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- Quarterly Report (10-Q)

Date : 04/27/2012 @ 6:03AM
Source : Edgar (US Regulatory)
Stock : Brinks CO (The) (BCO)
Quote : 24.85  -1.45 (-5.51%) @ 8:00PM
Brinks share price Chart

- Quarterly Report (10-Q)






UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________


Commission file number 001-09148


 
THE BRINK’S COMPANY
 
 
(Exact name of registrant as specified in its charter)
 


 
Virginia
 
54-1317776
 
 
(State or other jurisdiction of
 
(I.R.S. Employer
 
 
incorporation or organization)
 
Identification No.)
 


1801 Bayberry Court, Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)

(804) 289-9600
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   x No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes   x   No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):  Large Accelerated Filer   x   Accelerated Filer   ¨   Non-Accelerated Filer   ¨   Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   ¨   No   x

As of April 24, 2012, 47,260,169 shares of $1 par value common stock were outstanding.
 
 



 

 

Part I - Financial Information
Item 1.  Financial Statements

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Balance Sheets
(Unaudited)

   
March 31,
   
December 31,
 
(In millions)
 
2012
   
2011
 
             
ASSETS
           
             
Current assets:
           
Cash and cash equivalents
  $ 155.5       182.9  
Accounts receivable, net
    599.2       550.5  
Prepaid expenses and other
    140.1       134.1  
Deferred income taxes
    81.3       66.4  
Total current assets
    976.1       933.9  
                 
Property and equipment, net
    770.2       749.2  
Goodwill
    254.4       231.4  
Other intangibles
    64.1       63.8  
Deferred income taxes
    371.1       350.8  
Other
    78.9       77.1  
                 
Total assets
  $ 2,514.8       2,406.2  
                 
                 
LIABILITIES AND EQUITY
               
                 
Current liabilities:
               
Short-term borrowings
  $ 23.0       25.4  
Current maturities of long-term debt
    30.6       28.7  
Accounts payable
    148.7       159.5  
Accrued liabilities
    497.9       488.5  
Total current liabilities
    700.2       702.1  
                 
Long-term debt
    378.3       335.3  
Accrued pension costs
    359.8       369.6  
Retirement benefits other than pensions
    317.0       315.4  
Deferred income taxes
    33.6       23.0  
Other
    182.2       178.4  
Total liabilities
    1,971.1       1,923.8  
                 
Commitments and contingent liabilities (notes 3, 4 and 9)
               
                 
Equity:
               
The Brink’s Company (“Brink’s”) shareholders:
               
Common stock
    47.3       46.9  
Capital in excess of par value
    570.1       559.5  
Retained earnings
    601.7       589.5  
Accumulated other comprehensive loss
    (754.2 )     (787.9 )
Brink’s shareholders
    464.9       408.0  
                 
Noncontrolling interests
    78.8       74.4  
                 
Total equity
    543.7       482.4  
                 
Total liabilities and equity
  $ 2,514.8       2,406.2  
                 
See accompanying notes to consolidated financial statements.
 

 
2

 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Income
(Unaudited)

   
Three Months
 
   
Ended March 31,
 
(In millions, except per share amounts)
 
2012
   
2011
 
             
Revenues
  $ 966.8       913.3  
                 
Costs and expenses:
               
Cost of revenues
    787.0       757.6  
Selling, general and administrative expenses
    139.6       121.7  
Total costs and expenses
    926.6       879.3  
Other operating income (expense)
    2.2       3.0  
                 
Operating profit
    42.4       37.0  
                 
Interest expense
    (6.3 )     (5.8 )
Interest and other income (expense)
    3.9       4.4  
Income from continuing operations before tax
    40.0       35.6  
Provision (benefit) for income taxes
    16.2       11.4  
                 
Income from continuing operations
    23.8       24.2  
                 
Income from discontinued operations, net of tax
    -       1.1  
                 
Net income
    23.8       25.3  
Less net income attributable to noncontrolling interests
    (6.8 )     (5.3 )
                 
Net income attributable to Brink’s
    17.0       20.0  
                 
Income attributable to Brink’s:
               
Continuing operations
    17.0       18.9  
Discontinued operations
    -       1.1  
                 
Net income attributable to Brink’s
  $ 17.0       20.0  
                 
Earnings per share attributable to Brink’s common shareholders:
               
Basic:
               
Continuing operations
  $ 0.35       0.40  
Discontinued operations
    -       0.02  
Net income
    0.35       0.42  
                 
Diluted:
               
Continuing operations
  $ 0.35       0.39  
Discontinued operations
    -       0.02  
Net income
    0.35       0.41  
                 
Weighted-average shares
               
Basic
    48.1       47.6  
Diluted
    48.3       48.1  
                 
Cash dividends paid per common share
  $ 0.10       0.10  
                 
See accompanying notes to consolidated financial statements.
 

 
3

 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Comprehensive Income
(Unaudited)

 
   
Three Months
 
   
Ended March 31,
 
(In millions)
 
2012
   
2011
 
             
Net income
  $ 23.8       25.3  
                 
Other comprehensive income (loss):
               
     Benefit plan adjustments:
               
          Net experience gains (losses) arising during the quarter
    (6.0 )     -  
          Deferred profit sharing
    0.2       -  
          Tax benefit (provision) related to net experience gains and losses arising during the quarter
    1.7       -  
          Reclassification adjustment for amortization of prior net experience loss included in net income
    21.5       11.6  
          Tax benefit related to reclassification adjustment
    (7.9 )     (4.3 )
          Reclassification adjustment for amortization of prior service cost (credit) included in net income
    0.9       0.9  
          Tax provision (benefit) related to reclassification adjustment
    (0.3 )     (0.3 )
          Benefit plan adjustments, net of tax
    10.1       7.9  
                 
     Foreign currency:
               
