Brinks Co (BCO) 2014 Q4 法說會逐字稿

Welcome to The Brink's Company's Fourth Quarter 2014 Earnings Call. Brink's issued a press release on the fourth 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. A question-and-answer session will follow the formal presentation. (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, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thank you, Denise. Good morning. 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 several items, including U.S. retirement expenses, severance and restructuring charges, certain compensation and employee benefit items, acquisitions, dispositions and some currency-related items, including the write-down of net monetary assets in Venezuela. The non-GAAP results use a tax rate of 38.5%, up from 34.2% in 2013. The higher rate is due primarily to lower profits in Venezuela as a result of the currency devaluation in that country in March of 2014.

We believe the non-GAAP results make it easier for investors to assess operating performance between periods. Accordingly, our comments today, including those referring to our guidance, will focus on non-GAAP results. A summary reconciliation of non-GAAP to GAAP results is provided on page three of the release. More detailed reconciliations are provided in the release, in the appendix of the slides we are using today, in this morning's 8-K filing and on our website. Page 10 of the press release provides a summary of several outlook items, including guidance on revenue, operating profit and earnings per share.

I'll now turn the call over to Tom.

Thanks, Ed. Good morning, everyone. We've got a lot of ground to cover today. So I am going to provide a brief overview of our results, some recent restructuring actions and our outlook for this year and for 2016.

In addition to the normal financial review, Joe is going to spend some extra time on our recent restructuring activities, our new financial reporting format, the impact of currency on our results and the actions we're taking to improve results in the United States and Mexico. Providing this information should help investors track and assess our progress.

Fourth quarter earnings from continuing operations came in at $0.69 per share despite a negative impact of $0.25 related to last year's devaluation in Venezuela and an additional negative impact of $0.14 from other currency declines. Revenue fell 12%. Organic revenue, which excludes the effects of currency translation, was up 19%.

On our last call, we projected a full year segment margin rate of 5.5% to 6% and we came in at 6.1%. So it was a good quarter and we are particularly encouraged by the strong revenue and profit growth in our US operations. On an adjusted basis, which uses the devaluated exchange rate in Venezuela for both quarters, fourth quarter earnings were up 25%. After this year's first quarter, the impact of the devaluation on earnings comparisons will be behind us.

Looking at full year earnings, the decline was driven entirely by Venezuela devaluation and currency declines in other countries which more than offset modest profit growth at the operating level. Regardless, we are not satisfied with the 2014 full year earnings and we expect significant improvement going forward.

Looking ahead, our margin goals have not changed. Our prior guidance for 2015 called for a segment margin rate of 6.5% to 7% and 8% for 2016. We fully intend to achieve these targets. With 80% of our revenue generated outside the US, currency has a major impact on our results and is the primary reason for reducing our 2015 revenue guidance from $3.8 billion to $3.4 billion. We expect 2015 earnings to be in a range between $1.55 and $1.75 per share. This represents an improvement of 30% to 45% after currency impact. For 2016 our earning guidance range is now $2 to $2.40 per share. This is the first time we've given current year EPS guidance. We felt it was important to estimate and communicate the potential impact of currency declines on our earnings. Once again, our margin targets have not changed.

Now to help ensure that we achieve these targets, we're taking aggressive actions to reduce cost and to improve operational efficiency. In December, we announced the consolidation of our four regional units into two operating units. This enables us to eliminate managerial positions and administrative structure. These actions are expected to generate about $15 million in cost savings in 2015.

In addition, most of our country based support functions such as IT, HR, legal, finance, procurement, security and project management are being centralized. We expect this reorganization and centralization will contribute significantly to our overall speed, decision making and savings.

This morning we announced a plan to reduce 2015 costs by an additional $30 million to $35 million by eliminating approximately 1,700 positions throughout the Company. The implementation of this plan is underway and should be substantially completed in the first quarter. So with the $15 million of expected savings that we disclosed in December, we now expect total 2015 savings from these organizational changes to be approximately $45 million to $50 million.

Our goal was to increase profits on a global basis. And our primary focus, at least in the near-term, is on our largest five markets, the US, France, Mexico, Brazil and Canada. In 2014, these countries accounted for 60% of our total revenue and had a combined operating margin of 5.5%.

