Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of presentation
The Brink’s Company (along with its subsidiaries, “Brink’s”, the “Company”, “we”, “us” or “our”) has four operating segments:
•North America
•Latin America
•Europe
•Rest of World
Our unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2022.
Use of Estimates
In accordance with GAAP, we have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements. Actual results could differ materially from these estimates. The most significant estimates are related to goodwill, intangibles and other long-lived assets, pension and other retirement benefit assets and obligations, legal contingencies, allowance for doubtful accounts, deferred tax assets and purchase price allocations.
In the first quarter of 2022, we further refined our global methodology of estimating the allowance for doubtful accounts. Our updated method not only reviews historical loss rates and identifies high risk customer accounts but now also includes an estimated allowance for accounts receivable significantly past due in order to adjust for at-risk receivables not captured in our previous method. As part of the analysis under the updated estimation methodology, we recorded an additional allowance of $16.7 million in the first quarter of 2022. Due to the fact that management had excluded this amount when evaluating internal performance, we excluded it from segment results. There was no additional impact in the first quarter of 2023.
Consolidation
The condensed consolidated financial statements include our controlled subsidiaries. Control is determined based on ownership rights or, when applicable, based on whether we are considered to be the primary beneficiary of a variable interest entity. See "Venezuela" section below for further information. For controlled subsidiaries that are not wholly-owned, the noncontrolling interests are included in net income and in total equity.
Investments in businesses that we do not control, but for which we have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method and our proportionate share of income or loss is recorded in other operating income (expense). Investments in businesses for which we do not have the ability to exercise significant influence over operating and financial policies are accounted for at fair value, if readily determinable, with changes in fair value recognized in net income. For equity investments that do not have a readily determinable fair value, we measure these investments at cost minus impairment, if any, plus or minus changes from observable price changes. All intercompany accounts and transactions have been eliminated in consolidation.
Foreign Currency Translation
Our condensed consolidated financial statements are reported in U.S. dollars. Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate. The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary or not. Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary.
Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and losses are recorded in net income.
Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency. Local currency monetary assets and liabilities are remeasured into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Other than nonmonetary equity securities, nonmonetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar. For nonmonetary equity securities traded in highly inflationary economies, the fair market value of the equity securities are remeasured at the current exchange rates to determine gain or loss to be recorded in net income. Revenues and expenses are translated at rates of exchange in effect during the year.
Argentina
We operate in Argentina through wholly owned subsidiaries and a smaller controlled subsidiary (together "Brink's Argentina"). Revenues from Brink's Argentina represented approximately 4% of our consolidated revenues for the first three months of 2023 and 5% of our consolidated revenues for the first three months of 2022.
The operating environment in Argentina continues to present business challenges, including ongoing devaluation of the Argentine peso and significant inflation. In the first three months of 2023 and 2022, the Argentine peso declined approximately 14% (from 178.6 to 208.3 pesos to the U.S. dollar) and approximately 7% (from 103.1 to 111.1 pesos to the U.S. dollar), respectively. For the year ended December 31, 2022, the Argentine peso declined approximately 42% (from 103.1 to 178.6 pesos to the U.S. dollar).
Beginning July 1, 2018, we designated Argentina's economy as highly inflationary for accounting purposes. As a result, we consolidated Brink's Argentina using our accounting policy for subsidiaries operating in highly inflationary economies beginning with the third quarter of 2018. Argentine peso-denominated monetary assets and liabilities are remeasured at each balance sheet date using the currency exchange rate then in effect, with currency remeasurement gains and losses recognized in earnings. In the first three months of 2023, we recognized a $9.8 million pretax remeasurement loss. In the first three months of 2022, we recognized a $4.9 million pretax remeasurement loss.
At March 31, 2023, Argentina's economy remains highly inflationary for accounting purposes. At March 31, 2023, we had net monetary assets denominated in Argentine pesos of $66.0 million (including cash of $58.9 million). At March 31, 2023, we had net nonmonetary assets of $168.6 million (including $99.8 million of goodwill, $1.7 million in equity securities denominated in Argentine pesos and $28.2 million in debt securities denominated in Argentine pesos).
At December 31, 2022, we had net monetary assets denominated in Argentine pesos of $66.2 million (including cash of $57.7 million) and net nonmonetary assets of $168.2 million (including $99.8 million of goodwill, $1.9 million in equity securities denominated in Argentine pesos and $27.4 million in debt securities denominated in Argentine pesos).
During September 2019, the Argentine government announced currency controls on both companies and individuals. The Argentine central bank issued details as to how the exchange control procedures would operate in practice. Under these procedures, central bank approval is required for many transactions, including dividend repatriation abroad.
We have previously elected to use other market mechanisms to convert Argentine pesos into U.S. dollars. Conversions under these other market mechanisms generally settle at rates that are less favorable than the rates at which we remeasure the financial statements of Brink’s Argentina. We did not have any such conversion losses in the three months ended March 31, 2023 or March 31, 2022.
Although the Argentine government has implemented currency controls, Brink’s management continues to provide guidance and strategic oversight, including budgeting and forecasting for Brink’s Argentina. We continue to control our Argentina business for purposes of consolidation of our financial statements and continue to monitor the situation in Argentina.
Venezuela
Our Venezuelan operations offer transportation and route-based logistics management services for cash and valuables throughout Venezuela. Currency exchange regulations, combined with other government regulations, such as price controls and strict labor laws, significantly limit our ability to make and execute operational decisions at our Venezuelan subsidiaries. As a result of these conditions, we do not meet the accounting criteria for control over our Venezuelan operations and, as a result, we report the results of our investment in our Venezuelan subsidiaries using the cost method of accounting, the basis of which approximates zero. Prior to the imposition of the U.S. government sanctions in 2019, we provided immaterial amounts of financial support to our Venezuela operations. We continue to monitor the situation in Venezuela, including the imposition of sanctions by the U.S. government targeting Venezuela.
Goodwill
Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. We review goodwill for impairment annually, as of October 1, and whenever events or circumstances in interim periods indicate that it is more likely than not that an impairment may have occurred. Impairment indicators were reviewed as of March 31, 2023 and we concluded that there were no indicators that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We will continue to monitor results in future periods to determine whether any indicators of impairment exist that would cause us to perform an impairment review.
Restricted Cash
In France and Malaysia, we offer services to certain of our customers where we manage some or all of their cash supply chains. In connection with these offerings, we take temporary title to certain customers' cash, which is included as restricted cash in our financial statements due to customer agreement or regulation. In addition, in accordance with a revolving credit facility, as of March 31, 2023, we are required to maintain a restricted cash reserve of $42.0 million ($40.7 million at December 31, 2022) and, due to this contractual restriction, we have classified these amounts as restricted cash in our condensed consolidated balance sheet.
Note 2 - Revenue from Contracts with Customers
Performance Obligations
We provide various services to meet the needs of our customers and we group these service offerings into two broad categories: Cash and Valuables Management; and Digital Retail Solutions ("DRS") and ATM Managed Services ("AMS").
Cash and Valuables Management
Cash and valuables management services are provided to customers throughout the world. Cash-in-transit services include the secure transportation of cash, securities and other valuables between businesses, financial institutions and central banks. Basic ATM management services include cash replenishment, treasury management and first and second line maintenance. Our global services business provides secure transport of high-value commodities including diamonds, jewelry, precious metals, securities, banknotes, currency, high-tech devices, electronics and pharmaceuticals. Additional global services include pick-up, packaging, customs clearance, secure vault storage and inventory management. We also offer a variety of cash management services including money processing (e.g., counting, sorting, wrapping, checking condition of bills, etc.), check imaging and other cash management services (e.g., cashier balancing, counterfeit detection, account consolidation and electronic reporting). Our vaulting services combine cash-in-transit services, cash management services, vaulting and electronic reporting technologies to help banks expand into new markets while minimizing investment in vaults and branch facilities. In addition to providing secure storage, we process deposits, provide check imaging and reconciliation services, perform currency inventory management, process ATM replenishment orders and electronically transmit banking transactions.
Digital Retail Solutions and ATM Managed Services
DRS and AMS are technology enabled services provided to customers throughout the world. DRS includes services that leverage Brink’s tech-enabled sales and software platforms to simplify cash acceptance, enables merchants to access their cash without visiting a bank and provide customers with enhanced analytics and visibility. DRS includes our patented Brink’s CompleteTM and CompuSafe® services. AMS provides comprehensive services beyond basic ATM services including cash forecasting, cash optimization, ATM remote monitoring, service call dispatching, transaction processing, and installation services. These services allow financial institutions, retailers and independent ATM owners to outsource day-to-day operation of ATMs. For certain customers, we take ownership of ATM devices as part of our managed services offering.
For performance obligations related to the services described above, we generally satisfy our obligations as each action to provide the service to the customer occurs. Because the customers simultaneously receive and consume the benefits from our services, these performance obligations are deemed to be satisfied over time. We use an output method, units of service provided, to recognize revenue because that is the best method to represent the transfer of our services to the customer at the agreed upon rate for each action.
Although not as significant as our service offerings, we also sell goods to customers from time to time, such as safe devices. In those transactions, we satisfy our performance obligation at a point in time. We recognize revenue when the goods are delivered to the customer as that is the point in time that best represents when control has transferred to the customer.
Our contracts with customers describe the services we can provide along with the fees for each action to provide the service. We typically send invoices to customers for all of the services we have provided within a monthly period and payments are generally due within 30 to 60 days of the invoice date.
