Brinks Co (BCO) 2015 Q4 法說會逐字稿

Welcome to the Brink's Company's fourth-quarter 2015 earnings call. Brink's issued a press release on 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 Brink's.com. (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, investor presentation and in the Company's most recent SEC filings. Information presented and discussed on this call is represented 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, everyone.

Joining me today are our 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 Venezuela operations, US and Mexico retirement expenses, reorganization and restructuring charges, certain compensation items, acquisitions and dispositions.

We believe the non-GAAP results make it easier for investors to assess the operating performance between periods. Accordingly, our comments today including those referring to our guidance will focus primarily on non-GAAP results.

Please note that, as in past years, our quarterly non-GAAP results have been adjusted to reflect our full-year tax rate, which was 37% in 2015. Prior to this adjustment, results for the first three quarters of 2015 used an estimated full-year rate of 42%. The resulting EPS figures for each quarter are provided on page 16 of today's press release.

Joe will provide additional information on our tax rate in a few minutes.

Summary reconciliation of GAAP to non-GAAP results is provided on page 3 of the release. More detailed reconciliations are provided in the release and the Appendix to the slides we are using today and on our website.

Finally, page 9 of the press release provides a summary of several outlook items including guidance on revenue, operating profit and earnings per share.

With that, I'll turn the call over to Tom.

Thanks, Ed. Good morning, everyone.

I'm pleased to report that on a non-GAAP basis, our fourth-quarter and full-year earnings came in well ahead of the guidance we provided in October. Fourth-quarter earnings per share was $0.55 versus the $0.58 we reported in a very strong year-ago quarter. Revenue declined 14% or $115 million due to negative currency translation, which also reduced operating profit by $16 million and EPS by $0.20.

On a constant currency basis, the fourth-quarter earnings per share was $0.75 or up 29%. Earnings for the full year showed very strong improvement at $1.69 per share, up 67% versus $1.01 in 2014, despite currency headwinds that reduced annual revenue by $467 million, operating profit by $50 million and earnings per share by $0.64. So even with the currency-related decline of $467 million, about 75% of our total revenue in 2015 was generated outside of the United States.

Now we understand that currency fluctuations are a fact of life for global companies. We can't control them and we can't hide behind them. But it's important to point out that, despite strong currency headwinds that worsened throughout the year and continuing challenges in the US, we increased earnings by 67% in 2015. And on a constant currency basis, full-year earnings more than doubled.

Our year-over-year improvement was driven by strong organic profit growth in Argentina, Mexico, Chile and Asia, and disciplined execution of a restructuring plan that achieved $50 million in global cost reductions. These positive factors were partially offset by profit declines in the US and Europe and negative currency.

The net result was a year-over-year operating profit improvement of $33 million, which boosted our margin rate by 160 basis points to 5.3%.

While fourth-quarter and full-year results in the US were clearly disappointing, we expect significant improvements this year. Joe is going to cover the drivers behind last year's US profit decline and the specific action items that are in place to drive profit improvement in the US in 2016.

In addition to a profit recovery in the US, we expect improved results in Mexico and in our payments business, along with savings from our ongoing restructuring actions to drive continued profit growth and help us deliver earnings in the $2 to $2.20 per share range on revenue of approximately $2.8 billion. Our operating profit guidance targets a margin range of 6.7% to 7.4%, which includes a negative currency impact of about $30 million.

In summary, we feel good about the progress we've made and the earnings growth we achieved in 2015. I am confident that Brink's will deliver further improvement in 2016.

Now, before Joe provides the details behind our 2015 results and our outlook for 2016, I'll close with a reminder that my retirement is effective as of this year's annual meeting of shareholders, which is scheduled for early May. It may be earlier if a successor is named before then. CEO search process is underway. It is being overseen by our Board's governance and nominating committee, and internal and external candidates are being considered. We will update you as necessary during the search process.

And with that, I'm going to turn it over to Joe and then we will open it up for some questions. Joe?

