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 Consolidated Review Brink’s, Incorporated Brink’s Home Security BAX Global Corporate Expense - The Brink’s Company Retained Liabilities and Assets of Former Natural Resource Operations Other Operating Income, Net Nonoperating Income and Expense Income Taxes Foreign Operations

Income Taxes

Continuing Operations

The Company’s income tax provision in 2003 includes $22.0 million of expense related to adjustments to valuation allowances for certain state and foreign deferred tax assets, net of the federal benefit of recording valuation allowances on state deferred tax assets. The valuation allowances were required due to the Company’s assessment that these assets did not meet the more-likely-than-not recognition criteria of SFAS No. 109.

The Company’s effective tax rate, excluding the valuation allowances, was higher in 2003 compared to 2002 as a result of adjustments made to the Company’s deferred tax assets and liabilities based on an analysis completed in 2003 and other adjustments related to the reconciliation of its 2002 tax provision to its tax returns. In 2003 and 2002, the Company also reversed contingency accruals due to favorable settlements of issues relating to the Company’s U.S. federal tax returns.

The 2002 effective tax rate was lower than 2001, reflecting the reversal of certain accruals for U.S. tax contingencies in 2002 based on settlements, and the tax effects of the required change in the method of accounting for goodwill. In 2001, the provision for income taxes from continuing operations was greater than the statutory federal income tax rate of 35% primarily due to the effects of goodwill amortization, partially offset by lower taxes on foreign income.

As of December 31, 2003, the Company has not recorded U.S. federal deferred income taxes on $224.3 million of undistributed earnings of its foreign subsidiaries and equity affiliates. It is expected that these earnings will either be permanently reinvested in operations outside the U.S. or, if repatriated, will be substantially offset by tax credits. If the earnings were remitted to the U.S. and no credits were available, additional U.S. tax expense of $78.5 million would ultimately be recognized.

Based on the Company’s historical and future expected taxable earnings, management believes it is more likely than not that the Company will realize the benefit of the deferred tax assets, net of valuation allowances.

Discontinued Operations

Discontinued operations includes the income (loss) before taxes and the related tax provision or benefit associated with the Company’s former coal, natural gas, timber and gold businesses. The effective tax rate in 2003 was higher than 2002 due to additional accruals made in 2003 for tax contingencies related to the natural resource business. In addition, tax benefits from percentage depletion of coal production were reflected in the effective tax rate of discontinued operations in 2002 and 2001. The amount of percentage depletion was higher in 2001 compared to 2002, which resulted in a higher effective tax benefit rate on 2001’s losses compared to 2002.

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