By contrast, the combined margin rate for the 36 countries that comprise our global markets group was about 13%. Clearly, our five largest countries have the greatest upside profit potential. In particular, executing turnarounds in the US and Mexico are expected to have a substantial impact on our value creation efforts. Joe is going to update you on our progress in both of these countries.

I'll close with some comments on the improvement in our US operations. Fourth quarter profit in the US totaled $12 million reflecting a 6.3 margin rate on 7% revenue growth. The full-year margin was about 3%. And no doubt we'll see some volatility as we execute on a wide variety of improvement initiatives but these results represent a strong finish to 2014 and a good start to achieving our goals in 2015 and 2016.

Overall, we ended 2014 on a positive note and I'm confident that we're entering 2015 as a leaner, more customer-focused company that's well positioned to deliver significant growth in earnings and cash flow.

I'll now turn it over to Joe.

Thanks, Tom. Good morning, everyone. As in the past, I'll start by covering our quarterly results in the same format as prior quarters then I'll review how the recent organizational changes led to a new format of reporting our results at a more granular level. I'll close by reviewing our financial targets for 2015 and 2016 and what we're doing to achieve them.

The quarterly revenue decline of $116 million was driven by a $108 million decline in Venezuela. Organic growth in other countries was offset by the strengthening US dollar. Segment operating profit fell by $11 million due to a $[90] million decline in Venezuela. The rest of the business grew by $9 million overcoming $12 million of unfavorable currency. The US and Argentina were the primary drivers of the improvement.

Brazil profits declined versus last year's results which included the positive resolution of several operating tax items that did not repeat in 2014. Non-GAAP EPS fell by $0.03 as unfavorable currency offset operating profit growth.

The adjusted non-GAAP EPS which adjusts Venezuela to the same exchange rate in both periods shows a 25% increase from $0.52 to $0.65 per share, driven by the growth in the US and Argentina. The EPS bridge highlights the variances from last year's fourth quarter.

The segment operating profit decrease of $0.13 per share was driven mainly by two factors, a profit decline in Venezuela due to the bolivar's devaluation and negative currency translation from other countries, mostly in Argentina, Brazil and France. The positive news on this bridge is the $0.25 profit growth from other countries. The lower non-controlling interest expense and the increased tax rate were also due to the exchange rate change in Venezuela.

For the full year, reported revenue declined 6%, segment profit was down 20% and EPS fell 30%. Once again, currency declines in Venezuela and other countries had a major impact on the results across all metrics.

Here is a simplified version of the full-year earnings per share bridge. It clearly shows that the year-over-year earnings decline of $0.64 per share was driven almost entirely by two items, negative currency outside of Venezuela and the net impact of all Venezuela related items. The rest of the business improved versus last year by $0.10 per share.

Cash flow from operating activities was about flat versus last year as improved working capital and the timing of insurance payments was more than offset by the lower earnings.

Total year capital expenditures and capital leases decreased by $30 million due to lower spend on IT, CompuSafe and money processing equipment. The reduced IT spend was driven primarily by lower spend related to our shared services center for Latin America, reduced spending on US business projects and lower spending across most other countries from centralizing the IT function.

The lower spend on CompuSafe is primarily the result of transitioning to operating leases for this device instead of purchasing the safes.

Net debt increased by $107 million from the end of 2013 due to the write-down of $82 million of cash and cash equivalents in Venezuela, and increased borrowing to pay $87 million of contributions to the US pension. These items were partially offset by about $60 million of proceeds from the sale of our ownership interest in Peru and slightly improved working capital. We continue to manage capital spending prudently while leveraging procurement to generate additional savings.

We spent less than our targeted 1.0 reinvestment ratio in 2014, partially due to the timing of certain purchases that will move into 2015 as well as the transition of some of our CompuSafes to an operating lease structure. We are targeting about $160 million to $170 million of CapEx and capital leases in 2015 which is consistent with our reinvestment ratio target of 1.0.

The underfunding of our primary US pension plan remained about the same in spite of $87 million of contributions. The discount rate declined by 90 basis points to 4.1% and the new mortality tables adopted in 2014 completely offset the contributions and investment returns. The funding ratio remains flat at 88%. The UMWA underfunding increased due to a lower discount rate.

