Brinks Co (BCO) 2010 Q1 法說會逐字稿

Greetings. And welcome to The Brink's Company first-quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions.) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ed Cunningham, Director of Investor Relations for The Brink's Company. Thank you, Mr. Cunningham. You may now begin.

Thank you, Shea. Good morning and thanks for joining today's call, which will proceed as follows. CEO Michael Dan will provide an overview of financial results, segment operating performance, strategy, and outlook. Then CFO Joe Dziedzic will make some follow-up comments before we open it up for questions.

An earnings release was issued this morning and is available on our Web site at brinkscompany.com. Before turning it over to Michael, I want to point out a few things about the release and today's call.

First of all, most of our comments regarding comparisons to the year-ago quarter will be focused on adjusted results for that period. Adjusted results are non-GAAP financial measures that reflect the impact of reporting results from Venezuela at the less favorable parallel market exchange rate. Reporting 2010 results from Venezuela at the parallel rate had a negative currency impact of $73 million and a negative operating profit impact of $20 million. Additional details regarding last year's adjusted result and a reconciliation to comparable GAAP results are provided by quarter at the end of the press release.

Our earnings release also provides information on organic growth. Organic growth represents the change between periods excluding acquisitions and divestitures, foreign currency translation, and the remeasurement of net monetary assets in Venezuela under highly inflationary accounting. Compared to last year's adjusted results, first-quarter organic revenue growth was up $13 million and there was an organic decline in segment operating profit of $2 million. There is a summary of selected results and outlook items on page 9 of the release. It provides our current forecast for 2010 revenue growth, segment operating margin, and several other items, including non-segment G&A costs, US retirement plan expenses, royalty income, tax rate, capital expenditures, and D&A.

In regard to retirement plan expenses, we've included estimates for the next five years on funded status costs and payments. Please note that the estimates for cost and payments have increased by about $2 million annually as a result of the recently enacted healthcare legislation. The details are on pages 13 through 15.

Now for our safe harbor statement. This call and the ensuant question-and-answer session may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from projected or estimated results. Information regarding factors that could cause such differences is available in today's press release and in our SEC filings which include our most recent Form 10-Q and 10-K documents. The information discussed on the call is representative as of today only and Brink's assumes no obligation to update any forward-looking statements made during the call. The call is copyrighted and may not be used without written permission from Brink's.

I'll now turn the call over to Michael Dan.

Thanks, Ed. Good morning and thank you for joining our call. I'm going to start with a brief overview of the quarter as reported on both a GAAP and adjusted basis. Then, as Ed mentioned, the rest of my comments will focus on adjusted results. I will also briefly comment on business conditions, strategy, and outlook. There were several items that affected results, including the new healthcare legislation, and a large, negative currency impact related mostly to Venezuela. Joe will cover these items in more detail. And then we'll open it up for questions.

On a GAAP basis, we reported a first-quarter loss from continuing operations of $0.10 per share versus income of $0.48 per share in 2009. The loss includes a $0.28 income tax charge related to the new US healthcare legislation, and a $0.06 charge related to the remeasurement of nonmonetary assets in Venezuela.

Revenue was up slightly.

Segment operating profit declined by $17 million due mainly to the unfavorable currency impact of $22 million that was a largely a result of our decision to report this year's Venezuela results at the less-favorable parallel exchange rate. When you factor out currency items and look at organic results, segment profit rose $3 million or 5% on a GAAP basis.

From this point on, my comments will focus on adjusted results, which reflect Venezuela's results from both periods at the parallel rate.

On an adjusted basis, a $0.10 per-share loss for the quarter compares to income of $0.31 last year. The organic decline in segment operating profit was $2 million due mainly to a $5 million decline in North America that was more than offset by improved results in Latin America.