          Translation adjustments arising during the quarter
    26.4       23.1  
          Foreign currency translation adjustments, net of tax
    26.4       23.1  
                 
     Available-for-sale securities:
               
          Unrealized net gains (losses) on available-for-sale securities arising during the quarter
    0.7       2.8  
          Tax benefit (provision) related to unrealized net gains and losses on available-for-sale securities
    (0.2 )     (0.2 )
          Reclassification adjustment for net (gains) losses realized in net income
    (2.1 )     (4.4 )
          Tax provision (benefit) related to reclassification adjustment
    0.8       0.9  
          Unrealized net gains (losses) on available-for-sale securities, net of tax
    (0.8 )     (0.9 )
                Other comprehensive income
    35.7       30.1  
                 
                      Comprehensive income
  $ 59.5       55.4  
                 
     Amounts attributable to Brink’s:
               
          Net income (loss)
  $ 17.0       20.0  
          Benefit plan adjustments
    10.1       7.9  
          Foreign currency
    24.4       23.1  
          Available-for-sale securities
    (0.8 )     (1.0 )
               Other comprehensive income
    33.7       30.0  
                     Comprehensive income attributable to Brink’s
    50.7       50.0  
                 
     Amounts attributable to noncontrolling interests:
               
          Net income
    6.8       5.3  
          Foreign currency
    2.0       -  
          Available-for-sale securities
    -       0.1  
               Other comprehensive income
    2.0       0.1  
                    Comprehensive income attributable to noncontrolling interests
    8.8       5.4  
                 
                    Comprehensive income
  $ 59.5       55.4  
                 
See accompanying notes to consolidated financial statements.
               

 
4

 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statement of Equity

Three Months ended March 31, 2012
(Unaudited)

   
Attributable to Brink’s
             
               
Capital
         
Accumulated
   
Attributable
       
               
in Excess
         
Other
   
to
       
         
Common
   
of Par
   
Retained
   
Comprehensive
   
Noncontrolling
       
(In millions)
 
Shares
   
Stock
   
Value
   
Earnings
   
Loss
   
Interests
   
Total
 
                                           
Balance as of December 31, 2011
    46.9     $ 46.9       559.5       589.5       (787.9 )     74.4       482.4  
                                                         
Net income
    -       -       -       17.0       -       6.8       23.8  
Other comprehensive income (loss)
    -       -       -       -       33.7       2.0       35.7  
Shares contributed to pension plan (see note 6)
    0.4       0.4       8.6       -       -       -       9.0  
Dividends:
                                                       
   Brink’s common shareholders ($0.10 per share)
    -       -       -       (4.7 )     -       -       (4.7 )
   Noncontrolling interests
    -       -       -       -       -       (4.6 )     (4.6 )
Share-based compensation:
                                                       
   Stock options and awards
    -       -       1.2       -       -       -       1.2  
   Other share-based benefit programs
    -       -       0.8       (0.1 )     -       -       0.7  
Capital contributions from noncontrolling interest
    -       -       -       -       -       0.2       0.2  
                                                         
Balance as of March 31, 2012
    47.3     $ 47.3       570.1       601.7       (754.2 )     78.8       543.7  
                                                         
See accompanying notes to consolidated financial statements
 

 
5

 

THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Cash Flows
(Unaudited)

   
Three Months
 
   
Ended March 31,
 
(In millions)
 
2012
   
2011
 
             
Cash flows from operating activities:
           
Net income
  $ 23.8       25.3  
Adjustments to reconcile net income to net cash provided (used) by operating activities:
               
Income from discontinued operations, net of tax
    -       (1.1 )
Depreciation and amortization
    42.2       38.8  
Stock compensation expense
    1.4       0.6  
Deferred income taxes
    (26.5 )     (7.5 )
Gains and losses:
               
Sales of available-for-sale securities
    (2.1 )     (4.4 )
Sales of property and other assets
    (0.2 )     0.4  
Acquisitions of controlling interest
    -       (0.4 )
Retirement benefit funding (more) less than expense:
               
Pension
    (3.8 )     3.6  
Other than pension
    5.3       2.5  
Other operating
    3.6       1.7  
Changes in operating assets and liabilities, net of effects of acquisitions:
               
Accounts receivable
    (32.5 )     (21.7 )
Accounts payable, income taxes payable and accrued liabilities
    (15.4 )     (27.3 )
Prepaid and other current assets
    (14.6 )     (21.3 )
Other
    2.4       3.9  
Discontinued operations
    -       1.2  
Net cash provided (used) by operating activities
    (16.4 )     (5.7 )
                 
Cash flows from investing activities:
               
Capital expenditures
    (34.3 )     (29.4 )
Acquisitions
    (16.4 )     (1.2 )
Available-for-sale securities:
               
Purchases
    -       (0.8 )
Sales
    11.5       11.8  
Cash proceeds from sale of property, equipment and investments
    0.4       0.7  
Other
    0.2       -  
Net cash used by investing activities
    (38.6 )     (18.9 )
                 
Cash flows from financing activities:
               
Borrowings (repayments) of debt:
               
Short-term debt
    (3.7 )     2.8  
Long-term revolving credit facilities
    43.9       (100.2 )
Issuance of private placement notes
    -       100.0  
Other long-term debt
    (6.9 )     (5.8 )
Debt financing costs
    (1.5 )     (0.3 )
Dividends to:
               
Shareholders of Brink’s
    (4.7 )     (4.7 )
Noncontrolling interests in subsidiaries
    (4.6 )     (1.0 )
Proceeds from exercise of stock options
    -       2.6  
Excess tax benefits associated with stock compensation
    -       0.8  
Minimum tax withholdings associated with stock compensation
    (0.3 )     (1.4 )
Net cash provided (used) by financing activities
    22.2       (7.2 )
Effect of exchange rate changes on cash
    5.4       4.1  
Cash and cash equivalents:
               
Increase (decrease)
    (27.4 )     (27.7 )
Balance at beginning of period
    182.9       183.0  
Balance at end of period
  $ 155.5       155.3  
                 
See accompanying notes to consolidated financial statements
 

 
6

 

THE BRINK’S COMPANY
and subsidiaries
 
Notes to Consolidated Financial Statements
(Unaudited)

Note 1 – Basis of presentation

The Brink’s Company (along with its subsidiaries, “Brink’s” or “we”) has two reportable segments:

·              International
·              North America

Our unaudited 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 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 accruals) 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.  For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2011.

