UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-9148
THE PITTSTON COMPANY
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(Exact name of registrant as specified in its charter)
Virginia 54-1317776
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 Bayberry Court, Richmond, Virginia 23226-8100
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 289-9600
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
As of August 3, 2001, 51,767,497 shares of $1 par value Pittston Brink's Group
Common Stock were outstanding.
1
Part I - Financial Information
The Pittston Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
June 30 December 31
2001 2000
- -----------------------------------------------------------------------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 94,256 97,751
Accounts receivable (net of estimated
uncollectible amounts:
2001 - $40,634; 2000 - $39,803) 506,828 560,118
Prepaid expenses and other current assets 62,871 57,876
Deferred income taxes 77,935 81,408
Current assets of discontinued
operations (Note 9) 15,248 16,473
- -----------------------------------------------------------------------------
Total current assets 757,138 813,626
Property, plant and equipment,
(net of accumulated depreciation:
2001 - $611,763; 2000 - $563,073) 814,033 831,557
Goodwill, net of accumulated amortization 229,927 232,969
Deferred pension assets 117,523 118,381
Deferred income taxes 227,558 229,693
Other assets 152,155 141,936
Noncurrent assets of discontinued
operations (Note 9) 109,969 110,547
- -----------------------------------------------------------------------------
Total assets $ 2,408,303 2,478,709
- -----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 47,862 51,003
Current maturities of long-term debt 47,139 34,378
Accounts payable 250,577 315,956
Accrued payroll and vacation 98,666 105,105
Accrued miscellaneous liabilities 366,444 388,131
Current liabilities of discontinued
operations (Note 9) 3,619 3,734
- -----------------------------------------------------------------------------
Total current liabilities 814,307 898,307
Long-term debt, less current maturities 315,226 311,418
Postretirement benefits other than pensions 397,959 401,093
Workers' compensation and other claims 81,814 85,116
Deferred revenue 125,483 123,831
Deferred income taxes 17,713 16,654
Other liabilities 139,540 142,225
Noncurrent liabilities of discontinued
operations (Note 9) 22,771 24,242
Commitments and contingent liabilities
(Notes 9 and 11)
Shareholders' equity:
Preferred stock, par value $10 per share:
Authorized: 2,000 shares of $31.25
Series C Cumulative Convertible Preferred
Stock; Issued and outstanding:
2001 and 2000 - 21 shares 214 214
Common stock, par value $1 per share:
Authorized: 100,000 shares;
Issued and outstanding:
2001 - 51,767 shares; 2000 - 51,778 shares 51,767 51,778
Capital in excess of par value 348,141 348,752
Retained earnings 192,077 182,525
Accumulated other comprehensive loss (Note 5) (87,338) (82,020)
Employee benefits trust, at market value (11,371) (25,426)
- -----------------------------------------------------------------------------
Total shareholders' equity 493,490 475,823
- -----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,408,303 2,478,709
- -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements (unaudited).
2
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
2001 2000 2001 2000
- --------------------------------------------------------------------------------
Revenues $ 884,474 948,160 1,792,801 1,877,944
- --------------------------------------------------------------------------------
Expenses:
Operating expenses 762,391 811,914 1,542,312 1,598,177
Selling, general and
administrative expenses 110,333 121,003 217,528 235,195
- --------------------------------------------------------------------------------
Total expenses 872,724 932,917 1,759,840 1,833,372
Other operating income,
net (Note 6) 4,742 2,955 8,958 5,925
- --------------------------------------------------------------------------------
Operating profit 16,492 18,198 41,919 50,497
Interest income 1,633 1,445 2,725 2,088
Interest expense (9,170) (10,604) (18,045) (20,488)
Other expense, net (Note 7) (2,909) (1,345) (6,585) (1,038)
- --------------------------------------------------------------------------------
Income from continuing operations
before income taxes and cumulative
effect of change in accounting
principle 6,046 7,694 20,014 31,059
Provision for income taxes 2,267 2,939 7,505 11,865
- --------------------------------------------------------------------------------
Income from continuing operations
before cumulative effect of change
in accounting principle 3,779 4,755 12,509 19,194
Loss from discontinued operations,
net of tax (Note 9) - (6,400) - (10,883)
- --------------------------------------------------------------------------------
Income (loss) before cumulative
effect of change in accounting
principle 3,779 (1,645) 12,509 8,311
Cumulative effect of change in
accounting principle, net
of tax (Note 8) - - - (51,952)
- --------------------------------------------------------------------------------
Net income (loss) 3,779 (1,645) 12,509 (43,641)
Preferred stock dividends (168) (231) (335) (462)
- --------------------------------------------------------------------------------
Net income (loss) attributed to
common shares $ 3,611 (1,876) 12,174 (44,103)
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Comprehensive income (loss) $ 7,796 (6,762) 6,856 (57,216)
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Basic and diluted net income (loss)
per common share:
Continuing operations $ 0.07 0.09 0.24 0.37
Discontinued operations - (0.13) - (0.22)
Cumulative effect of change in
accounting principle - - - (1.04)
- --------------------------------------------------------------------------------
$ 0.07 (0.04) 0.24 (0.89)
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements (unaudited).