Although our customer contracts specify the fees for each action to provide service, the majority of the services stated in our contracts do not have a defined quantity over the contract term. Accordingly, the transaction price is considered variable as there is an unknown volume of services that will be rendered over the course of the contract. We recognize revenue for these services in the period in which they are provided to the customer based on the contractual rate at which we have the right to invoice the customer for each action.
Some of our contracts with customers contain clauses that define the level of service that the customer will receive. The service level agreements (“SLA”) within those contracts contain specific calculations to determine whether the appropriate level of service has been met within a specific period, which is typically a month. We estimate SLA penalties and recognize the amounts as a reduction to revenue.
Taxes collected from customers and remitted to governmental authorities are not included in revenues in the condensed consolidated statements of operations.
Revenue Disaggregated by Reportable Segment and Type of Service
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(In millions) | Cash and Valuables Management | | DRS and AMS | | Total |
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Three months ended March 31, 2023 | | | | | |
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Reportable Segments: | | | | | |
North America | $ | 308.0 | | | 93.9 | | | 401.9 | |
Latin America | 274.3 | | | 41.2 | | | 315.5 | |
Europe | 180.1 | | | 88.6 | | | 268.7 | |
Rest of World | 186.5 | | | 12.8 | | | 199.3 | |
Total reportable segments | $ | 948.9 | | | 236.5 | | | 1,185.4 | |
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Three months ended March 31, 2022 | | | | | |
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Reportable Segments: | | | | | |
North America | $ | 285.0 | | | 83.8 | | | 368.8 | |
Latin America | 264.2 | | | 27.1 | | | 291.3 | |
Europe | 185.6 | | | 36.5 | | | 222.1 | |
Rest of World | 181.6 | | | 10.2 | | | 191.8 | |
Total reportable segments | $ | 916.4 | | | 157.6 | | | 1,074.0 | |
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Certain of our high-value services involve the leasing of assets, such as safes, to our customers along with the regular servicing of those safe devices. Revenues related to the leasing of these assets are recognized in accordance with applicable lease guidance, but are included in the above table as the amounts are a small percentage of overall revenues.
Contract Balances
Contract Assets
Although payment terms and conditions can vary, for the majority of our customer contracts, we invoice for all of the services provided to the customer within a monthly period. For certain customer contracts, the timing of our performance may precede our right to invoice the customer for the total transaction price. For example, Brink's affiliates in certain countries, primarily in Latin America, negotiate annual price adjustments with certain customers and, once the price increases are finalized, the pricing changes are made retroactive to services provided in earlier periods. These retroactive pricing adjustments are estimated and recognized as revenue with a corresponding contract asset in the same period in which the related services are performed. As the estimate of the ultimate transaction price changes, we recognize a cumulative catch-up adjustment for the change in estimate. In our Rest of World segment, certain Brink's affiliates provide services to specific customers and, per contract, a portion of the consideration is retained by the customers until the contract is completed. The retention amounts are reported as contract assets until we have the right to bill the customer for these amounts. Contract assets expected to be collected within one year ($7.7 million at March 31, 2023) are included in prepaid expenses and other on the condensed consolidated balance sheet. Amounts not expected to be billed and collected within one year ($8.6 million at March 31, 2023) are reported in other assets on the condensed consolidated balance sheet.
Contract Liabilities
For other customer contracts, we may obtain the right to payment or receive customer payments prior to performing the related services under the contract. When the right to customer payments or receipt of payments precedes our performance, we recognize a contract liability, which is included in accrued liabilities on the condensed consolidated balance sheet.
The opening and closing balances of receivables, contract assets and contract liabilities related to contracts with customers are as follows:
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(In millions) | Receivables | | Contract Assets | | Contract Liabilities |
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Opening (January 1, 2023) | $ | 862.2 | | | 12.6 | | | 17.0 | |
Closing (March 31, 2023) | 876.9 | | | 16.3 | | | 18.1 | |
Increase | $ | 14.7 | | | 3.7 | | | 1.1 | |
The amount of revenue recognized in the three months ended March 31, 2023 that was included in the January 1, 2023 contract liabilities balance was $5.1 million. This revenue consists of services provided to customers who had prepaid for those services prior to the current year.
Revenue recognized in the three months ended March 31, 2023 from performance obligations satisfied in the prior year was not significant. This revenue is a result of changes in the transaction price of our contracts with customers.
Contract Costs
Sales commissions directly related to obtaining new contracts with customers are capitalized when incurred and are then amortized to expense ratably over the term of the contracts. At March 31, 2023, the net capitalized costs to obtain contracts was included in other assets on the condensed consolidated balance sheet. The capitalized amounts at March 31, 2023 and December 31, 2022 were $4.0 million and $3.7 million, respectively. The amortization expense in the first three months of 2023 and 2022 was $0.5 million and $0.3 million, respectively.
Practical Expedients
For the majority of our contracts with customers, we invoice a fixed amount for each unit of service we have provided. These contracts provide us with the right to invoice for an amount or rate that corresponds to the value we have delivered to our customers. The volume of services that will be provided to customers over the term is not known at inception of these contracts. Therefore, while the rate per unit of service is known, the transaction price itself is variable. For this reason, we recognize revenue from these contracts equal to the amount for which we have the contractual right to invoice the customers. Because we are not required to estimate variable consideration related to the transaction price in order to recognize revenue, we are also not required to estimate the variable consideration to provide certain disclosures. As a result, we have elected to use the optional exemption related to the disclosure of transaction prices, amounts allocated to remaining performance obligations and the future periods in which revenue will be recognized, sometimes referred to as backlog.
We have also elected to use the practical expedient for financing components related to our contract liabilities. We do not recognize interest expense on contracts for which the period between our receipt of customer payments and our service to the customer is one year or less.
Note 3 - Segment information
We identify our operating segments based on how our chief operating decision maker (“CODM”) allocates resources, assesses performance and makes decisions. Our CODM is our President and Chief Executive Officer. Our CODM evaluates performance and allocates resources to each operating segment based on a profit or loss measure which, at the reportable segment level, excludes the following:
•Corporate expenses - include corporate headquarters costs, regional management costs, currency transaction gains and losses, adjustments to reconcile segment accounting policies to GAAP, and costs related to global initiatives.
•Other items not allocated to segments - certain significant items such as reorganization and restructuring actions that are evaluated on an individual basis by management and are not considered part of the ongoing activities of the business are excluded from segment results. We also exclude certain costs, gains and losses related to acquisitions and dispositions of assets and of businesses. Brink's Argentina is consolidated using our accounting policy for subsidiaries operating in highly inflationary economies. We have excluded from our segment results the impact of highly inflationary accounting in Argentina, including currency remeasurement losses. Net charges related to a change in the methodology for estimating the allowance for doubtful accounts have been excluded from segment results. Finally, we have also excluded from our segment results estimated charges related to an antitrust legal matter in our Brink's Chile operations.
We manage our business in the following four segments:
•North America – operations in the U.S. and Canada, including the Brink’s Global Services ("BGS") line of business,
•Latin America – operations in Latin American countries where we have an ownership interest, including the BGS line of business,
•Europe – total operations in European countries that primarily provide services outside of the BGS line of business, and
•Rest of World – operations in the Middle East, Africa and Asia. This segment also includes total operations in European countries that primarily provide BGS services and BGS activity in Latin American countries where we do not have an ownership interest.
The following table summarizes our revenues and segment profit for each of our reportable segments and reconciles these amounts to consolidated revenues and operating profit:
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| Revenues | | Operating Profit |
| Three Months Ended March 31, | | Three Months Ended March 31, |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 |
Reportable Segments: | | | | | | | |
North America | $ | 401.9 | | | 368.8 | | | 38.6 | | | 24.4 | |
Latin America | 315.5 | | | 291.3 | | | 66.6 | | | 63.0 | |
Europe | 268.7 | | | 222.1 | | | 22.0 | | | 14.8 | |
Rest of World | 199.3 | | | 191.8 | | | 37.3 | | | 33.1 | |
Total reportable segments | 1,185.4 | | | 1,074.0 | | | 164.5 | | | 135.3 | |
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Reconciling Items: | | | | | | | |
Corporate expenses: | | | | | | | |
General, administrative and other expenses | — | | | — | | | (42.6) | | | (28.5) | |
Foreign currency transaction gains | — | | | — | | | 5.1 | | | 2.4 | |
Reconciliation of segment policies to GAAP(a) | — | | | — | | | 0.4 | | | 2.9 | |
Other items not allocated to segments: | | | | | | | |
Reorganization and Restructuring(b) | — | | | — | | | (14.2) | | | (11.7) | |
Acquisitions and dispositions(c) | — | | | — | | | (22.0) | | | (15.2) | |
Argentina highly inflationary impact(d) | — | | | — | | | (11.2) | | | (6.1) | |
Change in allowance estimate(e) | — | | | — | | | — | | | (16.7) | |
Chile antitrust matter(f) | — | | | — | | | (0.2) | | | — | |
Total | $ | 1,185.4 | | | 1,074.0 | | | $ | 79.8 | | | 62.4 | |
(a)This line item includes adjustments to bad debt expense and a Mexico profit sharing plan accrual reported by the segments to the estimated consolidated amounts required by U.S. GAAP.