Thanks, Tom. Good morning, everyone. I'll start this morning by comparing our full-year results against the guidance we provided at the beginning of 2015. Last year at this time we were estimating EPS of $1.55 to $1.75, driven by improvement from operations of $0.89 to $1.09. We ended the year up $1.32 from operations, well above our original estimate, and we needed every bit of it to cover the much higher than expected currency impact of $0.64 versus the $0.35 we expected at the beginning of 2015.

Not everything went the way we had projected in 2015, particularly in the US, but we did deliver at the high end of our original guidance. Our 2016 EPS outlook has not changed. We expect continued operating improvement to overcome currency headwinds and drive another year of significant earnings growth from $1.69 to a range between $2 and $2.20 per share.

My next few slides will provide an overview of our fourth-quarter results and full-year results. Then I will cover segment results with an emphasis on the challenges and opportunities we face in our US operations. I will close with a more detailed review of the assumptions behind our 2016 guidance.

The fourth quarter was our most profitable quarter of 2014, accounting for $0.58 of the full-year EPS of $1.01. This year, fourth-quarter 2015, we improved $0.17 operationally, but currency completely offset these gains. This slide shows our fourth-quarter reported revenue, operating profit and EPS, and the impact of currency on each.

Revenue declined entirely due to currency. In constant currency, operating profit grew by $6 million. But currency was negative $16 million. The operational improvement for the quarter was led by Argentina's volume and pricing increases, lower corporate expenses, price increases in Brazil combined with solid seasonal volume growth and continued improvement in Mexico.

The currency headwinds continued to be driven by the Argentine peso, the Brazilian real, the euro and the Mexican peso. The Argentine peso devalued in mid-December from about 9.5 pesos per US dollar to about 13 pesos per US dollar. A significant Argentina devaluation was already included in our 2016 guidance, so this was not a surprise.

Looking once again at our full-year results, the operational improvement of $1.32 from a base of $1.01 was driven by a variety of factors. The $50 million of cost reductions, the growth in Argentina and Asia, the turnarounds in Mexico and Chile and the lower corporate expenses more than offset the decline in the US and unfavorable impact of currency. We were also able to lower the 2015 tax rate to 37%.

At our Investor Day presentation in October we said we were working on using the Latin America withholding taxes we pay as an offset against our US income tax. At that time we were confident we could deliver this reduction in 2016 but added that we were working to accelerate it into 2015. Not only were we able to do so, we also realized an even greater benefit from some one-time recoveries of previously recognized taxes.

In summary, our full-year revenue grew 3% organically but currency had a negative impact of $467 million. The operating margin rate expanded from 3.7% to 5.3% as operating profit grew by $33 million despite $50 million of unfavorable currency. EPS grew 131% last year on a constant currency basis. Overall, a very strong performance. And there are still significant opportunities to drive additional profit improvement in 2016.

Now I'll cover segment results beginning with the US. Our single biggest opportunity for improvement in 2016 is our US operations.

But before discussing 2016, I will address the disappointing 2015 results after a fairly strong start to the year. The challenge of adding new business while implementing significant headcount and cost reductions in late 2014 and early 2015 pushed volumes and profits higher through the first half.

Unfortunately, we did not manage the increased volume and the cost actions effectively enough. As a result, profits fell sharply in the second half of 2015. In hindsight, our global cost reduction plan was generally well executed. But we cut too deeply in the US, given our operational capabilities in the branches. Our overhead in the branches was too high but was necessary, even our inefficient manual processes.

As a result, we had to increase spending in 2015 to address service quality, staffing challenges and fleet availability. As staff turnover increased we also experienced higher security costs and additional inefficiencies. This increased spending and higher security costs were the primary drivers of the profit decline in the second half of 2015.

In addition, we completed the transition of the significant profitable money contracts to a competitor, as expected, in the second quarter, which put even more downward pressure on the second half revenue and profits.

Despite the challenging end to 2015, we believe the US has laid a strong foundation for significant improvement in 2016. We've made solid progress on our productivity initiatives and have brought our service quality back in line. For example, we completed the rollout of the [Central S] building project and handheld scanners, which we are working on to add greater functionality to drive more savings. We optimized 17% of our routes through our route logistics optimization projects and we integrated 162 one-person vehicles into our operations.