3
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30
2001 2000
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ 12,509 (43,641)
Adjustments to reconcile net income (loss) to net cash
provided by continuing operations:
Loss from discontinued operations, net of tax - 10,883
Cumulative effect of change in accounting principle,
net of tax - 51,952
Depreciation and amortization 95,045 92,823
Provision for aircraft heavy maintenance 13,712 20,164
Provision (credit) for deferred income taxes 2,089 (2,949)
Provision for pensions 4,257 6,100
Provision for uncollectible accounts receivable 6,811 7,526
Minority interest expense 2,956 929
Equity in earnings of unconsolidated affiliates,
net of dividends received (1,897) (2,468)
Other operating, net 7,767 8,340
- -----------------------------------------------------------------------------
143,249 149,659
Change in operating assets and liabilities,
net of effects of acquisitions:
Decrease in accounts receivable 47,588 20,283
Increase in prepaid expenses and other current assets (3,178) (8,537)
Increase in other assets (3,513) (12,865)
Decrease in accounts payable and accrued liabilities (72,837) (50,254)
Increase (decrease) in other liabilities (2,816) 4,522
Increase (decrease) in workers' compensation and other
claims, noncurrent (800) 774
Other, net 8,663 2,198
- -----------------------------------------------------------------------------
Net cash provided by continuing operations 116,356 105,780
Net cash used by discontinued operations (21,937) (11,704)
- -----------------------------------------------------------------------------
Net cash provided by operating activities 94,419 94,076
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (96,040) (99,253)
Aircraft heavy maintenance expenditures (6,292) (33,627)
Proceeds from disposal of property, plant and equipment 2,812 2,024
Acquisitions, net of cash acquired (5,000) (3,784)
Discontinued operations, net (5,298) (7,240)
Other, net (4,033) (959)
- -----------------------------------------------------------------------------
Net cash used by investing activities (113,851) (142,839)
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term borrowings (3,141) 7,151
Additions to long-term debt 123,179 80,397
Reductions of long-term debt (105,863) (76,767)
Proceeds from exercise of stock options 4,425 482
Dividends paid (2,663) (2,818)
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Net cash provided by financing activities 15,937 8,445
- -----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (3,495) (40,318)
Cash and cash equivalents at beginning of period 97,751 131,159
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Cash and cash equivalents at end of period $ 94,256 90,841
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See accompanying notes to consolidated financial statements (unaudited).
4
The Pittston Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
(1) The Pittston Company and subsidiaries (the "Company") currently includes
four operating segments and one discontinued segment. The operating
segments are Brink's, Incorporated ("Brink's"), Brink's Home Security,
Inc. ("BHS"), BAX Global Inc. ("BAX Global") and Other Operations which
consists of the Company's gold, timber and gas operations.
In the fourth quarter of 1999, the Company announced its intention to exit
the coal business through the sale of the Company's coal mining operations
and reserves ("Coal Operations"). In December 2000, the Company formalized
its plan to dispose of those operations by the end of 2001. As a result,
Coal Operations have been reported as discontinued operations for all
periods presented herein. The Company reported an estimated loss on the
disposal of the discontinued segment of $189,141, net of tax, in the
fourth quarter of 2000. The Company has continued to evaluate the factors
which entered into the calculation of the estimated loss and has
determined that no adjustment to the estimated loss is currently
appropriate.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America ("GAAP") for interim financial reporting and
applicable quarterly reporting regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
notes required by GAAP for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Certain
prior period amounts have been reclassified to conform to the current
period's financial statement presentation. Operating results for the
interim periods of 2001 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2001. For further
information, refer to the Company's annual report on Form 10-K for the
year ended December 31, 2000.
(2) The following are reconciliations between the calculations of basic and
diluted income (loss) per common share for the three and six month periods
ended June 30, 2001 and 2000.
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2001 2000 2001 2000
--------------------------------------------------------------------------
Numerator:
Income from continuing $ 3,779 4,755 12,509 19,194
operations before cumulative
effect of change in
accounting principle
Preferred stock dividends (168) (231) (335) (462)
--------------------------------------------------------------------------
Basic and diluted income from
continuing operations per
share numerator 3,611 4,524 12,174 18,732
--------------------------------------------------------------------------
Denominator:
Basic weighted average common 51,139 49,971 50,904 49,789
shares outstanding
Effect of dilutive stock options 261 20 235 29
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Diluted weighted average
common shares outstanding 51,400 49,991 51,139 49,818
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5
The Company excludes the effect of antidilutive securities from the
computations of income (loss) per common share. The equivalent weighted
average shares of common stock that were excluded in each period are as
follows:
Quarter Ended June 30 Six Months Ended June 30
(In thousands) 2001 2000 2001 2000
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Stock options 1,521 2,837 1,670 2,749
$31.25 Series C Cumulative
Convertible Preferred Stock 27 38 27 38
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Total 1,548 2,875 1,697 2,787
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Common stock held in The Pittston Company Employee Benefits Trust (the
"Trust") is excluded from the basic and diluted income (loss) per common
share calculations. As of June 30, 2001 and 2000, 510 and 1,689 shares,
respectively, of common stock were held by the Trust.
(3) Depreciation and amortization of property, plant and equipment totaled
$43,596 and $86,119 in the second quarter and first six months of 2001,
respectively, compared to $43,757 and $84,779 in the second quarter and
first six months of 2000, respectively.
