Management’s Discussion and Analysis

Results of Operations

Retained Liabilities and Assets of Former Natural Resource Operations

Executive Overview

The Company retains obligations which arose during its long history of operating within the coal industry. Since these obligations require significant annual cash outflows and the recording of significant annual expenses, management believes it is important to closely monitor and manage these obligations and address the related financial effects.

Of the various obligations, several have shorter terms and lesser values (reclamation, advance minimum royalties, workers’ compensation and the multi-employer pension plan withdrawal liability). The Company expects the cash payments for these to be concentrated over the next few years and then end or decline significantly.

The other three obligations (retiree medical benefit plan, Health Benefit Act and Black Lung) are longer in term and higher in estimated cost. Payments associated with each liability are projected to be made over the next 60 years or more. Each liability is largely medical benefits-related, so medical inflation is an important consideration. Each obligation covers a pool of individuals which is essentially capped since the Company no longer operates within the coal industry. Further, such individuals are, for the most part, above or near normal retirement age. Accordingly, these obligations should see a steady decrease in number of participants and beneficiaries over time. The only exception to this is the potential exposure to an increased share of the unassigned obligation under the Health Benefit Act.

The net present value of these obligations is a valuable tool for assessing their fair value as of a point in time. However, such values will fluctuate over time solely due to changes in market interest rates. The critical factor in each obligation is the cash flow needed to satisfy it.

The Company employs a team of employees, along with third parties, to monitor and control these liabilities with a primary goal of reducing future cash out-flows. The primary activities of this group are to verify eligibility of participants, design and implement plans which provide the required benefit at the lowest cost and verify costs charged to these plans.

The Company has also taken the step of establishing a VEBA in order to help manage the financial impact of the obligations. The VEBA is used as a tax efficient way to fund the obligations related to the retiree medical benefit plan. A second VEBA could be set up to help fund the Health Benefit Act obligations. A funded VEBA or VEBAs will help insulate the Company’s assets, and eventually its cash flow, from the obligations. The Company currently plans to fund the VEBA over time to a range of $300 to $400 million.

Legacy Liabilities and Assets

The Company refers to its various long-term liabilities and assets related to the former coal operations as its “legacy” liabilities and assets. Some of the Company’s legacy liabilities and assets are not fully recorded on the balance sheet because certain losses have been deferred in accordance with GAAP. In addition under GAAP, some of these liabilities are discounted to reflect a present value, while others are not discounted.

To facilitate an understanding of the total estimated present value of these liabilities and assets as of December 31, 2004, the following table presents a Company-defined amount, a “Legacy Value,” for the Company’s legacy liabilities and assets. Some of the Legacy Values are considered non-GAAP measures because they exclude GAAP deferred loss adjustments, or reflect discounts to a present value for liabilities with extended payment dates that are not recorded at present value under GAAP. The table reconciles each non-GAAP Legacy Value to its GAAP counterpart.

The liabilities and assets in the table are based on a variety of estimates, including actuarial assumptions, as are described in the Application of Critical Accounting Policies and in the notes to the consolidated financial statements. These estimated liabilities and assets will change in the future to reflect payments made, investment returns, annual actuarial revaluations, periodic revaluations of reclamation liabilities and other changes in estimates. Actual amounts could differ materially from the estimated amounts.