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 consolidated financial statements. Actual results could differ materially from these estimates.  The most significant estimates are related to goodwill and other long-lived assets, pension and other retirement benefit obligations, legal contingencies, foreign currency translation and deferred tax assets.

Foreign Currency Translation
Our 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.  Non-monetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.

Venezuela
Our Venezuelan operations accounted for $74.3 million or 8% of total Brink’s revenues in the three months ended March 31, 2012.  Our operating margins in Venezuela have varied depending on the mix of business during any year and have been up to three times our overall international segment operating margin rate.

The economy in Venezuela has had significant inflation in the last several years.  Beginning January 1, 2010, we designated Venezuela’s economy as highly inflationary for accounting purposes, and we consolidated our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies. In June 2010, the Venezuelan government established a new exchange process that requires each transaction be approved by the government’s central bank (the “SITME” rate).  On a daily basis, the central bank publishes ranges of prices at which it may approve transactions to purchase dollar-denominated bonds, resulting in an exchange rate range of 4.3 to 5.3 bolivar fuertes to the U.S. dollar. To date, approved transactions have been at the upper end of the range.  To the extent we need to obtain U.S. dollars, we currently expect our U.S. dollar-denominated transactions to be settled at a rate of 5.3 bolivar fuertes to the U.S. dollar.  We have used this rate to remeasure our bolivar fuerte-denominated monetary assets and liabilities into U.S. dollars at March 31, 2012, resulting in bolivar fuerte-denominated net monetary assets at March 31, 2012, of $68.8 million.  For the three months ended March 31, 2012, we did not recognize any remeasurement gains or losses as the SITME rate did not change.

 
7

 


Under the SITME process, approved transactions may not exceed $350,000 per legal entity per month.  We have obtained sufficient U.S. dollars to purchase imported supplies and fixed assets to operate our business in Venezuela but our continued ability to do this is less certain.  Although we believe the repatriation of cash invested in Venezuela will be limited in the future, we have been successful at converting some bolivar fuertes to U.S. dollars through other legal channels, at a rate not as favorable as the SITME rate.

At March 31, 2012, our Venezuelan subsidiaries held $1.2 million of cash and short-term investments denominated in U.S. dollars and $20.9 million of cash denominated in bolivar fuertes.  On an equity-method basis, we had investments in our Venezuelan operations of $84.7 million at March 31, 2012.

Recently Adopted Accounting Standards
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS .  ASU 2011-04 changes how fair value guidance is applied in certain circumstances and expands the disclosure requirements around fair value measurements.  For entities with fair value measurements classified as Level 3, required disclosures include a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, a description of the valuation processes in place, a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs, and quantitative disclosures about unobservable inputs used in fair value measurements other than those valuations that use net asset value as a practical expedient.  We adopted the guidance effective January 1, 2012.  The adoption of this guidance did not have a material effect on our financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income .  For annual periods, an entity has the option to present the components of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  For interim periods, total comprehensive income is required to be disclosed either below net income on the income statement or as a separate statement. The ASU does not change the items that must be reported as other comprehensive income.  Whether presenting two separate statements or one continuous statement in annual periods, the ASU required entities to present reclassifications from other comprehensive income in the statement reporting net income.  In December 2011, however, the FASB deferred this requirement when it issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 , which has the same effective date as ASU 2011-05.  Companies must continue to disclose reclassifications from other comprehensive income on the statement that reports other comprehensive income, or in the notes to the financial statements.  We adopted this guidance effective January 1, 2012, and included a statement of comprehensive income in our interim financial statements.  The adoption of this guidance did not have a material effect on our financial statements.

 
8

 

Note 2 – Segment information

We identify our operating segments based on how resources are allocated and operating decisions are made.  Management evaluates performance and allocates resources based on operating profit or loss, excluding non-segment expenses.  Under the criteria set forth in FASB ASC 280, Segment Reporting , we have four geographic operating segments, which are aggregated into two reportable segments: International and North America.  We currently serve customers in more than 100 countries, including approximately 50 countries where we operate subsidiaries.

The primary services of the reportable segments include:
·  
Cash-in-transit (“CIT”) – armored vehicle transportation
·  
Automated teller machine (“ATM”) – replenishment and servicing, network infrastructure services
·  
Global Services – transportation of valuables globally
·  
Cash Logistics – supply chain management of cash
·  
Payment Services – consumers pay utility and other bills at payment locations
·  
Guarding Services – including airport security


             
   
Three Months
 
   
Ended March 31,
 
(In millions)
 
2012
   
2011
 
             
Revenues:
           
International
  $ 730.4       674.3  
North America
    236.4       239.0  
Revenues
  $ 966.8       913.3  
                 
                 
   
Three Months
 
   
Ended March 31,
 
(In millions)
    2012       2011  
                 
Operating profit:
               
International
  $ 60.9       45.2  
North America
    5.8       6.8  
Segment operating profit
    66.7       52.0  
Non-segment
    (24.3 )     (15.0 )
Operating profit
  $ 42.4       37.0  
                 

 
9

 

Note 3 – 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 (credit) for our pension plans were as follows:

   
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(In millions)
 