(4) Cash payments made for interest and income taxes, net of refunds received,
were as follows:
Three Months Ended June 30 Six Months Ended June 30
2001 2000 2001 2000
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Interest $ 7,462 10,430 16,823 22,375
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Income taxes $ 5,565 8,410 10,754 18,802
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(5) The cumulative impact of foreign currency translation adjustments deducted
from shareholders' equity was $86,827 and $73,698 at June 30, 2001 and
December 31, 2000, respectively. The cumulative impact of cash flow hedges
deducted from shareholders' equity was $3,146 and $8,556 at June 30, 2001
and December 31, 2000, respectively. The cumulative impact of unrealized
holding gains on investments added to shareholders' equity was $2,635 and
$234 at June 30, 2001 and December 31, 2000, respectively.
(6) Operating performance for BAX Global for the first half of 2001 and 2000
includes the benefit of $2,100 and $500, respectively, from the reversal
of incentive accruals during the first quarter of each year.
(7) During the fourth quarter of 2000, BAX Global entered into a five-year
agreement to sell a revolving interest in certain of its accounts
receivable through a commercial paper conduit program. Other expense, net,
for the three and six month periods ended June 30, 2001 includes costs
related to the sale of accounts receivable of $1,699 and $3,693,
respectively, comprising related discounts and fees.
(8) The Company's results for the first six months of 2000 include a noncash
after-tax charge of $51,952 ($84,676 pretax), or $1.04 per diluted share,
to reflect the cumulative effect on years prior to 2000 of changing the
method of accounting for nonrefundable up-front revenues and the portion
of the sales and marketing costs deemed to be direct costs of acquiring
new subscribers at BHS. Under the Company's current accounting policy,
both the nonrefundable up-front revenues and the related direct costs, as
defined, of obtaining subscribers (primarily a portion of the sales
commissions and direct marketing expenses) are deferred and recognized in
results of operations over the estimated term of the subscriber
relationship, which is generally 15 years. BHS previously recognized
nonrefundable up-front revenue as received and the related direct costs as
incurred.
6
(9) As noted above, Coal Operations were reported as discontinued operations
of the Company as of December 31, 2000 and the accompanying unaudited
consolidated financial statements and related disclosures for all periods
presented reflect this presentation. The Company's formal plan of disposal
includes the sale of all of its active and idle coal mining operations and
reserves (including 23 company or contractor operated mines and 6 active
plants), as well as other assets which support those operations. Included
in the assets expected to be sold is the Company's interest in Dominion
Terminal Associates ("DTA"), a coal port facility in Newport News,
Virginia. The Company expects to sell these properties and support
operations by December 31, 2001. The assets to be sold primarily include
inventory, its DTA partnership interest and property, plant and equipment,
and it is expected that certain liabilities, primarily reclamation costs
related to active properties will be assumed by the acquiror. Total
proceeds from the sale of Coal Operations, which could include cash, the
present value of future royalties to be received and liabilities to be
transferred, are expected to exceed $100,000. No adjustments were made
during the three and six month periods ended June 30, 2001 to the
estimated loss on disposal of the discontinued operations.
The ultimate outcome of the sale of the coal business, including the
timing of sales, assets sold, liabilities assumed by the acquiror,
liabilities retained by the Company and proceeds received from the sales,
is subject to known and unknown risks, uncertainties and contingencies,
many of which are beyond the control of the Company, that could cause
actual results, performance or achievements to differ materially from
those which are anticipated. Such risks, uncertainties and contingencies
include, but are not limited to, the completion of sales of coal assets on
mutually agreeable terms, the timing of such sales, the parties that
purchase the coal assets and variations in the price of coal.
Certain assets and liabilities are expected to be retained by the Company,
including net working capital (excluding inventory), certain parcels of
land, income and non-income tax assets and liabilities, certain inactive
employee liabilities primarily for postretirement medical benefits,
workers' compensation and black lung obligations, and reclamation related
liabilities associated with certain closed coal mining sites in Virginia,
West Virginia and Kentucky. In addition, the Company expects to continue
to be liable for other contingencies, including its unconditional
guarantee of the payment of the principal and premium, if any, on coal
terminal revenue refunding bonds (principal amount of $43,160). The
following is a summary of the assets and liabilities at carrying value
that the Company expects to retain as of June 30, 2001:
(In thousands) June 30, 2001
--------------------------------------------------------------------------
Assets:
Net working capital and other assets $ 11,758
Property, plant and equipment, net 8,804
Net deferred tax assets 231,614
Liabilities:
Inactive workers' compensation and black lung obligations $ 78,384
Retiree medical obligations 421,775
Reclamation liabilities - inactive properties 24,309
Other liabilities (a) 52,649
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(a) Includes $43,160 unconditional guarantee related to coal terminal
revenue refunding bonds.
On February 10, 1999, the US District Court of the Eastern District of
Virginia entered a final judgment in favor of certain of the Company's
subsidiaries, ruling that the Federal Black Lung Excise Tax ("FBLET") is
unconstitutional as applied to export coal sales. A total of $800
(including interest) was refunded in 1999 for the FBLET that those
companies paid for the first quarter of 1997. The Company has sought
refunds of the FBLET it paid on export coal sales for all open statutory
periods and
7
expects to receive refunds for some or all of that tax paid (plus
interest) pursuant to a review of claim documentation by the Internal
Revenue Service. Through a lawsuit filed in the Court of Federal Claims,
the Company is pursuing the refund of other FBLET payments made prior to
the second quarter of 1994. That suit is proceeding as a result of the US
Supreme Court's denial of the government's request that it review a
related case filed by another company concerning the applicable statute of
limitations. Due to the uncertainty as to the ultimate amounts to be
received, which are expected to range from $12,000 to $37,000 (before
interest and applicable income taxes), as well as the timing of the FBLET
refunds, the Company has not currently recorded a receivable for such
amounts in its estimate of operating losses during the sale period.