In late 2015 we de-layered the US field operations. We continue to roll out new KPIs and dashboard tools for our branch managers and have increased the target of one-person vehicles to be placed in service in 2016.

We expect to grow margins to the 4% to 5% range in 2016 from these and other actions initiated in 2015. Given the weak finish to 2015, we do not expect significant improvement in the first quarter, but we do expect the second quarter to be closer to our 4% to 5% margin target. And the second half should be even stronger as our one-person vehicles ramp up and the other initiatives yield significant savings. We expect the US margins to be at or above 6% in the second half of 2016.

During the fourth quarter of 2015, we de-layered the US field operations by eliminating the regional VP and area director roles. We replaced these layers with district VPs who will provide increased support to our branch operations as we implement changes necessary to improve profitability at the branch level. This structure moves decision-making closer to the branches where we serve our customers and should allow us to make changes faster to drive efficiencies.

New incentive plans have been rolled out to provide more performance-based variable compensation at the branch level. Another important change is a new COO, who brings a significant logistics experience to our US business.

In our October 6 investor day we talked about our introduction of lower-cost one-person vehicles that reduce labor, fuel and maintenance costs. We are also retrofitting vehicles from our existing fleet to enable them to operate with one crew member.

At the end of 2015 we reached 162 one-person vehicles, well ahead of our October projection of 100. For 2016 we increased our original plan from 300 of these vehicles to achieve at least 460 by year-end. In addition to lower labor, fuel and maintenance cost we expect to reduce total labor hours, increase our stops per worked hour and maintain or improve current premise and drive times between customer locations. This rollout plan is critical to achieving our 2016 profit improvements.

During the fourth quarter we rolled out a CIT dashboard that provides branch management with improved visibility into data that enables them to drive process improvement. The dashboard provides daily visibility into the performance of a route and its crew. These include the time required to check in at the branch in the morning and check out in the evening, time spent on our customers' premise and the total route time, all critical elements in measuring and managing the performance of a route crew. These dashboards will continue to evolve to support branch management and driving efficiency and improving profitability.

Mexico delivered strong fourth quarter and ended the year at a 7.3% margin, right in the middle of the 6% to 8% range we provided at the beginning of the year. In local currency, fourth-quarter profit and margin rates were at all-time highs since we acquired full ownership of the business in late 2010.

Mexico is on the trajectory we need to deliver 10% margins in 2016, which was our original margin goal when we acquired what was an unprofitable operation. Delivering a 10% margin rate in Mexico is critical to achieving our 2016 guidance.

Fourth-quarter profits in France fell slightly due to currency headwinds. For the full year, France faced a challenging environment as slight volume declines were offset by growth in retail solutions. Revenue declined significantly due to the weaker euro but France was able to expand margins from 7.6% to 8% during the year. In addition to reducing our costs, we are repositioning this business to pursue higher-margin solutions within the cash supply chains of our customers, and we expect to see the benefits of these efforts in 2016.

Brazil delivered a strong quarter in the midst of a deteriorating macroeconomic environment with pressures from all directions. The team executed on retroactive price increases, as predicted, and benefited from solid seasonal volumes, even though they were slightly lower than in the past. Approximately half of the full-year profit from Brazil was in the fourth quarter, but the significant devaluation of the Brazilian real caused a year-over-year decline.

We expect 2016 to continue to be difficult, but our Brazilian team is up to the challenge.

Profits in Canada for the quarter and full year were down, due mainly to currency. But Canada delivered a solid 8% margin for the quarter and maintained the same full-year margin rate of about 7%, despite slight revenue decline and higher pension cost.

The steady performance of our global market segment continued into the fourth quarter. The combined operating margin rate of the 35 countries that comprised this segment was 17%, up 250 basis points over the year-ago quarter.

The Latin America region delivered 15% organic revenue growth and solid margin growth, almost entirely due to Argentina. Results in Chile also improved, due mainly to recent restructuring actions but lower profits in Colombia partially offset these improvements.

The EMEA region delivered lower but still solid margins of 8.6% as revenue declined as expected, due to both currency and lower volumes. The organic revenue decline in Germany was expected as we exited a guarding contract last year.