                 
    December 31, 2004
(In millions)    
Legacy
Value		   Add Back
Present-Value
Effect		   Amounts Not
Yet Recognized
Under GAAP		   GAAP
Amount
Legacy liabilities:
Company-sponsored retiree medical (a):
Before Medicare subsidy and VEBA $ 676.5    -   (375.6)   300.9 
Medicare subsidy value   (58.8)   -   53.0    (5.8)
VEBA   (172.4)   -   8.0    (164.4)
Company-sponsored retiree medical   445.3    -   (314.6)   130.7 
Health Benefit Act (b)   104.1    81.4   -   185.5 
Black lung (c)   55.2    -   (13.7)   41.5 
Multi-employer pension plans withdrawal liability (d)   36.6    -   -   36.6 
Workers’ compensation   30.2    -   -   30.2 
Advance minimum royalties   13.0    -   -   13.0 
Reclamation   4.6    -   -   4.6 
Legacy liabilities $ 689.0    81.4   (328.3)   442.1 
Legacy assets:
Other assets (e) $ 15.5    -   -   15.5 
Deferred tax assets (f)   261.7    28.5   (133.4)   156.8 
(a)
Company-sponsored retiree medical liabilities are accounted for in accordance with Statements of Financial Accounting Standards (“SFAS”) No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” SFAS No. 106 requires a liability be recorded for the present value of future obligations; however, under the provisions of SFAS No. 106, actuarial gains and losses are deferred. Actuarial gains and losses occur when actual events differ from assumptions (for example, when the actual health care inflation rate differs from the assumed inflation rate or when the actual return on investments is different than the estimated return) or when changes are made to assumptions used to estimate the liability, including the discount rate used to compute the present value (5.75% at December 31, 2004), expected health care inflation rates, expected life expectancy rates, asset returns and the effect of the Medicare subsidy. Actuarial gains and losses are not immediately recognized in earnings because SFAS No. 106 allows employers to defer these gains and losses and then amortize these gains and losses into earnings in future periods if the total unrecognized net gains and losses exceed 10% of the greater of the accumulated postretirement benefit obligation or plan assets as of the beginning of the year. As a result, the Company’s balance sheet does not reflect these liabilities at the full present value of the ultimate projected obligations at the end of the year. The Legacy Value in the table reflects the Company’s liability had the Company’s total projected obligations been fully accrued at the end of the year. The Company discloses the projected amount of its obligation before the deferral of unrecognized gains and losses as “funded status” in note 4 to the consolidated financial statements.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law. The Act provides for the payment of subsidies to sponsors of retiree medical benefit plans for a portion of the pharmaceutical expenses as long as the plan meets certain regulations. The $58.8 million Legacy Value in the table above reflects an estimate of the current value of such payments over the life of the plan.

In January 2004, the Company designated the VEBA to pay future benefits of the Company-sponsored medical plans. Accordingly, it is now accounted for as a reduction to the liability value of such plans.
(b)
Health Benefit Act liabilities are accounted for in accordance with EITF No. 92-13, “Accounting for Estimated Payments in Connection with the Coal Industry Retiree Health Benefit Act of 1992,” and, accordingly, the Company has accrued the undiscounted estimate of its projected obligation. The Company uses various assumptions to estimate its liability to The United Mine Workers of America Combined Fund (the “Combined Fund”) for future annual premiums, including the number of assigned and unassigned beneficiaries in future periods, medical inflation, and the amount of funding of the Combined Fund to be provided from the Abandoned Mine Reclamation Fund in future periods. The estimated annual payments are expected to gradually decline over time as the beneficiary population declines, and the Company expects payments will be made over the next 60 to 70 years. To determine the Legacy Value of these assets, the Company’s actuaries discounted the estimated future cash flows to a present value amount using a discount rate of 5.75%. The Company’s estimates of annual payments may change materially due to changes in future assumptions. Changes to the 1992 law under which benefits are paid also could materially affect the Company’s estimate of its liability. The estimation of the Legacy Value should not be considered a precise estimate because of the many variables that have been used to determine the estimate, including the discount rate and the amount of expected annual cash flows. There are many factors that may change and cause the amount recorded in the balance sheet to not be representative of the amount the Company may actually pay.
(c)
Actuarial gains and losses resulting from changes in estimates of the Company’s black lung obligations are deferred and amortized into earnings in future periods. As a result, the Company’s balance sheet does not report these liabilities as if the projected obligation had been fully accrued at the end of the year. The Legacy Value in the table reflects the Company’s projected obligations had it been fully accrued at the end of the year. Of the Company’s $55.2 million of present value of self-insured black lung benefit obligations at December 31, 2004, approximately $41.5 million had been recognized on the balance sheet, with the difference relating to deferred unrecognized actuarial losses. See note 4 to the consolidated financial statements for further information.
(d)
The Company participates in two coal-related multi-employer pension plans and believes that it is likely that a withdrawal will occur during the plan year ending June 30, 2005. A withdrawal would require the Company to pay its pro rata share of the underfunded position of the plans as of June 30, 2004. The payments to settle these obligations may be made in 2005, and the estimated amounts have been classified as a current liability.
(e)
“Other Assets” in the table is primarily a receivable from the state of Virginia related to tax benefits earned because of coal produced in prior years. The Company expects to receive approximately $5 million in each of 2005 and 2006; $3 million in 2007 and $1 million in each of 2008 and 2009.
(f)
The Company has not yet taken deductions in its tax returns for most of the retained liabilities associated with the former coal business, and has recorded a deferred tax asset for this future benefit for these temporary differences in book and tax bases. The Company’s deferred tax benefit on a Legacy Value basis is different from its GAAP counterpart because the Company’s temporary differences were based on the Legacy Values of the various coal-related liabilities and assets. In other words, if the Company had recorded the higher net Legacy Value of the liabilities on its balance sheet, it would have also recognized a larger deferred tax asset. The $133.4 million reconciling item represents the additional hypothetical tax benefit related to the Company-sponsored retiree medical and black lung obligations. The $28.5 million reconciling item represents the associated decrease to the deferred tax asset if the Health Benefit Act liability were recorded on a discounted basis.