(b)Management periodically implements restructuring actions in targeted sections of our business. Due to the unique circumstances around the charges related to these actions, they have not been allocated to segment results.
(c)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 segment results. These items include amortization expense for acquisition-related intangible assets and integration, transaction and restructuring costs related to business acquisitions.
(d)We have designated Argentina's economy as highly inflationary for accounting purposes. Currency remeasurement gains and losses related to peso-denominated monetary assets and liabilities as well as incremental expense related to nonmonetary assets are excluded from segment results.
(e)Represents impact of a change in our methodology to estimate our allowance for doubtful accounts in the first quarter of 2022. See Note 1 for further details.
(f)See details regarding the Chile antitrust matter at Note 14.
Note 4 - Retirement benefits
Pension plans
We have various defined-benefit pension plans covering eligible current and former employees. Benefits under most plans are based on salary and years of service.
The components of net periodic pension cost for our pension plans were as follows:
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| U.S. Plans | | Non-U.S. Plans | | Total |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
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Three months ended March 31, | | | | | | | | | | | |
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Service cost | $ | — | | | — | | | 1.8 | | | 2.1 | | | 1.8 | | | 2.1 | |
Interest cost on projected benefit obligation | 8.1 | | | 5.7 | | | 4.4 | | | 3.3 | | | 12.5 | | | 9.0 | |
Return on assets – expected | (11.8) | | | (12.1) | | | (2.8) | | | (2.9) | | | (14.6) | | | (15.0) | |
Amortization of losses | 0.5 | | | 5.8 | | | 0.4 | | | 0.5 | | | 0.9 | | | 6.3 | |
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Settlement loss | — | | | — | | | 0.1 | | | 0.4 | | | 0.1 | | | 0.4 | |
Net periodic pension cost | $ | (3.2) | | | (0.6) | | | 3.9 | | | 3.4 | | | 0.7 | | | 2.8 | |
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We did not make cash contributions to the primary U.S. pension plan in 2022 or the first three months of 2023. Based on current assumptions described in our Annual Report on Form 10-K for the year ended December 31, 2022, we do not expect to make contributions to the primary U.S. pension plan until 2026.
Retirement benefits other than pensions
We provide retirement healthcare benefits for eligible current and former U.S., Canadian, and Brazilian employees. Retirement benefits related to our former U.S. coal operations include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for United Mine Workers of America Represented Employees (the “UMWA plans”) as well as costs related to Black Lung obligations.
The components of net periodic postretirement cost related to retirement benefits other than pensions were as follows:
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| UMWA Plans | | Black Lung and Other Plans | | Total |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
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Three months ended March 31, | | | | | | | | | | | |
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Service cost | $ | — | | | — | | | 0.1 | | | — | | | 0.1 | | | — | |
Interest cost on accumulated postretirement benefit obligations | 3.0 | | | 2.7 | | | 1.3 | | | 0.9 | | | 4.3 | | | 3.6 | |
Return on assets – expected | (2.6) | | | (3.3) | | | — | | | — | | | (2.6) | | | (3.3) | |
Amortization of losses | 1.7 | | | 3.1 | | | 1.1 | | | 1.9 | | | 2.8 | | | 5.0 | |
Amortization of prior service cost | (2.7) | | | (1.2) | | | — | | | — | | | (2.7) | | | (1.2) | |
Net periodic postretirement cost | $ | (0.6) | | | 1.3 | | | 2.5 | | | 2.8 | | | 1.9 | | | 4.1 | |
The components of net periodic pension cost and net periodic postretirement cost other than the service cost component are included in interest and other nonoperating income (expense) in the condensed consolidated statements of operations.
Note 5 - Income taxes
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Continuing operations | | | | | | | |
Provision (benefit) for income taxes (in millions) | | | | | $ | 20.3 | | | (41.1) | |
Effective tax rate | | | | | 53.6 | % | | (123.8 | %) |
2023 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first three months of 2023 was greater than the 21% U.S. statutory rate due to the geographical mix of earnings, the seasonality of book losses for which no tax benefit can be recorded, nondeductible expenses in Mexico, taxes on cross border payments and U.S. taxable income and credit limitations, and the characterization of a French business tax as an income tax.
2022 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first three months of 2022 was less than the 21% U.S. statutory rate primarily due to the release of valuation allowances on U.S. tax credits deemed realizable as a result of the issuance of U.S. final foreign tax credit regulations, offset by the geographical mix of earnings, the seasonality of book losses for which no tax benefit can be recorded, nondeductible expenses in Mexico, taxes on cross border payments and U.S. taxable income limitations, and the characterization of a French business tax as an income tax.
Valuation Allowance-Tax Credits
In the first quarter of 2022, we concluded that it is more likely than not that a substantial amount of the U.S. deferred tax assets for U.S. foreign tax credit and general business credit carryforwards that previously required a valuation allowance would be realized. Our conclusion was based upon an analysis of the final foreign tax credit regulations that the U.S. Treasury published in the Federal Register on January 4, 2022. Based upon this analysis, we determined a significant amount of the post-2021 foreign withholding taxes will now be ineligible for U.S. foreign income tax credit treatment and therefore we are forecasting that our U.S. operations will no longer annually be generating new foreign tax credits in excess of its annual foreign tax credit utilization limit. As a result, we expect to be able to utilize a substantial amount of our foreign tax credit and general business tax credit carryforwards to offset future tax prior to their expiration. Accordingly, we reversed a substantial amount of our valuation allowance on our net U.S. deferred tax assets, resulting in a $58.3 million benefit in our provision for income taxes for the three months ended March 31, 2022. Due to the novel approach that the final regulations impose, it is possible that further developments in foreign country or U.S. tax laws could occur and may require us to change our assessment of the ultimate amounts we consider more-likely-than-not to be realized.
Note 6 - Acquisitions and Dispositions
Acquisitions
We account for business combinations using the acquisition method. Under the acquisition method of accounting, assets acquired and liabilities assumed from these operations are recorded at fair value on the date of acquisition. The condensed consolidated statements of operations include the results of operations for each acquired entity from the date of acquisition.
NoteMachine Limited Acquisition
On October 3, 2022, we acquired 100% of the capital stock of NoteMachine Limited and Testlink Services Limited. At the acquisition date, these two entities directly owned 100% of the ownership interests in three additional entities (collectively, the five entities are referred to as "NoteMachine"). We acquired the NoteMachine businesses for approximately $194 million. NoteMachine is based in the United Kingdom and manages a portfolio of ATMs. NoteMachine generated approximately $150 million in revenues in the twelve month period prior to the acquisition.
We estimated fair values for the assets purchased, liabilities assumed and purchase consideration as of the date of the acquisition in the following table. The determination of estimated fair value required management to make significant estimates and assumptions. The amounts reported are considered provisional as we are completing the valuations that are required to allocate the purchase price in areas such as property and equipment, deferred tax assets and liabilities and goodwill. As a result, the allocation of the provisional purchase price may change in the future.
| | | | | |
(In millions) | Estimated Fair Value at Acquisition Date |
| |
Fair value of purchase consideration | |
| |
Cash paid through March 31, 2023 | $ | 183.6 | |
Contingent consideration not yet paid | 10.1 | |
Fair value of purchase consideration | $ | 193.7 | |
| |
Fair value of net assets acquired | |
| |
Cash | $ | 6.8 | |
Restricted cash | 15.3 | |
Accounts receivable | 37.9 | |
Other current assets | 14.5 | |
Property and equipment, net | 39.9 | |
Intangible assets(a) | 84.2 | |
Goodwill(b) | 61.2 | |
Other noncurrent assets | 6.2 | |
Current liabilities | (50.3) | |
Other noncurrent liabilities | (22.0) | |
Fair value of net assets acquired | $ | 193.7 | |
(a)Intangible assets are composed of customer relationships ($47 million fair value and 13 year amortization period), developed technology ($27 million fair value and 12 year amortization period) and a trade name ($10 million fair value and 5 year amortization period).
(b)Consists of intangible assets that do not qualify for separate recognition, combined with synergies expected from integrating NoteMachine's operations with our existing Brink's operations. Goodwill of $60 million has been assigned to the Europe reporting unit and goodwill of $1 million has been assigned to the North America reporting unit. We do not expect goodwill in these reporting units to be deductible for tax purposes.
Touchpoint 21 Acquisition
In January 2022, we acquired net assets from Touchpoint 21 LLC, an ATM and cash management solutions company operating in Texas and Oklahoma. We have determined that this acquisition represents a business combination and we have recorded acquired assets and liabilities at estimated fair value. The purchase consideration is approximately $15 million.
Actual and Pro Forma (unaudited) disclosures
Below are the actual results included in Brink's consolidated results for the businesses we acquired in 2022 and the first three months of 2023.
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(In millions) | Revenue | | Net income attributable to Brink's |
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Three months ended March 31, 2023 | | | |
NoteMachine | $ | 34.1 | | | (1.1) | |
Total | $ | 34.1 | | | (1.1) | |
| | | |
Three months ended March 31, 2022 | | | |
NoteMachine | — | | | — | |
Total | $ | — | | | — | |
The pro forma consolidated results of Brink's presented below reflect a hypothetical ownership as of January 1, 2021 for the businesses we acquired during 2022.
