Brinks Co (BCO) 2014 Q1 法說會逐字稿

Welcome to The Brink's Company's First Quarter 2014 Earnings Call.

Brink's issued a press release on first quarter results this morning. The Company also filed an 8-K that includes the release and the slides that will be used in today's call. For those of you listening by phone, the release and slides are available on the Company's website at brinks.com.

At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded.

Now, for the Company's Safe Harbor statement. This call and the Q&A session contain forward-looking statements. 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 the Company's most recent SEC filings. Information presented and discussed on this call is representative as of today only. Brink's assumes no obligation to update any forward-looking statements. The call is copyrighted and may not be used without written permission from Brink's.

It is now my pleasure to introduce your host, Ed Cunningham, Director of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thank you, Denise. Good morning, everyone. Joining me today are CEO, Tom Schievelbein and CFO, Joe Dziedzic.

This morning, we reported results on both the GAAP and non-GAAP basis. The non-GAAP results exclude a number of items including US retirement expenses, certain employee benefit items, acquisitions, dispositions and some currency related items including the write down of net monetary assets in Venezuela. The non-GAAP results for the quarter use a tax rate of 37.5%, which is the midpoint of our full year range of 36% to 39%.

We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments from this point forward will focus primarily on non-GAAP results from continuing operations.

Before summarizing these results, I want to quickly highlight two items. The first is the recently announced change to the exchange rate we use to translate results in Venezuela from VEF6.3 per US dollar to approximately VEF50 per dollar. We want to be clear from the outset this morning that the new exchange rate known as SICAD II became effective on March 24. So it had a relatively minor impact on first quarter results. However, we will have a significant impact on results going forward, which is reflected in our revised full-year guidance and other forward-looking information that was disclosed in this morning's release.

The second item is security losses, which were down significantly from the year ago quarter due mainly to last year's $19 million charge related to a theft loss in Belgium. The $19 million charge, which equates to $0.24 per share, was allocated across each of our regional segments on a pro rata basis, resulting in more favorable year-over-year comparisons in each segment.

Now, for a brief summary of first quarter results from continuing operations. Earnings for the quarter came in at $0.43 per share versus $0.38 in 2013. The segment margin rate was 7%, up from 5.4% in 2013. Last year's results included the $0.24 charge related to the Belgium theft loss. Organic revenue was 11%. Currency translation had a negative impact of $67 million on revenue, $13 million on operating profit and $0.16 at the EPS level.

On a hypothetical basis, which assumes the SICAD II rate had been in effect beginning in January of 2013, first quarter 2014 adjusted earnings would have been $0.22 versus $0.19 in the first quarter of 2013. For those of you who model our results, page 8 of the press release provides a summary of selected results and outlook guidance, which now includes revenue and margin guidance for each of our four geographic segments. Page 9 presents the same outlook information, adjusted to reflect the impact of the SICAD II rate on our full year outlook for 2014 versus 2013 at the same rate. Finally, pages 13 through 16 of the release provide hypothetical results for this year's first quarter and the four quarters of 2013 with each quarter's results adjusted to reflect the unfavorable impact of the SICAD II rate.

A summary reconciliation of non-GAAP to GAAP results is provided on page 3 of the release. More detailed reconciliations are provided in the release in the appendix of the slides we're using today, in this morning's 8-K filing and on our website.

I'll now turn the call over to Tom.

Thanks, Ed and good morning everyone.

Obviously, the major news in the quarter revolves around the devaluation in Venezuela, which effectively eliminates our profits there for the rest of the year. It's important to note that we have been operating in Venezuela for over forty years and that the business has been extremely well run by our local team. I also want to emphasize that the first quarter results we reported this morning include higher profits in Venezuela that were translated at the far more favorable official rate of VEF6.3 until March 24 when we began using the SICAD II rate of approximately VEF50. Joe is going to provide more details on the developments that led us to report our Venezuela results at the new rate and its financial impact.

As a result of the rate change, we've reduced our 2014 segment margin guidance from 7% to 6.5%, and we now expect revenue to come in at around $3.7 billion. I want to be clear that this change in guidance is due entirely to the devaluation. With the exception of Latin America, our outlook has not changed for any region.