Although the Company is not currently liable for a multi-employer pension
plan withdrawal liability associated with its planned exit from the coal
business, it could, under certain circumstances, become liable for such
obligations during the sale process. Such liability, if any, is subject to
several factors, the effects of which cannot be predicted at this time.
Those factors include funding and benefit levels of the plans and the
ultimate timing and form of the sale transactions. Accordingly, the
Company has not recorded a withdrawal liability in the determination of
the estimated loss on disposal.
(10) During the fourth quarter of 2000, BAX Global finalized a restructuring
plan aimed at reducing the capacity and cost of its airlift capabilities
in the US as well as reducing station operating expenses and sales,
general and administrative costs in the Americas and Atlantic regions.
This included the elimination of approximately 300 full time positions at
BAX Global and subsidiaries including aircraft crew and station operating,
sales and business unit overhead positions. The following table analyzes
the changes in liabilities during the first six months of 2001 for such
costs:
Fleet Station &
(In thousands) Charges Severance Other Total
--------------------------------------------------------------------------
Balance at December 31, 2000 $ 6,649 2,006 3,379 12,034
Adjustments (21) (86) (2) (109)
Payments (2,607) (1,493) (620) (4,720)
--------------------------------------------------------------------------
Balance at June 30, 2001 $ 4,021 427 2,757 7,205
--------------------------------------------------------------------------
Substantially all severance costs are expected to be paid out during 2001.
Other cash charges primarily include contractual commitments for aircraft
and facilities, approximately two-thirds of which are expected to be paid
out during 2001, with the remainder expected to be paid out by the end of
2002.
(11) Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" were
issued in July 2001. SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30,
2001. SFAS No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but be tested for
impairment at least annually. SFAS No. 141 will be adopted in the third
quarter of 2001 and SFAS No. 142 will be adopted in the first quarter of
2002. Because of the extensive effort needed to comply with adopting SFAS
No. 141 and 142, it is not practicable to reasonably estimate the impact of
adopting these statements on the Company's financial statements at the date
of this report.
8
The Pittston Company and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion is a summary of the key factors management considers
necessary or useful in reviewing the Company's results of operations, liquidity
and capital resources. The Company's reported results of operations exclude its
discontinued operations.
Summary
The Pittston Company and subsidiaries (the "Company") currently includes four
operating segments and one discontinued segment. The operating segments are
Brink's, Incorporated ("Brink's"), Brink's Home Security, Inc. ("BHS"), BAX
Global Inc. ("BAX Global") and Other Operations which includes the Company's
natural gas, timber and gold interests.
In the fourth quarter of 1999, the Company announced its intention to exit the
coal business through the sale of its Pittston Coal Operations ("Coal
Operations"). In December 2000, the Company formalized its plan to dispose of
those operations by the end of 2001, and accordingly, Coal Operations have been
reported as discontinued operations for all periods presented herein.
The Company's income from continuing operations before cumulative effect of
change in accounting principle was $3.8 million and $12.5 million, respectively,
in the second quarter and first half of 2001, down from $4.8 million and $19.2
million, respectively, in the comparable 2000 periods. Income from continuing
operations before cumulative effect of change in accounting principle was lower
in the 2001 periods principally due to lower operating profit at Brink's
partially offset by improved results at BAX Global.
RESULTS OF OPERATIONS
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Revenues:
Business and security services:
Brink's $ 372,068 364,463 745,383 718,159
BHS 64,229 58,942 126,015 116,807
BAX Global 438,087 516,445 901,484 1,025,485
- --------------------------------------------------------------------------------
Total business and security
services 874,384 939,850 1,772,882 1,860,451
Other Operations 10,090 8,310 19,919 17,493
- --------------------------------------------------------------------------------
Revenues $ 884,474 948,160 1,792,801 1,877,944
- --------------------------------------------------------------------------------
Operating profit (loss):
Business and security services:
Brink's $ 15,507 21,548 34,266 45,503
BHS 14,630 14,496 29,136 28,546
BAX Global (10,080) (13,539) (15,820) (16,407)
- --------------------------------------------------------------------------------
Total business and security
services 20,057 22,505 47,582 57,642
Other Operations 1,444 1,285 3,740 3,529
- --------------------------------------------------------------------------------
Segment operating profit 21,501 23,790 51,322 61,171
General corporate expense (5,009) (5,592) (9,403) (10,674)
- --------------------------------------------------------------------------------
Operating profit $ 16,492 18,198 41,919 50,497
- --------------------------------------------------------------------------------
Discussion of the operating segments' financial results follows.