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(In millions) | Revenue | | Net income attributable to Brink's |
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Pro forma results of Brink's for the three months ended March 31, | | | |
2023 | | | |
Brink's as reported | $ | 1,185.4 | | | 15.0 | |
NoteMachine(a) | — | | | — | |
Total | $ | 1,185.4 | | | 15.0 | |
| | | |
2022 | | | |
Brink's as reported | $ | 1,074.0 | | | 71.3 | |
NoteMachine(a) | 36.0 | | | 0.6 | |
Total | $ | 1,110.0 | | | 71.9 | |
(a)Represents amounts prior to acquisition by Brink's.
Argentina Union Payments
In the third quarter of 2017, we acquired 100% of the shares of Maco Transportadora de Caudales S.A. ("Maco Transportadora") and Maco Litoral, S.A. ("Maco Litoral" and, together with Maco Transportadora, "Maco"). Maco Transportadora is a CIT and money processing business and Maco Litoral provides CIT and ATM services. Both businesses operate in Argentina.
Although the Maco operations were acquired by Brink's Argentina in 2017, the National Antitrust Authority did not formally approve the business acquisitions until 2021. The approval was issued conditioned on the divestiture of certain armored vehicles and relocation of other armored vehicles. These actions were completed in 2022. Upon the acquisition approval by the National Antitrust Authority, the national teamster unions demanded that Maco employees be paid severance benefits as if the employees had been terminated in 2022 and then immediately rehired by Brink's Argentina without their seniority.
Brink's Argentina management finalized negotiations with the Maco Transportadora and Maco Litoral unions and has agreed to pay amounts to the union members in monthly installments through June 2024. We recognized $12.5 million in related costs in 2022. In the first quarter of 2023, we recognized a $3.3 million charge for an inflation-adjusted labor increase to the expected payments. Changes in the liability as a result of currency-related remeasurement are reflected in our operating results as described in Note 1. Changes in the liability as a result of labor rate increases are reflected as acquisition-related costs.
Due to the fact that management has excluded these amounts when evaluating internal performance, we have excluded the amounts from segment results.
Note 7 - Accumulated other comprehensive income (loss)
Other comprehensive income (loss), including the amounts reclassified from accumulated other comprehensive loss into earnings, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amounts Arising During the Current Period | | Amounts Reclassified to Net Income (Loss) | | |
(In millions) | Pretax | | Income Tax | | Pretax | | Income Tax | | Total Other Comprehensive Income (Loss) |
Three months ended March 31, 2023 | | | | | | | | | |
| | | | | | | | | |
Amounts attributable to Brink's: | | | | | | | | | |
Benefit plan adjustments | $ | (0.5) | | | (0.1) | | | 0.6 | | | (0.1) | | | (0.1) | |
Foreign currency translation adjustments(b) | 44.6 | | | 0.1 | | | (1.4) | | | 0.3 | | | 43.6 | |
Unrealized losses on available-for-sale securities | (1.9) | | | 0.7 | | | — | | | — | | | (1.2) | |
Gains (losses) on cash flow hedges | (8.4) | | | 2.4 | | | (0.3) | | | (0.2) | | | (6.5) | |
| 33.8 | | | 3.1 | | | (1.1) | | | — | | | 35.8 | |
| | | | | | | | | |
Amounts attributable to noncontrolling interests: | | | | | | | | | |
| | | | | | | | | |
Foreign currency translation adjustments | 0.2 | | | — | | | — | | | — | | | 0.2 | |
| 0.2 | | | — | | | — | | | — | | | 0.2 | |
| | | | | | | | | |
Total | | | | | | | | | |
Benefit plan adjustments(a) | (0.5) | | | (0.1) | | | 0.6 | | | (0.1) | | | (0.1) | |
Foreign currency translation adjustments(b) | 44.8 | | | 0.1 | | | (1.4) | | | 0.3 | | | 43.8 | |
Unrealized losses on available-for-sale securities(c) | (1.9) | | | 0.7 | | | — | | | — | | | (1.2) | |
Gains (losses) on cash flow hedges(d) | (8.4) | | | 2.4 | | | (0.3) | | | (0.2) | | | (6.5) | |
| $ | 34.0 | | | 3.1 | | | (1.1) | | | — | | | 36.0 | |
| | | | | | | | | |
Three months ended March 31, 2022 | | | | | | | | | |
| | | | | | | | | |
Amounts attributable to Brink's: | | | | | | | | | |
Benefit plan adjustments | $ | (0.9) | | | 0.2 | | | 10.1 | | | (2.4) | | | 7.0 | |
Foreign currency translation adjustments(b) | 35.1 | | | (0.4) | | | (1.5) | | | 0.4 | | | 33.6 | |
Unrealized losses on available-for-sale securities | (0.4) | | | — | | | — | | | — | | | (0.4) | |
Gains (losses) on cash flow hedges | (1.2) | | | 2.1 | | | 14.6 | | | (4.8) | | | 10.7 | |
| 32.6 | | | 1.9 | | | 23.2 | | | (6.8) | | | 50.9 | |
| | | | | | | | | |
Amounts attributable to noncontrolling interests: | | | | | | | | | |
| | | | | | | | | |
Foreign currency translation adjustments | (1.5) | | | — | | | — | | | — | | | (1.5) | |
| (1.5) | | | — | | | — | | | — | | | (1.5) | |
| | | | | | | | | |
Total | | | | | | | | | |
Benefit plan adjustments(a) | (0.9) | | | 0.2 | | | 10.1 | | | (2.4) | | | 7.0 | |
Foreign currency translation adjustments(b) | 33.6 | | | (0.4) | | | (1.5) | | | 0.4 | | | 32.1 | |
Unrealized losses on available-for-sale securities(b) | (0.4) | | | — | | | — | | | — | | | (0.4) | |
Gains (losses) on cash flow hedges(d) | (1.2) | | | 2.1 | | | 14.6 | | | (4.8) | | | 10.7 | |
| $ | 31.1 | | | 1.9 | | | 23.2 | | | (6.8) | | | 49.4 | |
(a)The amortization of actuarial losses and prior service cost is part of total net periodic retirement benefit cost when reclassified to net income. Net periodic retirement benefit cost also includes service cost, interest cost, expected return on assets, and settlement losses. Total service cost is allocated between cost of revenues and selling, general and administrative expenses on a plan-by-plan basis and the remaining net periodic retirement benefit cost items are allocated to interest and other nonoperating expense:
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| | | Three Months Ended March 31, |
(In millions) | | | | | 2023 | | 2022 |
Total net periodic retirement benefit cost included in: | | | | | | | |
Cost of revenues | | | | | $ | 1.4 | | | 1.6 | |
Selling, general and administrative expenses | | | | | 0.5 | | | 0.5 | |
Interest and other nonoperating expense | | | | | 0.7 | | | 4.8 | |
(b)2023 foreign currency translation adjustment amounts arising during the three months ended March 31, 2023 reflect primarily the appreciation of the Mexican peso, the Brazilian real, the Chilean peso, the euro, and the British pound. 2022 foreign currency translation adjustment amounts arising during the three months ended March 31, 2022 reflect primarily the appreciation of the Brazilian real and the Mexican peso, partially offset by the devaluation of the euro and British pound.
(c)Gains and losses on sales of available-for-sale debt securities are reclassified from accumulated other comprehensive income (loss) to the condensed consolidated statements of operations when the gains or losses are realized. Pretax amounts are classified in the condensed consolidated statements of operations as interest and other income (expense).
(d)Pretax gains and losses on cash flow hedges are classified in the condensed consolidated statements of operations as:
•other operating income (expense) ($3.4 million loss in the three months ended March 31, 2023 and $11.8 million gain in the three months ended March 31, 2022) and
•interest expense ($3.7 million reduction to expense in the three months ended March 31, 2023 and $2.8 million of expense in the three months ended March 31, 2022).
The changes in accumulated other comprehensive loss attributable to Brink’s are as follows:
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(In millions) | Benefit Plan Adjustments | | Foreign Currency Translation Adjustments | | Unrealized Losses on Available-for-Sale Securities | | Gains (Losses) on Cash Flow Hedges | | Total |
| | | | | | | | | |
Balance as of December 31, 2022 | $ | (290.7) | | | (433.8) | | | (0.6) | | | 24.6 | | | (700.5) | |
Other comprehensive income (loss) before reclassifications | (0.6) | | | 44.7 | | | (1.2) | | | (6.0) | | | 36.9 | |
Amounts reclassified from accumulated other comprehensive loss to net income | 0.5 | | | (1.1) | | | — | | | (0.5) | | | (1.1) | |
Other comprehensive income (loss) attributable to Brink's | (0.1) | | | 43.6 | | | (1.2) | | | (6.5) | | | 35.8 | |
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Balance as of March 31, 2023 | $ | (290.8) | | | (390.2) | | | (1.8) | | | 18.1 | | | (664.7) | |
Note 8 - Fair value of financial instruments
Investments in Marketable Securities
We have investments in mutual funds, equity securities and available for sale debt securities that are carried at fair value in the condensed financial statements. For these investments, fair value was based on quoted market prices, which we have categorized as a Level 1 valuation.