The segment profit bridge illustrates the favorable impact that Venezuela had on profit growth for the quarter. The year-over-year comparison was also more favorable due to last year's Belgium theft loss. Excluding the improvement in Venezuela and the 2013 theft loss, segment profit declined by $6 million on an organic basis. Other than the impact of the devaluation, these results are consistent with the guidance we provided at the beginning of the year.

A loss of profits in Venezuela has driven our full year margin guidance for Latin America down to a range of between 7% and 9%. Our prior guidance reflected a flat to slightly down year in Mexico and higher spending on productivity across the region, but did not factor in a currency devaluation in Venezuela. We expect Mexico to resume profitable growth next year and to achieve its 10% margin goal by the end of 2016. We also expect continued profit growth in Brazil and Argentina, both of which delivered higher profits in the first quarter on an organic basis.

Our full year outlook for North America has not changed. We expect to improve to a profit margin range between 2.5% and 3.5% on relatively flat revenues. This margin reflects our planned investment of about $6 million in our Global Payments unit. Excluding our planned investments in Global Payments, we expect our margin to be between 3% and 4% in 2014 and to reach 7% by the end of 2016.

Our North American management and sales teams have been completely revamped to focus on selling higher margin solutions to customers. Our team is also aggressively pursuing cost reductions and productivity gains that we expect will drive higher margins throughout our branch network.

We're continuing to lay the groundwork necessary to improve the number of performing branches in the US, which stood at 45% at the end of 2013. We expect to see progress on this performance metric when we report on it at mid-year. Our plan is to improve by about 10% annually to reach our goal of 75% by the end of 2016.

Throughout 2013 and into the first quarter of this year, we've taken definitive actions to reduce labor and management overhead costs and to strengthen our IT infrastructure. We expect these actions to add several million dollars of profit to our US operations in 2014.

In addition to reducing cost by managing labor more effectively, we're investing in technology to improve the efficiency of our branch operations. We are pilot testing a new route planning system that will help manage logistics, labor and other costs more efficiently. We're also introducing handheld tracking devices for our employees. We expect to begin to complete a full rollout of both initiatives by year end. Starting in 2015, these two projects are expected to have a significant impact on productivity.

We're also implementing a centralized billing system throughout our branch network. This initiative along with our more streamlined CompuSafe service offerings should have a positive impact on cost and productivity beginning in 2015.

Our 2014 guidance for Europe calls for a margin of 6% to 8%. Given our expectations of relatively flat revenues, we are highly focused on reducing cost, improving productivity, growing our Global Services business and introducing new higher margin solutions.

For example, we're pleased with our initial efforts to introduce our integrated managed service offering known as Brink's IMS. Brink's IMS is an attractive outsourcing opportunity for financial institutions, because it provides a single source for ATM related cash and device management services. These include incident management and web portal services that enable the customers to monitor their ATM networks in real time, detect and react to certain events and improve cash forecasting. Brink's IMS was launched recently in France and the Netherlands and we expect to be able to leverage our experience from these into new geographies. To date, the feedback we received from our customers has been very promising.

In our relatively small Asia Pacific region, we expect full year organic revenue growth of 5% to 7% with a margin rate of 9.5% to 11.5%. This region's results are driven largely by our Global Services business, where we're seeing recent strength in the diamond and jewelry market. Movement of gold into the region continues to grow. So it is likely to be partially offset by the continued decline of gold imports into India. The demand for gold storage also is growing. So we're continuing to invest in new capacity with expansions underway in Hong Kong, China and Singapore.

Our cost reduction efforts are being executed on a global basis. Our new global procurement initiative is focused on capturing untapped cost synergies. Basically, we are changing the way Brink's has been managed for many years. We have a great opportunity to centralize management and reduce costs and many functions, including the purchase and maintenance of our fleet and other equipment, IT resources, travel management and support functions such as finance and human resources. Centralized management of these costs is an important part of the cultural transformation we are making throughout our global business.