9
Brink's
The following is a table of selected financial data for Brink's on a comparative
basis:
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Revenues:
North America (a) $ 171,586 160,241 338,272 317,078
International 200,482 204,222 407,111 401,081
- --------------------------------------------------------------------------------
Total revenues $ 372,068 364,463 745,383 718,159
- --------------------------------------------------------------------------------
Operating profit:
North America (a) $ 12,032 12,974 20,632 23,788
International 3,475 8,574 13,634 21,715
- --------------------------------------------------------------------------------
Total segment operating profit $ 15,507 21,548 34,266 45,503
- --------------------------------------------------------------------------------
Depreciation and amortization $ 15,363 15,714 30,258 30,611
Capital expenditures 13,974 14,060 33,621 37,266
- --------------------------------------------------------------------------------
(a) Includes US, Canada and Puerto Rico.
Revenue
Revenues were higher in North America in the second quarter and first half of
2001 compared to the 2000 periods primarily due to armored car operations, which
include ATM services.
International revenues in the second quarter and first half of 2001 were reduced
by approximately $18 million and $31 million, respectively, as a result of the
year-over-year strengthening of the US dollar relative to local currencies.
During the second quarter of 2000, Brink's French subsidiary accelerated its
reporting by one month to current month reporting, which increased revenue for
the second quarter of 2000 by approximately $22 million; this was partially
offset by an estimated $8 million reduction in revenues due to an industry-wide
strike in France in May 2000. Excluding both of these unusual items and foreign
currency effects, International revenues in the second quarter and first half of
2001 would have increased 14% and 13%, respectively, from the same periods of
2000, primarily due to higher revenues in France, Venezuela and Brazil.
Operating Profit
Lower North American operating profits in the second quarter and first half of
2001 versus the 2000 periods were largely due to the loss of business and a
continuing labor dispute in Canada and lower results in the Global Services
business (air courier and diamond/jewelry), partially offset by the effect of
improved performance in armored car and ATM services in the United States. The
Company expects the trends seen in Canada to continue to negatively affect
operating profit comparisons to 2000 in the second half of 2001. North American
operating profits in the second quarter improved 40% from those reported in the
first quarter of 2001 as a result of an improvement in Global Services results,
the implementation of price increases and improvements in the Company's armored
car operations.
International operating profits were negatively affected in Europe and Latin
America for the second quarter and first half of 2001 as compared to the same
periods of 2000. In Europe, France's operating profits for the second quarter of
2000 were reduced by approximately $5 million as a result of the May 2000
strike, partially offset by approximately $2 million associated with the
previously mentioned acceleration of reporting. France incurred additional
expenses during the 2001 quarter due to up-front hiring, training and other
costs associated with upcoming euro transportation work, costs associated with
entry into new markets and higher personnel costs. European operating
performance was also negatively impacted during the second quarter of 2001 by
market development costs associated with ongoing efforts to build the United
Kingdom's ATM business and in the first half of 2001 by certain start-up costs
for new business in Belgium. In Latin America, lower operating profits during
the second quarter and first half of 2001 were due to economic and competitive
pressures and increased labor costs in certain markets. International operating
profit is expected to benefit in the fourth quarter of 2001 and the first half
of 2002 from armored car business associated with the euro currency distribution
that is planned in Europe.
10
Brink's Home Security
The following is a table of selected financial data for BHS on a comparative
basis:
Three Months Ended June 30 Six Months Ended June 30
(Dollars in thousands) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Revenues (a) $ 64,229 58,942 126,015 116,807
- --------------------------------------------------------------------------------
Operating profit:
Operating profit from recurring
services (b) $ 25,473 24,333 51,375 48,124
Investment in new subscribers (c) (10,843) (9,837) (22,239) (19,578)
- --------------------------------------------------------------------------------
Total segment operating profit $ 14,630 14,496 29,136 28,546
- --------------------------------------------------------------------------------
Monthly recurring revenues (d) $ 18,634 17,495
- --------------------------------------------------------------------------------
Annualized disconnect rate 7.6% 8.2% 7.4% 7.9%
- --------------------------------------------------------------------------------
EBITDA (e) $ 32,410 30,385 63,060 59,571
- --------------------------------------------------------------------------------
Number of subscribers:
Beginning of period 683,657 652,578 675,278 643,277
Installations 22,509 20,713 43,136 42,255
Disconnects (13,139) (13,412) (25,387) (25,653)
- --------------------------------------------------------------------------------
End of period 693,027 659,879 693,027 659,879
- --------------------------------------------------------------------------------
Average number of subscribers
during the period 688,223 656,205 683,701 652,103
Depreciation and amortization $ 17,780 15,889 33,924 31,025
Capital expenditures 20,557 18,221 39,815 35,400
- --------------------------------------------------------------------------------
(a) 2000 results have been restated to reflect the change in accounting
principle implemented as a result of the issuance of Staff Accounting Bulletin
No. 101 "Revenue Recognition in Financial Statements."
(b) Operating profit from recurring services reflects the normal monthly
earnings generated from the existing subscriber base plus the amortization of
deferred revenues and deferred subscriber acquisition costs (direct marketing
and selling expenses).
(c) Investment in new subscribers primarily includes the marketing and selling
expenses, net of the deferral of direct subscriber acquisition costs.
(d) Monthly recurring revenues are calculated based on the number of subscribers
at period end multiplied by the average fee per subscriber received in the last
month of the period for monitoring, maintenance and related services. The
monthly recurring revenues exclude the amortization of deferred revenues.