Organic revenue growth was 2%. The segment margin of 4.7% compares to last year's margin of 5.7%. These results are not satisfactory and the environment, needless to say, remains challenging. But it's important to keep in mind that Brink's performance historically lags economic cycles. At this time last year, we had not yet felt the full impact of the global financial crisis and the ensuing recession. Likewise, an uptick in our results will probably lag an economic rebound.

The second quarter, seasonably our weakest regardless of the macro environment, poses another difficult comparison for similar reasons. But I'm optimistic about the rest of the year and, more importantly, our longer-term prospects. We've taken several steps to improve near-term performance, including aggressive restructuring in Europe, and our outlook for the year is unchanged. We continue to expect annual organic revenue growth in the low to mid-single digits over last year's adjusted revenue of $2.9 billion, with a segment operating margin between 7% and 7.5%.

Profit improvement in Europe and North America and continued growth in Latin America are key to achieving our annual targets. Latin America continued to lead the way in the first quarter thanks to organic revenue and profit growth in Venezuela, Brazil, Columbia, and Argentina. Organic revenue was up 13%, while organic profit grew 23%. As in other regions, there's pressure on price and volume in Latin America as well, but our people there have done a good job in managing costs. And last year's acquisition in Brazil continues to boost performance in the region.

The growth in our relatively small Asia-Pacific region was due to last year's acquisitions in India and China. And we are pursuing opportunities to continue growing our presence there.

I've already mentioned the $5 million profit decline in North America where there continues to be intense pressure on CIT volume and pricing. We are highly focused on improving efficiency and maintaining our pricing discipline here and we expect near-term results to improve.

In Europe, organic revenue was flat and profits were down about $1 million. The profit decline includes a $2 million increase in restructuring costs over last year's first quarter. Improving performance in Europe continues to be our biggest challenge. Economic conditions there are terrible and like North America, there's intense pressure on price and volume. We've taken actions on several fronts and are seeing some progress in certain countries. More to follow.

Despite these challenges, results should improve later this year. A moderate improvement in the regional economy could certainly help. If additional restructuring is necessary, as always, we'll do it and move on as we did in the first quarter this year.

Near-term improvement in both Europe and North America are critical to meeting our annual revenue and margin goals. Our challenge in both regions is to deliver results in an environment where some competitors are offering prices that are not only unsustainable, but they are encouraging compromises in safety and security. We won't do that.

We know more than any of our competitors what it costs to provide safe, reliable service. And we set prices accordingly. You often hear us talk about our disciplined approach to operating our business. It applies to everything we do, from allocating capital to continuously improving our security procedures. If we lower our standards, we compromise our ability to protect our people, our customers, and the long-term profitability of the business.

Maintaining our discipline on safety, security, and price is in the best interest of our employees and shareholders. Over the long term, history shows that we win more business than we lose to those who cut corners on safety, security, and price to win market share. That's why Brink's is the premier brand in the industry.

The current pressure on CIT pricing and volume is clearly affecting results, but it also plays to our strengths in several ways. First, customers who leave Brink's for lower pricing often return when service levels decline or their assets are threatened. In addition, as customers look to reduce their internal costs, they're outsourcing more and more of their cash processing activities. Brink's has the broadest vaulting and money processing infrastructure in the industry so we're uniquely positioned to increase our share in this high-margin, cash logistics business. And our pipeline is full and recent wins will improve results later this year and in 2011.

Our CompuSave service is another good example how Brink's has improved the efficiency for both our retail and banking customers. During the first quarter, we added about 400 net installs while increasing our installed base to about 10,700 units. The pipeline continues to be strong and we expect to grow our installed base by about 30% this year. This is currently a US-based business but we have many pilot projects underway in several other countries and the future looks bright.

Another positive development is the improved results in our Global Services operations, which span all regions, benefited [from] increased transportation and storage of commodities, including gold and other precious metals. The diamond and jewelry markets appear to have stabilized and are showing signs of recovery. Demand for our services in the US diamond and jewelry market are somewhat lower that we had hoped to see, but there are signs of increased activity among US retailers who are, by far, the largest drivers of global diamond and jewelry demand. Sustained improvement in the US is key to improving Global Services, not only in North America, but across all regions.