Asia continues to perform well on all fronts with an exceptionally strong margin rate of 23% in the quarter and 18% for the full year.

Year-to-date cash flow from operating activities on a non-GAAP basis increased $9 million despite approximately $25 million of restructuring and severance payments. Capital expenditures and capital leases were down $28 million versus last year, due to both currency and decreased spend across most segments.

Net debt decreased by $49 million from the end of 2014, due primarily to lower CapEx spend, increased CFOA and the cash collected on the sale of a facility in Mexico.

Since I'm on the slide covering cash flow and net debt, I would like to highlight a change in our future cash payments to our US pension plan.

Due to the low equity returns in the market in 2015, we are now projecting payments to the US pension plan starting in the year 2020. Slide 33 in the Appendix provides the payments by year, but we are now estimating about $50 million spread over four years.

I'll close with a review of our 2016 outlook and the assumptions behind it. Our 2016 revenue outlook assumes 5% organic growth and 9% unfavorable currency impact, resulting in about $2.8 billion of revenue, which is lower than our guidance at the end of 3Q 2015 due to increased currency pressure. We expect to grow operating profit to a range between $190 million and $210 million, despite $29 million of unfavorable currency impact. The currency impact is due primarily to the devaluations of the Argentine peso and the Brazilian real.

Our operational improvements come from the US and Mexico delivering their targeted margins, the payments business improvement from the US prepaid card and the rest of the world contributing another year of solid profit growth, led by continued organic growth in Argentina and Brazil, the benefits of the business transformation in France and the benefits of additional restructuring actions.

Despite the lower revenue, our EPS guidance is still $2 to $2.20. We estimate our tax rate will be 39%, which is higher than the 37% in 2015 due to the one-time tax benefits realized from our actions in 2015.

This slide summarizes our 2015 year-over-year results and our outlook for 2016. Our performance in 2015 was not perfect, but our overall results were exceptional and we delivered EPS at the high-end of our guidance despite significant currency headwinds. We grew our margins from 3.7% to 5.3% and expect to grow to about 7% in 2016. And we expect another year of significant earnings growth in 2016.

That concludes my comments this morning. Denise, let's open up for questions.

(Operator Instructions) Jamie Clement, Macquarie.

Joe, could I get a little bit more info on the retroactive price increases in Brazil? Typically, 1Q-2Q in most of these Latin American markets -- and by the way, maybe I'm lumping them all together inaccurately -- but usually sees margin pressure in the first two quarters because you've got to up your wages because of inflation, and then you get it back more in a gradual way in Q3 and Q4. This year, Q4 much more dramatic as a good guy for the Brink's Company. So can you talk us through that a little bit?

Certainly. The environment in Brazil just continued to deteriorate throughout the year. We saw last retroactive price increases in the first half with most of that being recovered in the third and fourth quarter. We actually got a little more of the retroactive price increases during the third quarter, and we performed a little better in the third quarter versus what we expected. And we got the balance of it back in the fourth quarter.

The Brazilian business also took some cost actions midyear as the environment continued to deteriorate and we saw volume pressure.

And the fourth quarter ended up being our strongest by far. In fact, it came down to the month of December, where we picked up a great seasonal volume pickup as well as the bulk of the price increases in the fourth quarter. It all came down to the very last minute, but the team was able to execute and deliver as they had expected to all year. And given our customers' traditional practice of settling up by year-end, it just went down to the wire this year.

Okay. As we look at Brazil's margin for the quarter, which was -- gosh, it was high teens. And I look at it for the full year and I think it was more -- I think it was maybe more about -- 8. -- (multiple speakers)? Okay, I was going to say 9. Okay, very good.

As we think about modeling this business going forward, should we be thinking more -- which numbers are you thinking more about?

Well, let's start with the fourth quarter was extraordinarily high margin due to the factors we discussed. The way we are thinking about Brazil is, given the incredibly difficult macro environment, geopolitical environment continues to worsen -- I think from the outside in, you would say, if a business can maintain their margin rate and, ex-currency, maintained their local currency profit, that would probably be viewed as a very good performance in that environment.