We are also reviewing the structure of some of our larger business units to ensure that we have the appropriate spans of control and layers of management. Finally, we will look for opportunities to share learnings from our US productivity initiatives throughout our global operations.

In addition to improving our internal efficiencies, we are pursuing growth opportunities in several areas. Latin America remains at the center of our growth strategy and we will continue to invest there. With the exception of Global Services, we are not counting on significant near-term revenue growth from our Europe and North American operations. We will continue to invest in longer term growth initiatives and adjacencies that provide opportunities to leverage the Brink's brand into new security related markets. The Brink's IMS solution that I mentioned earlier is a good example of how we can offer more sophisticated and higher margin solutions to our customers.

We are also continuing to invest in our payments business, which includes a portfolio of established businesses and start-ups. A recent example is our Brink's branded reloadable prepaid card, which is in development with an expected launch for this year. The increased payments -- the increased spending in Global Payments that I mentioned earlier is related primarily to the introduction and promotion of this new product, which is expected to reduce profit in North America by about $6 million in 2014 and slightly less in 2015. Our expectation is that our reloadable prepaid business card will be profitable beginning in 2016.

Finally, in January, we disclosed that we are considering a potential re-entry into the home security market, which we exited in late 2008 through the spin-off of our Brink's Home Security unit. Our review is ongoing and we have not made a decision as to how or whether we might re-enter this market. We'll discuss any significant developments on this front when it's appropriate to do so.

In summary, we are intensifying our focus on controlling costs within each country and on a global basis. We're executing on our productivity investments and we're continuing to reposition our portfolio of businesses for growth in 2015 and beyond.

Now, I'm going to turn it over to Joe and then we'll open it up for questions.

Thanks, Tom. Before getting into first quarter results, I want to provide some background on the Venezuela devaluation and its impact on Brink's.

I'll start by covering some of the events and rationale behind our decision to change the rate that we use to translate Venezuela results, but first some history. In December 2009, we accessed what was then called the parallel market to repatriate approximately VEF75 million at an exchange rate of VEF6.2 to the US dollar. This repatriation yielded about $12 million. During the first half of 2010, we repatriated another approximately VEF50 million yielding another $7 million. In May 2010, the parallel market closed. We have obtained very limited currency conversions since May 2010 through any mechanism. In some years, we have been able to access enough US dollars to pay for needed aircraft parts or maintenance. But in recent years, even dollars for this purpose have been inaccessible to us.

This background is important, because the reality is, we have been able to operate our business with very limited US dollars because we are very much a local company in Venezuela, with local revenues and expenses and very limited needs for imports. We believe we are different from many of the companies you are reading about who are converting to SICAD I at an exchange rate of about VEF11 to the US dollar. Many of these companies sell consumer goods that must be imported into Venezuela. Our business is based on local services performed with local personnel who are paid in local currency.

Given the recent developments in the exchange mechanisms in Venezuela and the government's stated purpose of the various exchange mechanisms, we believe we are not eligible for the official exchange rate and that it is unlikely we will be invited to participate in the SICAD I exchange mechanism. The SICAD II exchange mechanism opened on March 24, and we were successful in converting some bolivars to US dollars during the first two weeks of SICAD II. We hope that we will be able to continue converting currency through this mechanism in the future.

Our inability to regularly convert currency was an important factor for accounting purposes to determine the exchange rate for reporting purposes before SICAD II opened. After the SICAD II exchange mechanism opened, we worked with our accountants to review the developments and the various Venezuelan exchange mechanisms and how to interpret the new set of facts and circumstances for our Company's situation.

Under Venezuelan law, we believe that Brink's is legally allowed to access only the SICAD I and the SICAD II exchange mechanisms. The SICAD I exchange mechanism is by invitation-only from the government and it appears this exchange has been designated for the importation of goods, products and equipment. Therefore, it is our opinion that it is very unlikely that our business activity meets the government requirements to participate and we expect that we will not be able to access SICAD I. This only leaves SICAD II, which is designated for individuals and private sector legal entities. We meet the legal requirements to participate and have been successful at converting currency. Although converting currency is not a requirement on the latest accounting guidance for determining the exchange rate. Based on the facts and circumstances, specific to our business activity, we determined that we should begin using the SICAD II exchange rate effective with its opening on March 24, 2014.

