP
YTD '19 | YTD '20 | ||||||||||||||||||
Pre-tax | Tax | Effective tax rate | Pre-tax | Tax | Effective tax rate | ||||||||||||||
Effective Income Tax Rate | |||||||||||||||||||
GAAP | $ | 24.2 | 9.7 | 40.1 | % | $ | (9.4 | ) | (12.2 | ) | 129.8 | % | |||||||
Retirement plans(c) | 8.4 | 1.9 | 7.7 | 1.8 | |||||||||||||||
Venezuela operations(h) | 0.5 | — | — | — | |||||||||||||||
Reorganization and Restructuring(a) | 3.5 | 1.0 | 5.6 | 1.3 | |||||||||||||||
Acquisitions and dispositions(a) | 18.7 | 1.7 | 22.8 | 2.1 | |||||||||||||||
Argentina highly inflationary impact(a) | 4.3 | — | 2.4 | (0.2 | ) | ||||||||||||||
Internal loss(a) | — | — | 9.6 | 2.2 | |||||||||||||||
Reporting compliance(a) | 1.4 | — | 0.2 | — | |||||||||||||||
Income tax rate adjustment(b) | — | 4.9 | — | 24.4 | |||||||||||||||
Non-GAAP | $ | 61.0 | 19.2 | 31.4 | % | $ | 38.9 | 19.4 | 49.8 | % | |||||||||
Amounts may not add due to rounding.
(a) | See “Other Items Not Allocated To Segments” on pages 7-8 for details. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. |
(b) | Non-GAAP income from continuing operations and non-GAAP EPS have been adjusted to reflect an effective income tax rate in each interim period equal to the full-year non-GAAP effective income tax rate. The full-year non-GAAP effective tax rate is estimated at 49.8% for 2020 and was 31.4% for 2019. |
(c) | Our U.S. retirement plans are frozen and costs related to these plans are excluded from non-GAAP results. Certain non-U.S. operations also have retirement plans. Settlement charges related to these non-U.S. plans are also excluded from non-GAAP results. |
(d) | The non-GAAP tax rate excludes the 2019 foreign tax benefits that resulted from a transaction that accelerated U.S. tax in 2015. |
(e) | Due to reorganization and restructuring activities, there was a $7.7 million non-GAAP adjustment to share-based compensation in 2019. There is no difference between GAAP and non-GAAP share-based compensation amounts for the other periods presented. |
(f) | Adjusted EBITDA is defined as non-GAAP income from continuing operations excluding the impact of non-GAAP interest expense, non-GAAP income tax provision, non-GAAP depreciation and amortization and non-GAAP share-based compensation. |
(g) | Because we reported a loss from continuing operations on a GAAP basis in the fourth quarter of 2019, GAAP EPS was calculated using basic shares. However, as we reported income from continuing operations on a non-GAAP basis in the fourth quarter of 2019, non-GAAP EPS was calculated using diluted shares. |
(h) | Post-deconsolidation funding of ongoing costs related to our Venezuelan operations was $0.9 million in 2019 and was expensed as incurred and reported in interest and other nonoperating income (expense). We do not expect any future funding of the Venezuela business, as long as current U.S. sanctions remain in effect. |
(i) | Gain on termination of a mining lease obligation related to former coal operations. We have no remaining mining leases. |
10
The Brink’s Company and subsidiaries
Non-GAAP Results Reconciled to GAAP (Unaudited) - continued
(In millions, except for percentages and per share amounts)
2019 | 2020 | ||||||||||||||||||
1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
Revenues: | |||||||||||||||||||
GAAP | $ | 905.0 | 914.0 | 928.4 | 935.8 | 3,683.2 | $ | 872.8 | |||||||||||
Acquisitions and dispositions(a) | — | 0.3 | 0.2 | — | 0.5 | — | |||||||||||||
Internal loss(a) | — | — | (4.0 | ) | — | (4.0 | ) | — | |||||||||||
Non-GAAP | $ | 905.0 | 914.3 | 924.6 | 935.8 | 3,679.7 | $ | 872.8 | |||||||||||
Operating profit (loss): | |||||||||||||||||||