Fixed-Rate Debt
The fair value and carrying value of our material fixed-rate debt, excluding any unamortized debt issuance costs, are as follows:
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(In millions) | March 31, 2023 | | December 31, 2022 |
| | | |
$600 million senior unsecured notes | | | |
Carrying value | $ | 600.0 | | | 600.0 | |
Fair value | 538.0 | | | 528.7 | |
| | | |
$400 million senior unsecured notes | | | |
Carrying value | 400.0 | | | 400.0 | |
Fair value | 376.2 | | | 369.0 | |
Pricing inputs for nonpublic debt are often not observable. The fair value estimates of our senior notes reflect unobservable estimates and assumptions, which we have categorized as a Level 3 valuation. Our fair value estimates were based on the present value of future cash flows, discounted at rates for public debt at the measurement date. The rates for public debt were additionally adjusted for a factor which represented the change in the interest spreads between the inception rates and the public debt rates at the measurement date.
Forward and Swap Contracts
We have outstanding foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies. At March 31, 2023, the notional value of our outstanding foreign currency forward and swap contracts was $479 million, with average maturities of approximately one month. These foreign currency forward and swap contracts primarily offset exposures in the euro and the Mexican peso and are not designated as hedges for accounting purposes. Accordingly, changes in their fair value are recorded immediately in earnings.
At March 31, 2023, the fair value of our short term foreign currency contracts was a net asset of approximately $0.3 million of which $4.0 million was included in prepaid expenses and other and $3.7 million was included in accrued liabilities on the condensed consolidated balance sheet. At December 31, 2022, the fair value of these foreign currency contracts was a net liability of approximately $7.0 million of which $3.5 million was included in prepaid expenses and other and $10.5 million was included in accrued liabilities on the condensed consolidated balance sheet.
Amounts under these contracts were recognized in other operating income (expense) as follows:
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| | | Three Months Ended March 31, |
(in millions) | | | | | 2023 | | 2022 |
| | | | | | | |
Derivative instrument gains included in other operating income (expense) | | | | | $ | 8.2 | | | 18.9 | |
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.
In the first quarter of 2019, we entered into a long term cross currency swap contract to hedge exposure in Brazilian real, which is designated as a cash flow hedge for accounting purposes. Accordingly, changes in the fair value of the cash flow hedge are initially recorded in the gains (losses) on cash flow hedges component of accumulated other comprehensive income (loss). We immediately reclassify from accumulated other comprehensive income (loss) to earnings an amount to offset the remeasurement recognized in earnings associated with the respective intercompany loan. Additionally, we reclassify amounts from accumulated other comprehensive income (loss) to interest expense amounts that are associated with the interest rate differential between a U.S. dollar denominated intercompany loan and a Brazilian real denominated intercompany loan.
At March 31, 2023, the notional value of this long term contract was $47 million with a weighted-average maturity of 0.4 years. At March 31, 2023, the fair value of the long term cross currency swap contract was an asset of $11.6 million and was included in prepaid expenses and other on the condensed consolidated balance sheet. At December 31, 2022, the fair value of the long term cross currency swap contract was an asset of $14.6 million and included in prepaid expenses and other on the condensed consolidated balance sheet.
Amounts under this contract were recognized in other operating income (expense) to offset transaction gains or losses and in interest expense as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(In millions) | | | | | 2023 | | 2022 |
| | | | | | | |
Derivative instrument losses included in other operating income (expense) | | | | | $ | (3.4) | | | (11.8) | |
| | | | | | | |
Offsetting transaction gains | | | | | 3.4 | | | 11.8 | |
| | | | | | | |
Derivative instrument losses included in interest expense | | | | | (0.3) | | | (0.4) | |
| | | | | | | |
Net derivative instrument losses | | | | | (3.7) | | | (12.2) | |
In the first quarter of 2019, we entered into ten interest rate swaps that hedge cash flow risk associated with changes in variable interest rates and that are designated as cash flow hedges for accounting purposes. Accordingly, changes in the fair value of these cash flow hedges are initially recorded in the gains (losses) on cash flow hedges component of accumulated other comprehensive income (loss). We reclassify amounts from accumulated other comprehensive income (loss) into earnings in the same periods that the hedged debt affects earnings.
At March 31, 2023, the notional value of these contracts was $400 million with a remaining weighted-average maturity of 0.5 years. At March 31, 2023, the fair value of these interest rate swaps was an asset of $7.7 million and was included in prepaid expenses and other on the condensed consolidated balance sheet. At December 31, 2022, the fair value of these interest rate swaps was a net asset of $10.0 million of which $9.3 million was included in prepaid expenses and $0.7 million was included in other assets on the condensed consolidated balance sheet.
In the first quarter of 2022, we entered into four forward-starting interest rate swaps that hedge cash flow risk associated with changes in variable interest rates and that were designated as cash flow hedges for accounting purposes. The forward-starting interest rate swaps had a maturity date in July 2030 and had a mandatory settlement scheduled to occur in July 2022. In July 2022, an amendment was executed to terminate the four forward-starting interest rates swaps and concurrently enter into three forward-starting interest rate swaps with an amended maturity in June 2027. We designated these interest rates swaps as cash flow hedges for accounting purposes. Accordingly, the changes in the fair value of these cash flow hedges are initially recorded in the gains (losses) on cash flow hedges component of accumulated other comprehensive income (loss). We reclassify amounts from accumulated other comprehensive income (loss) into earnings in the same periods that the hedged debt affects earnings.
As of the July 2022 termination date of the four previous interest rate swaps, a cumulative net gain of $9.2 million was recorded in accumulated other comprehensive income (loss). This amount will be reclassified to earnings as forecasted interest payments occur through the original maturity date in July 2030. The three new interest rate swaps had an inception date fair value equal to a $9.2 million asset, approximating the settlement value of the four previous interest rate swaps. Instead of receiving cash upon termination of the previous swaps, we elected to negotiate a lower off-market fixed rate for the three new interest rate swaps. This inception date fair value will be amortized to earnings on a ratable and systematic basis through the maturity date of the new interest rate swaps in June 2027.
At March 31, 2023, the notional value of these contracts was $200 million with a remaining weighted-average maturity of 2.2 years. At March 31, 2023, the fair value of these interest rate swaps was a net asset of $12.8 million of which $5.6 million was included in prepaid expenses and other and $7.2 million was included in other assets on the condensed consolidated balance sheet. At December 31, 2022, the fair
value of these interest rate swaps was a net asset of $16.4 million of which $6.0 million was included in prepaid expenses and other and $10.4 million was included in other assets on the consolidated balance sheet.
In the fourth quarter of 2022, we entered into two interest rate swaps with a maturity date of June 2027. These swaps are intended to hedge cash flow risk associated with changes in variable interest rates and were designated as cash flow hedges for accounting purposes. Accordingly, changes in the fair value of these cash flow hedges are initially recorded in the gains (losses) on cash flow hedges component of accumulated other comprehensive income (loss). We reclassify amounts from accumulated other comprehensive income (loss) into earnings in the same periods that the hedged debt affects earnings.
At March 31, 2023, the notional value of these contracts was $175 million with a remaining weighted-average maturity of 2.2 years. At
March 31, 2023, the fair value of these interest rate swaps was a net liability of $1.5 million of which $1.8 million was included in prepaid expenses and other and $3.3 million was included in other liabilities on the condensed consolidated balance sheet. At December 31, 2022, the fair value of these interest rate swaps was a net asset of $1.0 million of which $2.0 million was included in prepaid expenses and other and $1.0 million was included in other liabilities on the condensed consolidated balance sheet.
In the second quarter of 2021, we entered into ten cross currency swaps to hedge a portion of our net investments in certain of our subsidiaries with euro functional currencies. As net investment hedges for accounting purposes, we elected to use the spot method to assess effectiveness for these derivatives that are designated as net investment hedges. Accordingly, changes in fair value attributable to changes in the undiscounted spot rates are recorded in the foreign currency translation adjustments component of accumulated other comprehensive income (loss) and will remain there until the hedged net investments are sold or substantially liquidated. We have elected to exclude the spot-forward difference from the assessment of hedge effectiveness and are amortizing this amount separately on a straight-line basis over the term of these cross currency swaps.
In July 2022, we terminated these cross currency swap contracts and received $67 million in cash for the fair value of the derivative assets at the settlement date. We subsequently entered into a total of nine cross currency swaps with a total notional of $400 million to hedge a portion of our net investment in certain of our subsidiaries with euro functional currencies. Swaps with a total notional of $215 million will terminate in May 2026 and swaps with a total notional of $185 million will terminate in April 2031. We have designated these swaps as net investment hedges for accounting purposes.
At March 31, 2023, the total notional value of these cross currency swap contracts was $400 million with a remaining weighted average maturity of 2.6 years for the cross currency swaps maturing in May 2026 and a remaining weighted average maturity of 6.5 years for the cross currency swaps maturing in April 2031. At March 31, 2023, the fair value of these cross currency swaps was a net liability of $14.9 million of which $5.6 million was included in prepaid expenses and other and $20.5 million was included in other liabilities on the condensed consolidated balance sheet. At December 31, 2022, the fair value of these cross currency swaps was a net liability of $11.7 million of which $5.6 million was included in prepaid expenses and other and $17.3 million was included in other liabilities on the condensed consolidated balance sheet.
The effect of the interest rate swaps and the amortization of the spot-forward difference on the net investment hedges cross currency swaps is included in interest expense as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(In millions) | | | | | 2023 | | 2022 |
| | | | | | | |
Interest rate swaps designated as cash flow hedges | | | | | (4.0) | | | 2.4 | |
Cross currency swaps designated as net investment hedges | | | | | (1.4) | | | (1.5) | |
Net derivative instrument (gains) losses included in interest expense | | | | | (5.4) | | | 0.9 | |
The fair values of these forward and swap contracts are based on the present value of net future cash payments and receipts, as well as inputs related to forward interest rates and forward currency rates that are derived principally from, or corroborated by, observable market data, which we have categorized as a Level 2 valuation.