This next slide provides our hypothetical 2013 results at VEF50 per US dollar for comparison purposes only. The non-GAAP basis includes Venezuela at about VEF6 per dollar. The adjusted non-GAAP basis includes Venezuela at VEF50 per US dollar, excluding the net monetary asset write-down of $13 million. This represents an 87% devaluation in the currency, which is what you would expect the middle column on this page to represent.

Unfortunately, due to Venezuela being designated a highly inflationary country for accounting purposes, it is not that simple. Without getting into the nuances of the accounting treatment of highly inflationary countries, the simple takeaway is that the depreciation expense does not devalue by 87%, but instead stays at the same amount as previously reported. The result is the operating profit and net income from Venezuela would have been essentially eliminated, if we had used a rate of VEF50 in 2013. So, the middle column reflects an 87% reduction in Venezuela's revenue, but a reduction of essentially 100% of the operating profit and net income.

We estimate that for 2014, Venezuela results for second quarter through fourth quarter of 2014 will also generate close to zero operating profit and net income as a result of the devaluation and the accounting treatment for depreciation for highly inflationary countries.

Let's cover the reported first quarter results, which were only slightly affected by the March 24 devaluation in Venezuela. Total revenue grew 4% on a reported basis and 11% on an organic basis due primarily to growth in Venezuela, Brazil and Argentina. Venezuela revenue, measured at the more favorable rate for the better part of the quarter, was the primary driver of the growth along with Brazil and Argentina to a lesser extent. Segment operating profit improved by $19 million primarily due to Venezuela profit growth and the 2013 Belgium theft loss. EPS improved to $0.43.

The EPS bridge highlights the variances from last year. The segment profit increase of $0.23 per share was driven by the absence of an event comparable to the 2013 Belgium theft loss and strong organic growth in Venezuela, partially offset by unfavorable currency in Venezuela and Argentina and a slight decline in profit across the other regions. The non-segment expense increase was driven by the timing of annual incentive grants in the first quarter versus the second quarter last year and the reversal of the benefit expense last year. The non-controlling interest increase was driven by Venezuela. The tax rate was slightly higher this year than last year, driven by the mix of income by geography.

First quarter cash flow from operating activities excluding changes in customer obligations and discontinued operations improved by $29 million due primarily to the 2013 Belgium theft loss and working capital improvements. First quarter capital expenditures and capital leases declined by $7 million due to delayed spending across several areas, including our armored vehicle spend as we prepared for a global tender of our vehicle purchases. We expect to generate significant savings in CapEx through our procurement processes later this year and into 2015, as we implement a global tender process across multiple categories starting with vehicles and computers.

Net debt increased by $104 million since the end of 2013, due mainly to the write-down of cash and cash equivalents in Venezuela.

As a result of the Venezuela devaluation, we reduced our projected CapEx spend to a range between $175 million and $185 million, down from our previous guidance of $200 million to $210 million. While this change is due entirely to the reduced level of spending in Venezuela, the decline in our reinvestment ratio over the last several years reflects our ongoing efforts to maximize asset utilization and maintenance spending, which we expect will enable us to reduce our annual spend to a level that is more consistent with depreciation.

Before closing, I want to comment on our legacy liabilities and the improved level of underfunding, which totaled $255 million at year end, a decline of $265 million since 2012. As a result, the level of cash outflows related to these liabilities has declined substantially to a level that is very manageable.

We expect that the next five years requires only $110 million of payments to the primary US pension, which is down from $226 million at the end of 2012. And the UMWA liability is not expected to require a cash payment from the company until 2033, as the existing trust is projected to cover payments until then.

As Tom stated, our outlook for the 2014 segment margin rate is now about 6.5%. To be clear, our assumptions for North America and Europe have not changed since our prior guidance on January 30. We still expect profit growth in North America and slightly higher profit in Europe from cost actions. Our prior guidance on Latin America called for lower year-over-year profits, unfavorable currency in Argentina and Brazil, a slight decline in Venezuela profits and higher productivity investments. The recent devaluation in Venezuela will obviously lead to a steeper profit decline in Latin America and is the sole cause of our revised overall guidance.