2012
   
2011
   
2012
   
2011
   
2012
   
2011
 
                                     
Three months ended March 31,
                                   
                                     
Service cost
  $ -       -       2.6       2.8       2.6       2.8  
Interest cost on projected benefit obligation
    11.0       11.5       4.1       4.3       15.1       15.8  
Return on assets – expected
    (15.1 )     (16.3 )     (3.0 )     (3.1 )     (18.1 )     (19.4 )
Amortization of (gains) losses
    10.0       7.0       1.1       0.8       11.1       7.8  
Amortization of prior service cost
    -       -       0.4       0.4       0.4       0.4  
Settlement loss
    4.0       -       0.8       -       4.8       -  
Net periodic pension cost (credit)
  $ 9.9       2.2       6.0       5.2       15.9       7.4  

In the first quarter of 2012, we made a $9 million stock contribution to our primary U.S. pension plan.  We are required to contribute an additional $22.5 million to the primary U.S. pension plan during the remainder of 2012.  We may decide to issue additional shares of Brink’s common stock to satisfy future contributions to our primary U.S. pension plan.
 
We recognized a $4.0 million settlement loss in the first quarter of 2012 related to the payment of pension benefits.
 
Retirement benefits other than pensions
We provide retirement healthcare benefits for eligible current and former U.S. and Canadian employees, including former employees of our former U.S. coal operation.  Retirement benefits related to our former coal operation 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:

   
UMWA plans
   
Black lung and other plans
   
Total
 
(In millions)
 
2012
   
2011
   
2012
   
2011
   
2012
   
2011
 
                                     
Three months ended March 31,
                                   
                                     
Interest cost on accumulated postretirement benefit obligations
  $ 5.6       6.1       0.8       0.7       6.4       6.8  
Return on assets – expected
    (5.3 )     (6.4 )     -       -       (5.3 )     (6.4 )
Amortization of (gains) losses
    5.4       3.7       0.2       0.1       5.6       3.8  
Amortization of prior service cost
    -       -       0.5       0.5       0.5       0.5  
Net periodic pension cost
  $ 5.7       3.4       1.5       1.3       7.2       4.7  

 
10

 

Note 4 – Income taxes

     
Three Months
 
     
Ended March 31,
 
     
2012 
 
2011 
 
             
Continuing operations
           
Provision for income taxes (in millions)
 
$
 16.2 
 
 11.4 
 
Effective tax rate
   
 40.5 
%
 32.0 
%

2012 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first quarter of 2012   was higher than the 35% U.S. statutory tax rate largely due to the geographical mix of earnings, withholding taxes, and the characterization of a French business tax as an income tax.

2011 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first quarter of 2011   was lower than the 35% U.S. statutory tax rate largely due to a $2.1 million benefit for legislation enacted in Greece and audit settlements, partially offset by higher taxes due to the geographical mix of earnings and the characterization of a French business tax as an income tax.

Note 5 – Share-based compensation plans
 

Nonvested Share Activity
                       
   
Number of Shares
   
Weighted-Average
 
   
2005
   
Directors’
         
Grant-Date
 
(in thousands of shares, except per share amounts)
 
Plan
   
Plan
   
Total
   
Fair Value (a)
 
                         
Balance as of December 31, 2011
    299.6       15.8       315.4     $ 25.99  
Granted
    16.6       -       16.6       26.74  
Cancelled awards
    (0.1 )     -       (0.1 )     26.40  
Vested
    (18.7 )     -       (18.7 )     27.66  
Balance as of March 31, 2012
    297.4       15.8       313.2     $ 25.93  
                                 
(a)  
Fair value is measured at the date of grant based on the average of the high and low per share quoted sales price of Brink’s common stock, adjusted for a discount on units that do not receive or accrue dividends.

Note 6 – Capital stock

Shelf Registration of Common Stock
On February 28, 2012, we filed a shelf registration statement under Form S-3ASR with the SEC for $150 million of our common stock.  Under this shelf registration, we are able to issue up to $150 million of new common stock.  On March 6, 2012, we issued 361,446 shares of our common stock and contributed the shares to our primary U.S. pension plan.  Sales of these shares by the plan are covered under our shelf registration statement.  The common stock was valued for purposes of the contribution at $24.90 per share, or $9 million in the aggregate, which reflected a 2.4% discount from the $25.51 per share closing share price of our common stock on March 5, 2012.

Shares Used to Calculate Earnings per Share

   
Three Months
 
   
Ended March 31,
 
(In millions)
 
2012
   
2011
 
             
Weighted-average shares:
           
Basic  (a)
    48.1       47.6  
Effect of dilutive stock options and awards
    0.2       0.5  
Diluted
    48.3       48.1  
                 
Antidilutive stock options and awards excluded from denominator
    2.6       2.2  
                 
(a)
We have deferred compensation plans for directors and certain of our employees.  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 units credited to employees and directors under the deferred compensation plans.  Accordingly, included in basic shares are 1.2 million weighted-average units in the three months ended March 31, 2012, and 1.1 million weighted-average units in the three months ended March 31, 2011.
 

 
11

 

Note 7 – Supplemental cash flow information

   
Three Months
 
   
Ended March 31,
 
(In millions)
 
2012
   
2011
 
             
Cash paid for:
           
Interest
  $ 6.1       4.4  
Income taxes
    18.9       19.4  

Non-cash Investing and Financing Activities
 
We acquired $5.1 million of armored vehicles, CompuSafe® units and other equipment under capital lease arrangements in the first three months of 2012, as compared to $14.0 million in the first three months of 2011.
 
We contributed $9 million of Brink’s common stock to our primary U.S. pension plan in the first quarter of 2012.
 
Note 8 – Fair value of financial instruments

Investments in Available-for-sale Securities
We have investments in mutual funds designated as available-for-sale securities that are carried at fair value in the financial statements.  For these investments, fair value was estimated based on quoted prices categorized as a Level 1 valuation.  Valuation levels were defined in our 2011 Form 10-K.