Under the Health Benefit Act, the Company and various subsidiaries are jointly and severally liable for approximately $440 million, at Legacy Value, of postretirement medical and Health Benefit Act obligations in the above table.

Projected Payments and Expenses of Retained Coal Liabilities and Administrative Costs

The following tables include the actual cash payments and expense (continuing operations only) related to the Company’s former coal liabilities for 2003 and 2004 and those projected for the next five years.

The projected payments and expenses are estimated based on the assumptions used in determining the estimated Legacy Value and GAAP counterparts at December 31, 2004; the actual amount of payments and expense in future periods may be materially different than amounts presented. The amounts paid or expensed in the future will be dependent on many factors, including inflation in health care and other costs, the ultimate impact of the recently enacted Medicare reform bill, discount rates, the market value of postretirement benefits plan assets, the level of contributions to and the performance of the VEBA, the number of participants in various benefit programs, and the level of administrative costs needed to manage the retained liabilities.

Cash Payments
                     
(In millions)   Actual Payments   Projected Payments
Years Ending December 31,   2003 2004   2005 2006 2007 2008 2009
Postretirement benefits other than pensions:
Company-sponsored medical plans (a):
Before Medicare subsidy $ 30 35   $ 38 41 44 46 47
Estimated effect of Medicare subsidy   - -   - - (3) (3) (3)
Subtotal   30 35   38 41 41 43 44
Health Benefit Act   8 9   9 12 11 11 10
Black lung   8 7   5 5 5 5 5
Withdrawal liability   - -   37 - - - -
Workers’ compensation   8 5   4 4 3 2 2
Advance minimum royalties   1 1   1 3 2 2 1
Reclamation and inactive mine costs   5 3   3 1 1 - -
Administration and other   18 8   5 5 4 4 4
Cash proceeds and receipts   (3) (6)   - - - - -
Total $ 75 62   $ 102 71 67 67 66
VEBA contributions (a) $ 82 50   $ - - - - -
(a)
The Company has contributed cash to a VEBA to be used to make future payments of the Company’s retiree medical plans. The Company intends to continue to contribute to the VEBA, depending on tax and other considerations such as alternative uses of capital, until the VEBA holds between $300 million and $400 million. The Company reevaluates its contribution policy annually and is not obligated to fund the VEBA. The Company may elect at any time to use either these assets or its cash from operations to pay benefits for its retiree medical plans. Estimated payments in the table have not been reduced to reflect the use of assets held by the VEBA since there are no plans to do so within the five years projected.
Expenses in Continuing Operations
                     