That concludes my review of operations.

When I reflect on the quarter and look ahead to the rest of the year, I'm encouraged by the fact that organic revenue and segment profits were fairly close to year-ago levels. We've demonstrated our company's ability to withstand a severe recession, and we've not strayed from our highly disciplined approach, positioning Brink's for future growth.

Our core strategy is to grow cash logistics and other high-margin businesses in our current markets while penetrating new geographies with strong growth potential. Last year, we demonstrated our commitment to executing this strategy by completing acquisitions in Brazil, Russia, India, and China. So far this year, we've strengthened our small but growing presence in Russia with the acquisition of a cash processing business. We now have 500 employees in Russia and offer a full range of CIT, money processing, and Global Service operations. We've also expanded in eastern France by acquiring a small CIT and cash processing business. And we are pursuing additional opportunities to expand our global infrastructure, which in turn, enables us to offer the high value solutions to a broader base of customers.

I have no doubt that economic and market conditions will continue to test us. But I feel good about our people, our competitive position, and our growth prospects. We have the world's premier security brand, a global footprint and industry's broadest array of value-added services, and the financial strength to address challenges and pursue growth opportunities. As economies around the world stabilize and improve, our position as a global leader in secured logistics will be reinforced.

I'll turn it over to Joe and we'll take questions.

Thank you, Michael. Good morning, everyone.

Michael covered the main points from an operating perspective, so I will provide some details behind the financial results.

I want to start by reinforcing Michael's perspective on our performance and outlook. The first-quarter results did not meet our expectations due to some items within our control and some that were not. We had more severance and restructuring expense in Europe earlier than planned, which is tough medicine but necessary and positions our cost structure appropriately. The volume and price pressure in the US continued, resulting in lower volume as we maintained our pricing discipline.

Highly inflationary accounting and the weakening of the Venezuela bolivar-fuerte led to a $5 million charge and a higher tax rate. The tax increase was expected and previously communicated.

The US healthcare legislation created a $14 million tax charge and an increase in our Black Lung liability. In spite of these items, on an adjusted basis, we still generated 2% organic revenue growth and experienced only a $2 million organic segment operating profit decline, which is equal to the increase in severance and restructuring costs versus last year.

Although our adjusted segment margin rate declined from 5.7% to 4.7%, the decline is explained by the $5 million Venezuela remeasurement charge and the $2 million higher severance and restructuring. We lagged the recession on the way in and we are seeing a lag in the recovery as well.

I would summarize our review of the year-over-year earnings-per-share change, the loss of $0.10 in the first quarter 2010 against the first quarter 2009 adjusted profit of $0.31, as driven primarily by three factors -- the $0.28 tax charge from the new healthcare legislation; the $0.06 Venezuela monetary asset remeasurement charge; and the higher tax rate in the quarter.

Now for some of the details behind first-quarter results.

We are one of the estimated 1,400 companies impacted by the healthcare change on Medicare Part D subsidies. Our estimated impact is $14 million. It is important to note that the cash flow impact of this doesn't start until 2013 and is approximately $1 million per year. The new healthcare legislation also amended laws governing our legacy Black Lung liability, which required us to record a $12 million after-tax charge to shareholders' equity. Our current estimate is that this amendment will increase our retirement expenses by about $2 million annually starting in the second quarter of 2010. We have provided more details in the press release and in the upcoming 10-Q.

Our first-quarter segment operating profit compared to last year was impacted by an unfavorable currency exchange of $25 million from Venezuela accounting and exchange rate changes. The first and largest currency impact was the result of our decision in December of last year to begin repatriating cash from Venezuela and to begin reporting results at the less favorable parallel rate. The parallel rate is now nearly 70% lower than the official rate used to translate our results last year on a GAAP basis, resulting in approximately $20 million in lower profits from Venezuela on a GAAP basis. Our adjusted results reflect both years at the parallel rate. The parallel rate was weaker by 11% versus the first quarter 2009 adjusted results. We repatriated dividends in December of last year and again in the first quarter of this year, and we will continue to regularly repatriate dividends from Venezuela.