   
March 31,
   
December 31,
 
(In millions)
 
2012
   
2011
 
             
Mutual Funds
           
Cost
  $ 7.0       16.9  
Gross unrealized gains
    1.8       3.1  
Fair value
  $ 8.8       20.0  

Fixed-Rate Debt
The fair value estimate of our obligation related to the fixed-rate Dominion Terminal Associates (“DTA”) bonds is based on price information observed in a less-active market, which we have categorized as a Level 2 valuation.

The fair value estimate of our unsecured private-placement notes is based on the present value of future cash flows, discounted at rates for similar instruments at the valuation date, which we have categorized as a Level 3 valuation.

The fair value and carrying value of our DTA bonds and our unsecured notes are as follows:

   
March 31,
   
December 31,
 
(In millions)
 
2012
   
2011
 
             
DTA bonds
           
Carrying value
  $ 43.2       43.2  
Fair value
    44.2       44.0  
                 
Unsecured notes issued in a private placement
               
Carrying value
    100.0       100.0  
Fair value
    106.3       106.4  

Other Financial Instruments
Other financial instruments include cash and cash equivalents, short-term fixed rate deposits, accounts receivable, floating rate debt, accounts payable and accrued liabilities.  The financial statement carrying amounts of these items approximate the fair value.

The fair value of outstanding foreign currency contracts was not significant.  There were no transfers in or out of any of the levels of the valuation hierarchy in the first three months of 2012.




 
12

 

Note 9 – Commitments and contingent matters

Operating leases
We have made residual value guarantees of approximately $25.0 million at March 31, 2012, related to operating leases, principally for trucks and other vehicles.

Bankruptcy of Brink’s Belgium
Our former cash-in-transit subsidiary in Belgium (Brink’s Belgium) filed for bankruptcy in November 2010 after a restructuring plan was rejected by local union employees and was placed into bankruptcy on February 2, 2011.  We continue to operate our Global Services unit in Belgium, which provides secure transport of diamonds, jewelry, precious metals, banknotes and other commodities. 

Legal Dispute.    In December 2010, the court-appointed provisional administrators of Brink’s Belgium filed a claim for €20 million against a subsidiary of Brink’s.  In June 2011, the Brink’s subsidiary entered into a settlement agreement related to this claim.  Under the terms of the settlement agreement, the Brink’s subsidiary agreed to contribute, upon the satisfaction of certain conditions, €7 million toward social payments to former Brink’s Belgium employees in exchange for the bankruptcy receivers requesting withdrawal of the pending litigation and agreeing not to file additional claims. The conditions of the settlement agreement included a release from liability by affected employees, the Belgian tax authority and the Belgian social security authority.  After these conditions were satisfied, the settlement was finalized in September 2011, the request to withdraw the litigation was accepted by the court in March 2012 and the case was dismissed.  We recorded a pretax charge of €7 million (approximately $10 million) in the second quarter of 2011 related to this claim.

Other
We are involved in various other lawsuits and claims in the ordinary course of business.  We are not able to estimate the range of losses for some of these matters.  We have recorded accruals for losses that are considered probable and reasonably estimable.  We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our liquidity, financial position or results of operations.

 
13

 


THE BRINK’S COMPANY
and subsidiaries

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world.  These services include:
·  
armored car transportation, which we refer to as cash in transit (“CIT”)
·  
automated teller machine (“ATM”) -  replenishment and servicing, network infrastructure services
·  
arranging secure transportation of valuables over long distances and around the world (“Global Services”)
·  
currency deposit processing and cash management services.  Cash management services include cash logistics services (“Cash Logistics”), deploying and servicing safes and safe control devices (e.g., our patented CompuSafe® service), coin sorting and wrapping, integrated check and cash processing services (“Virtual Vault Services”)
·  
providing bill payment acceptance and processing services to utility companies and other billers (“Payment Services”)
·  
security and guarding services (including airport security)

We have four geographic operating segments:  Latin America; Europe, Middle East, and Africa (“EMEA”); Asia Pacific; and North America, which are aggregated into two reportable segments: International and North America.

 
14

 

RESULTS OF OPERATIONS

Consolidated Review

Non-GAAP Results
Non-GAAP results described in this filing are financial measures that are not required by, or presented in accordance with U.S. generally accepted accounting principles (“GAAP”).  The purpose of the non-GAAP results is to report financial information without certain income and expense items and to adjust the quarterly non-GAAP tax rates so that the non-GAAP tax rate in each of the quarters is equal to the full-year non-GAAP tax rate.  For 2012, a forecasted full-year tax rate is used.  The full year non-GAAP tax rate in both years excludes certain pretax and tax income and expense amounts.  The non-GAAP information provides information to assist comparability and estimates of future performance.  Brink’s believes these measures are helpful in assessing operations and estimating future results and enable period-to-period comparability of financial performance.  Non-GAAP results should not be considered as an alternative to revenue, income or earnings per share amounts determined in accordance with GAAP and should be read in conjunction with their GAAP counterparts.  The adjustments are described in detail and are reconciled to our GAAP results on page 25.

