Brink(BCO) - 2022 Q2 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements, highlighting growth in total assets, revenues, and net income Condensed Consolidated Balance Sheet Highlights (As of June 30, 2022) | Account | June 30, 2022 (In millions) | December 31, 2021 (In millions) | | :--- | :--- | :--- | | Total Assets | $5,823.1 | $5,566.7 | | Total Current Assets | $2,222.3 | $1,999.5 | | Goodwill | $1,379.8 | $1,411.7 | | Total Liabilities | $5,456.4 | $5,314.1 | | Long-term debt | $3,060.9 | $2,841.7 | | Total Equity | $366.7 | $252.6 | Condensed Consolidated Statements of Operations Highlights | Metric (In millions, except EPS) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenues | $2,207.9 | $2,026.5 | | Operating Profit | $158.9 | $135.0 | | Net Income Attributable to Brink's | $106.4 | $36.6 | | Diluted EPS | $2.21 | $0.72 | Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity (In millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41.1 | $81.0 | | Net cash used by investing activities | $(102.5) | $(379.9) | | Net cash provided by financing activities | $136.5 | $314.4 | Note 1 - Basis of presentation Financial statements prepared under U.S. GAAP, reflecting segment operations, key estimates, and specific accounting for highly inflationary economies - The company operates through four segments: North America, Latin America, Europe, and Rest of World[20] - In Q1 2022, the company updated its methodology for estimating the allowance for doubtful accounts, resulting in an additional allowance of $16.7 million, primarily due to an increase in past-due receivables in the U.S.[22] - Argentina's economy is accounted for as highly inflationary. In the first six months of 2022, this resulted in a $13.4 million pretax remeasurement loss. At June 30, 2022, the company held net monetary assets in Argentine pesos of $75.8 million[30][31] Note 2 - Revenue from Contracts with Customers Revenue is categorized into Core, High-Value, and Other Security Services, primarily recognized over time, with High-Value Services being a significant contributor Revenue by Service Type (Six Months Ended June 30) | Service Type | 2022 Revenue (In millions) | 2021 Revenue (In millions) | | :--- | :--- | :--- | | Core Services | $1,045.7 | $1,017.6 | | High-Value Services | $1,057.4 | $907.6 | | Other Security Services | $104.8 | $101.3 | | Total | $2,207.9 | $2,026.5 | - The company's main service offerings are grouped into three categories: Core Services, High-Value Services, and Other Security Services[40][41][42] Note 3 - Segment information The company operates across four segments, with North America leading in revenue and Latin America in operating profit Segment Performance (Six Months Ended June 30, 2022) | Segment | Revenues (In millions) | Operating Profit (In millions) | | :--- | :--- | :--- | | North America | $770.4 | $58.5 | | Latin America | $597.6 | $127.7 | | Europe | $448.8 | $37.2 | | Rest of World | $391.1 | $72.6 | | Total Segments | $2,207.9 | $296.0 | - Segment performance is evaluated based on operating profit, excluding corporate expenses and other specific items like restructuring costs, acquisition impacts, and the effects of highly inflationary accounting in Argentina[57] Note 9 - Debt The company's total debt increased, with a recently amended senior secured credit facility and continued compliance with all debt covenants Total Debt Composition | Component | June 30, 2022 (In millions) | Dec 31, 2021 (In millions) | | :--- | :--- | :--- | | Short-term borrowings | $14.0 | $9.8 | | Long-term debt | $3,145.1 | $2,956.9 | | Total Debt | $3,159.1 | $2,966.7 | - In June 2022, the company amended its Senior Secured Credit Facility, which now includes a $1 billion revolving credit facility and $1.4 billion of term loans, both maturing on June 23, 2027[106][107] - As of June 30, 2022, $510 million was available for borrowing under the Revolving Credit Facility[107] Note 12 - Capital Stock The company maintains a share repurchase program and pays regular quarterly dividends, with a recent accelerated share repurchase completion - A $250 million share repurchase program is authorized through December 31, 2023, with the full amount available as of June 30, 2022[142][143] - An accelerated share repurchase (ASR) under the 2020 program was completed in April 2022, with a total of 2,289,153 shares repurchased for $150 million[143] - The company paid a quarterly dividend of $0.20 per share in Q2 2022[141] Note 14 - Contingent matters The company is involved in a DOJ investigation and an antitrust complaint in Chile, with potential financial implications and ongoing legal processes - The company is cooperating with a DOJ investigation concerning cross-border shipments and anti-money laundering compliance. The outcome and potential loss, if any, cannot be reasonably estimated at this time[154] - In Chile, the company faces an antitrust complaint alleging anti-competitive practices. The Chilean antitrust agency has requested a fine of $30.5 million. The company has recorded a total estimated loss of $10.3 million as of June 30, 2022[155] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue and operating profit growth driven by organic expansion, despite currency headwinds, and assesses liquidity Results of Operations Revenues and operating profit increased significantly in Q2 and H1 2022, driven by organic growth across segments, though partially offset by unfavorable currency impacts Consolidated Financial Highlights (GAAP) | Metric (In millions, except EPS) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,133.9 | $1,048.8 | $2,207.9 | $2,026.5 | | Operating Profit | $96.5 | $73.3 | $158.9 | $135.0 | | Diluted EPS | $0.73 | $0.47 | $2.22 | $0.73 | - Q2 2022 revenue growth was driven by organic increases in Latin America ($44.0M), North America ($43.5M), Europe ($24.6M), and Rest of World ($22.5M), partially offset by a $53.9M unfavorable currency impact[172] - H1 2022 operating profit increased by $23.9 million, primarily due to organic growth in Latin America, Rest of World, and Europe, and lower restructuring costs, partially offset by an organic decrease in North America and unfavorable currency changes[176] Liquidity and Capital Resources Liquidity is primarily from operations and debt facilities, with a decrease in operating cash flow but sufficient overall liquidity to meet future needs - Cash flows from operating activities decreased by $39.9 million in the first six months of 2022 compared to the same period in 2021, primarily due to working capital changes and higher income tax payments[243][246] - As of June 30, 2022, $510 million was available for borrowing under its Revolving Credit Facility[260] Net Debt Reconciliation | Component (In millions) | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Debt | $3,159.1 | $2,966.7 | | Less: Cash available for general corporate purposes | $703.3 | $675.6 | | Net Debt | $2,455.8 | $2,291.1 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates, foreign currency, and commodity prices, reporting no material changes in exposures during the first half of 2022 - The company's primary market risks include interest rates, foreign currency exchange rates, and commodity prices[275] - There were no material changes in the company's market risk exposures in the six months ended June 30, 2022[275] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[276] - No material changes to the internal control over financial reporting occurred during the quarter ended June 30, 2022[277] Part II - Other Information Item 1. Legal Proceedings This section refers to Note 14 for details on ongoing legal proceedings, including a DOJ investigation and a Chilean antitrust complaint - For details on legal proceedings, the report directs readers to Note 14, which discusses contingent matters such as the DOJ investigation and the Chilean antitrust complaint[283] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company completed an accelerated share repurchase during the quarter, with a significant amount remaining available under its current repurchase program - In April 2022, an additional 546,993 shares were delivered to the company, completing a prior accelerated share repurchase (ASR) agreement[285] - As of June 30, 2022, approximately $250 million remained available for repurchase under the company's publicly announced plan[285] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including loan document amendments, CEO/CFO certifications, and the Interactive Data File - Key exhibits filed include the Fifth Amendment to Loan Documents, CEO/CFO certifications (Sections 302 and 906), and the iXBRL data file[287]