Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2021

Investments in Marketable Securities

We have investments in mutual funds, equity securities and available for sale debt securities that are carried at fair value in the financial statements and are included in other assets on the consolidated balance sheet. For these investments, fair value was based on quoted market prices, which we have categorized as a Level 1 valuation.

Fixed-Rate Debt

The fair value and carrying value of our material fixed-rate debt, excluding any unamortized debt issuance costs, are as follows:


	December 31,
(In millions)	2021		2020

$600 million Senior unsecured notes
Carrying value	$	600.0	600.0
Fair value	625.7		640.9

$400 million Senior unsecured notes
Carrying value	$	400.0	400.0
Fair value	414.8		426.8

Pricing inputs for nonpublic debt are often not observable. The fair value estimates of our senior notes reflect unobservable estimates and assumptions, which we have categorized as a Level 3 valuation. Our fair value estimates were based on the present value of future cash flows, discounted at rates for public debt at the measurement date. The rates for public debt were additionally adjusted for a factor which represented the change in the interest spreads between the inception rates and the public debt rates at the measurement date.

Forward and Swap Contracts

We have outstanding foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies. At December 31, 2021, the notional value of our outstanding foreign currency forward and swap contracts was $614 million, with average maturities of approximately one month. These foreign currency forward and swap contracts primarily offset exposures in the euro, the British pound and the Mexican peso and are not designated as hedges for accounting purposes. Accordingly, changes in their fair value are recorded immediately in earnings.

At December 31, 2021, the fair value of our short term foreign currency contracts was a net asset of approximately $1.9 million, of which $3.4 million was included in prepaid expenses and other and $1.5 million was included in accrued liabilities on the consolidated balance sheet. At December 31, 2020, the fair value of these foreign currency contracts was a net asset of approximately $2.4 million, of which $3.5 million was included in prepaid expenses and other and $1.1 million was included in accrued liabilities on the consolidated balance sheet.

Amounts under these contracts were recognized in other operating income (expense) and in interest and other nonoperating income and expense as follows:


	Twelve Months Ended December 31,
(In millions)	2021		2020	2019

Derivative instrument gains (losses) included in other operating income (expense)	$	24.2	(3.0)	6.9

Derivative instrument losses included in other nonoperating income (expense)(a)	—		(7.0)	—

(a)Represents net losses on foreign currency forward contracts related to acquisitions of business operations from G4S.

In the first quarter of 2019, we entered into a long term cross currency swap contract to hedge exposure in Brazilian real, which is designated as a cash flow hedge for accounting purposes. Accordingly, changes in the fair value of the cash flow hedge are initially recorded in the gains (losses) on cash flow hedges component of accumulated other comprehensive income (loss). We immediately reclassify from accumulated other comprehensive income (loss) to earnings an amount to offset the remeasurement recognized in earnings associated with the respective intercompany loan. Additionally, we reclassify amounts from accumulated other comprehensive income (loss) to interest expense amounts that are associated with the interest rate differential between a U.S. dollar denominated intercompany loan and a Brazilian real denominated intercompany loan.

At December 31, 2021, the notional value of this long term contract was $75 million with a weighted-average maturity of 1.3 years. At December 31, 2021, the fair value of the long term cross currency swap contract was a $26.3 million net asset, of which a $5.8 million asset is included in prepaid expenses and other and a $20.5 million asset is included in other assets on the consolidated balance sheet. At December 31, 2020, the fair value of the long term cross currency swap contract was a $23.6 million net asset, of which a $3.2 million asset is included in prepaid expenses and a $20.4 million asset is included in other assets on the consolidated balance sheet.