   
Three months
       
   
Ended March 31,
   
%
 
(In millions, except per share amounts)
 
2012
   
2011
   
Change
 
                   
GAAP
                 
Revenues
  $ 966.8       913.3       6  
Segment operating profit (a)
    66.7       52.0       28  
Non-segment expense
    (24.3 )     (15.0 )     62  
Operating profit
    42.4       37.0       15  
Income from continuing operations (b)
    17.0       18.9       (10 )
Diluted EPS from continuing operations (b)
    0.35       0.39       (10 )
                         
Non-GAAP (c)
                       
Revenues
  $ 966.8       913.3       6  
Segment operating profit (a)
    69.7       52.7       32  
Non-segment expense
    (9.6 )     (9.2 )     4  
Operating profit
    60.1       43.5       38  
Income from continuing operations (b)
    27.9       18.8       48  
Diluted EPS from continuing operations (b)
    0.58       0.39       49  
                         
Amounts may not add due to rounding.
(a)  
Segment operating profit is a non-GAAP measure when presented in any context other than prescribed by ASC Topic 280, Segment Reporting .  The tables on page 17 reconcile the measurement to operating profit, a GAAP measure.  Disclosure of total segment operating profit enables investors to assess the total operating performance of Brink’s excluding non-segment income and expense.  Forward-looking estimates related to total segment operating profit and non-segment income (expense) for 2012 are provided on page 24.
(b)  
Amounts reported in this table are attributable to the shareholders of Brink’s and exclude earnings related to noncontrolling interests.
(c)  
Non-GAAP earnings information is contained on page 25, including reconciliation to amounts reported under GAAP.

Organic Growth
Organic growth represents the change in revenues or operating profit between the current and prior period, excluding the effect of the following items: acquisitions and dispositions, changes in currency exchange rates and the remeasurement of net monetary assets in Venezuela under highly inflationary accounting.

 
15

 


Overview

GAAP
Our revenues increased $54 million or 6% and our operating profit increased $5 million or 15% in 2012.  Revenues increased due to organic growth in our International segment, partially offset by unfavorable changes in currency exchange rates.  Operating profit increased primarily due to organic profit improvement in our International segment ($18 million), partially offset by increased U.S. retirement plan expenses ($10 million) and the negative impact of changes in currency exchange rates ($2 million).

Our income from continuing operations in 2012 decreased 10% compared to 2011 primarily due to higher tax expense caused by a $2 million tax benefit in 2011 related to enacted tax legislation and audit settlements, as well as higher income attributable to noncontrolling interests ($2 million).  These negative factors were partially offset by the higher operating profit mentioned above.

Our earnings per share from continuing operations was $0.35, down from $0.39 in 2011.

Non-GAAP
Non-GAAP results include the following adjustments:
   
Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
             
GAAP Diluted EPS
  $ 0.35       0.39  
     Exclude U.S. retirement plan expenses
    0.22       0.09  
     Exclude gains on asset sales and acquisitions
    (0.02 )     (0.06 )
     Exclude employee benefit settlement charge
    0.01       -  
     Adjust quarterly tax rate to full-year average rate
    0.02       (0.03 )
Non-GAAP Diluted EPS
  $ 0.58       0.39  
                 
Amounts may not add due to rounding.  Non-GAAP results are reconciled in more detail to the applicable GAAP results on page 25.

The analysis of non-GAAP revenues is the same as the analysis of GAAP revenues.  Operating profit increased $17 million or 38% in 2012 primarily due to organic improvement in our International segment ($18 million) partially offset by the negative impact of changes in currency exchange rates ($2 million).

Our income from continuing operations in 2012 increased 48% primarily due to higher operating profit, partially offset by higher income attributable to noncontrolling interests ($2 million).

Our earnings per share from continuing operations was $0.58, up from $0.39 in 2011.

Outlook for 2012

GAAP
Our organic revenue growth rate for 2012 is expected to be in the 5% to 8% range, and our operating segment margin is expected to be approximately 7%.  Our assumptions behind the annual segment margin include continued strength in Latin America and modestly better results in Europe. Our International organic revenue growth rate for 2012 is expected to be in the 7% to 10% range, and our International segment margin is expected to be in the 7.0% to 8.0% range.  Our North America organic revenue growth rate for 2012 is expected to be flat, and our North America segment margin is expected to be in the 3.6% to 4.6% range.

Non-GAAP
Our outlook for non-GAAP revenues is the same as our outlook for GAAP revenues.

Our operating segment margin is expected to be approximately 7%. Our assumptions behind the annual segment margin include continued strength in Latin America and modestly better results in Europe. Our International segment margin is expected to be in the 7.0% to 8.0% range and our North America segment margin is expected to be in the 4.5% to 5.5% range.

See page 24 for a summary of our 2012 Outlook.

 
16

 

Segment Operating Results
Segment Review
First Quarter 2012 versus First Quarter 2011

GAAP
         
Organic
   
Acquisitions /
   
Currency
         
% Change
 
(In millions)
 
1Q '11
   
Change
   
Dispositions (b)
   
(c)
   
1Q '12
   
Total
   
Organic
 
Revenues:
                                         
International:
                                         
Latin America
  $ 332.3       68.8       -       (14.8 )     386.3       16       21  
EMEA
    307.1       11.9       0.3       (12.8 )     306.5       -       4  
Asia Pacific
    34.9       3.1       -       (0.4 )     37.6       8       9  
International
    674.3       83.8       0.3       (28.0 )     730.4       8       12  
North America
    239.0       (0.4 )     (1.3 )     (0.9 )     236.4       (1 )     -  
Total
  $ 913.3       83.4       (1.0 )     (28.9 )     966.8       6       9  
Operating profit:
                                                       
International
  $ 45.2       17.6       -       (1.9 )     60.9       35       39  
North America
    6.8       (1.1 )     0.1       -       5.8       (15 )     (16 )
Segment operating profit
    52.0       16.5       0.1       (1.9 )     66.7       28       32  
Non-segment (a)
    (15.0 )     (9.3 )     -       -       (24.3 )     62       62  
Total
  $ 37.0       7.2       0.1       (1.9 )     42.4       15       19  
Segment operating margin:
                                                       
International
    6.7 %                             8.3 %                
North America
    2.8 %                             2.5 %                
Segment operating margin
    5.7 %                             6.9 %                
                                                         