(e) EBITDA represents earnings before interest, tax, depreciation and
amortization including the amortization of deferred subscriber acquisition
costs. EBITDA is not a substitute for operating profit as determined in
accordance with generally accepted accounting principles as a measure of
profitability. It is presented as additional information because management
believes it is a useful indicator of the business unit's ability to generate
cash for reinvestment and other corporate uses. Because EBITDA is not calculated
identically by all companies, the presentation herein may not be comparable to
similarly titled measures of other companies.
Revenue
The increase in BHS's revenues for the three and six months ended June 30, 2001
versus the comparable 2000 periods was primarily the result of a 5% higher
average subscriber base in each period as well as higher average per-subscriber
monitoring fees. These factors also contributed to the 7% increase in monthly
recurring revenues at June 30, 2001 versus June 30, 2000.
Operating Profit
The increase in BHS's operating profit in the second quarter and first half of
2001 in comparison to the same periods of 2000 is due to higher revenue as
discussed above, partially offset by increases in service costs for existing
customers and the up-front investment in new subscribers (marketing and selling
expenses which have not been deferred) incurred to generate new customers. In
addition, depreciation and amortization expenses have increased primarily as a
result of the increase in the capitalized costs (installation costs and deferred
subscriber acquisition costs) per installation in recent years and the higher
subscriber base.
11
BAX Global
The following is a table of selected financial data for BAX Global on a
comparative basis:
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2001 2000 2001 2000
- --------------------------------------------------------------------------------
Revenues:
Americas $ 250,400 308,369 516,403 618,828
International 202,768 221,816 415,846 434,221
Eliminations/other (15,081) (13,740) (30,765) (27,564)
- --------------------------------------------------------------------------------
Total revenues $ 438,087 516,445 901,484 1,025,485
- --------------------------------------------------------------------------------
Operating profit (loss):
Americas $ (12,224) (11,476) (21,822) (12,238)
International 6,720 8,884 14,385 16,260
Other (4,576) (10,947) (8,383) (20,429)
- --------------------------------------------------------------------------------
Total segment operating loss $ (10,080) (13,539) (15,820) (16,407)
- --------------------------------------------------------------------------------
Depreciation and amortization $ 13,894 14,905 28,505 28,478
Capital expenditures 4,879 13,589 19,993 25,564
- --------------------------------------------------------------------------------
Intra-US revenue $ 114,963 150,465 235,668 306,727
Worldwide expedited freight
services:
Revenues $ 348,768 421,133 727,690 837,283
Weight (million pounds) 355 441 732 873
- --------------------------------------------------------------------------------
Revenue
Revenues at BAX Global's Americas region decreased 19% and 17%, respectively, in
the second quarter and first half of 2001 compared to the 2000 periods as a
result of softening expedited freight demand caused primarily by weak economic
conditions in the US and Asia, combined with slightly lower overall pricing due
to a shift in product mix. International revenues decreased 9% and 4%,
respectively, in the second quarter and first half of 2001 as compared to the
2000 periods as higher revenues in the Atlantic region were more than offset by
lower revenues in the Pacific region. Revenues in the Atlantic region increased
due to growth in the freight forwarding business and strong demand for supply
chain management and transportation services. Revenues declined in the Pacific
region primarily due to lower volume from high-technology industry customers and
weakened economic conditions.
Operating Profit
Despite the reduction in revenue, operating performance improved in the second
quarter and first half of 2001 compared to the 2000 periods, reflecting the
reduction in North American transportation costs and certain global overhead
costs included within Other operating loss. In addition, beginning in 2001,
certain US-based logistics resources were refocused from a global to a largely
Americas role, resulting in costs that were classified as Other during 2000
($2.0 million and $3.9 million, respectively, for the second quarter and first
six months of 2000) being charged directly against the Americas during 2001.
The higher operating loss for the second quarter and first six months of 2001 in
the Americas region was largely the result of lower expedited freight volumes
and the inclusion in 2001 of the above-mentioned logistics costs, partially
offset by the reduction in costs resulting from implementation of the
restructuring plan announced in the fourth quarter of 2000. The decrease in
International operating profit in both periods of 2001 compared to the prior
year periods is primarily due to the weak US and Asian economies, which resulted
in lower volumes. These results were partially offset by increased profits in
the Atlantic region due in large part to savings from the restructuring and
continuing efforts to reduce overhead costs.
12
BAX Global Restructuring Plan
During the fourth quarter of 2000, BAX Global finalized a restructuring plan
aimed at reducing the capacity and cost of its airlift capabilities in the US as
well as lowering station operating expenses and sales, general and
administrative costs in the Americas and Atlantic regions. This included the
elimination of approximately 300 full-time positions at BAX Global including
aircraft crew and station operating, sales and business unit overhead positions.
The following table analyzes the changes in liabilities during the first six
months of 2001 for such costs:
Fleet Station &
(In thousands) Charges Severance Other Total
- --------------------------------------------------------------------------------
Balance at December 31, 2000 $ 6,649 2,006 3,379 12,034
Adjustments (21) (86) (2) (109)
Payments (2,607) (1,493) (620) (4,720)
- --------------------------------------------------------------------------------
Balance at June 30, 2001 $ 4,021 427 2,757 7,205
- --------------------------------------------------------------------------------
Substantially all severance costs are expected to be paid out during 2001. Other
cash charges primarily include contractual commitments for aircraft and
facilities, approximately two-thirds of which are expected to be paid out during
2001, with the remainder expected to be paid out by the end of 2002.