In 2014 we made good progress in our efforts to de-risk the pension plan, reduce future volatility and reduce our PBGC premiums. We've already disclosed our third quarter prepayment of $61 million which represented our 2015 and 2016 required contributions to the plan.

We also completed the lump sum buyout offer we initiated last August. Approximately 4,300 pension participants were paid a total of $150 million. As a result of these actions and based on current estimates and assumptions, we do not expect any future cash outflows to the pension. And with regard to the UMWA liability, we do not expect to have any cash outflows until the year 2032. I want to reiterate this point because it is important to our cash flow. We expect no additional payments to the US primary pension plan and the UMWA liability is funded by existing assets until 2032.

As investors think about our valuation, we believe it's important to look beyond the reported underfunding of these plans and consider that there is currently no expected cash flow impact on the Company until 2032. That completes our review of 2014 results.

I'll move on to our new reporting format which reflects how we are currently managing the business. We also believe it offers investors more granularity and transparency. This slide uses 2014 results to illustrate how our reporting format has changed.

As Tom noted, the four regional units that we used to report have been replaced with two large operating units, one covers our largest five markets and the second covers the rest of the world under the heading of Global Markets. The new format also breaks out the payment services business, which includes operations in Brazil, Colombia, Panama, Mexico and the US. The business is focused on serving the unbanked and under-banked population in these markets. The 2014 operating loss is caused by the investment in the prepaid card in the US, which is gaining traction and is expected to contribute to earnings in 2016.

Another important distinction is that we will no longer use segment margin as a performance metric. When we transitioned to the new organization structure, we combined the previous regional management cost with the corporate cost related to oversight of our business at the global level. These combined costs are now referred to as corporate items. As a result of this combination, our 2014 segment margin rate of 6.1% which was slightly above our 2014 guidance range of 5.5% to 6% now corresponds to an operating margin of 4.7%. The combined operating margin rate of the 36 countries that comprised our global markets unit has been consistently strong. Organic growth, particularly in Latin America, has been offset in recent years by unfavorable currency movements. Venezuela has historically driven volatility in both the revenue and operating profit for global markets. But the currency devaluation in the first quarter of 2014 significantly reduced results from Venezuela in US dollar terms. Excluding Venezuela, the profitability of the global markets unit has been steady and we expect this to continue.

In contrast, the organic growth rate for revenue in the largest five markets has been only 2% for the past two years. This limited organic growth has been completely offset by currency and the margin rate is far below the rate in our global markets unit. The decline in operating profit in 2014 is driven primarily by Mexico, but also France and Brazil. Improving the margin rates in these countries is our greatest opportunity to create value in the near term. So we are very focused on improving performance in these countries, especially the US and Mexico.

When you look at the 2014 results more closely, it's clear that the 14% organic revenue growth was driven by the global markets unit along with Brazil. These countries also had very good profit margins.

On the other hand, the US and Mexico, which together had $1.1 billion in revenue last year have the lowest operating margins. We view these two countries as the major opportunities to create value. Executing turnarounds in these countries is critical to achieving our financial targets.

I'll close by covering our outlook for revenue, operating margin and earnings per share, including the primary assumptions behind our financial targets and how we expect to achieve them.

While our revenue guidance for 2015 has been reduced from $3.8 billion to $3.4 billion, our margin rate goals have not changed. Last July, we said our goal was to achieve a segment margin rate of 6.5% to 7% in 2015 and 8% in 2016. Expressed in terms of operating margin, our 2015 target is to achieve an operating margin rate of 5.1% to 5.6%. For 2016, our 8% segment margin goal translates to an operating margin target of 6.7%.

Last July we also said our initial EPS goal for 2016 was to deliver earnings of $2.50 to $3 per share. Based on the steep currency declines in the second half of 2014, our reduced revenue guidance translates to a $0.60 decline in earnings per share. So we are now guiding to a range between $2 and $2.40 per share for 2016.

For 2015, our current estimate for revenue is $3.4 billion and our estimated range for operating margin rate is 5.1% to 5.6%. We have included an estimate for the tax rate, interest income and other items below operating profit. We expect the actual results to vary from these estimates, but believe the earnings per share range is wide enough to allow for this variability.