Non-GAAP
                                         
         
Organic
   
Acquisitions /
   
Currency
         
% Change
 
(In millions)
 
1Q '11
   
Change
   
Dispositions (b)
   
(c)
   
1Q '12
   
Total
   
Organic
 
Revenues:
                                         
International:
                                         
Latin America
  $ 332.3       68.8       -       (14.8 )     386.3       16       21  
EMEA
    307.1       11.9       0.3       (12.8 )     306.5       -       4  
Asia Pacific
    34.9       3.1       -       (0.4 )     37.6       8       9  
International
    674.3       83.8       0.3       (28.0 )     730.4       8       12  
North America
    239.0       (0.4 )     (1.3 )     (0.9 )     236.4       (1 )     -  
Total
  $ 913.3       83.4       (1.0 )     (28.9 )     966.8       6       9  
Operating profit:
                                                       
International
  $ 45.2       18.4       -       (1.9 )     61.7       37       41  
North America
    7.5       0.4       0.1       -       8.0       7       5  
Segment operating profit
    52.7       18.8       0.1       (1.9 )     69.7       32       36  
Non-segment  (a)
    (9.2 )     (0.4 )     -       -       (9.6 )     4       4  
Total
  $ 43.5       18.4       0.1       (1.9 )     60.1       38       42  
Segment operating margin:
                                                       
International
    6.7 %                             8.4 %                
North America
    3.1 %                             3.4 %                
Segment operating margin
    5.8 %                             7.2 %                
                                                         
(a)  
Includes income and expense not allocated to segments (see page 20 for details).
(b)  
Includes operating results and gains/losses on acquisitions, sales and exits of businesses.
(c)   
Revenue and Segment Operating Profit:   The “Currency” amount in the table is the summation of the monthly currency changes, plus (minus) the U.S. dollar amount of remeasurement currency gains (losses) of bolivar fuerte-denominated net monetary assets recorded under highly inflationary accounting rules related to the Venezuelan operations.  The monthly currency change is equal to the Revenue or Operating Profit for the month in local currency, on a country-by-country basis, multiplied by the difference in rates used to translate the current period amounts to U.S. dollars versus the translation rates used in the year-ago month.  The functional currency in Venezuela is the U.S. dollar under highly inflationary accounting rules.  Remeasurement gains and losses under these rules are recorded in U.S. dollars but these gains and losses are not recorded in local currency.  Local currency Revenue and Operating Profit used in the calculation of monthly currency change for Venezuela have been derived from the U.S. dollar results of the Venezuelan operations under U.S. GAAP (excluding remeasurement gains and losses) using current period currency exchange rates.

 
Amounts may not add due to rounding.

 
17

 


Segment Review
First Quarter 2012 versus First Quarter 2011

Consolidated Segment Review

GAAP
Revenue increased 6% to $967 million due primarily to organic growth in our International segment partially offset by unfavorable changes in currency exchange rates.  Organic revenue growth of 9% was mainly due to improvements in our International segment.

Segment operating profit increased 28% ($15 million) reflecting improvement in Latin America and Europe, which more than offset a slight decline in North America.

Non-GAAP
The analysis of non-GAAP revenue is the same as the analysis of GAAP revenue.

Segment operating profit increased 32% ($17 million) reflecting improvement in Latin America.


International Segment Review

Overview
GAAP
Revenues in the first quarter of 2012 for our International segment were 8% higher ($56 million) than the same period of 2011 as:
·  
revenues in Latin America were 16% higher ($54 million)
·  
revenues in EMEA were flat, and
·  
revenues in Asia Pacific were 8% higher ($3 million).

Operating profit in our International segment increased 35% ($16 million) due to improved profits in Latin America.

Non-GAAP
The analysis of non-GAAP International segment revenues is the same as the analysis of GAAP International segment revenues.

Operating profit in our International segment increased 37% ($17 million) due to improved profits in Latin America.

Latin America
GAAP
Revenue in Latin America increased 16% ($54 million) due to:
·  
organic growth of 21% ($69 million) driven by inflation-based price increases across the region, partially offset by
·  
an unfavorable currency impact ($15 million).

Latin America operating profit increased 55% due to:
·  
60% organic growth, primarily in Mexico, Venezuela, Argentina and Brazil,
·  
a 2011 tax on equity in Colombia which did not recur in 2012, and
·  
higher labor agreement expenses in the prior year quarter;
partially offset by unfavorable currency impact ($2 million).

Non-GAAP
The analysis of Latin America non-GAAP revenues is the same as the analysis of GAAP revenues.

Latin America operating profit increased 58% due primarily to:
·  
63% organic growth, primarily in Mexico, Venezuela, Argentina and Brazil,
·  
a 2011 tax on equity in Colombia which did not recur in 2012, and
·  
higher labor agreement expenses in the prior year quarter;
partially offset by unfavorable currency impact ($2 million).


 
18

 

EMEA
EMEA revenues remained flat during the 2012 quarter compared to the 2011 quarter.  Unfavorable currency impact ($13 million) was offset by organic revenue growth of 4% ($12 million).  Organic growth was driven by increased volumes in France, the Netherlands, emerging markets and Global Services, partially offset by a special project in Germany in 2011 that did not reoccur in 2012.

EMEA operating profit increased slightly due primarily to organic improvements in France, the Netherlands and emerging markets partially offset by a special project in Germany in 2011 that did not recur in 2012.

Asia Pacific
Revenue in Asia Pacific increased 8% ($3 million) due mainly to organic growth in China and India.

Operating profit decreased slightly.

North America Segment

GAAP
Revenues in North America decreased 1% ($3 million) due to unfavorable currency impact ($1 million) and the loss of revenue associated with the sale of the U.S. document destruction business in 2011 ($1 million).  Revenues in North America remained flat on an organic basis.

Operating profit decreased $1 million due to increased U.S. retirement charges ($2 million) and lower CIT demand and continued pricing pressure in the U.S.