(In millions)   Actual Expense   Projected Expense
Years Ending December 31,   2003 2004   2005 2006 2007 2008 2009
Postretirement benefits other than pensions:
Company-sponsored medical plans (a):
Before Medicare subsidy and VEBA $ 50 52   $ 59 58 58 57 56
Estimated effect of Medicare subsidy   - (6)   (7) (7) (7) (7) (7)
Estimated investment income in VEBA (a)   - (9)   (15) (16) (18) (19) (21)
Subtotal   50 37   37 35 33 31 28
Black lung   6 5   4 4 4 4 4
Pension (b)   (1) 2   4 4 3 1 1
Administrative, legal and other coal expenses, net   18 9   7 6 5 5 5
Other income, net (c)   (3) (7)   - - - - -
Total $ 70 46   $ 52 49 45 41 38
(a)
Beginning in 2004, the Company has accounted for the VEBA as a plan asset of Company-sponsored medical plans in accordance with SFAS No. 106 and has recognized a lower amount of amortization of previously unrecognized losses due to the effects of the 2003 medical subsidy legislation. The above projection does not assume that any further contributions will be made to the VEBA. To the extent contributions are made, projected investment income will be increased to reflect the long-term rate of return on such contributions.
(b)
The above projection does not assume that any pension contributions will be made. If voluntary or required contributions are made, projected expenses from that year forward would be reduced by the expected long-term return on those contributions.
(c)
The Company has not recognized an approximate $6 million gain related to the 2003 coal property sale since the purchaser has not yet fully assumed certain liabilities contractually transferred in the sale.

Following are comments covering the more significant legacy liabilities in the above tables. For additional information, please see note 4 to the consolidated financial statements. Each of these liabilities and assets are affected by estimates and judgments. More information on this is available at “Application of Critical Accounting Policies” later in this Management’s Discussion and Analysis.

Company-Sponsored Retiree Medical Benefits Obligations and VEBA

The Company provides postretirement health care benefits to eligible former coal miners and their dependents. With the assistance of actuaries, the Company annually reevaluates the estimated future cash flows, expenses and current values of the obligations. Projected payments are expected to increase each year for the next five years as a result of medical inflation and as eligible participants attain retirement age. This will be partially offset by reductions in the number of participants through mortality.

The Legacy Value, which equals the funded status at December 31, 2004 decreased to $445 million from $526 million at December 31, 2003. Most of this decrease was due to the assignment of the VEBA to the plan. The Company restricted the use of the VEBA in 2004 to pay only Company-sponsored retiree medical benefits and the VEBA in 2004 is considered a plan asset. Partially offsetting this were the effects of reducing the discount rate by 50 basis points to 5.75% and an increase in the assumed medical inflation rate.

The VEBA was established by the Company under Internal Revenue Code Section 501(c)(9). In general, a contribution made to the VEBA becomes deductible for federal income tax purposes in the year in which it is made. Investment earnings within the VEBA are not subject to federal income tax. Distributions from the VEBA to pay designated benefits or to reimburse the Company for designated benefit payments are nontaxable. The Company can determine the timing and size of any payment from the VEBA to cover expenses of eligible participants.

The Company intends to increase over time the amount of the assets within the VEBA to approximately $300 million to $400 million. The increase is expected to come from investment returns and contributions, after taking into consideration the Company’s levels of cash and debt, tax position and growth needs.

Contributions to the VEBA along with investment earnings amounted to about $18 million through December 31, 2002. The Company contributed $82 million to the VEBA in 2003 and the VEBA generated $5 million in investment returns, leaving a balance of $105 million at December 31, 2003. In 2004 the Company contributed approximately $50 million to the VEBA and the VEBA generated $17 million in investment returns, leaving a balance of $172 million at December 31, 2004. The Company has not finalized its plans for contributions, if any, in 2005 and beyond.

The VEBA’s assets are allocated among active investment managers of equities and fixed income securities. Approximately 70% of the trust assets are invested in equities, with 30% invested in fixed income securities. The VEBA is being invested in a similar fashion to the Company’s primary U.S. pension plan, and the Company has estimated the same expected long-term rate of return of 8.75% per annum.

Health Benefit Act Obligations

In October 1992, The Coal Industry Retiree Health Benefit Act of 1992 (the “Health Benefit Act”) was enacted as part of the Energy Policy Act of 1992. The Health Benefit Act established rules for the payment of future health care benefits for thousands of retired union mine workers and their dependents. The Health Benefit Act established a trust fund, The United Mine Workers of America Combined Benefit Fund (the “Combined Fund”), to which “signatory operators” and “related persons,” including The Brink’s Company and certain of its subsidiaries (collectively, the “Brink’s Companies”), are jointly and severally liable to pay annual premiums for those beneficiaries directly assigned to a signatory operator and its related persons, on the basis set forth in the Health Benefit Act.