GAAP | $ | 58.4 | 52.6 | 52.5 | 73.3 | 236.8 | $ | 26.2 | |||||||||||
Reorganization and Restructuring(a) | 3.5 | 10.6 | 6.4 | 8.3 | 28.8 | 5.6 | |||||||||||||
Acquisitions and dispositions(a) | 17.2 | 22.6 | 24.0 | 24.7 | 88.5 | 19.1 | |||||||||||||
Argentina highly inflationary impact(a) | 4.3 | 0.1 | 7.9 | 2.2 | 14.5 | 2.4 | |||||||||||||
Internal loss(a) | — | 2.6 | 11.3 | 7.0 | 20.9 | 9.6 | |||||||||||||
Reporting compliance(a) | 1.4 | 0.3 | 0.3 | 0.1 | 2.1 | 0.2 | |||||||||||||
Non-GAAP | $ | 84.8 | 88.8 | 102.4 | 115.6 | 391.6 | $ | 63.1 | |||||||||||
Operating margin: | |||||||||||||||||||
GAAP margin | 6.5 | % | 5.8 | % | 5.7 | % | 7.8 | % | 6.4 | % | 3.0 | % | |||||||
Non-GAAP margin | 9.4 | % | 9.7 | % | 11.1 | % | 12.4 | % | 10.6 | % | 7.2 | % | |||||||
Interest expense: | |||||||||||||||||||
GAAP | $ | (23.0 | ) | (22.7 | ) | (22.9 | ) | (22.0 | ) | (90.6 | ) | $ | (20.0 | ) | |||||
Acquisitions and dispositions(a) | 1.5 | 1.5 | 1.5 | 1.3 | 5.8 | 0.7 | |||||||||||||
Non-GAAP | $ | (21.5 | ) | (21.2 | ) | (21.4 | ) | (20.7 | ) | (84.8 | ) | $ | (19.3 | ) | |||||
Interest and other income (expense): | |||||||||||||||||||
GAAP | $ | (11.2 | ) | (3.1 | ) | (7.8 | ) | (30.6 | ) | (52.7 | ) | $ | (15.6 | ) | |||||
Retirement plans(c) | 8.4 | 6.5 | 6.6 | 25.8 | 47.3 | 7.7 | |||||||||||||
Venezuela operations(h) | 0.5 | 0.4 | — | — | 0.9 | — | |||||||||||||
Acquisitions and dispositions(a) | — | — | 0.2 | (0.9 | ) | (0.7 | ) | 3.0 | |||||||||||
Gain on lease termination(i) | — | (5.2 | ) | — | — | (5.2 | ) | — | |||||||||||
Non-GAAP | $ | (2.3 | ) | (1.4 | ) | (1.0 | ) | (5.7 | ) | (10.4 | ) | $ | (4.9 | ) | |||||
Taxes: | |||||||||||||||||||
GAAP | $ | 9.7 | 12.7 | 14.7 | 23.9 | 61.0 | $ | (12.2 | ) | ||||||||||
Retirement plans(c) | 1.9 | 1.6 | 1.6 | 6.0 | 11.1 | 1.8 | |||||||||||||
Reorganization and Restructuring(a) | 1.0 | 2.6 | 2.0 | 1.5 | 7.1 | 1.3 | |||||||||||||
Acquisitions and dispositions(a) | 1.7 | 1.1 | 0.9 | 1.4 | 5.1 | 2.1 | |||||||||||||
Tax on accelerated income(d) | — | — | — | 7.3 | 7.3 | — | |||||||||||||
Argentina highly inflationary impact(a) | — | — | (1.4 | ) | — | (1.4 | ) | (0.2 | ) | ||||||||||
Internal loss(a) | — | 0.1 | 2.4 | 1.5 | 4.0 | 2.2 | |||||||||||||
Reporting compliance(a) | — | — | — | 0.1 | 0.1 | — | |||||||||||||
Gain on lease termination(i) | — | — | (1.2 | ) | — | (1.2 | ) | — | |||||||||||
Income tax rate adjustment(b) | 4.9 | 2.7 | 6.1 | (13.7 | ) | — | 24.4 | ||||||||||||
Non-GAAP | $ | 19.2 | 20.8 | 25.1 | 28.0 | 93.1 | $ | 19.4 | |||||||||||
Amounts may not add due to rounding.
See page 9 for footnote explanations.
11
2019 | 2020 | ||||||||||||||||||
1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
Noncontrolling interests: | |||||||||||||||||||
GAAP | $ | 0.8 | 1.5 | 1.3 | 0.6 | 4.2 | $ | 1.0 | |||||||||||
Reorganization and Restructuring(a) | — | — | — | — | — | 0.1 | |||||||||||||
Acquisitions and dispositions(a) | — | — | — | 0.1 | 0.1 | — | |||||||||||||
Non-GAAP | $ | 0.8 | 1.5 | 1.3 | 0.7 | 4.3 | $ | 1.1 | |||||||||||
Income (loss) from continuing operations attributable to Brink's: | |||||||||||||||||||
GAAP | $ | 13.7 | 12.6 | 5.8 | (3.8 | ) | 28.3 | $ | 1.8 | ||||||||||
Retirement plans(c) | 6.5 | 4.9 | 5.0 | 19.8 | 36.2 | 5.9 | |||||||||||||
Venezuela operations(h) | 0.5 | 0.4 | — | — | 0.9 | — | |||||||||||||
Reorganization and Restructuring(a) | 2.5 | 8.0 | 4.4 | 6.8 | 21.7 | 4.2 | |||||||||||||
Acquisitions and dispositions(a) | 17.0 | 23.0 | 24.8 | 23.6 | 88.4 | 20.7 | |||||||||||||
Tax on accelerated income(d) | — | — | — | (7.3 | ) | (7.3 | ) | — | |||||||||||
Argentina highly inflationary impact(a) | 4.3 | 0.1 | 9.3 | 2.2 | 15.9 | 2.6 | |||||||||||||