Contingent Consideration
In the second quarter of 2020, we acquired cash management operations in Malaysia from U.K.-based G4S and have recorded a payable for contingent consideration. The contingent consideration will be paid when minimum dividend distributions are received by Brink's relating to cash on the balance sheets of the Malaysia subsidiaries as of the acquisition date. We used a probability-weighted approach to estimate the fair value of the contingent consideration. The fair value of the contingent consideration is the full $22 million that remains potentially payable as of March 31, 2023 as we believe it is unlikely that the contingent consideration payments will be reduced.
In the fourth quarter of 2022, we acquired NoteMachine and recognized a payable for contingent consideration, which consists of two components. The first component is a payable based on post-acquisition increases in ATM cash withdrawal interchange fees through June 30, 2023. The fair value of this payable was estimated at $4.3 million as of the October 3, 2022 acquisition date. The second component is a payable contingent on our post-acquisition collection of ATM tax rate rebates from municipal governments in the U.K. The fair value of this payable was estimated at $10.5 million as of the October 3, 2022 acquisition date.
Other Financial Instruments
Other financial instruments include cash and cash equivalents, accounts receivable, floating rate debt, accounts payable and accrued liabilities. The financial statement carrying amounts of these items approximate the fair value.
There were no transfers in or out of any of the levels of the valuation hierarchy in the first three months of 2023.
Note 9 - Debt
| | | | | | | | | | | |
| March 31, | | December 31, |
(In millions) | 2023 | | 2022 |
Debt: | | | |
| | | |
| | | |
| | | |
| | | |
Short-term borrowings | $ | 94.1 | | | 47.2 | |
Total short-term borrowings | $ | 94.1 | | | 47.2 | |
| | | |
Long-term debt | | | |
Bank credit facilities: | | | |
Term loan A(a) | $ | 1,368.9 | | | 1,377.4 | |
Senior unsecured notes(b) | 992.7 | | | 992.1 | |
Revolving Credit Facility | 602.1 | | | 646.9 | |
Other (c) | 99.2 | | | 147.0 | |
Financing leases | 213.9 | | | 192.2 | |
Total long-term debt | $ | 3,276.8 | | | 3,355.6 | |
| | | |
Total debt | $ | 3,370.9 | | | 3,402.8 | |
| | | |
Included in: | | | |
Current liabilities | $ | 180.7 | | | 129.6 | |
Noncurrent liabilities | 3,190.2 | | | 3,273.2 | |
Total debt | $ | 3,370.9 | | | 3,402.8 | |
(a)Amounts outstanding are net of unamortized debt costs of $4.8 million as of March 31, 2023 and $5.1 million as of December 31, 2022.
(b)Amounts outstanding are net of unamortized debt costs of $7.3 million as of March 31, 2023 and $7.9 million as of December 31, 2022.
(c)Other facilities include $74.2 million related to the Brink's Capital credit facility at March 31, 2023, compared to $106.8 million at December 31, 2022. The facility had $1,547.3 million in borrowings and $1,579.9 million in repayments in the first three months of 2023, which is reflected in the long-term revolving credit facilities movement in the consolidated statements of cash flows.
Long-Term Debt
Senior Secured Credit Facility
In June 2022, we amended our senior secured credit facility (the “Senior Secured Credit Facility”) with Bank of America, N.A. as administrative agent. After the amendment, the Senior Secured Credit Facility consisted of a $1 billion revolving credit facility (the "Revolving Credit Facility") and $1.4 billion of term loans (the "Term Loans").
All loans under the Revolving Credit Facility and the Term Loans mature on June 23, 2027. Principal payments for the Term Loans are due quarterly in an amount equal to 0.625% of the initial loan amount for the first eight quarterly installment payments and 1.25% for subsequent payments with a final lump sum payment due on June 23, 2027. Interest rates for the Senior Secured Credit Facility are based on the Secured Overnight Financing Rate ("SOFR") plus a margin or an alternate base rate plus a margin. The Revolving Credit Facility allows us to borrow money or issue letters of credit (or otherwise satisfy credit needs) on a revolving basis over the term of the facility. As of March 31, 2023, $398 million was available under the Revolving Credit Facility. The obligations under the Senior Secured Credit Facility are secured by a first-priority lien on all or substantially all of the assets of the Company and certain of its domestic subsidiaries, including a first-priority lien on equity interests of certain of the Company’s direct and indirect subsidiaries. The Company and certain of its domestic subsidiaries also guarantee the obligations under the Senior Secured Credit Facility.
The margin on both SOFR and alternate base rate borrowings under the Senior Secured Credit Facility is based on the Company’s total net debt leverage ratio. The margin on SOFR borrowings, which can range from 1.25% to 1.75%, was 1.50% at March 31, 2023. The margin on alternate base rate borrowings, which can range from 0.25% to 0.75%, was 0.50% as of March 31, 2023. We also pay an annual commitment fee on the unused portion of the Revolving Credit Facility based on the Company’s total net leverage ratio. The commitment fee, which can range from 0.15% to 0.28%, was 0.23% as of March 31, 2023.
Senior Unsecured Notes
In June 2020, we issued at par five-year senior unsecured notes (the "2020 Senior Notes") in the aggregate principal amount of $400 million. The 2020 Senior Notes will mature on July 15, 2025 and bear an annual interest rate of 5.5%. The 2020 Senior Notes are general unsecured obligations guaranteed by certain of the Company’s existing and future U.S. subsidiaries, which are also guarantors under the Senior Secured Credit Facility.
In October 2017, we issued at par ten-year senior unsecured notes (the "2017 Senior Notes" and together with the 2020 Senior Notes, the "Senior Notes") in the aggregate principal amount of $600 million. The 2017 Senior Notes will mature on October 15, 2027 and bear an annual interest rate of 4.625%. The 2017 Senior Notes are general unsecured obligations guaranteed by certain of the Company’s existing and future U.S. subsidiaries, which are also guarantors under the Senior Secured Credit Facility.
The Senior Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The notes were offered in the United States only to persons reasonably believed to be qualified institutional buyers in reliance on the exception from registration set forth in Rule 144A under the Securities Act and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.
The aggregate proceeds from the Senior Secured Credit Facility and the 2017 Senior Notes were used in part to repay certain prior indebtedness and certain fees and expenses related to the closing of certain transactions. Borrowings were used for working capital needs, capital expenditures, acquisitions and other general corporate purposes. The aggregate proceeds from the 2020 Senior Notes were used in part to repay certain existing indebtedness incurred in connection with the G4S acquisition, finance the remaining G4S acquisition transactions and pay certain fees and expenses related to the transactions. Remaining net proceeds from the 2020 Senior Notes were used for working capital needs, capital expenditures, acquisitions and other general corporate purposes.
Letter of Credit Facilities and Bank Guarantee Facilities
We have three committed letter of credit facilities totaling $70 million, of which approximately $11 million was available at March 31, 2023. At March 31, 2023, we had undrawn letters of credit and guarantees of $59 million issued under these facilities. The $15 million facility expires in April 2025, the $32 million facility expires in October 2025 and the $24 million facility expires in May 2027.
We have two uncommitted letter of credit facilities totaling $55 million, of which approximately $29 million was available at March 31, 2023. At March 31, 2023, we had undrawn letters of credit and guarantees of $26 million issued under these facilities. The $40 million and the $15 million facilities have no expiration date.
The Senior Secured Credit Facility is also available for issuance of letters of credit and bank guarantees.
The Senior Secured Credit Facility, Senior Unsecured Notes, the Letter of Credit Facilities and Bank Guarantee Facilities contain various financial and other covenants. The financial covenants, among other things, limit our ability to provide liens, restrict fundamental changes, limit transactions with affiliates and unrestricted subsidiaries, restrict changes to our fiscal year and to organizational documents, limit asset dispositions, limit the use of proceeds from asset sales, limit sale and leaseback transactions, limit investments, limit the ability to incur debt, restrict certain payments to shareholders, limit negative pledges, limit the ability to change the nature of our business, provide for a maximum consolidated net leverage ratio and provide for minimum coverage of interest costs. If we were not to comply with the terms of our various financing agreements, the repayment terms could be accelerated and the commitments could be withdrawn. An acceleration of the repayment terms under one agreement could trigger the acceleration of the repayment terms under the other financing agreements. We were in compliance with all covenants at March 31, 2023.
Note 10 - Credit losses
We are exposed to credit losses primarily through sales of our Cash and Valuable Management services and DRS and AMS services to customers with operations in the U.S. as well as customers in more than 100 countries outside the U.S. We typically invoice our customers on a monthly basis and payment terms are generally between 30 and 60 days.
We assess currently expected credit losses in our financial assets on a pool basis by aggregating financial assets with similar risk characteristics. We have pooled financial assets by geographic location because of the similarities within each location such as customers, payment terms, and services offered. Loss experience is monitored for each pool and we determine historical loss rates for each pool. These historical loss rates are the main assumption used in estimating expected credit losses over the life of the financial assets. We also considered current and expected economic conditions, particularly the effects of the pandemic, in determining an appropriate allowance.