Amounts under this contract were recognized in other operating income (expense) to offset transaction gains or losses and in interest expense as follows:


	Twelve Months Ended December 31,
(In millions)	2021		2020	2019

Derivative instrument gains included in other operating income (expense)	$	0.2	22.1	5.8

Offsetting transaction losses	(0.2)		(22.1)	(5.8)

Derivative instrument losses included in interest expense	(1.3)		(1.9)	(5.1)

Net derivative instrument gains (losses)	(1.1)		20.2	0.7

In the first quarter of 2019, we entered into ten interest rate swaps that hedge cash flow risk associated with changes in variable interest rates and that are designated as cash flow hedges for accounting purposes. Accordingly, changes in the fair value of these cash flow hedges are initially recorded in the gains (losses) on cash flow hedges component of accumulated other comprehensive income (loss). We reclassify amounts from accumulated other comprehensive income (loss) into earnings in the same periods that the hedged debt affects earnings.

At December 31, 2021, the notional value of these contracts was $400 million with a remaining weighted-average maturity of 1.1 years. At December 31, 2021, the fair value of these interest rate swaps was a net liability of $13.9 million, of which $8.3 million was included in accrued liabilities and $5.6 million was included in other liabilities on the consolidated balance sheet. At December 31, 2020, the fair value of these interest rate swaps was a net liability of $29.0 million, of which $9.7 million was included in accrued liabilities and $19.3 million was included in other liabilities on the consolidated balance sheet.

In the second quarter of 2021, we entered into ten cross currency swaps to hedge a portion of our net investments in certain of our subsidiaries with euro functional currencies. As net investment hedges for accounting purposes, we elected to use the spot method to assess effectiveness for these derivatives that are designated as net investment hedges. Accordingly, changes in fair value attributable to changes in the undiscounted spot rates are recorded in the foreign currency translation adjustments component of accumulated other comprehensive income (loss) and will remain there until the hedged net investments are sold or substantially liquidated. We have elected to exclude the spot-forward difference from the assessment of hedge effectiveness and are amortizing this amount separately on a straight-line basis over the term of these cross currency swaps.

At December 31, 2021, the notional value of these cross currency swap contracts was $400 million with a remaining weighted average maturity of 6.2 years. At December 31, 2021, the fair value of these currency swaps was a net asset of $28.5 million, of which $6.0 million was included in prepaid expenses and other and $22.5 million was included in other assets on the consolidated balance sheet.

The effect of the interest rate swaps and the amortization of the spot-forward difference on the net investment hedges cross currency swaps is

included in interest expense as follows:


	Twelve Months Ended December 31,
(In millions)	2021		2020	2019

Interest rate swaps designated as cash flow hedges	$	9.8	7.7	1.0
Cross currency swaps designated as net investment hedges	(4.1)		—	—
Net derivative instrument losses included in interest expense	$	5.7	7.7	1.0

The fair values of these forward and swap contracts are based on the present value of net future cash payments and receipts, which we have categorized as a Level 2 valuation.

Contingent Consideration

In the second quarter of 2020, we acquired cash management operations in Malaysia from U.K.-based G4S and have recorded a payable for contingent consideration. The contingent consideration will be paid when minimum dividend distributions are received by Brink's relating to cash on the balance sheets of the Malaysia subsidiaries as of the acquisition date. We used a probability-weighted approach to estimate the fair value of the contingent consideration. The fair value of the contingent consideration is the full $22 million that remains potentially payable as of December 31, 2021 as we believe it is unlikely that the contingent consideration payments will be reduced.

In the fourth quarter of 2019, we paid the remaining contingent consideration payable for our acquisition of Maco Transportadora. This remaining contingent consideration paid was a scheduled second installment, with the amount to be paid in the fourth quarter of 2019 based partially on the retention of customer revenue versus a target revenue amount. If there was a shortfall in revenues, a multiple of 2.5 would have been applied to the revenue shortfall and the contingent consideration to be paid to the former owners would have been reduced. Because there was no shortfall in revenues, no reduction occurred. We paid an additional $15.1 million and settled the outstanding contingent consideration.

Other Financial Instruments

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

There were no transfers in or out of any of the levels of the valuation hierarchy in 2021.