Non-GAAP
The analysis of North America non-GAAP revenues is the same as the analysis of North America GAAP revenues

Operating profit remained flat on lower CIT demand and continued pricing pressure in the U.S.


Most of the armored vehicles used by our U.S. operations are accounted for as operating leases.  The cost related to these leases is recognized as rental expense in the Consolidated Statements of Income.  Since March 2009, we have acquired armored vehicles in the U.S. either by purchasing or by leasing under agreements that we have accounted for as capital leases.  We currently expect to continue acquiring new vehicles in the U.S. with capital leases. The cost of vehicles under capital lease is recognized as depreciation and interest expense.  Because of the shift in the way we acquire vehicles in the U.S., our depreciation and interest related to the U.S. fleet is higher and our rental expense is lower compared to earlier periods and we expect this trend to continue.



 
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Non-segment Income (Expense)

GAAP
 
Three Months
       
   
Ended March 31,
   
%
 
(In millions)
 
2012
   
2011
   
change
 
                   
General and administrative
  $ (10.2 )     (9.5 )     7  
Retirement costs (primarily former operations)
    (14.7 )     (6.2 )  
unfav
 
Royalty income
    0.6       0.3       100  
Business acquisitions and dispositions –
                       
remeasurement of previously held ownership interest to fair value
    -       0.4       (100 )
Non-segment income (expense)
  $ (24.3 )     (15.0 )     62  

Non-segment expenses in the first quarter of 2012 were $9 million higher than 2011 mainly due to increased retirement costs ($9 million).  Retirement costs in the first quarter of 2012 included a $4 million settlement loss related to the payment of pension benefits.

Outlook for 2012
We believe that non-segment expenses will be approximately $89 million in 2012, up from $60 million in 2011 because of an increase in costs related to retirement plans.  See page 24 for a summary of our 2012 Outlook.


Non-GAAP
 
Three Months
       
   
Ended March 31,
   
%
 
(In millions)
 
2012
   
2011
   
change
 
                   
General and administrative
  $ (10.2 )     (9.5 )     7  
Royalty income
    0.6       0.3       100  
Non-segment income (expense)
  $ (9.6 )     (9.2 )     4  

Non-segment expenses on a non-GAAP basis in the first quarter of 2012 were consistent with the prior year quarter.

Outlook for 2012
We estimate that non-segment expenses on a non-GAAP basis will be approximately $41 million in 2012, which is the same as 2011.  See page 24 for a summary of our 2012 Outlook.

 
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Foreign Operations

We currently serve customers in more than 100 countries, including approximately 50 countries where we operate subsidiaries.

We are subject to risks customarily associated with doing business in foreign countries, including labor and economic conditions, political instability, controls on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive action by local governments.  Changes in the political or economic environments in the countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.  The future effects, if any, of these risks are unknown.

Our international operations conduct a majority of their business in local currencies. Because our financial results are reported in U.S. dollars, they are affected by changes in the value of various local currencies in relation to the U.S. dollar. Brink’s Venezuela is subject to local laws and regulatory interpretations that determine the exchange rate at which repatriating dividends may be converted and Brink’s Argentina may in the future be subject to similar restrictions.
 
 
From time to time, we use foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies.  At March 31, 2012, the notional value of our outstanding foreign currency contracts was $38.1 million with average contract maturities of one month. The foreign currency contracts primarily offset exposures in the Mexican peso.  These contracts are not designated as hedges for accounting purposes, and accordingly, changes in their fair value are recorded immediately in earnings.  We recognized losses of $0.1 million on our foreign currency contracts in the first quarter of 2012.  At March 31, 2012, the fair value of these outstanding contracts was an asset of $0.2 million which was included in prepaid and other on the consolidated balance sheet.

Venezuelan operations
Our Venezuelan operations constitute a material portion of our overall consolidated operations, and accounted for $74.3 million or 8% of total Brink’s revenues in the three months ended March 31, 2012.  Our operating margins in Venezuela have varied depending on the mix of business during any year and have been up to three times our overall International segment operating margin rate.

Beginning January 1, 2010, we designated Venezuela’s economy as highly inflationary for accounting purposes, and we consolidated our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies.

The Venezuelan government has established an exchange process that requires each transaction be approved by the government’s central bank (the “SITME” rate).  On a daily basis, the central bank publishes ranges of prices at which it may approve transactions to purchase dollar-denominated bonds, resulting in an exchange rate range of 4.3 to 5.3 bolivar fuertes to the U.S. dollar. To date, approved transactions have been at the upper end of the range.  To the extent we need to obtain U.S. dollars, we currently expect our U.S. dollar-denominated transactions to be settled at a rate of 5.3 bolivar fuertes to the U.S. dollar.  We have used this rate to remeasure our bolivar fuerte-denominated monetary assets and liabilities into U.S. dollars at March 31, 2012, resulting in bolivar fuerte-denominated net monetary assets at March 31, 2012, of $68.8 million.  For the three months ended March 31, 2012, we did not recognize any remeasurement gains or losses as the SITME rate did not change.

Under the SITME process, approved transactions may not exceed $350,000 per legal entity per month.  We have obtained sufficient U.S. dollars to purchase imported supplies and fixed assets to operate our business in Venezuela but our continued ability to do this is less certain.  We believe the repatriation of cash invested in Venezuela will be limited in the future.  We have also been successful at converting some bolivar fuertes to U.S. dollars through other legal channels, at a rate not as favorable as the SITME rate.

At March 31, 2012, our Venezuelan subsidiaries held $1.2 million of cash and short-term investments denominated in U.S. dollars and $20.9 million of cash denominated in bolivar fuertes.  On an equity-method basis, we had investments in our Venezuelan operations of $84.7 million at March 31, 2012.