Internal loss(a) | — | 2.5 | 8.9 | 5.5 | 16.9 | 7.4 | |||||||||||||
Reporting compliance(a) | 1.4 | 0.3 | 0.3 | — | 2.0 | 0.2 | |||||||||||||
Gain on lease termination(i) | — | (5.2 | ) | 1.2 | — | (4.0 | ) | — | |||||||||||
Income tax rate adjustment(b) | (4.9 | ) | (2.7 | ) | (6.1 | ) | 13.7 | — | (24.4 | ) | |||||||||
Non-GAAP | $ | 41.0 | 43.9 | 53.6 | 60.5 | 199.0 | $ | 18.4 | |||||||||||
Adjusted EBITDA(f): | |||||||||||||||||||
Net income (loss) attributable to Brink's - GAAP | $ | 13.7 | 12.5 | 5.4 | (2.6 | ) | 29.0 | $ | 1.8 | ||||||||||
Interest expense - GAAP | 23.0 | 22.7 | 22.9 | 22.0 | 90.6 | 20.0 | |||||||||||||
Income tax provision - GAAP | 9.7 | 12.7 | 14.7 | 23.9 | 61.0 | (12.2 | ) | ||||||||||||
Depreciation and amortization - GAAP | 47.9 | 48.7 | 42.9 | 45.5 | 185.0 | 45.0 | |||||||||||||
EBITDA | $ | 94.3 | 96.6 | 85.9 | 88.8 | 365.6 | $ | 54.6 | |||||||||||
Discontinued operations - GAAP | — | 0.1 | 0.4 | (1.2 | ) | (0.7 | ) | — | |||||||||||
Retirement plans(c) | 8.4 | 6.5 | 6.6 | 25.8 | 47.3 | 7.7 | |||||||||||||
Venezuela operations(h) | 0.5 | 0.4 | — | — | 0.9 | — | |||||||||||||
Reorganization and Restructuring(a) | 3.4 | 10.6 | 6.4 | 8.2 | 28.6 | 5.5 | |||||||||||||
Acquisitions and dispositions(a) | 10.8 | 12.2 | 17.2 | 16.6 | 56.8 | 14.7 | |||||||||||||
Argentina highly inflationary impact(a) | 4.1 | (0.2 | ) | 7.6 | 1.2 | 12.7 | 1.7 | ||||||||||||
Internal loss(a) | — | 2.6 | 11.3 | 7.0 | 20.9 | 9.6 | |||||||||||||
Reporting compliance(a) | 1.4 | 0.3 | 0.3 | 0.1 | 2.1 | 0.2 | |||||||||||||
Gain on lease termination(i) | — | (5.2 | ) | — | — | (5.2 | ) | — | |||||||||||
Share-based compensation(e) | 8.9 | 9.7 | 9.5 | 6.9 | 35.0 | 7.2 | |||||||||||||
Adjusted EBITDA | $ | 131.8 | 133.6 | 145.2 | 153.4 | 564.0 | $ | 101.2 | |||||||||||
Amounts may not add due to rounding.
See page 9 for footnote explanations.
12
2019 | 2020 | ||||||||||||||||||
1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
EPS: | |||||||||||||||||||
GAAP | $ | 0.27 | 0.25 | 0.11 | (0.08 | ) | 0.55 | $ | 0.03 | ||||||||||
Retirement plans(c) | 0.13 | 0.10 | 0.10 | 0.39 | 0.71 | 0.12 | |||||||||||||
Venezuela operations(h) | 0.01 | 0.01 | — | — | 0.02 | — | |||||||||||||
Reorganization and Restructuring costs(a) | 0.05 | 0.16 | 0.09 | 0.13 | 0.43 | 0.08 | |||||||||||||
Acquisitions and dispositions(a) | 0.33 | 0.45 | 0.49 | 0.46 | 1.73 | 0.40 | |||||||||||||
Tax on accelerated income(d) | — | — | — | (0.14 | ) | (0.14 | ) | — | |||||||||||
Argentina highly inflationary impact(a) | 0.09 | — | 0.18 | 0.04 | 0.31 | 0.05 | |||||||||||||
Internal loss(a) | — | 0.05 | 0.17 | 0.11 | 0.33 | 0.14 | |||||||||||||
Reporting compliance(a) | 0.03 | 0.01 | 0.01 | — | 0.04 | — | |||||||||||||
Gain on lease termination(i) | — | (0.10 | ) | 0.02 | — | (0.08 | ) | — | |||||||||||
Income tax rate adjustment(b) | (0.10 | ) | (0.05 | ) | (0.12 | ) | 0.27 | — | (0.48 | ) | |||||||||
Share adjustment(g) | — | — | — | — | — | — | |||||||||||||
Non-GAAP | $ | 0.81 | 0.86 | 1.05 | 1.18 | 3.89 | $ | 0.36 | |||||||||||
Depreciation and Amortization: | |||||||||||||||||||
GAAP | $ | 47.9 | 48.7 | 42.9 | 45.5 | 185.0 | $ | 45.0 | |||||||||||
Reorganization and Restructuring costs(a) | (0.1 | ) | — | — | (0.1 | ) | (0.2 | ) | — | ||||||||||
Acquisitions and dispositions(a) | (6.4 | ) | (10.4 | ) | (7.0 | ) | (7.1 | ) | (30.9 | ) | (7.4 | ) | |||||||
Argentina highly inflationary impact(a) | (0.2 | ) | (0.3 | ) | (0.3 | ) | (1.0 | ) | (1.8 | ) | (0.7 | ) | |||||||
Non-GAAP | $ | 41.2 | 38.0 | 35.6 | 37.3 | 152.1 | $ | 36.9 | |||||||||||
Amounts may not add due to rounding.