Going forward, we will continue to focus on reducing costs as we invest in Latin America, Global Services, new solutions and adjacencies.

Denise, let's open it up for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Jeff Kessler, Imperial Capital.

Hi, guys. Before I get into my couple of Venezuela questions, I do have some actual operating questions to ask you. First is, is there any way that you can expand the scope of Global Services from what it is today? I mean, granted it has its charge, we know what it does. Are there other things that you can do to expand the scope of Global Services, so that's a higher percentage of total revenue?

So we're looking at that, Jeff. And the Global Services guys are investigating a number of different opportunities, whether they be mining, pharmaceuticals, other things. It depends a little bit on the particular geography. And so that is, as we said earlier, one of the areas that we're looking at, part is expanding Global Services. We need to find the right products and the right opportunities, the right lines of business to be able to do that.

Okay. Second quick question is, I know you've been investigating a change in the operating model, the way that you sell CompuSafe from an actual sale to, perhaps more of a (inaudible) recurring revenue alarm type model. Have you come to a conclusion on that, have you changed the model at all in that way to get that system out there a little bit more, let's say, strenuously?

So we're -- as you said, we are investigating in different ways for us to go to market with CompuSafe. And so that -- whether that's a leasing arrangement, whether that's somebody else buying it and servicing it, we're in the process of going through that as we speak.

Okay. And finally, I want to ask, have you got involved in Europe? I know that Loomis has been investing in certain types of new bill marking and anti-counterfeiting technologies, DNA-type of stuff. Have you been investigating that as well?

We have a number of new technologies that we're putting in in Europe. Where we've concentrated, as I indicated earlier, is the managed services approach with Brink's IMS. We do that as, from our perspective, as a way to drive higher profitability and it's a more sticky issue with the customers. And we can basically outsource some of the back office functions for the financial institutions, and we've had good luck with that. We also do some of the counterfeiting and that sort of stuff as well, but we are concentrating on IMS.

Okay. So that would be part of the IMS business?

That's correct.

Okay. With regard to Venezuela, one of the things that we've gotten a lot of questions from clients on is actually stripping this down to GAAP cash flow, what that has done to your business overall. And number one, if you take out Venezuela, if one assumes that Venezuela is going to generate basically zero, the rest of the Company on an actual cash flow basis, given that you have some things that don't recur such as some of these incentive payments or some of the payments that you make internally into the Company, what type of free cash flow generation are you looking for in 2014 or can you attain in 2014, if you have this slightly better relationship between D&A and CapEx?

So, Jeff, I would -- this is Joe, I'd answer that by starting with our 2013 cash flows. We had a little over $200 million of cash flow from operating activities. We spent in round numbers on a cash basis about $180 million of CapEx. So you got about $20 million left over and then we spent a little less than $20 million paying the shareholders, dividends of Brink's, and a few million went to some of our minority shareholders. So in aggregate, the cash flow was about a wash from a free cash flow perspective.

The Venezuela net income obviously was and cash flow was in the cash flow from operating activities, and it's a fair approximation to use free cash flow for Venezuela that equals about the net income, which we provided in our release last week and in our appendix for the press release today. It's about $40 million for 2013. So last year, included in that zero free cash flow was about $40 million from Venezuela. Last year, we also had some acquisition disposition activity that generated about a little more than $40 million of free cash flow. So last year, in total, it would have been about a wash on a free cash flow basis with Venezuela removed.

Last year, we had a particularly tough working capital year. And if you look at the prior year, we were about $50 million better in cash flow from operating activities because of that. So what we expect going forward is to continue to focus on working capital and improving our working capital to help us get to as close to free cash flow of zero or positive as we can given our current income levels.

With regard to cash flow, how should we be treating the minority interest in Venezuela going forward?

Well, we disclosed in our cash flow statements the dividends we paid to minority shareholders. I think what you'll see now is the minority interest expense in the P&L will be pretty close to what we pay in dividends. In the last couple of years, there have been less dividends paid in a few of the countries than in previous years. So you can look at the income statement and the cash flow statement to see how those two correlate, but I would expect them to be reasonably close going forward.