That's not what we are targeting for Brazil. They have a growth plan. They have a plan to grow particularly in the retail segment. They did get good traction in 2015 in retail. The actions they took, particularly in the middle of the year on cost, we expect to help them going into 2016. They will continue to monitor the macro environment and take the necessary actions.

But we're expecting them to grow margin dollars in 2016 and to grow the topline. Expanding the margin rate would be incredibly difficult, but we have a plan in place to increase the profitability of the business nominally.

Okay. And then, Joe, last follow-up question and I'll turn it over to others. So in looking at your 2016 outlook, and I was just looking at page 25 of your slides, it looks to me like the incremental or detrimental operating margin assumption on your currency hit is, it looks like, somewhere between 10% and 11%.

Considering the floating -- I know we don't know what the profitability of Argentina is, although I think you all have made some public comments about its importance in the non-Brazil, non-Mexico LatAm segment, I would have thought that, considering the floating currency, and I think your assumption is 15 to 1 for the year, if I'm not mistaken; I think that's what you said at your investor day. I would have thought that the margin on the currency hit that you are anticipating in 2016 would be a lot higher than 10% to 11%. Where am I wrong?

So, your thought process is exactly right. Let me add some context. Argentina is far and away our most profitable country, particularly on the margin rate. Argentina has continued to perform exceptionally well in a high inflation environment. They expanded their margin rate. They grew local currency profit faster than the local currency inflation. They performed exceptionally well.

You are correct; we did -- back at our previous guidance at investor day and the third-quarter earnings release, we were expecting about 15 pesos to the dollar for 2016. Given the devaluation that occurred in mid-December we have now adjusted that to be at about 17 by year end. So we are counting on Argentina continuing to devalue throughout the year. That's the biggest driver of the revenue and the margin impact.

What is happening is we have other revenue impacts that are hitting us. But they are in lower margin segments. And we are not getting as much of a hit in those other business units that are having currency impacts from -- having the currency devaluations.

Okay, because just looking at my screen, the obvious ones particularly for the first half of 2016, the obvious headwinds are the real, the Mexican peso and the Argentine peso. And those are pretty darn profitable countries for you.

Right. So let me -- there's another critical, critical data point. So when we translate Argentina's results throughout the year, their local currency results, during 2015 we use the official rate. The official rate hovered between 8.5 and 9.5 pesos during the year.

Throughout the year we repatriated cash from Argentina. And when we pulled cash out of Argentina, we actually paid something closer to the floating market rate called the blue-chip swap rate. And that rate was closer to 14 to 14.5. So on the revenue line you saw Argentina in US dollars growing at the inflation rate with very little exchange change.

But at the profit and net income level we were absorbing the hit of translating earnings at a 14-ish rate because we were pulling the earnings out of the country by repatriating the cash.

So in 2015, we incurred costs to repatriate cash earnings from Argentina that was unfavorable FX. I'd have to go back and calculate an effective rate on earnings, but the effective rate in 2015 was much higher than the 8 to 9.5 rate we translated revenue at.

Okay. Well, that is definitely an important point. And thank you very much for your time, as always.

Ashish Sinha, Gabelli.

Thanks for taking my questions. I had two, to begin with. Firstly, talking about the US and the organic growth rate, your peers this morning on their conference call suggested that the market growth is running roughly, they estimate, around 3% to 4%. And if I look at your numbers, I just wanted to get a sense of what's happening in terms of the market and whether the internal disruptions you had this year impacted your market share. So that's my first question.

Secondly, on corporate expenses, so a good performance on that. But I wanted to understand how much of the reduction is sustainable and if there are any one-time items in there and whether $85 million would be a good all part to begin with as the base number for our estimates. And also, if we think three to five years out, how much one-time costs for these special projects which you are currently undertaking -- how much of those costs are in the $85 million which could probably go away over the three- to five-year timeframe? Thank you.

Sure. So let me just address the market and the growth in the US. We are not losing market share in the US. It's more about gaining additional outsourced business. So that's the basis of our assumptions.