See page 9 for footnote explanations.
13
First Quarter 2020 May 5, 2020 1
Safe Harbor Statements and Non-GAAP Results These materials contain forward-looking information. Words such as "anticipate," "assume," "estimate," "expect," “target” "project," "predict," "intend," "plan," These materials contain forward-looking information. Words such as "anticipate," "assume," "estimate," "expect," “target” "project," "predict," "intend," "plan," "believe," "potential," "may," "should" and similar expressions may identify forward-looking information. Forward-looking information in these materials includes, but is not limited to information regarding: second-quarter 2020 results, including adjusted EBITDA; third-quarter and fourth-quarter 2020 results; liquidity following the G4S acquisition; expected future payments to fund pension and UMWA obligations; 2020 cash flow and capex; and post-COVID-19 crisis tax rate. 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: our ability to improve profitability and execute further cost and operational improvement and efficiencies in our core businesses; our ability to improve service levels and quality in our core businesses; market volatility and commodity price fluctuations; seasonality, pricing and other competitive industry factors; investment in information technology (“IT”) and its impact on revenue and profit growth; our ability to maintain an effective IT infrastructure and safeguard confidential information; our ability to effectively develop and implement solutions for our customers; risks associated with operating in foreign countries, including changing political, labor and economic conditions, regulatory issues (including the imposition of international sanctions, including by the U.S. government), currency restrictions and devaluations, restrictions on and cost of repatriating earnings and capital, impact on the Company’s financial results as a result of jurisdictions determined to be highly inflationary, and restrictive government actions, including nationalization; labor issues, including negotiations with organized labor and work stoppages; pandemics (including the ongoing COVID-19 pandemic and related impact to and restrictions on the actions of businesses and consumers, including suppliers and customers), acts of terrorism, strikes or other extraordinary events that negatively affect global or regional cash commerce; anticipated cash needs in light of our current liquidity position and the impact of COVID-19 on our liquidity; the strength of the U.S. dollar relative to foreign currencies and foreign currency exchange rates; our ability to identify, evaluate and complete acquisitions and other strategic transactions and to successfully integrate acquired companies; costs related to dispositions and product or market exits; our ability to obtain appropriate insurance coverage, positions taken by insurers relative to claims and the financial condition of insurers; safety and security performance and loss experience; employee and environmental liabilities in connection with former coal operations, including black lung claims; the impact of the Patient Protection and Affordable Care Act on legacy liabilities and ongoing operations; funding requirements, accounting treatment, and investment performance of our pension plans, the VEBA and other employee benefits; changes to estimated liabilities and assets in actuarial assumptions; the nature of hedging relationships and counterparty risk; access to the capital and credit markets; our ability to realize deferred tax assets; the outcome of pending and future claims, litigation, and administrative proceedings; public perception of our business, reputation and brand; changes in estimates and assumptions underlying critical accounting policies; the promulgation and adoption of new accounting standards, new government regulations and interpretation of existing standards and regulations. 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, 2019, and in our other public filings with the Securities and Exchange Commission. Unless otherwise noted, the forward-looking information discussed today and included in these materials is representative as of today only and The Brink's Company undertakes no obligation to update any information contained in this document. These materials are copyrighted and may not be used without written permission from Brink's. Today’s presentation is focused primarily on non-GAAP results. Detailed reconciliations of non-GAAP to GAAP results are included in the appendix and in the First Quarter 2020 Earnings Release available in the Quarterly Results section of the Brink’s website: www.brinks.com. | 2