We monitor the aging of accounts receivables by country and write off any accounts that are deemed uncollectible. We also monitor any significant economic events to identify any current or expected trends and risks within a pool that could impact the collectability of outstanding accounts receivables balances that were not contemplated or relevant during a previous period.
The following table is a rollforward of the allowance for doubtful accounts for the three month period ended March 31, 2023.
Allowance for doubtful accounts:
| | | | | |
(In millions) | |
| |
December 31, 2022 | $ | 38.3 | |
| |
Provision for uncollectible accounts receivable | 6.3 | |
| |
Write-offs and recoveries | (5.8) | |
Foreign currency exchange effects | 0.2 | |
March 31, 2023 | $ | 39.0 | |
Note 11 - Share-based compensation plans
We have share-based compensation plans to attract and retain employees and non-employee directors and to more closely align their interests with those of our shareholders.
We have outstanding share-based awards granted to employees under the 2017 Equity Incentive Plan (the "2017 Plan"). The 2017 Plan permits grants of restricted stock, restricted stock units, performance stock, performance units, stock appreciation rights, stock options, as well as other share-based awards to eligible employees. The 2017 Plan also permits cash awards to eligible employees. The 2017 Plan became effective May 2017. During the first quarter ended March 31, 2023, the remaining outstanding awards granted under the 2013 Equity Incentive Plan (the "2013 Plan") were fully exercised. No further grants of awards will be made under the 2013 Plan.
We also have outstanding deferred stock units granted to directors under the 2017 Plan. Share-based awards were previously granted to directors and remain outstanding under the Non-Employee Director's Equity Plan and the Directors’ Stock Accumulation Plan, which has expired.
Outstanding awards at March 31, 2023 include performance share units, restricted stock units, deferred stock units, performance-based stock options, time-based stock options and certain awards that will be settled in cash.
Compensation Expense
Compensation expense is measured using the fair-value-based method. Prior to 2020, for employee and director awards considered equity grants, compensation expense is recognized from the award or grant date to the earlier of the retirement-eligible date or the vesting date. In 2020, the retirement eligibility provisions for many employee awards were changed on a go-forward basis to require a six month notification period prior to actual retirement. For the 2020 awards, we recognized expense from the grant date to six months after the participant's retirement eligible date. In 2021, the retirement eligibility provisions were changed to require a minimum of a one year service period in order to meet the retirement eligible conditions. For the 2021, 2022, and 2023 awards, we recognize expense from the grant date to the earlier of the retirement-eligible date (provided it is not less than one year from the grant date) or the vesting date.
For awards considered liability awards, compensation cost is based on the change in the fair value of the instrument for each reporting period and the percentage of the requisite service that has been rendered.
Compensation expenses are classified as selling, general and administrative expenses in the condensed consolidated statements of operations. Compensation expenses for the share-based awards were as follows:
| | | | | | | | | | | | | | | |
| | | Compensation Expense |
| | | Three Months Ended March 31, |
(in millions) | | | | | 2023 | | 2022 |
| | | | | | | |
Performance share units | | | | | $ | 7.9 | | | 4.9 | |
| | | | | | | |
Restricted stock units | | | | | 2.7 | | | 1.9 | |
Deferred stock units and fees paid in stock | | | | | 0.3 | | | 0.3 | |
| | | | | | | |
Time-based vesting stock options | | | | | — | | | 0.1 | |
Cash based awards | | | | | 1.1 | | | 0.4 | |
Share-based payment expense | | | | | 12.0 | | | 7.6 | |
Income tax benefit | | | | | (2.8) | | | (1.8) | |
Share-based payment expense, net of tax | | | | | $ | 9.2 | | | 5.8 | |
Performance-Based Stock Options
In 2018, 2017 and 2016, we granted performance-based stock options that have a service condition as well as a market condition. In addition, some of the awards granted in 2016 contained a non-financial performance condition. We measured the fair value of these performance-based options at the grant date using a Monte Carlo simulation model.
The following table summarizes performance-based stock option activity during the first three months of 2023:
| | | | | | | | | | | |
| Shares (in thousands) | | Weighted-Average Grant-Date Fair Value |
Outstanding balance as of December 31, 2022 | 446.2 | | | $ | 14.70 | |
| | | |
| | | |
Exercised | (263.4) | | | 12.47 | |
Outstanding balance as of March 31, 2023 | 182.8 | | | $ | 17.92 | |
Time-Based Stock Options
In 2020 and 2019, we granted time-based stock options that contain only a service condition. We measure the fair value of these time-based options at the grant date using a Black-Scholes-Merton option pricing model.
The following table summarizes time-based stock option activity during the first three months of 2023:
| | | | | | | | | | | |
| Shares (in thousands) | | Weighted-Average Grant-Date Fair Value |
Outstanding balance as of December 31, 2022 | 161.6 | | | $ | 21.41 | |
| | | |
Expired | — | | | — | |
| | | |
Outstanding balance as of March 31, 2023 | 161.6 | | | $ | 21.41 | |
Restricted Stock Units (“RSUs”)
We granted RSUs that contain only a service condition. We measure the fair value of RSUs based on the price of Brink’s stock at the grant date, adjusted for a discount for dividends not received or accrued during the vesting period.
The following table summarizes RSU activity during the first three months of 2023:
| | | | | | | | | | | |
| Shares (in thousands) | | Weighted-Average Grant-Date Fair Value |
Nonvested balance as of December 31, 2022 | 309.3 | | | $ | 67.25 | |
Granted | 147.0 | | | 66.29 | |
Forfeited | (6.9) | | | 63.98 | |
| | | |
Vested | (113.8) | | | 71.32 | |
Nonvested balance as of March 31, 2023 | 335.6 | | | $ | 65.52 | |
Performance Share Units ("PSUs”)
Historically, we have granted Internal Metric PSUs ("IM PSUs") and Relative Total Shareholder Return PSUs ("TSR PSUs").
The majority of outstanding IM PSUs contain a performance condition as well as a service condition. We measure the fair value of these PSUs based on the price of Brink’s stock at the grant date, adjusted for a discount for dividends not received or accrued during the vesting period. For the IM PSUs granted in 2021, the performance period is from January 1, 2021 to December 31, 2022 with an additional one year of service requirement after 2022. For IM PSUs granted in 2022, the performance period is from January 1, 2022 to December 31, 2024. For IM PSUs granted in 2023, the performance period is from January 1, 2023 to December 31, 2025. In 2023, we also granted IM PSUs to certain employees which contain a market condition, a performance condition, and a service condition. We measure the fair value of IM PSUs containing a market condition at the grant date using a Monte Carlo simulation model.
Before 2023, we granted TSR PSUs containing a market condition as well as a service condition. We measure the fair value of TSR PSUs at the grant date using a Monte Carlo simulation model. For the TSR PSUs granted in 2021, the service period is from January 1, 2021 to December 31, 2023. For the TSR PSUs granted in 2022, the service period is from January 1, 2022 to December 31, 2024.
The following table summarizes all PSU activity during the first three months of 2023:
| | | | | | | | | | | |
| Shares (in thousands) | | Weighted-Average Grant-Date Fair Value |
Nonvested balance as of December 31, 2022 | 726.0 | | | $ | 76.66 | |
Granted | 213.9 | | | 69.14 | |
Forfeited or expired(a) | (54.9) | | | 86.94 | |
| | | |
Vested(b) | (171.5) | | | 82.75 | |
Nonvested balance as of March 31, 2023 | 713.5 | | | $ | 72.15 | |
(a)Although the service condition had been met, 31.4 thousand TSR PSUs granted in 2020 expired in accordance with the market condition terms of the underlying award agreement. These units had a weighted average grant-date fair value of $94.52 per share.
(b)The vested PSUs presented are based on the target amount of the award. In accordance with the terms of the underlying award agreements, the actual shares earned and distributed for the performance period ended December 31, 2022 were 208.1 thousand, compared to target shares of 171.5 thousand.
Deferred Stock Units ("DSUs")
We granted DSUs to our non-employee directors. We measure the fair value of DSUs at the grant date, based on the price of Brink's stock, and, if applicable, adjusted for a discount for dividends not received or accrued during the vesting period.
DSUs granted after 2014 will be paid out in shares of Brink's stock approximately one year after the grant date, provided that the director has not elected to defer the distribution of shares until a later date. DSUs granted prior to 2015, in general, will be paid out in shares of stock following separation from service.
The following table summarizes all DSU activity during the first three months of 2023:
| | | | | | | | | | | |
| Shares (in thousands) | | Weighted-Average Grant-Date Fair Value |
Nonvested balance as of December 31, 2022 | 19.7 | | | $ | 54.74 | |
Granted | — | | | — | |
| | | |
Vested | — | | | — | |
Nonvested balance as of March 31, 2023 | 19.7 | | | $ | 54.74 | |
Note 12 - Capital Stock
Common Stock
At March 31, 2023, we had 100 million shares of common stock authorized and 46.4 million shares issued and outstanding.
Dividends
We paid regular quarterly dividends on our common stock during the last two years. On January 20, 2023, the Board declared a regular quarterly dividend of 20 cents per share payable on March 1, 2023 to shareholders of record on February 6, 2023. On May 4, 2023, the Board declared a regular quarterly dividend of 22 cents per share payable on June 1, 2023 to shareholders of record on May 15, 2023. The payment of future dividends is at the discretion of the Board of Directors and is dependent on our future earnings, financial condition, shareholder equity levels, cash flow, business requirements and other factors.