Relative to the details on the corporate overhead, I'm going to let Joe -- there are not a lot of one-time items in there but I think it's important Joe goes through the details with you.

Yes, so let me just add a point on the US revenue. Our reported revenue in the US was essentially flat, $730 million or $728 million. We absorbed about a 2 percentage point negative impact from fuel surcharge, which I think our competitor who released earnings today referenced that as well. So we actually had 2 percentage points of revenue growth, but we passed through fuel increases and in this case decreases through to customers. And that reduced revenue. So if you think about a 3% to 4% industry growth, we were in the 2% range.

We also had a midyear where we transition away a large profitable money processing contract that was a direct reduction of us and an increase for that other competitor who released today. So that negatively affected our second-half results. But we are still within $20 million or $30 million of revenue of that competitor in the US, and we are about the same size today.

With respect to corporate expenses, we have a number of things that occur in corporate expenses. I'll start with year-over-year we improved, and it was driven significantly by the restructuring and cost actions we took at the end of 2014, beginning of 2015. We quantified that around $15 million of the improvement. We have a number of different things in the corporate line item that relate to the operations of the business, namely our global insurance program, where each country takes a level of self-insurance and then at the global level we take a level of self-insurance for the whole Company. And we performed very well in 2015, particularly against the 2014 results, and that benefit showed up significantly in the corporate expenses line. So part of our improvement year over year is corporate expenses.

To specifically address your question about some of the corporate-funded projects or programs, we continue to work on reducing those as part of our restructuring we announced at the end of 2015. We are taking more cost out of those programs. And you should expect for 2016 somewhere in the neighborhood of $85 million for corporate expenses. That was the guidance we provided on investor day. That's still a good range. Over time we will continue to work to reduce that.

As the businesses are able to start to implement some of the projects we are working on at the global level, the corporate support will move away and the countries will take full ownership of that. So there will be decreases over time. It's unquantified at this time.

Great, thank you.

Saliq Khan, Imperial Capital.

I have a couple questions for you, the first one being in the US (inaudible) introduce a lot more vehicles, like you had noted, which require more fuel and lower maintenance. What is the estimated cost that you are seeing right now per vehicle? Estimated cost savings, excuse me, per vehicle, in comparison to the legacy vehicle that you had?

So we expect meaningful improvement in cost per mile operated. We've measured that down to maintenance and fuel, and the original acquisition cost, particularly with the transit connect vehicles and the Ford 550s. It is significant and substantial, and as we introduce more of those vehicles into the fleet we will able to realize those settings.

I'll just highlight, the 416 vehicles that we are targeting for year end 2016 -- that includes retrofits. There's a significant number of vehicles that are in our existing fleet that we are retrofitting to enable one-person crews. It's a lot less expensive to retrofit an existing vehicle versus buy a new one. And so, we are doing that as a way to realize the labor benefits as quickly as possible.

And Joe, you noted that the one-person truck crew and the savings that are associated with it on the labor cost side -- what impact, if any at all, are you seeing to the overall efficiency of the business as a result of the one-person crew?

We are seeing labor savings. We are paying the one person on the crew more because they are doing more, they are responsible for more. So they are getting a slightly higher wage. We are seeing that we are able to operate the route as efficiently as before, mostly. There's a few steps in the process where we are not as efficient. We are continuing to work on those core processes to figure out how to do them as efficiently with one versus two.

But by and large, if you think about the time driving between customers when there's one or two people on the vehicle, it's the same. It is a little more timely for one person to check in, in the branch, in the mornings and check out in the evenings because one crewmember operating both the vehicle and transferring the valuables takes a little bit more time. We are working on that. And in some cases premise time can be faster. But we are working on those processes.

But by and large, it is a meaningful savings. You don't get 100% of the labor savings for removing the one headcount, but we are getting a significant amount of it.

In regards to EMEA, the thing that you noted earlier was that both organic revenue and operating profits have been down. You noted it was largely because of lower volume. How are you guys thinking about the potential price increases or additional internal cost reductions?