In addition, the Health Benefit Act provides that assigned companies, including the Brink’s Companies, are required to fund, pro rata according to the total number of assigned beneficiaries, a portion of the health benefits for unassigned beneficiaries if these benefits are not funded from other designated sources. To date, almost all of the funding for unassigned beneficiaries has been provided from transfers from the Abandoned Mine Reclamation Fund (the “AML Fund”) or other government sources.

The Company’s liability for Health Benefit Act obligations is equal to the undiscounted estimated amount of future annual premiums the Company expects to pay to the Combined Fund. The Company’s estimated annual premium is equal to the total number of beneficiaries (including assigned beneficiaries and an allocated percentage of the total unassigned beneficiaries) at October 1, the beginning of the plan year, multiplied by the premium per beneficiary for that year. The Company expects to pay annual premiums over the next 60 to 70 years, but it expects these annual premiums to gradually decline over time as the number of beneficiaries decreases.

Since the passing of the Health Benefit Act, the vast majority of the costs for unassigned beneficiaries have been paid with transfers of cash from the AML Fund or other government sources. From the inception of the Combined Benefit Fund through December 31, 2004, the Company has paid only $0.6 million to the Combined Benefit Fund for benefits in the unassigned pool. The Company expects to pay an additional $0.5 million in 2005.

The authority for continued transfers from the AML Fund may expire in June 2005. Since the continued transfers of funds are not sufficiently assured, the Company’s current estimate of its obligations assumes that no transfers beyond 2005 will be made. There may be a legislative or regulatory extension to the transfer authority. If the transfer authority is extended, the Company may decrease its estimate of the probable liability for future premiums payments by a material amount.

Moreover, the Company’s estimate of its contingent liability for unassigned beneficiaries could increase materially in the future if other responsible coal operators become insolvent. This liability could also change materially if the percentage of unassigned beneficiaries that are allocated to the Company changes due to relative mortality rates of the Company’s assigned beneficiaries compared to the total assigned beneficiaries.

The Company believes that Legacy Value information is useful to investors and creditors as an estimate of the fair value of a series of payments to be made over an extended period of time for these obligations.

                   
  Legacy
Value
(discounted)		   Add-Back
Present-Value
Effect		   GAAP
basis
(undiscounted)
(In millions)   2004 2003   2004 2003   2004 2003
Assigned and other $ 67 71   53 61   120 132
Unassigned   37 35   29 31   66 66
Total $ 104 106   82 92   186 198

The Legacy Value (representing the present value of the obligation) of the Company’s Health Benefit Act obligations at December 31, 2004, was slightly lower than the $106 million of a year earlier. The Company made $9 million of payments in 2004. In addition, a slightly lower number of beneficiaries were assigned to the Brink’s Companies than was projected last year. Both of these factors explain the decrease in the GAAP basis measurement, which is undiscounted. In addition, the Legacy Value was unfavorably affected by a reduction in the discount rate used by 50 basis points to 5.75%, and the accretion of interest for 2004.

Payments related to the Health Benefit Act are projected to rise in 2006 to reflect the current assumption that the previous sources of funding for the unassigned pool will not continue beyond 2005. If future funding of all of the unassigned benefits becomes available through the AML Fund or other sources, projections for 2006 and later years may be reduced by up to $4 million per year.

Any changes to expected future obligations determined during annual reevaluations are recorded as expenses or benefits within discontinued operations.

Black Lung Obligations

The Company makes payments to former miners who have been determined to have pneumoconiosis (black lung disease). Such payments primarily cover disability payments and condition-related medical expenses. These payments stretch out over many years and have been discounted to a net present value. Actuarial gains and losses are deferred and amortized into expense over the average remaining life expectancy of all participants (approximately 10 years).

The Legacy Value, which equals the accumulated projected benefit obligation, of the black lung obligations decreased to $55.2 million in 2004 from $63.0 million in 2003 largely due to actuarial gains related to a reduction in the number of pending claims against the Company and $7.0 million of cash benefit payments made in 2004. This was partially offset by the effect of reducing the discount rate by 50 basis points to 5.75% as of December 31, 2004.