Preferred Stock
At March 31, 2023, we had the authority to issue up to 2.0 million shares of preferred stock with a par value of $10 per share.
Share Repurchase Program
On October 27, 2021, we announced that our Board of Directors authorized a $250 million share repurchase program that expires on December 31, 2023 (the "2021 Repurchase Program"). This authorization replaces our previous $250 million repurchase program, authorized by the Board in February 2020 (the "2020 Repurchase Program"), which expired on December 31, 2021, with no amount remaining available.
Under the 2021 Repurchase Program, we are not obligated to repurchase any specific dollar amount or number of shares. The timing and volume of share repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. Share repurchases under this program may be made in the open market, in privately negotiated transactions, or otherwise.
During the first quarter ended March 31, 2023, we repurchased a total of 247,422 shares of our common stock for an aggregate of $16.0 million and an average price of $64.79 per share. These shares were retired upon repurchase. At March 31, 2023, $182 million remained available under the 2021 Repurchase Program.
Under the 2020 Repurchase Program, we entered into an accelerated share repurchase arrangement ("ASR") in the fourth quarter of 2021 and repurchased 1,742,160 shares in November 2021 in exchange for a $150 million upfront payment to a financial institution. Under this ASR, the purchase period had a scheduled termination date of June 1, 2022. In April 2022, the financial institution elected to early terminate this ASR and an additional 546,993 shares were repurchased. In total, 2,289,153 shares were repurchased under this ASR at an average repurchase price of $65.53.
Shares Used to Calculate Earnings per Share
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(In millions) | | | | | 2023 | | 2022 |
| | | | | | | |
Weighted-average shares: | | | | | | | |
Basic(a) | | | | | 46.7 | | | 47.8 | |
Effect of dilutive stock awards and options | | | | | 0.7 | | | 0.5 | |
Diluted | | | | | 47.4 | | | 48.3 | |
| | | | | | | |
Antidilutive stock awards and options excluded from denominator(b) | | | | | 0.5 | | | 1.0 | |
(a)We have deferred compensation plans for directors and certain of our employees. Some amounts owed to participants are denominated in common stock units. Each unit represents one share of common stock. The number of shares used to calculate basic earnings per share includes the weighted-average common stock units credited to employees and directors under the deferred compensation plans. Additionally, nonvested units containing only a service requirement are also included in the computation of basic weighted-average shares when the requisite service period has been completed. Accordingly, included in basic shares are 0.3 million in the three months ended March 31, 2023, and 0.3 million in the three months ended March 31, 2022.
(b)Under the November 2021 ASR, based on our stock prices from November 1, 2021 to March 31, 2022, we would have received additional shares under the ASR if the
settlement date had been March 31, 2022. Because the ASR settlement date did not occur until April 2022 and because any anticipated receipt of additional shares of our common stock would have been antidilutive, no amounts were included in the computation of diluted EPS. The antidilutive impact from the first quarter of 2022 continued to have year-to-date antidilutive impact for the remainder of 2022.
Note 13 - Supplemental cash flow information
| | | | | | | | | | | |
| Three Months Ended March 31, |
(In millions) | 2023 | | 2022 |
Cash paid for: | | | |
Interest | $ | 59.1 | | | 25.4 | |
Income taxes, net | 23.3 | | | 31.3 | |
Argentina Currency Conversions
We have elected in the past and could continue in the future to repatriate cash from Brink's Argentina using different means to convert Argentine pesos into U.S. dollars. Conversions under these other market mechanisms generally settle at rates that are less favorable than the rates at which we remeasure the financial statements of Brink’s Argentina. The net cash flows from these transactions are treated as operating cash flows as the financial instruments are purchased specifically for resale and are generally sold within a short period of time from the date of purchase. We did not have any such conversions in the first three months of 2023 or 2022.
Non-cash Investing and Financing Activities
We acquired $20.7 million in armored vehicles and other equipment under financing lease arrangements in the first three months of 2023 compared to $14.4 million in armored vehicles and other equipment acquired under financing lease arrangements in the first three months of 2022.
Loans Held for Investment
In France, as part of an ATM managed services contract for a large customer, we purchase the ATMs at the beginning of the contract. However, since these ATMs are specifically for the benefit of the customer and transfer back to the customer at the end of the contract, this is recorded as a financing transaction. As a result, the loan to the customer, net of payments received, is treated as investing cash flows.
Restricted Cash (Cash Supply Chain Services)
In France, we offer services to certain of our customers where we manage some or all of their cash supply chains. Providing this service requires our French subsidiary to take temporary title to the cash received from the management of our customers' cash supply chains until the cash is returned to the customers. The cash for which we have temporary title is restricted and cannot be used for any other purpose other than to service our customers who participate in this service offering.
In Malaysia, we offer ATM replenishment services to certain of our financial institution customers. Providing this service requires our Malaysia subsidiary to take temporary title to the cash received in advance of ATM replenishment. The cash for which we have temporary title is restricted and cannot be used for any other purpose other than to service our customers who participate in this service offering.
In accordance with a revolving credit facility, we are required to maintain a restricted cash reserve of $42.0 million ($40.7 million at December 31, 2022) and, due to this contractual restriction, we have classified these amounts as restricted cash.
At March 31, 2023, we held $401.8 million of restricted cash ($187.5 million represented restricted cash held for customers and $158.2 million represented accrued liabilities). At December 31, 2022, we held $438.5 million of restricted cash ($229.3 million represented restricted cash held for customers and $156.3 million represented accrued liabilities).
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.
| | | | | | | | | | | |
| March 31, | | December 31, |
(In millions) | 2023 | | 2022 |
Cash and cash equivalents | $ | 816.6 | | | 972.0 | |
Restricted cash | 401.8 | | | 438.5 | |
Total, cash, cash equivalents, and restricted cash in the condensed consolidated statements of cash flows | $ | 1,218.4 | | | 1,410.5 | |
Note 14 - Contingent matters
In August 2020, the Company received a subpoena issued in connection with an investigation being conducted by the U.S. Department of Justice (the “DOJ”). The Company is fully cooperating with the investigation and has responded to requests from the DOJ for documents and other information, primarily related to cross-border shipments of cash and things of value and anti-money laundering compliance. Given that the investigation is still ongoing and that no civil or criminal claims have been brought to date, the Company cannot predict the outcome of the investigation, the timing of the ultimate resolution of the matter, or reasonably estimate the possible range of loss, if any, that may result from this matter. Accordingly, no accruals have been made with respect to this matter.
At the end of the fourth quarter of 2018, we became aware of an investigation initiated by the Chilean Fiscalía Nacional Económica (the Chilean antitrust agency) (“FNE”) related to potential anti-competitive practices among competitors in the cash logistics industry in Chile. In October 2021, the FNE filed a complaint before the Chilean antitrust court alleging that Brink’s Chile (as well as competitor companies) engaged in collusion in 2017 and 2018 and requested that the court approve a fine of $30.5 million. The Company filed its response to the complaint in November 2022, which signaled the beginning of the evidentiary phase. The Company intends to vigorously defend itself against the FNE's complaint. Based on available information to date, the Company recorded a charge of $9.5 million in the third quarter of 2021 in connection with this matter. In 2022, we recognized an additional $1.4 million adjustment and, in the first three months of 2023, we recognized an additional $0.2 million adjustment to our estimated loss. The adjustments resulted from a change in currency rates.
In addition, we are involved in various other lawsuits and claims in the ordinary course of business. We are not able to estimate the loss or range of losses for some of these matters. We have recorded accruals for losses that are considered probable and reasonably estimable. Except as otherwise noted, we do not believe that it is reasonably possible the ultimate disposition of any of the lawsuits currently pending against the Company could have a material adverse effect on our liquidity, financial position or results of operations.
Note 15 - Reorganization and Restructuring
2022 Global Restructuring Plan
In the first quarter of 2023, management completed the review and approval of remaining actions included in the previously announced restructuring plan across our global business operations. The actions were taken to enable growth, reduce costs and related infrastructure, and to mitigate the potential impact of external economic conditions. In total, we have recognized $32.6 million in charges under the program, including $10.4 million in the first quarter of 2023. We expect total expenses from the program to be between $42 million and $48 million.
The following table summarizes the changes in the accrued liability for costs incurred, payments and utilization, and foreign currency exchange effects of the 2022 Global Restructuring Plan:
| | | | | | | | | | | | | | | | | | | |
(In millions) | Severance Costs | | | | Other | | Total |
| | | | | | | |
Balance as of January 1, 2023 | $ | 11.5 | | | | | — | | | 11.5 | |
Expense | 9.1 | | | | | 1.3 | | | 10.4 | |
Payments and utilization | (6.1) | | | | | (1.3) | | | (7.4) | |
| | | | | | | |
Foreign currency exchange effects | 0.2 | | | | | — | | | 0.2 | |
Balance as of March 31, 2023 | $ | 14.7 | | | | | — | | | 14.7 | |
Other Restructurings
Management periodically implements restructuring actions in targeted sections of our business. As a result of these actions, we recognized net costs of $11.7 million in the first three months of 2022, primarily severance costs. We recognized $3.8 million net costs in the first three months of 2023, primarily severance costs. The majority of the costs in both the 2023 and 2022 periods resulted from the exit of a line of business in a specific geography with most of the remaining costs due to management initiatives to address the COVID-19 pandemic.
THE BRINK’S COMPANY
and subsidiaries