Today’s Message • First-quarter results affected by COVID-19, currency translation • Strong financial health; ample liquidity • Three priorities during the crisis: • Protect our employees and service customers • Preserve cash and optimize profitability • Position Brink’s to be stronger on the other side of the crisis • Our customer base is comprised of diverse, stable, resilient and essential businesses. • Cash is the preferred payment method – managing it for banks and retailers is a significant growth opportunity. • Strategy 2.0 offers “the right services at the right time.” • Expected near-term results: • Low point in 2Q, with target of $45M in Adjusted EBITDA • Improvement in 3Q and 4Q with new cost structure, gradual economic recovery • Emerge from crisis stronger than ever, positioned for long-term growth Notes: See detailed reconciliations of non-GAAP to GAAP results included in the Appendix and in the First Quarter 2020 Earnings Release | available in the Quarterly Results section of the Brink’s website www.brinks.com. 3
Our Priorities PRIORITY 1 Our people and customers • Our highest priority is the health and safety of our employees, their families and our customers. • Provide “essential services” to our customers. PRIORITY 2 Preserve cash and optimize profitability • Take decisive and timely actions to preserve cash, maximize liquidity. • Execute actions now to reduce variable and fixed costs. PRIORITY 3 Position Brink’s to be stronger on the other side of the crisis • Resize the business and rebuild our business model to achieve target profitability at lower revenue. Accelerate synergies and restructuring. • Complete and integrate G4S cash and G4Si acquisitions. • Continue Strategy 2.0 development and implementation. | 4
Our People & Customers – Health & Safety PRIORITY 1 • Working with public health authorities to respond to affected employees with contact tracing and aggressive branch cleaning to mitigate further spreading. • Implementing best practices and training for hygiene, sanitization, and social distancing. • Distributing personal protective equipment, including masks and gloves, and sanitation supplies to frontline employees. • Implementing all employee health screening including daily temperature checks for employees. Brink’s is providing essential services to customers around the world. | 5
First-Quarter 2020 Non-GAAP Results (Non-GAAP, $ Millions, except EPS) Impacted Globally by COVID-19 Pandemic Revenue (4%) Op Profit (26%) Adj. EBITDA (23%) EPS (56%) Constant currency +3% Constant currency (4%) Constant currency (8%) Constant currency (33%) Organic +2% Organic (5%) Tax Rate Acq +1% Acq +1% 49.8% vs. FX (7%) FX (21%) 31.4% in 2019 $932 $905 $132 $873 $853 $121 $85 12.8% $81 $110 Margin $101 $72 $63 $0.81 $0.68 8.4% 9.4% 7.2% 8.7% 12.9% 14.6% 11.6% 13.0% Margin Margin Margin Margin Margin Margin Margin Margin $0.54 $0.36 2018 2019 2020 Const. 2018 2019 2020 Const. 2018 2019 2020 Const. 2018 2019 2020 Const. Curr. Curr. Curr. Curr. Notes: See detailed reconciliations of non-GAAP to GAAP results included in the First Quarter 2020 Earnings Release available in the Quarterly Results section of the Brink’s website www.brinks.com. See detailed reconciliations of non-GAAP to GAAP 2018 results in the Appendix. | Constant currency represents 2020 results at 2019 exchange rates. 6
First-Quarter 2020 Operating Profit (Non-GAAP, $ Millions) % Change 10% 1% 11% (21%)(10%) (15%) (26%) Devaluation above $9 $1 $94 ( $18 ) original guidance $85 $76 ( $13 ) $63 9.4% ~9.9% ~8.5% 7.2% Margin Margin Margin Margin 9.4% 8.7% 7.2% Margin Margin Margin 2019 Organic excluding Acq / Disp* 2020 Currency 2020 without Estimated 2020 COVID Constant estimated COVID-19 Impact Op Profit Currency without COVID-19 Impact estimated COVID-19 Impact Notes: Amounts may not add due to rounding. See detailed reconciliations of non-GAAP to GAAP results included in the First Quarter 2020 Earnings Release available in the Quarterly Results section of the Brink’s website www.brinks.com. Acq/Disp amounts include the impact of | prior year trailing twelve-month results for acquired and disposed businesses. 7
First-Quarter 2020 – Adjusted EBITDA and EPS (Non-GAAP, $ Millions, except EPS) EPS: 1Q19 $0.81 1Q20 $0.36 (56%) vs PY EBITDA (23%) vs PY $7 $101 Tax Rate $39 49.8% vs. 31.4% in 2019 $63 ( $19 ) $37 ( $19 ) ( $6 ) $18 Op Profit Interest Taxes Other Income from D&A Interest Exp Stock Comp Adjusted Expense Continuing Ops & Taxes EBITDA vs ($22) $2 $-($3) ($23) ($4) ($2) ($2) ($31) 2019 Note: Amounts may not add due to rounding. See detailed reconciliations of non-GAAP to GAAP results included in the First Quarter 2020 | Earnings Release available in the Quarterly Results section of the Brink’s website www.brinks.com. 8
First-Quarter Results by Segment ($ Millions) North America South America Rest of World Revenue +2% Op Profit (25%) Revenue (14%) Op Profit (3%) Revenue (4%) Op Profit (37%) Constant currency +3% (24%) Constant currency: +8% +28% Constant currency (2%) (36%) Organic +2% (24%) Organic +8% +27% Organic (3%) (36%) Acq +1% 0% Acq 0% +1% Acq 2% 0% FX (1%) (1%) FX (22%) (31%) FX (2%) (1%) $435 $444 $240 $230 $231 $198 $44 $43 $42 $33 $24 10.1% 7.4% $15 Margin Margin 18.7% 21.0% 9.9% 6.5% Margin Margin Margin Margin 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 • U.S. and Canada volume impact began • Impact by country varied, volume • France and other European country in mid-March … expected low point in impact began in March … expected volume impact began mid-March … April low point in April expected low point in April. France heavily impacted by shutdown • Mexico volume slightly impacted in March … further impact in April • Asia Pacific volume impact began in February with some improvement in Hong Kong in late-March … impact varies across region • BGS volumes impact worldwide since mid-Q1 | 9