We are projecting $200 million of organic revenue growth, which is more than offset by the unfavorable currency impact of $250 million. The EPS bridge highlights the expected currency impact, which is an unfavorable $0.35. The estimated operating profit improvement of $63 million to $80 million is driven by regional consolidation, headcount reductions and operating improvements. This generates $0.74 to $0.94 of earnings per share, which is a significant improvement that would put us on a path to delivering our 2016 targets.

The recent reorganization enabled us to eliminate structure and costs from the former geographic regions. Our initial expectation was that this would reduce 2015 cost by $10 million to $15 million. We now expect to realize the full savings of $15 million.

Today we announced an additional $30 million to $35 million in expected cost savings related to headcount reductions throughout our global workforce. This difficult process is well underway. The total expected savings is $45 million to $50 million and the actions we have already taken will deliver about 80% of the savings.

The US business improved its margin rate in 2014 to 3.1% and we're projecting 4% to 5% rate into 2015 and 6% by 2016. There are a number of key projects the US team has been working on for several years that are in the implementation phase right now. Also, these projects have several phases which start with an implementation of core functionality and then build with enhancements and additional functionality after the users have optimized the capability of the new process or tool.

We've provided an update on the implementation status of several of these projects. This provides some perspective on when the project should start providing payback on the investments that have been made. The implementation of these projects should coincide with the profit improvements in the business over the next few years and then provide the foundation for continuous improvement in the business to enable us to deliver margin rates that are more in line with our US competitors.

As expected, 2014 profits in Mexico were driven downward for a variety of reasons, including some customer losses and a one-time insurance premium that we do not expect to repeat. Similar to the US, Mexico has several key projects that are expected to drive profit growth and enable Mexico to meet its 10% operating margin target. The implementation of a standard branch structure was nearly complete at the end of 2014. So we should see almost a full year of the benefits from this project in 2015. The CIT and ATM efficiencies are being implemented during 2015 and should generate most of the savings in 2016. In addition to these projects, Mexico is very focused on driving top line growth, particularly in the retail sector where we believe there is significant growth potential.

To summarize, we're glad we finished 2014 with a strong fourth quarter. Despite the currency headwinds, fourth quarter earnings per share were up about 25% on an adjusted basis and the revenue and profit growth in the US is very encouraging.

We entered 2015 with a clear plan to deliver significant profit growth even with the currency headwinds. We have a new organization structure in place to accelerate the expansion of our service offerings and drive productivity through continuous improvement. We are highly focused on meeting or exceeding our 2015 targets on our way to our 2016 goals. We remain focused on delivering for our customers, employees and shareholders in these challenging times. Thanks again for joining us this morning. Denise, let's open it up for questions.

(Operator Instructions) Ashish Sinha, Gabelli.

I had a few. Firstly, your new company structure, if you could give a bit more detail in terms of how the Company is set up now versus where it was before? So if you could run us through the org structure, I mean branch managers in each country, who do they report to and then how does it kind of flow up to the top in terms of reporting relationships and how is it different from before?

My second question is on Brazil and Lat Am margins, specifically Brazil. So, Q4 we can see a huge drop year on year. I do appreciate you talked a little bit about some one-offs which didn't repeat this year. But last quarter you were talking about passing on some wage increases in your contract. If you have any updates on that and if that impacted your margins at all?

And lastly, if you could also talk about some non-financial metrics as in terms of your branch performance levels and branch efficiency that'd be great. Thank you.

Good afternoon, Ashish. This is Tom Schievelbein and I will address the organizational question first and let Joe address specifics on Brazil and then we will talk about efficiency. So the first thing, on the organization, we've gone from a regional structure that had the Far East, Europe, North America and Latin America separate reporting into me, we've gone to a structure where I have heads of two now large operating segments, one being strategy and the focused markets which are the US, France, Mexico, Brazil and Canada under Mike Beech and I also have the global markets under Amit Zukerman which includes the rest of the world. So I think it's 36 countries. I think even more importantly is that we have changed into a more centralized function.

And so the operations and the support functions within each of those countries and I am talking specifically here about information technology, human resources, finance and the rest of the ones I mentioned have been centralized to again get advantages of volume, get advantages of synergies. And so, Patty Watson, the CIO has got responsibility for improving costs around the world from our information technology. Holly Tyson on HR, Mc Marshall on legal and of course Joe with finance.

