Management’s Discussion and Analysis

Operations Results of Operations Liquidity and Capital Resources Market Risk Exposures Application of Critical Accounting Pronouncements Recent Accounting Pronouncements Forward-Looking Information

Overview Summary of Cash Flow Information Operating Activities Investing Activities Business Segment Cash Flows Financing Activities Capitalization Off Balance Sheet Arrangements Contractual Obligations Other Potential Use of Credit Other Contingent Gains and Losses

Liquidity and Capital Resources

Contractual Obligations

The following table includes the contractual obligations of the Company.

(a) Long-term debt and capital lease obligations are reduced when payments of principal are made. Table excludes interest payments. See note 13 to the consolidated financial statements.
(b) Payments for operating leases in ongoing businesses are recognized as an expense in the consolidated statement of operations as incurred. See note 15 to the consolidated financial statements.
(c) Payments made pursuant to these purchase obligations are recognized as an expense in the consolidated statement of operations as incurred. Purchase obligations generally specify a minimum amount of service or product to be consumed by the Company, and the Company currently expects to consume at least the minimum levels specified in its contracts. (d) Aircraft, crew, maintenance and insurance agreements. See note 23 to the consolidated financial statements.
(e) Lease agreements for aircraft generally require payments be made for heavy maintenance at the end of the lease term.
(f) The projected payments for liabilities related to former coal operations (legacy liabilities) are discussed in “Results of Operations – Former Coal and Other Natural Resource Operations”. Payments above, which are expected to be made over the next seventy years, exclude Administration and other payments.
(g) This table excludes the Company’s estimated withdrawal obligations of $52 million from coal-related multi-employer pension plans. The timing and the actual amount to be paid, if any, will be based on the funded status of the plans as of the beginning of the plan year that a withdrawal is deemed to have occurred. It is likely that a withdrawal will be deemed to have occurred within the next two to three years.

Primary U.S. Pension Plan

The Company maintains a noncontributory defined benefit pension plan covering substantially all non-union employees in the U.S. who meet certain requirements. Using actuarial assumptions as of December 31, 2003, this plan had an accumulated benefit obligation (“ABO”) of approximately $586 million and a projected benefit obligation (“PBO”) of $656 million. The ABO is an estimate of the benefits earned through December 31, 2003. The difference between the ABO and PBO is essentially the expected changes in the value of the benefits due to projected increases in compensation of plan participants.

The ABO and PBO are net present values of expected future cash flows discounted to December 31, 2003 by 6.25%. The Company selects a discount rate for its pension liabilities after reviewing published long-term yield information for a small number of high-quality fixed-income securities (Moody’s AA bond yields) and yields for the broader range of long-term high-quality securities. Accordingly, as market interest rates fluctuate, the net present value of the Company’s obligations will change. The impact of a one percentage point (100 basis point) change in the discount rate used at December 31, 2003 would have been as follows (decrease)/increase:

The historical and projected benefit payments and expense for the U.S. plan are set out in the table below. The projected benefits and expense reflect assumptions used in the valuation at year end 2003. These assumptions are reviewed annually, and it is likely that they will change in future years.

The level of expense has increased largely due to the effects of the reduction in the discount rate used over the last several years and the poor performance of investment markets from 2000 to 2002. The above expense amounts are charged to the business segments in approximately the following proportions : Brink’s - 55%, BHS – 15%, BAX – 25%, former natural resources businesses – 5%.

At December 31, 2003, the market value of the plan’s assets approximated $542 million.

Based on December 31, 2003 data, assumptions and funding regulations, the Company does not expect to be required to make a contribution to the plan for the 2004 and 2005 plan years. Under existing regulations, a contribution of over $40 million could be required for the 2006 plan year but the actual payment could be delayed until as late as September 2007.

The above estimated contributions are likely to change. Congress is evaluating changes to the definition of the discount rate to be used for funding regulations since the discontinuance of the sale of 30-year Treasury bonds has created distortions in markets. Any change is likely to reduce required contributions. In addition, actual investment returns and interest rates are likely to differ from those assumed at December 31, 2003. Further, the Company may elect to contribute to the plan in 2004, 2005 and/or 2006. Voluntary contributions have the effect of reducing and potentially delaying later required contributions. The Company has made voluntary contributions aggregating $55 million over the last two years.

The pension plan’s benefits will be earned and paid out over an extended period of time. Accordingly, the Company takes a long-term approach to funding levels and contribution policies. Historically, long-term returns on assets invested have significantly exceeded the discount rate for pension liabilities so it is expected that a portion of the future liability will be funded by investment returns. As a result, the Company’s funding target over the medium-term is to cover the ABO, essentially, the obligations already earned as of a given measurement date. Under this approach, the plan was 92% funded at December 31, 2003.

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