Management’s Discussion and Analysis

Liquidity and Capital Resources

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, 2004, this plan had an accumulated benefit obligation (“ABO”) of approximately $662 million and a projected benefit obligation (“PBO”) of $742 million. The ABO is an estimate of the benefits earned through December 31, 2004. The difference between the ABO and PBO is essentially the expected changes in the value of the benefits due to projected increases in future compensation of plan participants.

The ABO and PBO are net present values of expected future cash flows discounted to December 31, 2004 by 5.75%. 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, 2004 would have been as follows:

           
  Discount Rates
(In millions) Increased
by 1.0%		   Decreased
by 1.0%
Increase (decrease) in:
ABO at December 31, 2004 $ (89)   $ 112
PBO at December 31, 2004   (106)   136
2005 expense   (16)   21

At December 31, 2004, the fair value of the plan’s assets approximated $595 million. The Company uses a long-term rate of return assumption to determine annual income from plan assets. Such expected income reduces plan expense. The Company’s current expected long-term rate of return is 8.75%. If the Company were to use a different long-term rate of return assumption it would affect annual pension expense.

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 2004. These assumptions are reviewed annually, and it is likely that they will change in future years.

               
(In millions)   Actual   Projected
Years Ending December 31,   2003 2004   2005 2006 2007
Benefits (paid from plan trust) $ 23 25   26 28 29
Expense   18 27   40 42 37

As can be noted from reviewing the above tables, changes in the amount of expense are significantly affected by discount rates. The level of expense has increased largely due to the effects of the reduction in the discount rate used as a result of the decrease in market interest rates over the last several years. Also contributing to the increase in expense has been the poor performance of investment markets from 2000 to 2002, although this has been moderated by the performance in 2003 and 2004. The above expense amounts are charged to the business segments in approximately the following proportions : Brink’s – 50%, BHS – 15%, BAX – 25%, former natural resources businesses – 10%.

The amount of cash the Company may have to contribute in the future for the Company’s primary U.S. pension plan is determined using a different set of assumptions than is used for financial accounting purposes.

Based on December 31, 2004 data, assumptions and funding regulations, the Company is not required to make a contribution to the plan for the 2005 plan year. Under existing regulations and using the same assumptions for 2005 activity, a contribution of approximately $26 million could be required for the 2006 plan year but the actual payment could be delayed until as late as September 2007. Up to $79 million could be required for the 2007 plan year.

The above estimated contributions are likely to change. Congress and the Executive Branch of the Federal government are expected to evaluate changes to pension funding requirements. As part of this evaluation they may adopt changes to the definition of the discount rate to be used for funding purposes. Such rate has changed substantially since the discontinuance of the sale of 30-year Treasury bonds. In the past, Congress has provided temporary relief from distortions caused by the discontinuance of the sale of 30-year Treasury bonds. The current relief expires this year. Any changes to the discount rate used for funding through an extension of the current relief is expected to reduce required contributions. In addition, actual investment returns and interest rates are likely to differ from those assumed at December 31, 2004. Further, the Company may elect to contribute to the plan in 2005 and/or 2006. Voluntary contributions have the effect of reducing and potentially delaying later required contributions. The Company has made voluntary contributions aggregating $66 million over the last three 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 90% funded at December 31, 2004.