Strong Financial Health - Ample Liquidity PRIORITY 2 ($ Millions, except where noted) Cash and Debt Capacity ~$800 million liquidity expected after $300 G4S Acquisition ~$3.1 B ~$0.8 B • ~$500 million Revolver plus ~$300 Liquidity million cash Cash • Incremental $590 million Term Loan A $285 $258 closed on April 1, 2020 ~$2.5 B ~$2.5 B ~$0.83B ~$1.2 B ~$0.9 B No Maturities until 2024 for G4S Revolver Liquidity Liquidity • Credit Facility matures February 2024 $1 B Acquisition • 4.625% Senior Notes mature October 2027. Interest Rates Utilized Revolver Available Revolver • Variable interest LIBOR plus 1.75% • Weighted average interest rate: ~3.16% (as of 3/31/20) Term Loan A $770 $760 ~$1,350 • Term Loan A amortizes 5% per year Current Plan to Maintain Dividend but Suspend Share Repurchases Senior Notes $600 $600 $600 1 Fin. Leases & Other $158 $159 $159 Ratings: Moody’s Ba1; S&P Rating 12/31/2019 3/31/2020 3/31/2020 BB+ Pro-Forma1 ~$800 Million of Liquidity Expected after G4S Acquisition 1. Pro-forma to include additional $590 million Term Loan A closed on April 1, 2020. | 10
CapEx – Target 40-60% Cash Reduction PRIORITY 2 Cash Capital Expenditures 2018-2020 ($ Millions) Targeting ~40-60% reduction in cash CapEx. $165 $165 Cash CapEx Remaining CapEx $155 primarily for safety and $26 $25 Cash Devices security. $25 ~$100 G4S ~$20 Acquisition Cash CapEx excl. Cash $138 $140 $130 ~$25 Devices ~$55 2018 Actual 2019 Actual 2020 Original Target 2020 Revised Cash CapEx Target | 11
Maximize Cash Flow PRIORITY 2 Includes G4S Acquisition1 (Non-GAAP, $ Millions) $564 $564 Adjusted EBITDA Cash From Operating Activities Working Capital and Cash Restructuring Q2 – Q4 • DSO risk ... negotiating with vendors $334 Op Profit • Cash restructuring related to G4S acquisition $392 Op Profit and adjusting labor due to the COVID-19 TBD crisis ~$280 - $310 Cash Taxes • 2019 included lower ETR, FTCs and refunds ~$120 - $150 $63 Q1 Actual Cash Interest Op Profit • Impacted by G4S acquisition and Adjusted $127 EBITDA ~ $65 Cash Capital Expenditures $24 $172 D&A / ~ $185 $165 D&A / • Remaining CapEx primarily for safety Other Other and security $80 ~ $95 $100 CFOA Cash Adj. CFOA Cash Adj. CapEx EBITDA CapEx EBITDA 2019 Actual 2020 Estimate Managing the Business to Maximize 2020 Free Cash Flow Includes full G4S acquisition with an estimated closing date on pending portion of July 1st. | Note: Amounts may not add due to rounding. See detailed reconciliations of cash flows in the Appendix. 12
Protecting Profitability and Free Cash Flow PRIORITY 2 2019 Cost Structure 2020 Actions (Percent of Total Costs) Direct, Indirect & SG&A Labor • Headcount reductions … severance and furloughs • Negotiated with unions and works councils • Government programs offsetting some payroll costs • Overtime management • Hiring and merit increases frozen 40% • Temporary salary and benefit reductions Direct Labor Fleet & Freight ~60% • Further route optimization • Utilizing most efficient vehicles • Fleet replacement on hold 20% 95% • Necessary/safety maintenance only Indirect & • Freight directly correlates with BGS revenue SG&A Facilities • Rationalizing facilities and maintenance costs Fleet & Freight 15% • Negotiating lease adjustments and deferrals Government Assistance • Pursuing government assistance … different in every country Other including • Payroll support, tax payment deferral SG&A 20% Other Depreciation & • Minimizing professional fees Stock Comp 5% • Essential travel only High Percentage of Variable Costs Flex with Volume / Revenue | 13
United States COVID-19 Volume Impact and Actions PRIORITY 2 Volume & Revenue Impact Revenue • Service volume reductions began in mid-March … April expected to be low point • Q3 & Q4 improvement expected with economies re-opening • Retailers more impacted than Financial Institutions 100% • 44% of retail customers “essential” and remain open ~(5%) • Positioning Strategy 2.0 service offerings with retailers ~(25-30%) Actions ~(30-35%) Direct, Indirect and SG&A Labor • Headcount reductions – (incl. contractors & open positions) • ~25% CIT, ~20% MP, ~20% SG&A • Overtime reduced • Salary reductions for management • Merit increase and 401(k) match frozen Fleet • 2020 fleet replacement on hold • Necessary/safety maintenance Other • Facilities maintenance tightened … accelerating closures Pre-COVID Total Volume Notes Volume Revenue Volume and • Travel reduced to minimum required for operations Revenue Estimated April Impact • PPE use increased Government Programs • No significant assistance available | 14
Our Customer Base Diverse, Stable, Resilient and Essential
A Strong Global Customer Base Percent of Revenue1 Brink’s Consolidated U.S. Mexico Brazil Argentina France = Financial Institutions = Retail = Gov’t / Other | 16 1. Brink’s Internal Analysis