So we have a more direct reporting responsibility, I think, should improve our speed and allowed us to reduce the number of managerial positions that we have that were overseeing the corporation.

Relative to Brazil, Joe?

So in Brazil we did have a significant impact, specifically in the fourth quarter from last year the resolution of some operating taxes that were favorable to us. We also were planning on getting some price recovery. We did not realize as much of that recovery as we were projecting. We also begun to take some of the actions to generate the savings that we announced today. There were some transition costs related to that overall. And the timing of price increases as well as the one-time resolution of the operating tax items in the fourth quarter also affected earlier quarters in the year and that was the primary driver of the year-over-year decline in Brazil.

You had asked a question about branch performing metrics -- performance metrics. I wouldn't characterize those as having changed dramatically due to the organization change, but one of the things we are driving with a much greater focus is the performance on utilizing lean tools for the stocks specific to the US. Many of the projects that we're implementing in the US gives us the data to be able to start measuring and managing the business in a very different way which allows us to provide tools to the branch and manage their routes and their efficiencies in a much more effective way. So that's really related specifically to the US, but the organization change in itself didn't really change the branch performance metrics across the Company.

If I could remember, you gave a number of 56% of your US branches I think were performing or fell under your performing criteria and you had a target to take it to 80%, I think. Do those targets change or they still hold?

The targets don't change. We're really more focused on driving efficiency across the entire business. We look at that as a measure of individual branch performance. At the end of the day, we need to see the total margins improved and each of the branches have opportunity to improve regardless of where they are today from an efficiency or profitability perspective.

So it's not going to be a metric you are going to communicate regularly or (multiple speakers)?

It depends on the communicate regularly. I think we said like on biyearly or every other earnings release we'd be reporting on that. It hasn't moved enough or changed enough to where we think it's helpful to report it on a quarterly basis. So you'll continue to see those metrics in the future on a regular basis and it's most likely going to be on a every six-month basis.

It did improve a few hundred basis points versus the baseline metric you referenced, but that's what you would expect given the margin rate improvement in the fourth quarter for the US.

Understood. Thank you.

Jamie Clement, Macquarie.

A couple of questions, kind of random order, but in light of the new way that you are reporting revenue and profits, if you look at the corporate items line, I think it was about $114 million all in in 2013 and I think maybe $111 million here in 2014. When you look at your cost savings number, is there a dollar value that should be coming out of that line versus the countries? Do you have a rough estimate of what that should look like?

Yes, we do. Hold on. Joe?

So, Jamie, most of the $15 million from the reorganization comes out of the corporate items because in the new structure, corporate items includes what used to be considered non-segment plus all of the regional cost. And so the $15 million of savings came directly out of regional cost and some of the corporate functions. You should expect to see about a $15 million improvement in that category. There are a number of items in that category of corporate items that move around and some of them actually have volatility which we'll talk about on a quarterly basis.

Joe, did you just say $15 million or $50 million?

$15 million.

$15 million, okay. And so the rest coming out of the countries?

Correct.

In years past, obviously with the way you refer to segment margin that led to a lot of tables, reconciliation between GAAP and non-GAAP, the principal one over the years being pension costs. Correct me if I am wrong here, but based on what you had said last year, it sounded like 2015 pension cost to the P&L on a GAAP basis was not going to change materially from 2014. It may even in fact get a little more favorable to you. Are the days of significant GAAP versus non-GAAP reconciliation based on that kind of behind us?

I think we will continue to remove the pension expense for the US and for the UMWA liability from the non-GAAP results because we think you should focus on the cash flow impact. So we are working through those numbers right now. I do think they will get better in 2015 versus 2014, but I would expect to see a continued difference between GAAP and non-GAAP driven by that item.

Sure. I think, Joe, what I was actually really getting at was reconciling the prior year's period versus the current year period and factoring that in, but I totally understand what you said. But -- sorry, go ahead.

But one of things I hope is easier for everyone to understand our results is that all of those reconciling items are now being categorized into one line item. The other items not allocated to segments, which I hope makes it easier because now at the country level the results you see on a GAAP and non-GAAP basis are going to be the same and the reconciling items will be on one line item that we detail in the press release and in the Qs and K.