The second currency-related item was a $5 million charge related to the remeasurement of net monetary assets in Venezuela. This is a direct result of highly inflationary accounting and the weakening of the bolivar-fuerte parallel rate within the quarter. Under highly inflationary accounting rules, bolivar-fuerte denominated monetary assets and liabilities must be remeasured into US dollars, with gains and losses recognized in earnings. During the quarter, the parallel rate weakened by 13% against the US dollar. As a result, we recognized a nondeductible $5 million charge for the quarter, which equates to about $0.06 per share when you factor out the minority partners' interest. We are required to remeasure these assets each quarter and will continue to work to reduce our exposure whenever economically feasible. At the end of the quarter, Venezuela had $28 million in net monetary assets. In spite of the accounting changes and the weakening of the exchange rate, the business in Venezuela performed well in a challenging economic and political environment, generating organic operating profit growth that contributed to the overall strong Latin America region performance.

Another significant item in the quarter was severance and restructuring. We incurred $9 million, mostly in Europe, which is ahead of our plan from a timing perspective and represents approximately 40% of last year's spend. The projected payback on most of this spend is about one-and-a-half years. We don't anticipate this level of expense during the remaining quarters, but as we've done in the past, we will take cost structure actions when necessary.

Looking at taxes, the effective income tax rate for the quarter was 107% versus a year ago rate of 24%. This year's extremely high rate is due primarily to the $14 million tax charge resulting from the new US healthcare legislation, the designation of Venezuela as highly inflationary, including the impact of the nondeductible $5 million remeasurement charge, and the reclassification of a business tax to an income tax in France. The effective rate for 2010 is now expected to be between 47% and 50%. Excluding the tax charge related to the new healthcare legislation, the effective tax rate for the year should still be between 36% and 39%.

Capital expenditures for the quarter were $27 million. Our full-year projections are still in the range of $180 million to $200 million. This compares to expected depreciation and amortization of $145 million to $155 million. As always, we will manage capital spending to support the growth of the business and deliver targeted returns as the business grows.

Now for a brief review of our liquidity position. We ended the quarter with $132 million of cash and $222 million of debt, resulting in a net debt position of $90 million. This is an increase in net debt of $37 million consistent with our historical quarterly trends.

We have a $400 million committed revolver and access to smaller, committed and uncommitted credit facilities. We've used $124 million of the $400 million revolver and therefore, have available committed capacity of $276 million. Our smaller credit facilities also have available capacity of $41 million.

Brink's has traditionally not provided quarterly or even annual earnings-per-share guidance. This is important within Brink's because it is an indication of how the business is operated for the long term, to deliver the required returns and not for a quarterly target. But I would like to share some perspective on our historical quarterly performance and how we see 2010 shaping up, since the past 18 months in the global economy have been anything but normal.

I'll start by reaffirming that we still believe we can deliver low to mid-single digit organic revenue growth versus the 2009 adjusted revenue of $2.9 billion and a margin rate of 7% to 7.5%. Why do we believe this? We expect lower severance and restructuring in the remainder of the year. We are optimistic about our Global Service business and the growth we experienced in the first quarter everywhere except the US, which seems to be lagging the global markets a bit. Latin America continues to perform very well. We continue to take the difficult steps in turning around Europe. And the severance and restructuring in 2009 and 2010 will start to pay back later this year. North America's comparisons eased in the second half of this year because it was the middle of 2009 when the volume pressure began to accelerate.

