Brink(BCO) - 2023 Q4 - Annual Report

PART I Item 1. Business The company provides global cash management, digital retail solutions, and ATM services, pursuing growth through strategic initiatives, acquisitions, and restructuring - The Brink's Company is a leading global provider of cash and valuables management, digital retail solutions, and ATM managed services, serving customers in over 100 countries with approximately 68,200 employees, 1,300 facilities, and 16,400 vehicles[7] - The company manages its business across four segments: North America, Latin America, Europe, and Rest of World, with Brink's Global Services (BGS) integrated into North America and Latin America, and also present in the Rest of World segment[8] - The company's strategy is built on four pillars: Growth and Customer Loyalty, Innovation, Operational Excellence, and Talent, aiming to provide a superior customer experience and drive continuous improvement[10][11][12] Revenue by Service Category (2023) | Service Category | 2023 Revenue (approx.) | % of Total Revenues | | :--- | :--- | :--- | | Cash and Valuables Management | $3.9 billion | 79% | | Digital Retail Solutions (DRS) & ATM Managed Services (AMS) | $1.0 billion | 21% | - In 2023, the company exited its Russia-based operations, recognizing a $2.0 million loss on disposal[39] - Key acquisitions include NoteMachine (UK ATM portfolio) for approximately $194 million in October 2022, and PAI Midco, Inc. (US ATM services) for approximately $216 million in April 2021[40] - The 2022 Global Restructuring Plan incurred $11.0 million in charges in 2023, with total expected expenses between $38 million and $42 million, aiming for annualized cost savings of approximately $60 million[41] Item 1A. Risk Factors The company faces significant business, operational, financial, and cybersecurity risks that could materially affect its performance and strategic objectives - Business risks include the potential for the company's growth strategy to be unsuccessful, intense competition and pricing pressures, and a decreased use of cash impacting demand for services[46][47][48] - Operational risks are significant due to operations in over 100 countries, exposing the company to political, economic, regulatory, and currency fluctuation risks, with 70% of 2023 revenues from outside the U.S.[54] - Financial risks include substantial pension and retiree medical obligations, potential future environmental liabilities from former coal operations, and the risk that significant U.S. deferred tax assets ($170 million at Dec 31, 2023) may not be realized[62][65] - Cybersecurity and IT risks are increasing due to expanding services, M&A, and emerging technologies, with potential for business disruptions, data breaches, and regulatory violations (e.g., GDPR, CCPA)[74][77] - The share repurchase program, while authorized for $500 million, does not obligate the company to repurchase shares and could increase stock price volatility or diminish cash reserves[78][79] - A material weakness in internal control over financial reporting identified in 2022 was remediated by Dec 31, 2023, but there's no assurance against future occurrences[81] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[89] Item 1C. Cybersecurity The company's cybersecurity program is managed by the CIO and CISO, aligned with ISO and NIST frameworks, and monitored by a 24/7 Global Security Operations Center - The Global Chief Information Officer (CIO) and Global Chief Information Security Officer (CISO) lead the company's cybersecurity strategy, policy, standards, architecture, and processes, including the Brink's Global Information Security (GIS) Program[89] - Cybersecurity risk management processes generally follow frameworks established by the International Organization for Standardization (ISO) and the U.S. National Institute of Standards and Technology (NIST)[90] - The company's Global Security Operations Center (GSOC) provides 24/7 monitoring, detection, and response capabilities for cybersecurity events and analyzes cyber threat intelligence[91] - As of December 31, 2023, management determined that none of the experienced cyberattacks, individually or in aggregate, had a material adverse effect on the business, financial condition, or results of operations[97] Item 2. Properties The company operates a global network of approximately 1,304 facilities and 16,385 vehicles, utilizing both owned and leased assets - As of December 31, 2023, the company operates approximately 1,304 facilities (1,141 leased, 163 owned) and 16,385 vehicles (7,666 leased, 8,719 owned) globally[102][103] Item 3. Legal Proceedings Information regarding legal proceedings is incorporated by reference from the consolidated financial statements - For a discussion of legal proceedings, refer to Note 23 to the consolidated financial statements[104] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[105] Information about Our Executive Officers This section lists the company's executive officers, their ages, positions, and tenure in their current roles as of February 29, 2024 Executive Officers as of February 29, 2024 | Name | Age | Positions and Offices Held | Held Since | | :--- | :--- | :--- | :--- | | Mark Eubanks | 51 | President and Chief Executive Officer | 2022 | | Kurt B. McMaken | 54 | Executive Vice President and Chief Financial Officer | 2022 | | Dominik Bossart | 49 | Executive Vice President and President, Latin America and Brink's Global Services | 2023 | | Elizabeth A. Galloway | 46 | Executive Vice President and Chief Human Resources Officer | 2023 | | Lindsay K. Blackwood | 47 | Executive Vice President, General Counsel and Corporate Secretary | 2021 | | James K. Parks | 55 | Executive Vice President and President, Europe, Middle East, Africa and Asia | 2023 | | Daniel J. Castillo | 55 | Executive Vice President and President, North America | 2022 | PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on the NYSE under 'BCO', with a new $500 million share repurchase program authorized through 2025 - The company's common stock trades on the New York Stock Exchange under the symbol 'BCO', and as of February 26, 2024, there were 1,004 shareholders of record[114] - On November 2, 2023, the Board authorized a new $500 million share repurchase program expiring December 31, 2025, replacing the prior $250 million program which expired on December 31, 2023, with approximately $28 million remaining[114][116][120] Common Stock Repurchases (Q4 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October 1 through Oct 31, 2023 | 306,508 | $70.71 | | November 1 through Nov 30, 2023 | 298,380 | $74.09 | | December 1 through Dec 31, 2023 | 239,494 | $85.08 | Five-Year Cumulative Total Return (Indexed to $100 at 12/31/2018) | Entity | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | The Brink's Company | $100.00 | $141.27 | $113.61 | $104.52 | $86.75 | $143.83 | | S&P MidCap 400 Index | $100.00 | $126.20 | $143.44 | $178.95 | $155.58 | $181.15 | | Peer Group | $100.00 | $138.62 | $154.49 | $204.70 | $198.74 | $246.80 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes financial results, highlighting revenue growth, operating profit improvement, and the significant impact of foreign currency fluctuations - The company's operations are segmented into North America, Latin America, Europe, and Rest of World, focusing on cash and valuables management, digital retail solutions (DRS), and ATM managed services (AMS)[134] - Revenues and earnings are typically higher in the second half of the year, especially the fourth quarter, due to increased economic activity during the holiday season[137] Consolidated Financial Highlights (GAAP & Non-GAAP) | Metric (in millions, except EPS) | 2023 (GAAP) | 2022 (GAAP) | % Change 2023 vs 2022 (GAAP) | 2023 (Non-GAAP) | 2022 (Non-GAAP) | % Change 2023 vs 2022 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $4,874.6 | $4,535.5 | 7% | $4,874.6 | $4,535.5 | 7% | | Operating profit | $425.2 | $361.3 | 18% | $615.0 | $550.3 | 12% | | Income from continuing operations (attributable to Brink's) | $86.0 | $173.5 | (50)% | $344.6 | $286.4 | 20% | | Diluted EPS from continuing operations | $1.83 | $3.63 | (50)% | $7.35 | $5.99 | 23% | - The GAAP effective income tax rate on continuing operations increased significantly to 59.0% in 2023 from 18.3% in 2022, primarily due to the geographical mix of earnings, adjustments to valuation allowances, and taxes on cross-border income[181][186][188] - Cash flows from operating activities increased by $222.5 million to $702.4 million in 2023, driven by higher operating profit, working capital changes, and lower income taxes paid[219] - Net cash used by investing activities decreased by $151.4 million to $179.8 million in 2023, mainly due to decreased payments for acquisitions, while capital expenditures increased by $20.1 million to $202.7 million[221][225] - Net cash used by financing activities was $207.1 million in 2023, a decrease of $452.3 million from 2022, primarily due to decreased net borrowings and increased share repurchases[228] - The company's net debt increased by $5 million to $2,520.9 million at the end of 2023, with debt as a percentage of capitalization rising to 87%[232][235] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate and foreign currency fluctuations, which it manages through monitoring and hedging instruments - The company is exposed to market risks from changes in interest rates and foreign currency exchange rates, which are monitored and managed as an integral part of its overall risk management program[316] - Floating rate debt, including the term loan and revolving credit facility, exposes the company to fluctuations in cash flows, and a hypothetical 10% increase in floating rates would increase cash outflows by approximately $7.6 million over a twelve-month period[318][319] - Foreign currency risk arises from operations in over 100 countries, with 70% of 2023 revenues from outside the U.S., and the company uses short-term foreign currency forward and swap contracts (notional value of $678.0 million at Dec 31, 2023) to hedge transactional risks[320][321] - Cross currency swaps are used to hedge net investments in euro and Hong Kong dollar functional currencies, with a total notional value of $400 million for euro swaps and $55 million for Hong