Got it. On that topic of the pension, Joe, I don't think I saw a balance sheet table of any sort in the press release. Obviously, with the prepayment of some of your pensioners, some of that was sort of formally taken onto the balance sheet. I guess that's one way somebody could interpret it. Do you have a net debt balance that you can give us year-end?

Our net debt is about $312 million. It's in one of the slides.

Oh, my bad. I was looking at the press release.

Oh, no, no that's okay. And it's on slide -- it's in the early section.

I can find.

$319 million and then if you add the underfunding to that you get a more traditional net debt, but I would encourage you to consider the cash flow or lack of cash flow requirements for the US pension UMWA.

Yes, and that's why I was asking specifically about the pure net debt component rather than the base GAAP underfunding. Switching gears -- I'm sorry.

$319 million.

$319 million, okay. Thanks very much. Switching gears and this will be the last question and I can get back in the queue. So obviously, the US and Mexico points of emphasis going forward, clearly understand that. One of the thing, and Tom maybe you can chime in here, fourth quarter was pretty good compared to Q2 and Q3 in both the US and Mexico. So I was wondering if you might be able to provide a little bit more clarity on that. And specifically 6.2% margin in the US, I mean if (inaudible) The Brink's Company that was the number that was probably people couldn't even have conceived of a number like that.

I mean I think what we saw in the US was some volume and the profitability flowing through, but there's also a lot of -- there are some one-offs in there, but they basically net out. I think in the end I believe we're starting to get traction but it's still early in terms of the turnaround and so a lot of these -- and that was my comment on volatility, as we put the new projects on line we could get some up and down in terms of the efficiency with which we do that in the US. But I'm encouraged specifically by the volume growth in the US because I view that as our customers starting to vote of confidence in what we're doing in the US in terms of fixing that operation.

And Tom if I could ask a follow-up on that, 2008 and 2009, not that far (inaudible) and any business partners of this country, large financial institutions have just been beating down on price ever since 2008 and 2009. Are we at the point where maybe customers are perhaps taking a little bit of a closer look now at service levels versus just the pure price that is being quoted to them and that maybe some businesses are starting to come back to you, because I mean the overall cash in circulation in the US, we kind of know what those trends are, so clearly something else is going on in your favor?

I mean I don't think it has anything to do with anybody in this particular industry getting paid a lot more for what we're doing. But we did have some pretty good corporate wins of $30 million to $35 million in the US mid-year. And so that provided us some volume. Obviously with a heavy fixed cost business then the profitability tends to be magnified by that volume. And I would also say that we're looking to provide a lot more value-added services with our CIT and some of the other actions. And I believe that we will continue to then be able to differentiate ourselves and get additional volume in the US. So it's a positive.

I don't think we want to declare a victory at this point because we still have a long ways to go. But obviously it's a positive for 2014 and it sets us up for a much more positive 2015 than we've had for the last say three, four, or five years.

Okay. And, Joe, I think you were the one that talked mostly about Mexico in your prepared remarks. Compared to where you were in Q2 and Q3 in Mexico and where you were in Q4, I know there were some things or sort of, I don't know, artificially depressing numbers in Q2 and Q3. 7.6% in Q4, what's kind of a -- is there a reasonable range of what kind of margin you might be looking for in 2015 in Mexico to show some improvement?

Mexico, we are looking at 6% to 8% for 2015. The fourth quarter revenues were down more than $10 million but profit was up slightly year over year. It was a strong fourth quarter and it was the event -- the results of the cost actions they've been taking all year. We saw the benefit of that begin to help the fourth quarter results. We expect that to continue to help us going into 2015 and it's an important part of getting to our 6% to 8% margin in 2015. And we're very focused on picking up some additional retail volume in 2015 to give us a little bit of top line help.

(Operator Instructions) Saliq Khan, Imperial Capital.

I'm speaking on behalf of Jeff Kessler as well. One of the things we're looking at is that the segment operating margins for you guys have largely increased and it seems like that the reorganization, all the restructuring efforts that you guys have been putting in place is finally starting to show a lot of real success. At the same time one of the things that we've been really thinking about is that the oil pressure, the oil price pressure could increase the volatility over the short term. What you're starting to see is that there is some real expenditure growth that's higher than the non-oil tax collection that's coming out of Venezuela. So, you have said the bolivar (inaudible) you're seeing that the free market is somewhere near [200]. There seems to be kind of a similar situation that you guys were in last year. As you're looking out of the next couple years, how are you guys thinking about the potential devaluation of the bolivar beyond the [50]?