Okay. Is there any expectation that going to SICAD II will make it a little bit easier for you to negotiate or get repatriation? Or is that something that you're just going to have to wait and see for the next 12 months?

SICAD II is an exchange mechanism that we've been applying for conversion of currency. Our success rate hasn't been very high. We have been able to get some currency out. If you look at our US dollar equivalent cash balance at the end of the first quarter, it's going to be in the $10 million to $15 million range, the specific number will be in the Q when we file it. But if we had $94 million at the end of the year and you devalue it by $87 million, we did generate a little bit of cash in the first quarter obviously given the earnings from Venezuela. So we're going to work to get as much of that $10 million to $15 million repatriated through SICAD II as we possibly can. I can't predict the success we'll have at that -- with that exchange mechanism.

Okay. Probably one last question. Your Latin American margins, if you had tried to strip out Venezuela, it appears that they have been flat or declining. It's kind of hard to obviously put the whole thing together, particularly given that you've been investing very heavily in Mexico, so that's obviously a big deal on this. But the question is, how do -- given that, you're talking about Mexico, Mexico actually improving in 2016, what are we looking at in terms of now you'd see nearly breaking out Latin America, how can we -- how are we to look at Latin American margins, I know you've given some guidance on that, but how would we look at Latin American margins going forward in 2014 to 2015?

Well, so Jeff, when you look at -- we had said in the past that we anticipate the Latin American margins to be in the low double-digit range. That obviously have Venezuela in that reasonable amount and that also assumes Mexico gets to the 10%. So you've got the guidance that we provided, the 7% to 9%. We'll have some investments in productivity there. That also has Venezuela in a zero. And so as we get Mexico up to the 10%, you'll see that start to trend much closer to that very low double-digit number. Joe, any comments other than that? So I mean, to make sure it's clear, obviously, the impact of Venezuela has been negative on those overall margins because we've taken a positive adder and provided the zero, while we keep the revenue in there.

And so what I'm -- and so getting -- from the base of 7% to 9%, my assumption is that you're not expecting a further decline in Latin American margin assuming that Mexico improves?

That would be correct.

The only thing I would add in comment is the 7% to 9% includes Venezuela for the first three months at VEF6 to the dollar. So when we get to next year, if the SICAD II rate remains at VEF50, it does fluctuate not by much, but should that change, that would obviously affect that. But the run rate of the business is slightly lower than 7% to 9% because it still has Venezuela for three months at VEF6.

Alright great. Thank you very much and thank you very much for being patient, being taking all my questions.

Jamie Clement, Sidoti.

Gentlemen, good morning.

Good morning.

Good morning.

Joe, one quick one with respect to the guidance and how you reported the first quarter. I believe it's the -- I think it's page 9, the hypothetical. The tax rate is now higher, reflecting essentially the elimination of Venezuela, yet when you discussed the first quarter, you were talking about the old tax rate. So I was just sort of curious what exactly was going on there. Should we be assuming that rate in the 40% range kind of for the foreseeable future?

So the difference in the 36% to 39% that you see on page 8 and the 40% to 43% is Venezuela for three months at the VEF6 exchange rate. Venezuela's tax rate was very low due to some -- very nuanced tax treatment on a US GAAP basis for Venezuela that is, it's rather technical and complex. But effectively, Venezuela had a very low tax rate for US GAAP purposes. And so the adjusted non-GAAP on page 9 assumes Venezuela at the VEF50 exchange rate for the full year and that effectively has Venezuela at zero operating profit and net income. And so the favorability in Venezuela's low tax rate gets washed away with the exchange rate change.

Okay, understood. With respect to one of your slides and talking about the percentage of "performing branches" in the US and your goals, I know we start getting into issues of security and propriety and that sort of thing, but can you help us in broad terms understand how you define a branch as performing or not?