Now for a look at our quarterly earnings history. If you review the last three years operating profit by quarter, the strongest quarters have always been in the third and fourth quarter, driven by the higher, global seasonal economic activity. The second quarter has traditionally been our lowest quarter, followed by the first quarter. This trend is slightly distorted by the high margin 2008 Venezuela monetary conversion project, which was predominantly a first and second quarter item, and which makes the first two quarters of 2008 appear stronger than normal.

I'll close by reiterating, that although this quarter did not meet our expectations for the results -- for the reasons highlighted, we are confident that we have the right strategy and are taking the necessary steps to position Brink's to deliver for our customers, employees, and shareholders.

Shea, let's open it up for questions now.

Thank you. We'll now be conducting a question-and-answer session. (Operator instructions.)

Our first question comes from Clint Fendley from Davenport & Company.

Good morning, gentlemen.

Morning.

Morning.

Michael, on the CompuSave, how much of your 30% growth in units will be outside of the US this year?

That will all be in the US, that figure.

Okay. Okay. And are you expanding that into Latin America and Europe soon? Or how do intend to grow that product?

Yes, and also Asia. We have units in service, in tests with customers in all three continents.

Okay. Thank you.

And Joe, on the $5 million charge due to the Venezuelan currency, if I'm hearing you correctly, under the new accounting, is it reasonable that there will be ongoing remeasurement adjustments then as we move forward from here?

I would expect yes. Each quarter as the bolivar-fuerte exchange rate goes up and down from quarter to quarter, and it's measured from the beginning to the end of the quarter, we will have to remeasure those assets. So there will continue to be an impact. What we're working to do is to reduce our net monetary asset exposure through economic transactions to mitigate that risk, to reduce it. We'll manage that as best we can when we have good solid economic basis to do that. But I would expect there will be some impact every quarter going forward. As with many companies that are starting to report who have significant operations in Venezuela, the impact can be significant.

How are you encouraging, I guess, we as analysts to report the number? I mean, should we be proformaing this? Are we looking at an $0.18 number for the quarter? Or is it really $0.24?

Well, what we looked at when we looked at the earnings-per-share change, I really think you've got to look at the tax charge from healthcare. You've got to consider the Venezuela remeasurement. Although it's $0.06 this quarter, it's $28 million of total exposure. And as the exchange rate moves, that will impact the quarter on an ongoing basis. It can move up or down depending on the movement of the exchange rate. And then the tax rate. The tax rate, even if you remove the healthcare charge, the tax rate was higher this quarter. It was higher than what our total year average is going to be because we have certain items that we anticipate in the second and third quarter that will happen but we cannot bake those into the total year forecast. They're discrete tax items. So the first quarter has a significantly higher discrete quarter tax rate than the total year average will be.

So if we backed out both the healthcare and the currency impact and the tax effect, I mean, what is the number?

I think you'll find that that explains the earnings-per-share change of the $0.10 lost to the $0.31 last year.

Okay, okay. Thank you, guys.

Thank you. Our next question comes from Jamie Clement from Sidoti.

Good morning, gentlemen.

Morning.

With the reminder that the second quarter is typically your seasonally weakest, to hit your guidance, obviously, that implies a pretty big second half. And I think you all laid out most of how you hope to get there. What I was curious about was, you generally don't specifically lay out restructuring and severance charges, but how significant were those in the second half of 2009, in other words, things that you pretty much know you're going to have in your back pocket this year?

Last year, we had pretty significant restructuring in the fourth quarter in Europe. We also in the fourth quarter and first quarter last year had restructuring and the second and third quarter were much lighter. We had restructuring in our estimates for the year, but in Europe we accelerated that because we had the opportunity to start to pull some of those benefits in sooner and move faster. Right now, we don't expect anywhere near the same levels as the $9 million total that we had in the first quarter, but there will be ongoing restructuring in the business. There's a certain level that we do just as a normal course of business and then as volume moves up and down and we have the opportunity to change the structure in certain places, we will. So I would not expect $9 million to be the go-forward number by quarter. It'll be something lower than that.