U.S. Retail Driven by Large, Essential Customers & CompuSafe® 44% Essential Services Multi-location Customers Strong Recurring Revenue Temporarily Essential <20 CompuSafe closed Services ~30% 100+ Limited Operations 20-99 CIT Retail Revenue1 Retail Revenue by Retail Revenue1 customer size (locations)1 Essential: Large Enterprises: Subscription-based: • Supermarkets, pharmacies, • 20% of retail revenue from customers • Long-term contracts and recurring superstores, mass merchants, discount with 1,000+ locations revenue streams stores, gas stations, convenience • 30% from customers with 100-999 stores, auto parts, healthcare locations Limited Operations: • 8% fast food restaurants • 7% dine-in restaurants, primarily large national chains Temporarily Closed: • Department stores, clothing stores, education, movie theaters | 17 1. Represents U.S. Cash Revenue, which excludes Brink’s Global Services and U.S. Global Payments
Recurring Revenue from Large U.S. Financial Institutions (FI) 66% of U.S. FI Revenue from Customers with 50+ Locations1 <10 • Top 25 Tier 1 banks comprise ~50% of FI revenue 52% • Recurring revenue and 10-49 18% long-term contracts 18% • Stable recurring revenue during the crisis • Outsourcing opportunities in post-pandemic 50+ environment • Potential opportunity to gain share with lower tier FIs | 18 1. Represents U.S. Cash Revenue, which excludes Brink’s Global Services and U.S. Global Payments
Cash in Circulation Continues to Grow Cash Availability Continues to Grow Number and value of notes in circulation consistently grows faster than GDP • 2009 – 2018 CAGR Value of Notes: USD ~7%, Euro ~5% • 2009 – 2018 CAGR Number of Notes: USD ~5%, Euro ~6% USD – notes in circulation1 Euro – notes in circulation2 (in billions) (in billions) 50 30 45 40 25 35 30 20 25 15 20 15 10 10 5 5 0 0 1996 2018 $1 $2 $5 $10 $20 $50 $100 $500 to $10,000 €5 €10 €20 €50 € 100 € 200 € 500 1. Board of Governors of the Federal Reserve System 2. ECB - ecb.europa.eu | 19
Cash is Most Preferred Payment – 75% of Global Transactions Drivers of Cash Usage Strong Cash Usage in our Largest Markets • Unbanked or underbanked rely on cash as a primary payment method • 25% of U.S. Households are unbanked / underbanked1 • All demographics use cash – all ages and income • Cash offers privacy for U.S. Brazil consumers, cannot be hacked • Cash is accessible to all (no hidden fees, required accounts) and ubiquitous • Cash is “go-to” payment method in times of crisis, disaster or cyber-attack Mexico France Argentina Cash All other methods Sources: Federal Reserve Bank of Atlanta, Federal Reserve Bank of Dallas, Banco do Brasil, European Central Bank Occasional Paper #201, PYMNTS.com, The Banque de France, Verdict, McKinsey & Co., Freedonia and internal estimates 12017 FDIC Survey of Unbanked and Underbanked Households | 20
During a Recession, Cash Usage Grows Cash usage grew significantly in the last Drivers of Cash Usage recession in a Recession Cash as a % of Total Payments - U.S. • Cash usage in 2008-2009 grew significantly with 31% government stimulus and constrained consumer 29% credit 27% • Unbanked and underbanked households increase 25% with higher unemployment and increased credit card losses 23% 21% Brink’s Stable in a Recession 19% 2008 2010 2012 2014 2016 2018 • During 2008-2010 recession – Brink’s U.S. revenue remained largely stable U.S. Organic Revenue 10% • Cash management services required at 5% 3% customers’ locations, even if volume is reduced 0% 0% • Unbanked and underbanked continue to transact in cash -5% -4% -10% 2008 2009 2010 Conversion to contactless and app-based payment systems will likely be from credit and debt card users, not cash-centric users Source: Survey of Consumer Payment Choice and Diary of Consumer Payment Choice – Federal Reserve Bank of Atlanta | 21
Cash is Safe and Vital to the Economy Cash has Lower Germ Index COVID-19 Virus Survival Time NYC (in hours)1 Fast Food 664 Door Handle 70 NYC Park Bench 503 60 Average Germ-Score 285 for Credit Cards 50 NYC 40 Train Station 163 Bathroom 30 Average Germ-Score 160 Average for Cash 20 Average Cash Germ Germ-Score 136 Score: 148 10 for Coins 0 Air Cardboard Copper Plastic Stainless Germ Score By Surface Steel Cash Debit/Credit Cards Adequate availability of cash is crucial for the functioning of the economy…(cash) remains the dominant means of payment for consumers, and is of fundamental importance for the inclusion of socially vulnerable citizens, such as elderly or lower-income groups … Overall, banknotes do not represent a particularly significant risk of infection compared with other kinds of surface that people come into contact within daily life. — Fabio Panetta Member, Executive Board, European Central Bank, April 2020 A recent study shows that the average germ score for credit/debit cards is 285 vs. average germ score for cash/coins at 148 (~2x higher for cards vs. cash). Source: https://lendedu.com/blog/dirty-money-credit-cards/ | 22 1BIS bulletin April 3, 2020