I'll let Joe take a shot at foreign exchange.

Venezuela is a significantly reduced piece of our Company. Last year it was about $15 million-ish in profits if you adjust the bolivar to [50] for the full year. We don't expect it to move materially and we don't expect Venezuela to have a material impact on our business positively or negatively from operations going forward.

Obviously if we get nationalized which is always a risk in Venezuela that that would have an impact on the balance sheet. But from an operating income, we don't expect a material impact.

Got it. And then one of the things that you guys have mentioned, in your filing you say, you reported somewhere around $24 million of operating profit from the Latin American segment which tends to be almost about a third of the overall contributions that you're seeing from the overall earnings. How much of the $24 million came out of Venezuela?

It was low single-digit dollars.

Perfect. Joe, a last question for you guys is that what you're finding is that we are in a world where with a lot of unstable foreign currency impact. How are you guys thinking about either spending money on dividends versus paying down your debt?

Right now we're focused on generating profit growth and generating more positive free cash flow so that we have that decision to make.

(Operator Instructions) [James Cochrane, Private Capital].

How much of revenues is cash-in-transit versus high-value services and security services? And then, I was just curious when you reiterated your 2016 guidance in December of $2.50 to $3 since then currency has probably devaluated in the euro about 10% and then across the other currencies marginally flat or like maybe slightly up, the dollar has been slightly up. So I'm just wondering that it's a big change since December, both on 2015 revenue and from an EPS basis 2016, I'm just wondering if there's anything else I am missing.

So, I am going to let Joe handle it. So nothing has changed in terms of the underlying operations other than foreign exchange. Joe?

The CIT compared to the other lines of business is in the range of 50% to 55% of our revenue which is pretty consistent with what it has been in the last few years. The dichotomy is in Latin America we grow CIT pretty well and outside of Latin America, in the more developed markets, the other segments tend to grow faster. We obviously are very focused on growing high value services whether it's BGS or ATM servicing or developing other solutions. But if we can grow CIT in Latin America great margins we will continue to do that.

With respect to exchange rates, you're right. There's been a significant impact. If you look at the euro back in the middle of the year when we gave our guidance for 2016, we've seen a 15%-plus decline in the value of the euro. So that has clearly had an impact and is what drove us largely from going from $3.8 billion as our 2015 revenue estimate down to $3.4 billion. Currency clearly has an impact when 80% of the business is outside the US. Hopefully, currency becomes a tailwind someday and we get some of that back.

It would be very nice if currency became a tailwind at some point.

Can I interpret that if currency moves in your favor, there is some upside to your guidance?

We're driving towards and committed to delivering on the performance metric of operating profit margin rate. So when we get to our margin rate targets, if currency drives revenue up, we get more income and more earnings per share, yes.

On a dollar basis.

[Marissa Olivera, Wurlich]

I was wondering why have you chosen the reduction [of provisions] as a way to achieve your goals? Isn't there any other way or something?

Could you repeat the question, please? We didn't get it.

Sure. Why have you chosen the reduction of provision as a way or as the best way to achieve your goals [for financial 2015]?

The question, if I am hearing it correctly, is why have we chosen cost reductions as a way to improve profitability.

(technical difficulty) you were saying that there will be a reduction of the regions.

Yes, reduction from four regions to two operating units.

Exactly. That includes Mexico?

Well Mexico is in one of those operating units. It's in the focused large five markets. So it's under Mike Beech and in his operating unit.

But why is it the best election, why is it the best way?

We view it as the best way because it allows us to focus the resources and the improvement actions on the US and Mexico.

Okay. Thanks.

Okay. So, I mean, it's really an issue of being able to focus the best and most efficient resources we have to help out both the US and Mexico along with those the rest of the big five, which is France, Brazil and Canada, which we told you is 60% of the revenue, but 5.5% margin rate. So, that's our biggest opportunity to improve the earnings of Brink's. And that's why we are focused on that particular segment of the business.

And ladies and gentlemen, this will conclude our question-and-answer session. The Brink's Company fourth quarter 2014 earnings conference call has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.