Oh, okay. And just a follow up. Sort of what I'm getting at is, just based on my math and obviously, these are my assumptions. You're going to need to have a second-half segment operating margin that's not dissimilar from the second half kind of 2008 level. And during that time, obviously, the bolivar was being converted in a different way and presumably at a very high margin. So I'm really just questioning the comfort level of your guidance.

In 2008, the monetary conversion project in Venezuela was really a first-half impact.

Right. No, no, no. But what I mean is, is that the size of your Venezuelan business as a result of converting at the unofficial rate is now less of a positive impact on your overall business. You see what I'm saying?

Right. Right. Yes, the size of Venezuela on a US dollar basis is considerably smaller. Yes.

Right. So from an overall, global kind of business quality basis, when you factor that in, it's like I'm just sort of questioning how Europe and how North America make up the difference for that in the second half of this year to be able to kind of get you into that low 7% margin range.

Remember, the revenue in Venezuela was also revalued.

Okay. No, no. Yes, I get -- all right. Thanks very much. I'll follow up after the call. Thank you.

Thank you. Our next question comes from Jeff Kessler from Imperial Capital.

Hi.

Hi, Jeff.

Quickly. You said that your net debt went up about $37 million. If we talk about your net operating cash flow or your operating cash flow, however you want to call it, is that approximately what the difference between, that you actually used about $37 million of cash or are there some other factors in there?

No, we actually had positive, very low, but positive operating cash flow for the quarter. But it's traditionally lower in the first quarter as we have some beginning-of-year payments that we make that were accumulated during the prior year and that start the year on some prepaids. And first quarter typically comes down from the second half. So first quarter's traditionally been a very light quarter for cash flow.

Okay. So even though you were positive, what caused the increase in the net debt?

There are a number of items from year end that -- expenses that occurred during the year that are paid out in the first quarter.

Okay.

And then there are a number of items that for the year they get prepaid for the year at the beginning of the year. So you kind of get a double whammy of accumulated items from the prior year and prepaids. So it bunches up in the first quarter. And so historically, the first quarter has seen this level of an increase in our net debt.

Right. Now in looking at your numbers coming through -- and I understand there's a lot of moving parts here that you have to deal with, particularly when you get down to your operating profit lines -- it appears that while your competition that has reported or will report, what we think will report, everybody's showing some small declines in revenue year over year and everybody is showing some small declines in operating profit. However, we have seen the operating margin in some of your competition at least hold or actually go up slightly on slightly down revenue. I'm just wondering if some of these extraneous factors that you had in the first quarter were the whole reason for that or you had some more pressure than they did in given areas? On the margin I'm talking about.

Yes, I know. Let me give you a view. The margin issue for the first quarter is basically limited to North America. We're basically down $5 million, right? And some of that is because of the economic conditions, the recession that we're in, and the lower volumes, things we talked about in the past with the ATM machines, which are lessening. But there are some desperate competitors in two countries, our two, largest countries. One is the US and the second is in France. And they are doing some very, very silly things in my judgment at dropping costs. And I'll give you an example of a major, financial institution in the United States where we just lost all the CIT and ATM business at rates 30% to 40% lower than we were charging them. And obviously, they wanted to stay with Brink's but they wanted those cost savings and they gave us an opportunity to keep the business. And we just choose to walk from the business because we know in the long term, that's going to be a plus. So short-term pain, long-term plus.

We had about $1 million impact in fuel in North America on the formula and how it gets passed on to our customers on a year-over-year basis. We had probably the worst winter weather this year over last year. We're expanding in Quebec. We opened up four new branches as we re-entered that province in a big way with support from the major Canadian banks. And we're continuing to invest in our solutions business in CompuSave, following our long-term strategy to create value.

And we've also had the advantage of a major competitor in this country who had a huge headquarters reduction in staff to improve their margins, enabled us to attract quite a few talented individuals into Brink's pursuing our solution strategy. And so that's really the story for the quarter.

