2005 Financial Review

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

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 include securely transporting and handling valuable assets, processing currency and deposits and the increasingly important preparing and transmitting related information.

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

brand name recognition,
reputation for high-quality service,
proprietary cash processing and information systems,
high-quality insurance coverage and general financial strength,
risk management capabilities, and
the ability to serve a customer in multiple markets through a global network.

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

As a result of management’s 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 and the information capabilities and financial strength underlying the Brink’s approach to business.

In order to earn an adequate return on 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 competitors that may not provide the same level of service and risk management. The Company believes that Brink’s operations are capable of generating operating profit margins near or above 7% on an annual basis. This level is necessary to earn what management believes is an appropriate return on its cost of capital.

The industries to which Brink’s provides services have been consolidating. As a result, the strength of customers in these industries has been increasing. Customers are seeking suppliers, such as Brink’s, with broad geographic solutions, 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 economies and the volume of business for specific customers. As contracts generally run for one or more years, there are costs which must be incurred to prepare to service a new customer or to transition away from one. Brink’s also periodically incurs costs to reduce operations when volumes decline, including costs to reduce the number of employees and close or consolidate branch and administrative facilities. In addition, safety and security costs can vary from period to period depending on Company and industry performance and cost of insurance coverage. Further, Brink’s operating profit 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 associated with the holiday season. As a result, margins are typically lower in the first half than in the second half of the year.

Summary of Brink’s Results


	Years Ended December 31,				% change
(In millions)		2005	2004	2003	2005	2004
Revenues
North America (a)	$	778.2	733.7	716.2	6	2
International		1,378.7	1,198.2	972.8	15	23
	$	2,156.9	1,931.9	1,689.0	12	14
Operating Profit
North America (a)	$	49.4	55.2	53.4	(11)	3
International		62.5	89.5	59.1	(30)	51
	$	111.9	144.7	112.5	(23)	29
Cash Flow Information
Depreciation and amortization	$	90.5	81.0	70.6	12	15
Capital expenditures		109.0	76.2	80.9	43	(6)

(a): U.S. and Canada.

2005

Overview

Revenues at Brink’s were 12% higher in 2005 compared to 2004 as a result of a combination of the effects of newly acquired businesses, core business growth and changes in currency exchange rates. Operating profit in 2005 was lower than 2004 despite additional profits on higher revenues, largely as a result of:

higher costs in Europe including restructuring and severance expenses to scale down operations in several markets with lower volume,
higher pension expenses in the U.S., and
higher safety and security expenses.

North America

Revenues increased in 2005 compared to 2004 primarily as the result of increased volumes in U.S. armored car, U.S. Cash Logistics services, U.S. Global Services and substantially all Canadian lines of business. Operating profit in 2005 was lower than 2004 primarily due to $6.0 million in higher U.S. pension costs due to higher amortization of actuarial losses, and higher safety and security costs, partially offset by additional profits from revenue growth.

In addition U.S. revenues and operating profit were affected by the effects of Hurricane Katrina. The Company anticipates that lost revenue in 2005 and 2006 will be recovered under business interruption insurance coverage. The Company expects to collect $1.0 million to $1.5 million of insurance proceeds when its claim is ultimately settled. The Company will record a gain when the business interruption insurance claim is settled.

As previously discussed, Brink’s expenses in 2006 related to retirement benefit plans are expected to be reduced by $13 million to $14 million as a result of the Company’s decision to freeze U.S. defined benefit pension plan benefits as of December 31, 2005.

International

Revenues increased in 2005 over 2004 in all regions. Increased revenue in the Europe, Middle East, and Africa region (“EMEA”) was primarily the result of acquisitions. Revenue increases in South America and Asia-Pacific were primarily due to organic revenue growth. Operating profit in 2005 was lower than 2004 in EMEA, while operating profits in South America and Asia-Pacific were higher as compared to 2004. International operating profit in 2004 was reduced by charges of approximately $3.1 million due to adjustments to non-income tax accruals.

EMEA. Revenues increased to $952.0 million in 2005 from $826.7 million in 2004, an increase of $125.3 million or 15% (15% on a constant currency basis) largely as a result of acquisitions and, to a lesser extent, organic revenue growth in a few markets, which was largely offset by declines in the Netherlands and Belgium. In addition, 2005 revenues were affected by competitive pressures and weak European economies. Brink’s acquired operations in:

Greece in the first quarter of 2004,
Luxembourg, Scotland and Ireland in the first quarter of 2005, and
Poland, Hungary, and the Czech Republic in the second quarter of 2005,

These acquisitions increased revenues by approximately $104 million in 2005 over 2004 but did not have a significant impact on operating profit.

Operating profit decreased by approximately $32 million in 2005 compared to 2004 due to:

Lower volumes in Belgium and Netherlands as a result of the loss of locally significant customers,
$8.6 million higher restructuring and severance expenses primarily in Belgium, the United Kingdom and the Netherlands,
lower volumes in Greece in the year after the Athens Olympics,
higher safety and security costs in the region, and
higher fuel costs.

The Company is highly focused on improving performance in Europe and expects to improve operating margins in 2006. The Company expects to ultimately realize approximately $8 million to $9 million in annual cost savings related to restructuring, of which $6 million should be realized in 2006.

South America. Revenues increased to $355.1 million in 2005 from $303.5 million in 2004, an increase of 17% (13% on a constant currency basis). This increase was due primarily to higher volumes, particularly in Venezuela, Colombia, Argentina and Chile. The increase in revenues is a reflection of the overall improvement in South American economies.

Operating profit in 2005 was 21% higher than 2004 due to the above-mentioned volume increases, and cost reduction and productivity improvements across the region. The increase in operating profit in the region was partially offset by operating losses in Brazil caused by intense price competition.

Asia-Pacific. Revenues increased to $71.6 million in 2005 from $68.0 million in 2004, an increase of 5% (3% on a constant currency basis). This increase was primarily due to exceptionally strong performance in Hong Kong partially offset by weaker performance in Korea. Operating profit in 2005 was about the same as 2004, reflecting improved performance in most countries, but offset by lower volumes in Korea and Australia.

Other. As discussed in “Liquidity and Capital Resources – Contingent Matters - Value-added taxes (“VAT”) and customs duties” below and in note 22 to the consolidated financial statements, international operating profit was reduced by expense of approximately $1.1 million in 2004 related to unpaid VAT and customs duties, including an estimate of related penalties. At any time, the Company could be assessed penalties materially in excess of those accrued.

2004

Overview

Revenues and operating profit increased modestly in North America and more significantly in the International region during 2004. Internationally, improvements occurred in both EMEA and South America. Operating profit in EMEA in 2004 improved because of higher revenues on a constant currency basis as a result of improved economic performance and operational changes made in 2003. Operating profit in EMEA 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 profit benefited from improved conditions.

North America

Revenue increased in 2004 primarily due to increased revenues from Global Services and Canadian armored transportation and ATM services, offset by lower revenues from U.S. armored transportation and ATM services. 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 the Company’s headquarters from Darien, Connecticut, to Richmond, Virginia, and Dallas, Texas.

International

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

EMEA. 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. Operating profit was higher than normal at the newly acquired Greek subsidiary due to additional revenue from the 2004 Athens 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. 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. 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 made in late 2003. However, the operating environment in Brazil remained highly competitive.

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

Other. International operating profit in 2004 was reduced by $3.1 million of higher expense as a result of the previously mentioned VAT and customs duties matter and unfavorable determinations in Brazil and Mexico related to non-income tax issues.