Future cash payments are expected to gradually decline over time as the number of participants declines through mortality. Future expense levels are also expected to decline as the remaining value of obligations declines over time.

Withdrawal Liabilities

The Company participates in the United Mine Workers of America (“UMWA”) 1950 and 1974 pension plans. The Company believes that it is likely that it will withdraw from the plans prior to June 30, 2005, the plan’s year end. A withdrawal from the plans occurs when there is a significant reduction in or elimination of the hours worked by employees working under UMWA labor agreements. Upon withdrawal from these coal-related plans, the Company will become obligated to pay the plans a portion of the underfunded status of the plans as of the beginning of the plan year in which a withdrawal occurs, as determined by the plan agreements and by law. The Company expects to become obligated to pay a $36.6 million withdrawal liability during 2005 based on the funded status of the plans at June 2004. The obligation could change materially if the Company does not withdraw prior to June 30, 2005.

Discontinued Operations
         
  Years Ended December 31,
(In millions)   2004 2003 2002
Gain (loss) on sale of
Timber $ 20.7 4.8 -
Gold   (0.9) - -
Natural Gas   - 56.2 -
Coal   5.0 - 13.2
Results from operations
Timber   (0.5) (0.2) (1.0)
Gold   (1.2) (4.1) (7.6)
Natural Gas   - 11.2 9.0
Coal   - - (28.1)
Adjustments to contingent liabilities of former operations
Health Benefit Act liabilities   3.2 (31.3) (24.0)
Withdrawal liabilities   15.4 (17.0) (26.8)
Reclamation liabilities   (0.1) (3.2) -
Workers’ compensation liabilities   (4.9) 0.2 -
Recovery of environmental costs   - 5.3 -
Other   (3.3) (2.7) -
Income (loss) from discontinued operation before income taxes   33.4 19.2 (65.3)
Income tax benefit (expense)   (12.5) (8.0) 22.0
Income (loss) from discontinued operations $ 20.9 11.2 (43.3)
Gain (loss) on Sale

The Company sold a portion of its timber business for $5.4 million in cash in 2003 and recognized a $4.8 million pretax gain. In 2004, the Company received an additional $33.7 million for the remaining portion of its timber business. After deducting the book value of related assets and the payment of $6.2 million in 2004 to purchase equipment formerly leased, the Company recognized a $20.7 million pretax gain in 2004.

In February 2004, the Company sold its gold operations for approximately $1.1 million in cash plus the assumption of liabilities and recognized a $0.9 million loss.

In August 2003, the Company sold its natural gas business and received $81.2 million in cash and recognized a $56.2 million gain.

During 2000 and 2001, the Company recorded charges of $101.8 million to reflect the estimated loss on the sale of the coal business. A $13.2 million reversal of the previously estimated loss on sale was recorded during 2002 to reflect the amount of actual proceeds and values of assets and liabilities at the dates of sale. The assets disposed of in 2002 primarily consisted of operations including coal reserves, property, plant and equipment, the Company’s economic interest in Dominion Terminal Associates and inventory. Certain liabilities, primarily reclamation costs related to properties disposed of, were assumed by the purchasers.

In February 2005, the Company received additional cash proceeds from the previous sale of its coal business in Virginia; the related gain of $5 million was recorded in 2004.

Results from Operations

The operating results of the coal, natural gas, timber and gold operations have been reclassified to discontinued operations for all periods presented.

The results of operations of the former natural gas operations in the eight months prior to the 2003 sale improved over the full year of 2002 as a result of higher natural gas prices. The Company recognized impairment losses related to its gold business of $1.7 million in 2003 and $5.7 million in 2002.

The Company accounted for the disposition of its coal operations under Accounting Principles Bulletin No. 30, (“APB No. 30”) “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” Under APB No. 30, estimated losses of the coal operation expected to be incurred through the end of the disposal period were accrued at the measurement date of December 31, 2000. Accordingly, operating losses (including significant ongoing expenses related to Company-sponsored pension and postretirement benefit obligations and black lung obligations) were recognized within discontinued operations in different periods than they would have been recorded if coal were a continuing operation. Total recorded charges for Company-sponsored pension and postretirement benefit obligations and black lung obligations were approximately $2 million in 2002 representing the difference between the estimated amount of expenses relating to 2002 that were accrued in 2001 and the amount actually incurred in 2002. Beginning in January of 2003 expenses related to Company-sponsored pension, postretirement and black lung obligations are recorded in continuing operations.