Right. Very good. One other final question. You mentioned that Global Services was stabilizing. What does that mean? This is -- while it's not a big business for you, obviously, everybody knows who is listening, it's a high margin business for you and a kind of a high profile business for your brand and for the companies that you serve. So the question I guess gets down to, is that business stabilizing or have you seen actual growth in any of your regions?

As I mentioned on the previous call, January looks strong but you can never tell whether that's just returns coming back because of a poor Christmas season. Februrary's always a dead month. And March was very strong, very strong. And so we're pretty optimistic. We watch all the diamond mines have opened up. We've watched the diamond pricing which has finally turned positive after being negative for 12 months. And so with the exception of the US, Global Services is benefiting from improvements in Europe, movement of precious metals, the increased velocity of currency moving around to some of the troubled areas of the world, and we're rising in Asia with the economic growth there as they become more of a consuming nation -- region of the world.

Great.

I'm pleased with Global Services. We're on a positive track. It's a growth track again.

Okay, very good. Thank you very much, Mike.

Thank you. Our next question comes from Alex Yahey from Morgan Stanley Smith Barney.

Good morning. It's Morgan Stanley Investment Management. I've a couple of clarifications I just want to hit on. Just looking at the second table in the release, the segment results. You talked about a 4.7% segment operating margin versus 5.7%. Now that 4.7% includes the $5 million revaluation charge for your assets in Venezuela? Is that correct?

Correct.

And that also includes higher severance from Europe?

Correct. So one-percentage point change on $700 million is roughly $7 million. So the two items you just referenced also equal about $7 million.

$7 million. So is it appropriate to add that 7 back? I know the Venezuela will fluctuate quarter to quarter, but if you add the 7 back to 24, it looks like you actually improved year over year. So really, what is the segment operating margin? Because it sounds like 4.7% is too low.

Well, 4.7%, it does have the higher severance within the quarter and we don't expect that level of severance going forward. And it does have the remeasurement. And I wish I could predict the exchange rate in Venezuela, but I can tell you we're going to do everything we can to economically manage our exposure down in our net monetary assets.

All right. But just to be clear, on a more or less ongoing basis, your segment operating margin really didn't change that much. It was the Venezuela currency revaluation and higher severance.

That's how we're looking at the quarter.

Okay.

That's certainly how we're looking at the quarter operationally.

Okay. And then second, on your EPS, it was $0.18 after you have the healthcare and then you add back the Venezuela so you get to $0.24. And you mentioned something earlier about your taxes explaining some of the difference. But --

Right.

-- at that $0.24 level, what is the implied tax rate?

Well, it's in the high 40%. If you look at our tax rate of 107%, and you just back out the $14 million charge for healthcare, you end up with a tax rate that's in the high 40% for the quarter, the discrete quarter.

Right.

And so we're expecting the total year tax rate, excluding the healthcare charge, to be in the 36% to 39%. So the first quarter tax rate is significantly higher than what we expect the total year average to be. And the reason for that is, we have a settlement that we anticipate in one of the later quarters that we cannot include in our average forecast for booking, for recording the tax rate for the first quarter. You create your aver- -- you estimate your total year tax rate, you book that average for the quarter, but there are discreet items that you're not allowed to forecast in your quarterly results. But you can obviously forecast them when you communicate what we expect the total year rate to be.

So we could adjust and say, your ongoing EPS for the quarter was probably higher than that $0.24 at a more normalized tax rate, right?

The way we're looking at the quarter from an EPS standpoint is, the negative $0.10 compared to the $0.31 profit last year, we think is explained by the healthcare tax charge, the remeasurement, and the higher tax rate. Even if you exclude the healthcare charge, the tax rate year over year is up significantly. And we don't anticipate that level of tax rate for the rest of the year.