What we've talked about is looking at what the branch does for margin, basically their P&L, then adding on the SG&A for the business that has run it, along with all the IT infrastructure and that sort of stuff, Jamie. So I'm trying to remember, was it 500 basis points? Yes, 5%. That's the floor for what we consider a performing branch. So it has to be net additive to the results for the Company. If they were non-performing, that means that they didn't meet that threshold.

Okay. From the language that you all are using, and please correct me if I'm wrong, when you talk about increasing the percentage of performing branches, it seems like that's as, really a function of making non-performing branches performing rather than subtracting underperforming branches. And that requires investments. You all clearly want to grow other areas of your business, and obviously potentially reentry into home security is on the table here. Cash obviously in the US is scarce. Repatriating what you have in some other countries can be costly. How do you think about return of capital to shareholders versus -- and balance sheet leverage versus long-term growth prospects for the Company? I mean, do you foresee a time possibly when you have a very, very tough decision to make, whether you want to go full blazes growth mode and have to spend more and perhaps even do away with the dividend? Or is the dividend something that's really sacred?

Those are all great questions, Jamie, and those are the questions that we have ongoing discussions with the Board on and I don't want to get in front of those particular discussions.

Okay, I get it.

Yes, I mean, at some point, you're going to have to decide which way you go.

Okay. And then I think the last question I have, and this is really my only one on Venezuela, is actually on operations on the ground right now. There are some really troubling news that we're reading about. So first of all, A, do you think your people are safe down there? B, do you think that from a -- how should I put this, a policy perspective where you've got a new law limiting gross margins and that sort of thing, do you feel that with the devaluation that your risk is essentially, from a P&L perspective, de minimis at this point in time? Are there things that we need to consider as a result of the unrest down there that maybe we aren't thinking about or haven't historically had to think about?

So I think you have two different points there, two different issues. On the financial side, the financial risk now in Venezuela is effectively zero. We do have to make sure that we continue to operate safely that we continue to care for the people that are down there and to continue to earn our customers' trust. As I said, we have a very effective team down there. They're doing a great job in terms of operating the business, even though we have these issues with the exchange in the financials. So I mean, the number one goal for the operators is to make sure that they run a good business and that they bring their people home safely, as well as the goods that they're transporting, which is different than the financial. As we said now, for the rest of 2014, we basically have zero risk because we're getting zero profit.

Certainly, from an EPS perspective, given our forecast as zero in there -- in the forecast from Venezuela operations, so the business continues to perform very well. You can see from the revenue and operating profit guidance or information we provided that our margin rate is not at risk given the limitations the government imposed. But the other factor is in times like this in Venezuela, our business does very well. On a local currency basis, in the first quarter year-over-year, we were up over 60%. So we had great volume growth and revenue growth in this difficult environment and the team continues to perform well.

And you all think they're safe?

When they are out on the routes, they're in armored vehicles.

Okay. I guess that's as good as you can do down there. Okay guys, thanks very much for your time, I will get back in queue. Thank you.

Okay.

Jeff Omohundro, Davenport.

Thanks. Just a question on the North American business specifically. And really coming out from a high level, maybe if you could talk to -- with the competitive landscape, pricing actions, in the context of the Company's growth objectives, margin objectives and focus on expanding value-added service. Thanks.

So in North America, we have and you got the US and Canada. In Canada, there's the -- there was just an acquisition there. So basically, the two large players in Canada are Brink's and Garda. In the US, we have Brink's, Garda and Loomis, with a couple of other smaller players. We're not assuming that we're getting a lift out of additional revenue in order to get to our margin goals for North America. Most of this is a discussion about how do we continue to reduce cost, how we continue to improve our service so that we keep our customers coming back. And so it's a much more of around, we talked about limiting overtime, we talked about productivity gains, we plan on becoming much more efficient and effective and to earn our customers' trust and therefore, get those margins back up to where we had talked about, which is at 7%.

I'm not sure I exactly answered your question. If I didn't, maybe you can give me some clarification, Jeff.

No, no, that was very good. I appreciate it. And thank you for all the granularity on the call so far.

(Operator Instructions) This will conclude our question-and-answer session. The Brink's Company First Quarter 2014 Earnings Call is now concluded. We thank you for attending today's presentation and you may now disconnect your lines.