The driver for EMEA on a year-over-year basis is we had a very profitable guarding contract in Germany. It was profitable only in the year 2014. It wasn't as profitable in the prior years; it was an unusual situation that allowed us to generate significant margin in one additional year added to the contract. And that contract went away at the end of 2014, which we expected.

So that's the single biggest driver on the profitability in Europe.

We also have a few countries, one particular one that's very small that unfortunately has sustained some significant deteriorations in its operations. And we are working to remedy that this year.

And lastly on my end, guys, as you take a look at your current overall capital structure, do you find that it is adequate to ensure both the growth and profitability measures that you have in place right now for 2016 but also to go ahead and look at potential acquisitions? Thank you.

We are very comfortable with our capital structure today. We paid down debt in 2015, particularly in the fourth quarter. We generated free cash flow in 2015, which was a nice change in trajectory. We have ample liquidity to invest in the business both organically and inorganically. We don't feel that we are limited in any way in making necessary investments to grow the business.

All right, thank you.

Jamie Clement, Macquarie.

Joe, given the second-half performance in the US, you went through in a lot of detail how you can get to your US margin target in 2016. But if I can ask you to look at two to three, four years, what are the next steps in getting that up to 8% to 10%? And can that even be done in the marketplace that your competitors may be plus 3 to 4, others might say GDP at best -- in that kind of growth environment?

Well, let me start with the reference to our competitors' margins. I think looking at their margins is a great thing for us because it proves the level of profitability that this industry can deliver in a very mature, developed market like the US. There's plenty of currency in circulation to allow us to continue to improve our business and grow. I think you see all the competitors growing at some level. In 2015 our revenues were $730 million. Our most profitable competitor was only slightly larger than that. They grew a little more than that, largely because of the contract we transitioned away to them.

But at the end of the day, what we need to focus on is what we can control in our business. And we can move our margins from the 2% we are at to industry level profitability.

Our focus right now is on helping our front-line employees run the business better. We need to help our front-line employees in managing the core processes in the business. We need to equip them with efficient processes, well-documented processes, train them, give them the tools that they need to run the business, whether it's the handheld scanners or optimize routes or, most important like, the visibility to how they are performing. If our front-line employees don't know how they are performing relative to the goals we are setting, it's difficult for them to know what success looks like. And that's a huge focus of the management team.

Arguably one of the most important things Mike Beach has brought to the US as the leader of the large five is a focus on core process improvement, breaking down what we do in the business at the most fundamental level, measuring it and putting resources in place and tools in place to allow the front-line employees to better manage it.

I think we are making the necessary changes in the business to allow us to do that. And the projects that we are implementing are going to deliver that.

Jamie, the other thing is that, clearly, continuous process improvement and improving efficiency is key to getting our margins up. But at the same time we are working really hard and having some success in terms of higher value services and getting customers to transition to more outsourcing.

So you have two things that will work to our advantage in terms of getting the margin rate up. First thing we have to work on real hard is the efficiency and then secondly is to transition to more higher value services that still use cash and transit but that add additional margin opportunity.

Okay, got it. And one follow-up, if I may. You all didn't discuss it much in 2015, but clearly the diamond market in 2015 was not what it has been over the last couple years. It's hard for me to know exactly what the right metrics are to look at, in terms of what drives your business.

Can you talk a little bit just conceptually about the diamond market, what you saw this year and if you can quantify what kind of a hit you might have taken on the P&L because of diamonds or not? Any increased visibility would be great.

Well, so Jamie, the diamond market was down, diamond and jewelry market was down. We typically looked at that and look at it from a portfolio perspective with currency as well as precious metals. And so that's -- you saw the improvement in the margin for the rest of the world, which is fundamentally that.

So diamonds and jewelry were just down. They've been down for a couple years now. We are hoping for a rebound in diamonds and jewelry. I did see where DeBeers had a good and-of-the-year sale. So we are hoping --

Yes, holidays.

Yes. We are hoping that that transitions to a better market going forward.

So it sounds to me like manageable is what you are telling me.

Yes, it's manageable.

Okay, great. Thanks very much.

(Operator Instructions) And in showing no questions at this time we will conclude the question-and-answer session. The Brink's Company fourth-quarter earnings conference call has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.