Other Operations
The Company's gold operations ("Mineral Ventures") had net sales of $3.3 million
during the second quarter of 2001 and $6.9 million in the first half of 2001,
decreasing 15% and 18%, respectively, from the 2000 periods primarily as a
result of a decrease in ounces of gold sold and a strong US dollar, partially
offset by higher gold realizations. Mineral Venture's operating loss was $0.8
million and $1.3 million in the second quarter and first half of 2001,
reflecting lower sales and production volume, a strong US dollar and higher gold
realizations.
Net sales from the Company's gas and timber businesses ("Allied") compared to
2000 periods improved 53% to $6.8 million in the second quarter of 2001 and
improved 44% to $13.0 million in the first half of 2001. The improvement was
primarily due to higher natural gas prices and increased timber sales volume.
Allied's operating profit of $2.2 million and $5.1 million in the second quarter
and first half improved 26% and 52%, respectively over the 2000 periods. The
increase was primarily due to improved natural gas prices and related royalties
partially offset by lower timber operating profits due to a decline in lumber
prices.
Discontinued Operations
As noted above, Coal Operations were reported as discontinued operations of the
Company beginning in the fourth quarter of 2000 and the accompanying financial
statements and related disclosures for all periods presented have been reported
accordingly. The Company's formal plan of disposal includes the sale of all of
its active and idle coal mining operations and reserves (including 23 Company-
or contractor-operated mines and 6 active plants), as well as other assets which
support those operations. Included in the assets expected to be sold is the
Company's interest in Dominion Terminal Associates ("DTA"), a coal port facility
in Newport News, Virginia. The Company expects to sell these properties and
support operations by December 31, 2001. The assets expected to be sold
primarily include inventory, its DTA partnership interest and property, plant
and equipment, and it is expected that certain liabilities, primarily
reclamation costs related to active properties will be assumed by the acquiror.
Total proceeds from the sale of Coal Operations, which could include cash, the
present value of future royalties to be received and liabilities to be
transferred, are expected to exceed $100 million.
13
The ultimate outcome of the sale of the coal business, including the timing of
sales, assets sold, liabilities assumed by the acquiror, liabilities retained by
the Company and proceeds received from the sales, is subject to known and
unknown risks, uncertainties and contingencies, many of which are beyond the
control of the Company, that could cause actual results, performance or
achievements to differ materially from those which are anticipated. Such risks,
uncertainties and contingencies include, but are not limited to, the completion
of sales of coal assets on mutually agreeable terms, the timing of such sales,
the parties that purchase the coal assets and variations in the price of coal.
The Company reported an estimated loss on the disposal of the discontinued
segment of $189.1 million, net of tax, in the fourth quarter of 2000. The
Company has continued to evaluate the factors which entered into the calculation
of the estimated loss and has determined that no adjustment to the estimated
loss is currently appropriate.
Coal revenues of $101.9 million and $200.1 million, respectively, for the second
quarter and first six months of 2001, respectively, were higher than the $92.8
million and $191.0 million in the comparable periods of 2000. Higher
realizations per ton due to improved market conditions were partially offset by
a decrease in volumes.
On February 10, 1999, the US District Court of the Eastern District of Virginia
entered a final judgment in favor of certain of the Company's subsidiaries,
ruling that the Federal Black Lung Excise Tax ("FBLET") is unconstitutional as
applied to export coal sales. A total of $0.8 million (including interest) was
refunded in 1999 for the FBLET that those companies paid for the first quarter
of 1997. The Company has sought refunds of the FBLET it paid on export coal
sales for all open statutory periods and expects to receive refunds for some or
all of that tax paid (plus interest) pursuant to a review of claim documentation
by the Internal Revenue Service. Through a lawsuit filed in the Court of Federal
Claims, the Company is pursuing the refund of other FBLET payments made prior to
the second quarter of 1994. That suit is proceeding as a result of the US
Supreme Court's denial of the government's request that it review a related case
filed by another company concerning the applicable statute of limitations. Due
to the uncertainty as to the ultimate amounts to be received, which are expected
to range from $12 million to $37 million (before interest and applicable income
taxes), as well as the timing of the FBLET refunds, the Company has not
currently recorded a receivable for such amounts in its estimate of operating
losses during the sale period.
Although the Company is not currently liable for a multi-employer pension plan
withdrawal liability associated with its planned exit from the coal business, it
could, under certain circumstances, become liable for such obligations during
the sale process. Such liability, if any, is subject to several factors, the
effects of which cannot be predicted at this time. Those factors include funding
and benefit levels of the plans and the ultimate timing and form of the sale
transactions. Accordingly, the Company has not included a withdrawal liability
in its determination of the estimated loss on disposal.
The Company expects to have ongoing expenses in future years (primarily interest
costs on retiree medical obligations) which are currently associated with its
Coal Operations. Such expenses are currently included in the loss from
discontinued operations since they are considered to be costs of the
discontinued operations. After the expected sale of the Company's Coal
Operations, these expenses will be a component of the Company's income from
continuing operations. Using assumptions as of December 31, 2000, the Company
estimates that such expenses will approximate $35 million to $40 million per
annum.