Okay. All right. And then finally, just to clarify, I think you talked about Global Services, but you've spoken about diamond jewelry demand in past quarters. Just curious if you could elaborate on what you're seeing now, if there's any improvement?

There's been substantial improvement, in March particularly. Mines that have been closed down have been reopened around the world because of demand. And prices of rough have risen the last three months, which is the first time that's happened in like the last 15 months. So we're bullish that there's demand. And it's increasing. And the only segment that's lagging is US demand. It has not come back yet. The US is still the biggest market, consuming market. But the business is looking good. We're pleased and there's been a good growth year over year after the disaster falloff which started in the fourth quarter of '08.

Okay. Thank you.

Thank you. (Operator instructions.)

Our next question comes from Brad Safalow from PAA Research.

Hi. Thanks for taking my questions.

Hi, Brad.

Just a question on CompuSave. I think in your K you said that it was 7% of total revenues in North America. The installed base is up 30%, 40% for the year. Are revenues up a similar amount?

Yes, they will be a similar amount although we do have a new model that we introduced this year, which is a smaller, less expensive model for less cash-intensive businesses, which will probably generate, that that portion of sales will generate a little less revenue.

Okay. And as far as your installed base in terms of the type of clients that you have, can you give us a sense of what type of retailers these are? Do you have the mix of national chains versus smaller organizations?

ExxonMobil is probably one of our larger customers. But most of them are regional players, smaller people. They're able to make decisions faster on the economic benefits than some large organizations. Although we have some Hess gas stations in the Northeast, is a big customer of ours as an example. So it's both. It's across the spectrum.

Okay. And as you have increased traction in the channel, do you expect to get some larger retailers?

Yes, we have some very, very good, strong banking partners who are marketing our safe to expand their footprint outside their geographical area. And so we're starting to see the benefit of additional sales support in close collaboration with some of our strong regional banks that is benefiting both of us as we work hard on the solutions side of our business.

Okay. And then not to belabor the point on the diamond and jewelry business and the Global Services, when I look at the import-export data for polished and rough diamonds in the US, India, Israel, some of the bigger diamond markets, there was a huge increase on a year-over-year basis in the first quarter. Now you're saying that, I guess you started to see a more meaningful pickup in March. Can you help us understand what are -- I can look at the IDEX Online Diamond Price Index. I can look at rough diamond prices. What are the key external indicators that you guys look at to determine where that business should be and kind of directionally where it's going?

We look at liability because that's how we charge. And we look at volume of shipments. Volume of shipments. So where the volumes are still down, as I said previously, is in the United States. And so once again, the example I think I used on the last call, if a plane arrives from Europe and there's 100 packages on board, that's different than if a plane arrives with 50 because our expenses are the same, having trucks meet these planes and things like that. So at the end of the day, we want to see more volume in the United States. And we're starting to see that finally, but it's [lagged] Europe. Europe's doing better. And Asia's doing better. Asia's a smaller market, but it's growing. And it actually recovered first. So it's volume and price. Volume and price.

Okay. I guess the data I'm looking at, it does say volume. And I guess I should follow up with you guys to just understand where the differences are. But going forward, you guys are expecting that to pick up over the course of the year at this point.

Yes. The indications -- we said at the last call that we really won't know until March where that business is going. And we're pleased to see how strong March was, which I think is a good [arbor] for the balance of the year.

Okay. And then just my final question. You guys indicated or gave us some more detail on restructuring charges you took in the first quarter. I know that there's always, given the size of your organization, and your growth and different strategic efforts, there's always restructuring going on. What's the normal level on a nominal basis?

Probably in the 2 to 5 range in any given quarter, is if you look back historically. But there has been -- we take actions when necessary and so it tends to be lumpy. So it's hard to say what an average is. Last year we were in the low 20s, about 23 last year in total, but there were two quarters where we had a couple lumps.

Okay, thank you.

Thank you. (Operator instructions.) At this time, we have no further questions.

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