Management’s Discussion and Analysis

Results of Operations

Brink’s, Incorporated

Executive Overview

Brink’s provides multiple services related to cash and other valuables to the financial community, retailers and other businesses. These services vary from secure transportation and handling of valuable assets to currency and deposit processing to the increasingly important preparation and transmittal of related information.

The Company believes that Brink’s has significant competitive advantages including:

Because of the emphasis on managing the risks inherent in handling valuables and the high level of service provided, Brink’s believes that it spends more than its competitors on training and retaining its people and on the facilities and processes needed to provide quality services to its customers.

As a result of its emphasis on high-quality services and risk management, Brink’s focuses its marketing and selling efforts on customers who appreciate the value and breadth of the services delivered, the information capabilities and the financial strength underlying the Brink’s approach to the business.

In order to earn an adequate return on the capital employed in the business, Brink’s focuses on the effective and efficient use of its resources and the adequacy of pricing. First, Brink’s attempts to maximize the amount of business which flows through its branches, vehicles and systems in order to obtain the lowest costs possible without compromising safety, security or service. Due to its higher costs of people and processes, Brink’s generally charges higher prices than its competitors which may not provide the same level of service and risk management. The Company believes that Brink’s operations are capable of generating profit margins above 7% on an annual basis. This level is necessary to earn a reliable return on its cost of capital.

The industries to which Brink’s provides services have been consolidating. As a result, the strength of the customers in these industries has been increasing. Customers are seeking suppliers with broader geographic solutions, more sophisticated outsourcing capabilities and financial strength.

Operationally, Brink’s performance may vary from period to period. Since revenues are generated from charges per service performed as well as on an ad valorem basis, revenues can be affected by the level of activity in an economy and the level of business for specific customers. In addition, contracts generally run for one or more years and there are costs which must be incurred to prepare to service a new customer or to transition away from one. Further, Brink’s level of operation and related revenues are generally higher in the second half of the year, and in particular in the fourth quarter, because of the generally higher economic activity then. As a result, margins are typically lower in the first half of the year than in the second half.

               
  Years Ended December 31,   % change
(In millions)   2004 2003 2002   2004 2003
Revenues
North America (a) $ 733.7 716.2 694.9   2 3
International   1,198.2 972.8 885.0   23 10
  $ 1,931.9 1,689.0 1,579.9   14 7
Operating Profit
North America (a) $ 55.2 53.4 52.2   3 2
International   89.5 59.1 43.9   51 35
  $ 144.7 112.5 96.1   29 17
Cash Flow Information
Depreciation and amortization $ 81.0 70.6 61.3   15 15
Capital expenditures   76.2 80.9 79.3   (6) 2
(a)
U.S. and Canada.

2004

Overview

Revenues and operating profit in 2004 increased modestly in North America and more significantly in the International region compared to 2003. Internationally, improvements occurred in both Europe and South America. European operating profit in 2004 improved because of higher local currency revenues as a result of improved economic performance and also as a result of operational changes made last year. European operating profit in the first half of 2003 reflected reduced volumes of business due to the effects of generally slow economies and the buildup to the conflict in the Middle East along with approximately $4.7 million in severance costs. Operating profit in South America in the first half of 2003 was depressed due to poor economic and political conditions. In 2004, operating performance benefited from improved conditions. International operating profit in 2004 included approximately $3.1 million of operating expenses related to adjustments to non-income tax accruals, including $1.1 million of operating expenses related to unpaid value-added taxes and customs duties. The Company anticipates an increase in expenses related to safety and security costs in 2005.

North America

Revenue increased in North American operations in 2004 primarily due to increased revenues from Global Services and Canadian armored transportation and ATM services, offset by lower U.S. armored transportation and ATM revenue. Operating profit increased in 2004 primarily due to improved performance in coin wrapping services, cash logistics services, and Canadian armored transportation operations, partially offset by a lower contribution from the U.S. armored car transportation operations. In 2003, a $5.5 million gain on the sale of operating assets was largely offset by severance and other costs related to the transfer of its headquarters operation from Connecticut to Richmond, Virginia and Dallas, Texas. Defined benefit plan costs will increase in 2005 over 2004.

International

Revenues in 2004 increased 23% over 2003 (16% on a constant currency basis). The increase in International revenues and operating profit was primarily due to better performance in South America and Europe.

