The Brink’s Company — 2021 Q1 Form 10-Q Summary
Business context and reporting period
The filing covers the three months ended March 31, 2021. Brink’s provides cash-in-transit, ATM, global logistics, cash management, payment, guarding and related security services in more than 100 countries. Operations are reported in North America, Latin America, Europe and Rest of World. Results include ongoing integration of the G4S cash-management acquisitions.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $977.7 million | $872.8 million | 12% |
| Operating profit | $61.7 million | $26.2 million | Up $35.5 million |
| GAAP operating margin | 6.3% | 3.0% | Up 330 bps |
| Non-GAAP operating profit | $90.1 million | $63.1 million | 43% |
| Non-GAAP operating margin | 9.2% | 7.2% | Up 200 bps |
| Net income attributable to Brink’s | $12.7 million | $1.8 million | Up $10.9 million |
| Diluted EPS attributable to Brink’s | $0.25 | $0.03 | Up $0.22 |
| Non-GAAP diluted EPS | $0.82 | $0.50 | 64% |
| Cash flow from operating activities | $(1.5) million | $13.4 million | Down $14.9 million |
| Capital expenditures | $32.2 million | $30.2 million | Up $2.0 million |
Interest expense increased to $27.2 million from $20.0 million because of higher borrowing levels related primarily to acquisitions. The effective tax rate was 46.9%, compared with a 129.8% rate in the prior-year quarter, when pretax income was negative.
At March 31, 2021, cash and cash equivalents were $598.1 million and restricted cash was $274.2 million. Total debt was $2.587 billion, including $2.428 billion of long-term debt. Management reported $896 million of availability under the Revolving Credit Facility and compliance with all debt covenants. Reported net debt was $2.026 billion, up from $1.884 billion at December 31, 2020.
Material changes versus the prior comparable period
- Revenue growth was driven primarily by acquisitions and dispositions, which contributed $170.2 million, while organic revenue declined 6% and currency reduced revenue by $9.3 million.
- Organic revenue declined in North America, Europe and Rest of World, principally because of lower customer volumes related to COVID-19. Latin America had a small organic increase.
- Segment operating profit increased to $132.0 million from $89.6 million. Cost-control measures, government COVID-19 assistance in certain countries, acquisitions and lower internal-loss charges contributed to the improvement.
- The G4S acquisitions contributed $156.4 million of revenue and $5.6 million of net income attributable to Brink’s in the quarter. First-quarter 2021 acquisitions in Macau, Luxembourg and Kuwait completed the planned G4S transactions.
- GAAP operating profit included $6.6 million of restructuring costs, $18.7 million of acquisition-related items, $3.9 million of Argentina-related highly inflationary accounting charges and a $0.8 million benefit from the internal-loss matter.
- Cash flow from operations was negative on a GAAP basis, while management’s non-GAAP operating cash flow measure was $49.1 million, compared with $(61.6) million in the prior-year period. The non-GAAP measure excludes customer-related restricted cash movements, certain customer obligations and G4S intercompany payments.
- Accumulated other comprehensive loss attributable to Brink’s increased to $1.041 billion, primarily reflecting a $44.2 million foreign-currency translation loss.
Guidance, outlook, risks and unusual items
The filing does not provide explicit full-year revenue or earnings guidance. Management states that it expects to have sufficient liquidity to meet obligations for the next twelve months based on cash on hand, operating cash flow and available credit capacity, but cautions that this assessment excludes a potential material worsening of COVID-19 conditions.
- COVID-19 continues to affect customer volumes, operating procedures and service costs. The duration and ultimate financial impact remain uncertain.
- Restructuring actions are expected to reduce the workforce by approximately 1,500 to 1,700 positions and generate annualized cost savings of $18 million to $23 million. Additional restructuring costs of $3 million to $5 million are expected.
- The company completed the planned G4S transactions but continues to face integration, acquisition-related amortization and financing risks. On April 1, 2021, Brink’s acquired PAI, Inc. for approximately $213 million; PAI is expected to generate approximately $320 million in annual revenue.
- Argentina remains highly inflationary, with currency controls and a 2021 pretax remeasurement loss of $3.0 million. Currency devaluation, repatriation restrictions and foreign-exchange volatility remain material risks.
- The DOJ is investigating matters primarily related to cross-border shipments of cash and valuables and anti-money-laundering compliance. No claims have been filed, no loss range can be estimated and no accrual has been recorded.
- Brink’s continues to monitor a Chilean antitrust investigation for which no proceedings have been initiated and no loss range can be estimated.
- The company recorded an $11.0 million allowance against $11.9 million of receivables associated with a prior employee embezzlement. Collection assumptions and potential insurance recoveries may change.
- Legacy retirement obligations, including UMWA and black-lung liabilities, remain material. The American Rescue Plan Act reduced or deferred estimated funding requirements for the primary U.S. pension plan.
Important facts for investors to verify
- Whether organic volumes and revenue recover as COVID-19 restrictions ease, particularly in North America and Europe.
- The pace and cost of integrating G4S and PAI, including the effect on leverage, interest expense and free cash flow.
- Future operating cash flow after excluding customer-related restricted cash movements and other non-GAAP adjustments.
- Compliance with leverage and interest-coverage covenants as acquisition financing and net debt increase.
- The outcome and potential financial exposure from the DOJ investigation, Chilean antitrust matter and other litigation.
- Potential impairment or valuation pressure on goodwill and other long-lived assets if pandemic, foreign-exchange or operating conditions deteriorate.
- Future restructuring charges and whether the projected $18 million to $23 million of annual savings are realized.
- The collectability of the remaining internal-loss receivables and the availability of additional insurance recoveries.