2005 Financial Review

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

RESULTS OF OPERATIONS

Consolidated Review

Revenues in 2005 were 12% higher than 2004 as a result of acquisitions and growth in existing operations at Brink’s and a larger subscriber base at BHS. The Company’s operating profit in 2005 was 16% lower than in 2004 as a result of 23% lower operating profit at Brink’s due primarily to lower operating profit from Europe compared to the strong prior year, partially offset by 8% higher operating profit at BHS on continued subscriber growth.

Revenues in 2004 were 14% higher than 2003 because of growth at Brink’s and BHS and changes in currency exchange rates. Operating profit increased 41% in 2004 due to improved operating performance by Brink’s and BHS and lower expenses related to former coal operations. These improvements were partially offset by higher corporate expenses and the nonrecurrence of the 2003 gain on the sale of an equity investment.

Effective December 31, 2005, the Company elected to freeze U.S. defined benefit pension plan benefits. Effective January 1, 2006, the Company elected to enhance benefits for its U.S. defined contribution 401(k) plan.

Estimated net lower expense in 2006 is as follows:

• Brink’s between $13 million and $14 million
• BHS between $3 million and $4 million
• Corporate approximately $2 million.

The lower expense is estimated and could change significantly as a result of items such as changes in defined benefit pension plan assumptions and U.S. 401(k) plan participation rates.

Revenue growth rates for operations outside the U.S. include the effect of changes in currency exchange rates. On occasion in this report, the change in revenue versus the prior year has been disclosed using constant currency exchange rates in order to provide information about growth rates without the impact of changing foreign currency exchange rates. Growth at constant-currency exchange rates equates to growth as measured in local currency. This measurement of growth using constant-currency exchange rates is higher than growth computed using actual currency exchange rates when the U.S. dollar is strengthening and lower when the U.S. dollar is weakening. Changes in currency exchange rates did not materially affect period-to-period comparisons of segment operating profit for the periods presented herein. Relative to most European currencies relevant to the Company, the U.S. dollar in 2005 was about even with 2004, but was weaker in 2004 compared to 2003. Currencies in most Asia-Pacific and South American countries, other than Venezuela, strengthened against the U.S. dollar in both 2005 and 2004 versus the prior years. The Venezuelan bolivar weakened against the U.S. dollar in both 2005 and 2004 as compared to the prior years. 

The following table provides supplemental information related to Organic Revenue Growth which is not required by U.S. generally accepted accounting principles (“GAAP”). The Company defines Organic Revenue Growth as the change in revenue from the prior year due to factors such as changes in prices for products and services (including the effect of fuel surcharges), changes in business volumes and changes in product mix. Estimates of changes due to fluctuations in foreign currency translation rates and the effects of new acquisitions are excluded from Organic Revenue Growth.

The supplemental Organic Revenue Growth information presented above is non-GAAP financial information that management believes is an important measure to evaluate results of existing operations without the effects of acquisitions, dispositions and currency exchange rates. The limitation of this measure is that the effects of acquisitions, dispositions and changes in values of foreign currencies cannot be completely separated from changes in prices and volume of a unit’s base business. This supplemental non-GAAP information does not affect net income or any other reported amounts. This supplemental non-GAAP information should be viewed in conjunction with the Company’s consolidated statements of operations.