2005 Financial Review

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Capitalization

The Company uses a combination of debt, operating leases and equity to capitalize its operations. As of December 31, 2005, debt as a percentage of capitalization (total debt and shareholders’ equity) was 27% compared to 26% at December 31, 2004. The increase resulted from higher debt of $68.7 million partially offset by the impact of higher equity of $149.0 million. Equity increased in 2005 primarily as a result of net income of $142.4 million and the issuance of shares related to employee benefit plans, partially offset by other comprehensive losses.

Summary of Debt, Equity and Other Liquidity Information

	Amount available under credit facilities			Outstanding Balance
	December 31,			December 31,
(In millions)		2005			2005	2004		$ change (a)
Debt:
Short-term debt:
Multi-currency revolving facility and other committed facilities	$	51		$	25.5	27.5		$	(2.0)
Long-term debt:
Revolving Facility		276			123.6	18.4			105.2
Letter of Credit Facility		6			-	-			-
Senior Notes					76.7	95.0			(18.3)
Dominion Terminal Associates (“DTA”) bonds					43.2	43.2			-
Other					43.9	60.1			(16.2)
Debt	$	333		$	312.9	244.2		$	68.7
Shareholders’ equity				$	837.5	688.5		$	149.0
Other Liquidity Information:
Cash and cash equivalents				$	96.2	169.0		$	(72.8)
Amount sold under accounts receivable securitization facility					-	25.0			(25.0)
Net Debt (b)					216.7	75.2			141.5
Net Financings (b)					216.7	100.2			116.5

(a)

In addition to cash borrowings and repayments, the change in the debt balance also includes changes in currency exchange rates and borrowings under new capital leases.

(b)

Net Debt and Net Financings are non-GAAP measures. Net Debt is equal to short-term debt plus the current and noncurrent portion of long-term debt, (“Debt” in the tables), less cash and cash equivalents. Net Financings are equal to Net Debt plus the amount sold under the accounts receivable securitization facility. See reconciliation below.

Reconciliation of Net Debt and Net Financings to GAAP Measures

	December 31,
(In millions)		2005	2004	2003	2002	2001
Short-term debt	$	25.5	27.5	35.8	41.8	27.8
Long-term debt		287.4	216.7	238.7	317.5	270.1
DTA bonds		-	-	-	-	43.2
Debt		312.9	244.2	274.5	359.3	341.1
Less cash and cash equivalents		(96.2)	(169.0)	(128.7)	(102.3)	(86.7)
Net Debt		216.7	75.2	145.8	257.0	254.4
Amounts sold under accounts receivable securitization facility		-	25.0	77.0	72.0	69.0
Net Financings	$	216.7	100.2	222.8	329.0	323.4

 

The supplemental Net Debt and Net Financing information is non-GAAP financial information that management believes is an important measure to evaluate the Company’s financial leverage. This supplemental non-GAAP information does not affect any reported amounts. This supplemental non-GAAP information should be viewed in conjunction with the Company’s consolidated balance sheets.

Debt

The Company has an unsecured $400 million revolving bank credit facility (“Revolving Facility”) with a syndicate of banks upon which it may borrow (or otherwise satisfy credit needs) on a revolving multi-currency basis over a five-year term ending in October 2009. At December 31, 2005, $276.4 million was available for use under the Revolving Facility. The Company has the option to borrow based on LIBOR plus a margin, prime rate or a competitive bid among the individual banks.

The Company has an unsecured $150 million credit facility with a bank to provide letters of credit and other borrowing capacity over a five-year term ending in December 2009 (the “Letter of Credit Facility”). The costs of these letters of credit are expected to be approximately the same as borrowings under its $400 million facility discussed above. As of December 31, 2005, $5.9 million was available for use under this revolving credit facility. The Revolving Facility and the multi-currency revolving credit facilities described below are also used for the issuance of letters of credit and bank guarantees.

The Company has three unsecured multi-currency revolving bank credit facilities totaling $121.4 million at December 31, 2005, of which $50.8 million was unused. When rates are favorable, the Company also borrows from other banks under short-term uncommitted agreements. Various foreign subsidiaries maintain other secured and unsecured lines of credit and overdraft facilities with a number of banks. Amounts borrowed under these agreements are included in short-term borrowings.

At December 31, 2005, the Company had $76.7 million of Senior Notes outstanding that are scheduled to be repaid in 2006 through 2008, including $18.3 million which was paid as scheduled in January 2006. Interest on each series of the Senior Notes is payable semiannually, and the Company has the option to prepay all or a portion of the Senior Notes prior to maturity subject to a make-whole provision. The Senior Notes are unsecured. On February 28, 2006, the Company gave notice to the holders of the Senior Notes that the Company would elect to prepay the remaining $58.4 million outstanding in the first quarter of 2006. A make-whole payment of approximately $1.7 million is expected to be paid in connection with this prepayment. 

The Company’s Brink’s, BHS and BAX Global subsidiaries have guaranteed the Revolving Facility, the Letter of Credit Facility and the Senior Notes. As of January 31, 2006, BAX Global is no longer a guarantor. The Revolving Facility, the Letter of Credit Facility, the agreement under which the Senior Notes were issued and the multi-currency revolving bank credit facilities each contain various financial and other covenants. The financial covenants, among other things, limit the Company’s total indebtedness, limit the use of proceeds on sales of assets (including the sale of BAX Global), provide for minimum coverage of interest costs, and require the Company to maintain a minimum level of net worth. The credit agreements do not provide for the acceleration of payments should the Company's credit rating be reduced. If the Company were not to comply with the terms of its various loan agreements, the repayment terms could be accelerated and the commitment could be withdrawn. An acceleration of the repayment terms under one agreement could trigger the acceleration of the repayment terms under the other loan agreements. The Company was in compliance with all financial covenants at December 31, 2005.

In 2003, at the Company’s request, the Peninsula Ports Authority of Virginia issued a new series of bonds to replace the previous bonds related to Dominion Terminal Associates, a deep water coal terminal in which the Company no longer has an interest. The Company continues to pay interest on and guarantee payment of the $43.2 million principal of the new bonds and ultimately will have to pay for the retirement of the new bonds in accordance with the terms of the guarantee. The new bonds bear a fixed interest rate of 6.0% and mature in 2033. The new bonds may mature prior to 2033 upon the occurrence of specified events such as the determination that the bonds are taxable or the failure of the Company to abide by the terms of its guarantee.

The Company believes it has adequate sources of liquidity to meet its near-term requirements.

Equity

At December 31, 2005, the Company had 100 million shares of common stock authorized and 58.7 million shares issued and outstanding. Of the outstanding shares at December 31, 2005, 1.2 million shares were held by The Brink’s Company Employee Benefit Trust and have been accounted for in a manner similar to treasury stock for earnings per share purposes. The Company has the authority to issue up to 2.0 million shares of preferred stock, par value $10 per share.

The Company has the authority to repurchase up to 1.0 million shares of common stock with an aggregate purchase price limitation of $19.1 million. The Company made no repurchases under this program during 2005 or 2004.