The Company had recorded its estimate of operating losses during the expected disposal period prior to the end of 2001. The Company recorded an additional $28.1 million of operating losses during 2002, primarily reflecting worse-than-expected price, volume and costs per ton of coal as a result of adverse coal market conditions during that year.

Adjustments to Contingent Liabilities of Former Operations

Health Benefit Act Liabilities. The Company has obligations under the Coal Industry Retiree Health Benefit Act of 1992 (the “Health Benefit Act”), as described in note 4 to the consolidated financial statements. The estimated liability is reduced each year as payments are made. In addition, the Company reduced the estimated liability by $3.2 million in 2004 and increased the estimated liability by $31.3 million in 2003 and $24.0 million in 2002 to reflect changes in the estimates of the undiscounted liability. This estimated liability will be adjusted in future periods as assumptions change.

The $3.2 million reduction in the liability in 2004 is primarily related to a slight decrease in the number of beneficiaries assigned to the Company at October 1, 2004 compared to the amount estimated at the end of 2003. As a result, the estimate of assigned beneficiaries in future periods was also lower.

The $31.3 million charge in 2003 is primarily related to the assumed increase in the number of unassigned beneficiaries allocated to the Company. The increased allocation was due to two factors. First, the Company increased its allocation percentage because of a change in the way the Company interprets the statute governing the allocation, based on findings of court cases that year. Second, other coal operations became insolvent during the period and their assigned beneficiaries were transferred to the unassigned pool. These actions reduced the denominator (the total assigned pool) in the computation of the allocation percentage, increasing the Company’s allocation assumption, and increased the unassigned pool.

The $24.0 million charge in 2002 primarily resulted from the Company’s being able to obtain and use Company-specific information regarding the age of the beneficiaries covered by the Health Benefit Act rather than using averages relating to the entire population of beneficiaries covered, slightly higher per-beneficiary health care premiums, and slightly lower mortality than was estimated at the end of 2001 for the plan year ended September 30, 2002.

Withdrawal Liabilities. The Company participates in the United Mine Workers of America (“UMWA”) 1950 and 1974 pension plans. The Company believes that it is likely that it will withdraw from the plans prior to June 30, 2005, the plan’s year end. A withdrawal from the plans occurs when there is a significant reduction in or elimination of the hours worked by employees working under UMWA labor agreements. Upon withdrawal from these coal-related plans, the Company will become obligated to pay the plans a portion of the underfunded status of the plans as of the beginning of the plan year in which a withdrawal occurs, as determined by the plan agreements and by law. The Company expects to become obligated to pay a $36.6 million withdrawal liability during 2005 based on the funded status of the plans at June 2004. The obligation could change materially if the Company does not withdraw prior to June 30, 2005.

The Company’s estimate of the obligation in each year is based on the funded status of the multi-employer plans for the most recent measurement date. The change in the Company’s estimated liability in the last three years was largely due to changes in the UMWA plans’ unfunded liabilities.

Other. In 2004 the Company settled certain legal and other contingencies related to its former coal operations and recognized $3.3 million of additional expense.

In 2003, the Company and a third party reached an agreement that establishes the allocation of past costs related to the recovery of environmental costs, and as a result, recognized a $5.3 million pretax gain. The matter relates to the remediation of the Company’s formerly owned petroleum terminal facility in Jersey City, New Jersey.

Sale of Other Natural Resources Assets

In October 2003, the Company sold its 23.3% equity interest in MPI Mines Ltd., an Australian minerals exploration and development Company with interests in gold and nickel, for $18.8 million in cash and recognized a $10.4 million pretax gain in continuing operations.

In November 2003, the Company sold substantially all of its remaining coal-related assets for $14 million in cash plus the assumption of reclamation and other liabilities for total proceeds of $28.8 million. A gain of up to $6 million may be recognized in 2005 as liabilities related to reclamation are formally transferred to the buyer.