Large U.S. Retail Opportunity for Brink’s Pre- and Post-COVID-19 Large in-person retail market with one-third of purchases in cash 2019 Total U.S. Cash accounts for 32% Retail Market $5.5T1 of in-person purchases2 Check 89% of 2% Purchases Credit In-Person at 28% Point-of-Sale E-Commerce Cash 11% 32% Debit Other 31% 7% 1. Retail Indicators Branch, U.S. Census Bureau. | 2. 2019 Findings from the Diary of Consumer Payment Choice, Cash Product Office, Federal Reserve System. Note, excludes bill payments 23
Opportunity: 90% of U.S. Retail Locations Not Served by Cash Management Industry in 2019 ~90% Unvended ~10% Vended BCO 3.8M Retail Brink’s initial Strategy 2.0 Locations1 targets include select enterprise companies with >500 locations Credit / Debit2 Unvended Market Landscape (Estimated) ~3% • 90% of the 3.8 million U.S. retail locations lack a cash 3.8M management solution (“unvended”) Loc.1 • ~380K are “vended” by Brink’s or competitors Vended • Of the 380K, Brink’s currently serves ~135K ~97% 1. Source U.S. Census Bureau and internal estimates 2. Nilson Report and Brink’s analysis | 24
Why Do So Few Retailers Have a Cash Management Solution? Facts • Cash is a popular payment method for retailers & will be post COVID-19 • Cash logistics industry provides incomplete, limited-value service vs. credit cards Customer Perceptions Customer Needs Cash-in-Transit: • Digital credit for cash deposits • Expensive • Reduce internal and external losses • Inconvenient • Reduce labor costs - staff time for cash • Unnecessary handling and daily trips to the bank • Risky • Consolidate bank accounts and reduce bank fees Credit: • One source for complete service to single • A better value bank of customer’s choice •Easy • Necessary •Safe BRINK’S OPPORTUNITY – Offer a flexible cash management solution that is easy to use and lower cost than credit | 25
Strategy 2.0 – Brink’s Complete™ The Right Service at the Right Time 26
Seizing the Unvended Opportunity with Strategy 2.0 Brink’s Complete disrupts cash management’s one-size-fits-all paradigm with flexible, tech-enabled solutions for a wider range of customers. Introducing Brink’s Complete A Strategy 2.0 Offering • Subscription-based cash management service, target cost <1% of payments • Combines a low-cost device with a self-service app, allowing customers to make deposits and request change orders. • Customers receive advance credit the next business day for the deposits they place in the device. | 27
Brink’s Complete – How It Works Retailers use Brink’s 24SEVEN app to create and track deposits, place 1 change orders, and request support 2 Retailers place cash in a secure device – (provided by Brink’s) 3 Retailers receive advance credit for deposits the next day Brink’s collects and processes cash ~1x/week and 3rd party providers 4 deliver change orders Brink’s Complete designed to eliminate customer trips to the bank, improves employee safety and reduces losses. | 28
Brink’s Complete The Right Service at the Right Time Brink’s Complete Value Proposition Simplified, cost-effective cash management Customer Benefits • Next-day credit • Target cost <1% of cash payments • Eliminates trips to the bank • Bank agnostic • Hassle-free onboarding, use and billing • Enables retail staff to prioritize customer service Well-Positioned for the “New Normal” • More digital experiences and less human contact • Cost-effective solution • Supports quick and safe re-opening • Improved access to working capital | 29 Notes: See detailed reconciliations of non-GAAP to GAAP results included in the Appendix.
Priority 3: Position Brink’s to be stronger post-crisis PRIORITY 3 Continue to execute on all 3 layers of our strategic plan Strategy 1.0 WD – Wider and Deeper • Continue to implement organic growth initiatives across global network of countries • Accelerate restructuring to re-size business • Continue and accelerate integration and synergies from acquisitions Strategy 1.5 Acquisitions • Complete acquisition and integration of G4S operations; achieve synergies Strategy 2.0 • Introduce Brink’s Complete subscription-based cash management service • Expedite adoption by focusing on current customers • Target and contract with large, multi-location retailers that are currently unvended or undervended • Continue to introduce new cash management services including recyclers, ATM network management See detailed reconciliations of non-GAAP to GAAP results included in the First Quarter 2020 Earnings Release available in the | 30 Quarterly Results section of the Brink’s website www.brinks.com.
Outlook 2020 – Targets through the Crisis • At least $45M of Adjusted EBITDA in 2Q • Improvement in 3Q and 4Q with aggressive cost reduction actions and gradual economy re-openings • Positive operating cash flow for the year and ample liquidity 2021 and Beyond • Emerge from crisis stronger than ever, poised for long-term revenue and margin growth • Leverage expanded global presence and repositioned cost structure • Accelerate organic growth with Strategy 2.0, including Brink’s Complete, solutions | 31 Notes: See detailed reconciliations of non-GAAP to GAAP results included in the Appendix.
The world counts on Brink’s. A Brink’s truck alone on the streets of Paris. We are grateful to our employees who continue to provide essential services to customers around the world during the COVID-19 pandemic. | 32