Management’s Discussion and Analysis
MD&A Quicklinks
- Results of Operations
- Retained Liabilities and Assets of Former Natural Resource Operations
- Executive Overview
- Legacy Liabilities and Assets
- Projected Payments and Expenses of Retained Coal Liabilities and Administrative Costs
- Company-Sponsored Retiree Medical Benefits Obligations and VEBA
- Health Benefit Act Obligations
- Black Lung Obligations
- Withdrawal Liabilities
- Discontinued Operations
- Sale of Other Natural Resources Assets
- Liquidity and Capital Resources
Liquidity and Capital Resources
Business Segment Cash Flows
The Company’s cash flows before financing activities for each of the operating segments are presented below.
| Years Ended December 31, |
$ change | |||||||
|---|---|---|---|---|---|---|---|---|
| (In millions) | 2004 | 2003 | 2002 | 2004 | 2003 | |||
| Cash flows before financing activities | ||||||||
| Continuing operations: | ||||||||
| Business segments: | ||||||||
| Brink’s | $ | 103.7 | 63.6 | 57.6 | $ | 40.1 | 6.0 | |
| BHS | 47.6 | 28.8 | 26.3 | 18.8 | 2.5 | |||
| BAX Global | 10.6 | 4.0 | 13.4 | 6.6 | (9.4) | |||
| Subtotal of business segments | 161.9 | 96.4 | 97.3 | 65.5 | (0.9) | |||
| Corporate and former operations: | ||||||||
| Proceeds from sale of natural resource interests | 28.6 | 145.4 | 42.3 | (116.8) | 103.1 | |||
| Contributions to the VEBA, net | (50.0) | (82.0) | - | 32.0 | (82.0) | |||
| Contributions to primary U.S. pension plan | (11.0) | (20.0) | (35.1) | 9.0 | 15.1 | |||
| Other, including payments for coal-related obligations in 2004 and 2003 | (71.3) | (11.6) | 15.4 | (59.7) | (27.0) | |||
| Subtotal of continuing operations | 58.2 | 128.2 | 119.9 | (70.0) | 8.3 | |||
| Discontinued operations: | ||||||||
| Natural gas, timber and gold | (0.6) | 10.4 | (0.7) | (11.0) | 11.1 | |||
| Coal | - | - | (86.3) | - | 86.3 | |||
| Cash flows before financing activities | $ | 57.6 | 138.6 | 32.9 | $ | (81.0) | 105.7 | |
Overview
Cash flows before financing activities from the Company’s business segments have averaged over $100 million per year over the last three years. Sales of natural resource interests also provided significant cash over that period. Using this cash flow, the Company made almost $200 million in voluntary contributions to its VEBA and primary U.S. pension plan over the last three years. The Company’s cash flow also allowed it to make significant cash payments over the last three years covering the regular annual payments associated with retained liabilities of the former coal operations. 2002 also had significant cash outflows associated with the final year of operation of the coal business and poor market conditions.
Brink’s
Cash before financing activities increased in 2004 over 2003 primarily due to higher operating profit partially offset by an increase in cash used for acquisitions.
Cash flows before financing activities at Brink’s increased in 2003 over 2002 due to higher operating profit, offset by a year-over-year increase in the amount of cash used for working capital needs and costs to relocate its headquarters. In addition, $10 million in higher proceeds from the sale of operating assets in 2003 were partially offset by $7 million in cash outflows primarily related to a 2003 acquisition in Belgium.
BHS
The year-over-year increase in cash flows before financing activities at BHS in both 2004 and 2003 is primarily due to higher operating results partially offset by an increase in capital expenditures reflecting growth in installations of security systems.
BAX Global
Cash flow before financing activities at BAX Global improved in 2004, reflecting much better operating results versus 2003. This improvement was largely offset by the effect of the sale of $52 million less of accounts receivable at year end 2004 versus the prior year as a result of the Company’s overall cash flow in 2004.
Cash flows before financing activities at BAX Global in 2003 decreased $9.4 million from 2002 reflecting lower operating results in 2003. Partially offsetting 2003’s lower operating results was a reduction in the amount of cash used to cover working capital needs and lower capital and aircraft heavy maintenance expenditures.
Corporate and Former Operations
The Company received $216 million in net proceeds during the last three years from the sale of substantially all of its natural resource interests. In the last three years, the Company contributed $132 million to its VEBA and $66 million to its primary U.S. pension plan. The $59.7 increase in other cash outflows reflects higher corporate expenses in 2004 and the collection of remaining receivables of the coal business during 2003. The increase in other cash outflows for 2003 compared to 2002 reflects cash spent in 2003 associated with retained liabilities of the former coal operations (these types of payments were included in discontinued operations in 2002). The Company expects to pay approximately $37 million in 2005 associated with the anticipated withdrawal from the 1950 and 1974 multiemployer pension plans.
Discontinued Operations
Cash flow from discontinued operations, which includes cash from operations and capital expenditures of the former natural resource businesses, was lower in 2004 as a result of the sale of the businesses in 2003 and early 2004. Higher natural gas prices improved the natural gas business’ cash flows in 2003 compared to 2002. Discontinued operations’ cash flow before financing activities for 2002 reflected cash spent associated with retained liabilities and operating losses resulting from weak coal market conditions; spending associated with retained liabilities was included in continuing operations in 2003.