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

Results of Operations

Overview

The income (loss) items in the above table are reported after tax.

The Company’s results from continuing operations have varied in the last couple of years due partially to changes the Company has made to reduce costs and improve efficiency and partially as a result of changes in economic conditions. The Company’s results were also affected by the required movement of certain expenses related to former coal operations from discontinued operations to continuing operations. These factors are expected to continue to affect the Company’s results in future periods. There were impairment charges, gains on the divestiture of natural resource operations and an adjustment to deferred taxes which are less likely to recur in the future.

Continuing Operations

Business and Security Services

Brink’s and BHS reported improved operating profit in both 2003 and 2002 over prior-year periods. BAX Global’s operating profit has been more volatile in the last three years: about break-even in 2003, profitable in 2002 and a loss in 2001.

Operating profit at Brink’s in 2003 improved 17% from the prior year on higher international earnings. Brink’s operating profit in the fourth quarter of 2001 and the first quarter of 2002 reflected the benefit of special euro currency processing and transportation work. Costs were higher than normal in relation to revenue in the first nine months of 2001 and the last nine months of 2002 as a result of higher staffing levels related to the euro work. Staff reductions in various European countries in late 2002 and the first half of 2003 improved profitability in the last half of 2003 compared to the same 2002 period. Operating profit in South America was stronger in 2003 compared to the weak 2002; 2002 was affected by economic and political turmoil in several South American countries.

Strong growth in BHS’ operating profit in 2003 (17%) and 2002 (11%) resulted primarily from the steady subscriber growth of the last two years and improving efficiency. The average number of subscribers increased 8% in 2003 over 2002 and 7% in 2002 over 2001.

Although the fourth quarter comparison was favorable versus the prior-year quarter, BAX Global’s full year 2003 operating profit was below 2002 levels primarily as a result of lower shipments through its largely fixed-cost Intra-America transportation network due to the weak U.S. economy seen for much of 2003 and a continuing shift away from expedited freight by customers. Volume in the Intra-America network was also lower in 2002 compared to 2001, but reductions in the number of airplanes used to service the network in 2001 and other cost reductions allowed BAX Global to improve results in 2002 compared to 2001.

Cost of Former Coal Operations

With the completion of its plan to exit the coal business, the Company began in 2003 to reflect within continuing operations the costs and expenses related to employee benefit expenses, administration and other charges related to the liabilities retained from the former natural resource businesses. Accordingly, pretax results for 2003 include total costs of former coal operations of approximately $70 million. These types of costs were recorded within discontinued operations in earlier years. These costs will continue to affect results of operations well into the future. However, due to the normal wind down of administration and other expenses, the sale of most of the remaining idle properties in late 2003, the enactment of the Medicare reform bill in December 2003 and the growth in the value of the Company’s VEBA, these costs are expected to decrease by over $20 million in 2004.

Divestitures and Taxes

In 2002, the Company recorded a $19.2 million (pretax) charge related to impairment and other charges associated with coal properties which were shut down and prepared for sale. Most of these properties were sold in 2003. When actions are completed by the purchaser to formally assume additional liabilities associated with the properties (expected to happen during 2004), the Company expects to record a gain in continuing operations.

In 2003, the Company recorded a $10.4 million (pretax) gain on the sale of shares that it held in an Australian exploration and mining Company.

Neither the impairment charge related to coal nor these gains are expected to recur, although other gains and impairment losses may occur in the future.

The Company performs an annual review of deferred tax assets as required by Statements of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” In 2001 and 2002, the Company recorded valuation adjustments of under $2 million per year to reflect its judgment that the ability to utilize deferred tax assets for certain entities was not more likely than not to happen. As a result of a recent history of losses, and continuing recession in the U.S. and Europe in 2003, the Company believes that the ability to use deferred tax assets related to two international operations and certain states no longer meets the more-likely-than-not standard. Accordingly, a valuation charge of approximately $22 million was recorded in 2003.

Since the Company performs a review of its deferred tax assets annually, there could be further valuation charges required in future years. On the other hand, if operations in affected jurisdictions return to profitability, the Company may reverse all or a portion of the valuation reserves in future years.

In estimating its effective tax rate to be recorded in 2004 and later years, the Company will not record the potential benefit of any losses in the tax entities for which it has already recorded a valuation adjustment unless such entities demonstrate an ability to consistently use tax benefits (e.g. through a return to profitability). As a result, the effective tax rate for 2004 will be higher than historical rates for normal operations. The Company currently estimates its effective tax rate for 2004 will approximate 40%. It reevaluates this rate on a quarterly basis; the actual tax rate could be materially different from the Company’s estimate.

Discontinued Operations

Over the past three years, the Company sold essentially all of its natural resource businesses, the biggest being its former coal operations. The Company recognized a significant loss on the sale of its coal business, although most of the loss was recognized in 2000, a period not presented in this report. In addition to the loss on sale, the Company has accrued significant liabilities related to benefits for former coal employees. Expenses related to some of these liabilities (including revisions to estimated amounts primarily related to Health Benefit Act obligations and multi-employer pension plan withdrawal liabilities) are recorded in discontinued operations and were significant in 2003 and 2002. In 2002 and 2001, significant coal operating losses were also included in discontinued operations.

Besides the coal operations, discontinued operations also includes gains and losses from the sale of other noncore businesses and their operating results for all years presented. These operating results have been reclassified from prior year’s presentations within continuing operations.

• Natural gas business – sold in August 2003 for a $56.2 million pretax gain
• Timber business – sold a small portion in December 2003 and completed the sale in 2004 for an expected $26 million overall pretax gain ($4.8 million recognized in 2003)
• Gold business – sold in early 2004. Pretax impairment losses were recognized in 2003 ($1.7 million) and 2002 ($5.7 million).

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