Kong dollar swaps at Dec 31, 2023[321][526][529] APPLICATION OF CRITICAL ACCOUNTING POLICIES This section details critical accounting policies requiring significant judgment, including deferred tax assets, acquisitions, goodwill, and retirement benefits - The application of accounting principles requires significant assumptions, estimates, and judgments, particularly for goodwill, intangibles, retirement benefits, legal contingencies, and deferred tax assets[260][379] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements and supplementary data, accompanied by an unqualified audit opinion from KPMG LLP - KPMG LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[329][330] - The valuation of goodwill for the Europe reporting unit was identified as a critical audit matter due to the inherent uncertainty in revenue growth rates, forecasted operating margin, and the discount rate used in fair value estimation[333][334] Consolidated Balance Sheet Highlights (in millions) | Metric | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $6,601.8 | $6,366.0 | | Total Liabilities | $6,081.6 | $5,795.8 | | Total Equity | $520.2 | $570.2 | Consolidated Statements of Operations Highlights (in millions, except EPS) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $4,874.6 | $4,535.5 | $4,200.2 | | Operating Profit | $425.2 | $361.3 | $354.7 | | Net Income attributable to Brink's | $87.7 | $170.6 | $105.2 | | Diluted EPS attributable to Brink's | $1.87 | $3.57 | $2.10 | Consolidated Statements of Cash Flows Highlights (in millions) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $702.4 | $479.9 | $478.0 | | Net cash used by investing activities | $(179.8) | $(331.2) | $(454.7) | | Net cash (used) provided by financing activities | $(207.1) | $245.2 | $171.3 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[615] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[616] - Management concluded that, as of December 31, 2023, the company's internal control over financial reporting was effective, based on the COSO framework[618] - The material weakness in internal control over financial reporting identified in 2022, related to revenue and accounts receivable in certain North America locations, was fully remediated by December 31, 2023[619] Item 9B. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fourth quarter of 2023 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended December 31, 2023[625] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[625] PART III Item 10. Directors, Executive Officers and Corporate Governance The company has adopted a Code of Ethics, and further information on governance and directors is incorporated by reference from the 2024 Proxy Statement - The company has adopted a Code of Ethics applicable to all directors, officers, and employees, including the CEO, CFO, and Controller, which is posted on its website[627] - Information regarding executive officers is included in the report following Item 4, and other required information is incorporated by reference to the definitive 2024 Proxy Statement[627] Item 11. Executive Compensation Information on executive compensation is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by Item 11 is incorporated by reference to the Registrant's definitive 2024 Proxy Statement[628] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by Item 12 is incorporated by reference to the Registrant's definitive 2024 Proxy Statement[628] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by Item 13 is incorporated by reference to the Registrant's definitive 2024 Proxy Statement[629] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by Item 14 is incorporated by reference to the Registrant's definitive 2024 Proxy Statement[630] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists all financial statements and exhibits included in the Form 10-K filing - Item 15 includes all financial statements (pages 61–123), financial statement schedules (not applicable), and exhibits, with each exhibit listed as a previously filed document incorporated by reference[632][634] Item 16. Form 10-K Summary The company does not provide a Form 10-K Summary - There is no Form 10-K Summary[633] Exhibit Index This section provides a comprehensive list of all exhibits filed with the Form 10-K, including corporate documents, agreements, and certifications - The Exhibit Index lists various documents, including Stock Purchase Agreements, Articles of Incorporation, Bylaws, Senior Notes Indentures, Equity Incentive Plans, Offer Letters, and Certifications[635][636][637] - Exhibit 101 is the Interactive Data File (iXBRL) of the Annual Report on Form 10-K, including consolidated financial statements and notes, which is deemed not filed for certain liability purposes[638] Signatures The report is duly signed by the company's principal officers and a majority of its directors as of February 29, 2024 - The report was signed on behalf of The Brink's Company by Mark Eubanks (President and Chief Executive Officer), Kurt B. McMaken (Executive Vice President and Chief Financial Officer), Michael Sweeney (Controller), and various Directors on February 29, 2024[642][643]