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Management’s Discussion and Analysis

	Operations Results of Operations Liquidity and Capital Resources Market Risk Exposures Application of Critical Accounting Policies Recent Accounting Pronouncements Foreward-looking Information
	Overview of Results 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

Income Taxes

Overview

The Company’s effective tax rate has fluctuated in the past three years from statutory rates due to various factors, including:

• changes in valuation allowances, and
• state taxes, changes in the expected geographical mix of earnings.

The Company establishes or reverses valuation allowances for deferred tax assets depending on all available information including historical and expected future operating performance of its subsidiaries. Changes in judgment about the future realization of deferred tax assets can result in significant adjustments to the valuation allowances. 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.

Continuing Operations

2004

The effective income tax rate on continuing operations in 2004 was higher than the 35% U.S. statutory tax rate primarily as a result of the recording of $9.9 million of net valuation allowance adjustments, mostly related to certain European operations.

2003

The effective income tax rate for continuing operations in 2003 was higher than the 35% U.S. statutory tax rate primarily due to $28.4 million of net additional valuation allowance adjustments for certain state and foreign deferred tax assets.

2002

The effective income tax rate in 2002 was higher than the 35% U.S. statutory tax rate primarily due to foreign income taxes and the recording of $1.5 million of valuation allowances.

Adjustments to income tax expense

The Company has recorded adjustments in each of the last three years based on an ongoing analysis of its U.S. and non-U.S. current and deferred income tax asset and liability accounts. The Company has included in current earnings, the effect of these adjustments because they did not aggregate to a material amount in any individual year. The income tax expense (benefit) related to these adjustments was ($0.3) million in 2004, $3.3 million in 2003, and $1.6 million in 2002.

Discontinued Operations

Discontinued operations includes the income (loss) before taxes and the related tax provision or benefit associated with the Company’s former natural resource businesses. The effective tax rate in 2004 was higher than the 35% U.S. statutory tax rate due to state income tax expense. The effective tax rate in 2003 was higher than the U.S. statutory rate due to additional accruals made in 2003 for tax contingencies related to the natural resource business. In 2002, tax benefits from percentage depletion of coal production were reflected in the effective tax rate of discontinued operations.

As discussed in note 23 to the consolidated financial statements, up to $27 million in tax benefits could be recognized in discontinued operations upon the favorable resolution of a tax contingency.

Other

As of December 31, 2004, the Company has not recorded U.S. federal deferred income taxes on $340.7 million of undistributed earnings of its foreign subsidiaries and equity affiliates. With the exception of amounts discussed below, it is expected that these earnings will be permanently reinvested in operations outside the U.S. It is not practical to compute the estimated deferred tax liability on these earnings.

The Company does not expect to be able to complete its evaluation of the repatriation provision of the new American Jobs Creation Act of 2004 until after Congress passes statutory technical corrections and the Treasury Department issues further guidance on key elements of the provision. In January 2005, the Treasury Department began to issue the first of a series of clarifying guidance documents related to this provision. The Company expects to complete its evaluation of the effects of the repatriation provision within the first two fiscal quarters of 2005, provided Congress and the Treasury Department issue guidance by that time. The range of possible amounts that the Company is considering for repatriation under this provision is between zero and $150 million. While the Company estimates that the related potential range of additional income tax payments is between zero and $10 million, this estimate may change based on the passage of technical correction legislation.