Europe. Revenues increased 26% in 2004 (15% on a constant currency basis) due to increased volumes in armored transportation, ATM servicing, currency processing and Global Services operations. Operating profit improved due to higher volumes as a result of improved business conditions and competitor difficulties, particularly in France, and the impact of an acquisition of security operations in Greece and the recently held Olympic Games. Revenues in 2003, particularly in the first quarter, were adversely affected by a generally weak economy and uncertainty related to the then-impending conflict in the Middle East. In addition, European operating results began to improve in the last half of 2003 partially as a result of management changes and workforce reductions made to align resources to business needs.

South America. South American revenues and operating profits in 2004 improved due to better operating performance throughout the region and particularly in Venezuela. This improved operating performance was primarily due to higher volumes of armored transportation business, which was driven in part by the exit of competitors from the market. Improved operating performance in Brazil was the result of increased volumes as well as the benefit of cost reductions taken in late 2003. However, the operating environment in Brazil remains highly competitive.

Asia-Pacific. Asia-Pacific revenues and operating profits in 2004 were above the prior year reflecting improved results, particularly in Australia and Hong Kong.

Other. As discussed in “Value-added taxes and customs duties” above and in note 23 to the consolidated financial statements, the Company recorded operating expense of approximately $1.1 million in 2004 related to unpaid value-added taxes and customs duties, including an estimate of the penalties. At any time, the Company could be assessed penalties materially in excess of those accrued. International operating profit in 2004 also included $2.0 million of higher expense as a result of unfavorable determinations in Brazil and Mexico related to non-income tax issues.

2003

Overview

Improved revenues and operating profit in 2003 over 2002 reflected much better results in the International region. International operating profit increased over 2002, despite the higher profit levels achieved in the first quarter of 2002 associated with special euro currency processing and transportation work. Most of the improvement in the International region occurred in South America where performance was weak in 2002.

North America

North American operating profit was 2% higher in 2003 over the prior year on a 3% increase in revenues (2% increase in revenues on a constant currency basis). The slightly higher operating profit in North America was primarily due to improved performance in the Cash Logistics operations and Global Services, mostly offset by higher employee benefit expenses. A $5.5 million gain on the sale of operating assets was largely offset by severance and other costs.

In 2003, management closed its Brink’s corporate headquarters in Darien, Connecticut and relocated employees to either Brink’s U.S. headquarters in Coppell, Texas, or to The Brink’s Company headquarters in Richmond, Virginia. As a result, approximately $5.4 million of severance and other costs were incurred in the U.S. during 2003.

An increase in employee benefit costs in 2003 included $4.8 million higher expense from the Company’s primary U.S. pension plan and higher health care costs for active employees.

International

International operating profit for 2003 was 35% higher than 2002 on a 10% increase in revenues (3% increase in revenues on a constant currency basis). Improvements in revenues and operating profit on a constant currency basis in South America and Asia-Pacific were offset by lower European revenues and operating profit, as discussed below.

Europe. European revenues and operating profit in the first quarter of 2002 benefited from the currency processing and transportation work associated with the introduction of the euro on January 1, 2002. However, the cost of staffing levels, which remained high after the euro work was completed, negatively affected the last nine months of 2002 and, to a lesser degree, the first half of 2003.

Europe’s revenues and operating profit in 2003 were below the prior year on a constant currency basis primarily because of the absence of the euro work performed in the first quarter of 2002. There was also approximately $4.7 million of higher severance expense associated with workforce reductions. Revenues on a constant currency basis were higher in the second half of 2003 compared to the same 2002 period due to better performance and, to a lesser extent, due to additional revenues associated with a first-quarter 2003 acquisition in Belgium. Operating profit in the second half of 2003 also improved compared to the same period in 2002 reflecting improvements in a number of countries, and the benefits of management and operational changes, particularly in France.

South America. In South America, operating profit in 2003 was higher than the prior year reflecting better performance in Venezuela, partially offset by lower operating performance in Brazil. Favorable market conditions and lower labor costs as a percentage of revenue benefited Venezuela’s performance in 2003. Venezuela is Brink’s largest operation in South America. Brazil, Brink’s second largest operation in South America, did not perform as well in 2003 compared to 2002 as a result of the continuing difficult economic and operating conditions there. Brazil’s operating results improved in the fourth quarter of 2003 over the same period a year earlier primarily due to improved profitability of ATM and Cash Logistics services, partially offset by lower armored transportation profitability.

Asia-Pacific. Asia-Pacific revenues and operating profit in 2003 was higher than last year primarily due to improved results in Australia. In addition, Global Services business improved in Hong Kong and Korea.