The Company has established a Voluntary Employees' Beneficiary Association
("VEBA") which is intended to tax efficiently fund certain retiree medical
liabilities primarily for retired coal miners and their dependents. The VEBA may
receive partial funding from the proceeds of the planned sale of the Company's
coal business as well as other sources over time. The Company contributed $15.0
million to the VEBA in December 1999. As of June 30, 2001, the balance in the
VEBA was $16.3 million and was included in other non-current assets.
14
Foreign Operations
A portion of the Company's financial results is derived from activities in over
100 countries each with a local currency other than the US dollar. Because the
financial results of the Company are reported in US dollars, they are affected
by changes in the value of the various foreign currencies in relation to the US
dollar. Changes in exchange rates may also affect transactions which are
denominated in currencies other than the functional currency. The diversity of
foreign operations helps to mitigate a portion of the impact that foreign
currency fluctuations may have in any one country on the translated results. The
Company, from time to time, uses foreign currency forward contracts to hedge
transactional risks associated with foreign currencies. Translation adjustments
of net monetary assets and liabilities denominated in the local currency
relating to operations in countries with highly inflationary economies, such as
the Company's Venezuelan subsidiary, are included in net income, along with all
transaction gains or losses for the period.
The Company is also subject to other risks customarily associated with doing
business in foreign countries, including labor and economic conditions,
political instability, controls on repatriation of earnings and capital,
nationalization, expropriation and other forms of restrictive action by local
governments. The future effects, if any, of such risks on the Company cannot be
predicted.
Other Operating Income, Net
Other operating income, net, which is a component of each operating segment's
previously discussed operating profit, generally includes the Company's share of
net earnings or losses of unconsolidated foreign affiliates, royalty income and
gains and losses from foreign currency exchange. Other operating income, net for
the three and six months ended June 30, 2001 was $4.7 million and $9.0 million,
respectively, compared to $3.0 million and $5.9 million, respectively, in the
three and six months ended June 30, 2000. The increase in other operating income
for the three and six month periods ended June 30, 2001 as compared to the same
periods of 2000 was primarily due to gains realized from higher royalty income
and foreign currency exchange.
Interest Expense, Net
Net interest expense decreased $1.6 million (18%) and $3.1 million (17%) in the
second quarter and first six months of 2001 as compared to the same periods of
2000. The decrease in interest expense was predominantly due to lower average US
borrowings, partly attributable to the sale of a revolving interest in certain
of BAX Global's accounts receivable. Additionally, the Company had lower
borrowings in Venezuela during the three and six months ended June 30, 2001 as
compared to the prior year periods.
Other Expense, Net
Other expense, net for the three and six months ended June 30, 2001 was $2.9
million and $6.6 million, respectively, compared to $1.3 million and $1.0
million, respectively, for the three and six months ended June 30, 2000. The
higher expense for the second quarter and first half of 2001 compared to the
2000 periods was primarily due to additional expenses in 2001 associated with
the previously mentioned sale of a revolving interest in certain of BAX Global's
accounts receivable, representing the related discounts and fees (see Note 7 to
the unaudited Consolidated Financial Statements), as well as an increase in
minority interest expense reflecting improved operating results in certain
affiliates.
Income Taxes
In both the 2001 and 2000 periods presented, the provision for income taxes from
continuing operations was greater than the statutory federal income tax rate of
35% primarily due to goodwill amortization and state income taxes, partially
offset by lower taxes on foreign income. As a result of Coal Operations being
reported under discontinued operations, the tax benefits of percentage depletion
are no longer reflected in the effective tax rate of continuing operations.
Beginning in 2002, the Company's future effective tax rates are expected to be
favorably impacted by the adoption of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets". The Company is
currently assessing the potential impacts of adopting this Statement (see
"Pending Accounting Changes").
15
FINANCIAL CONDITION
Operating Activities
Net cash provided by operating activities during the first six months of 2001
totaled $94.4 million compared with $94.1 million in the first six months of
2000. Cash from operating activities remained relatively flat as lower cash flow
from operating activities before changes in operating assets and liabilities and
an increased use of cash by discontinued operations in 2001 were offset by lower
cash usage for other operating assets and liabilities.
Investing Activities
Net cash used in investing activities during the first six months of 2001 and
2000 was $113.9 million and $142.8 million, respectively, including $5.3 million
and $7.2 million used by the discontinued operations. The decrease of $29.0
million in net cash used in investing activities was primarily due to lower
aircraft heavy maintenance expenditures. Aircraft heavy maintenance expenditures
of $6.3 million during the first six months of 2001 decreased $27.3 million over
the same period of 2000, primarily due to a decrease in the number of planes in
maintenance, largely the result of the decrease in the total number of planes
operated by BAX Global's Air Transport International unit. In addition, the
Company paid $5.0 million during the first half of 2001 to purchase the
remaining third party interest in Brink's Argentina.
Capital expenditures for the first six months of 2001 approximated $96 million,
down from approximately $99 million in the comparable period of 2000. Of the
2001 capital expenditures, $33.6 million was spent by Brink's, $39.8 million was
spent by BHS, $20.0 million was spent by BAX Global, and $2.5 million was spent
by Other Operations. For the full year of 2001, company-wide capital
expenditures for continuing operations are projected to range between $195 and
$205 million. The foregoing amounts exclude expenditures that have been or are
expected to be financed through capital leases.
Financing Activities
Net cash provided by financing activities was $15.9 million for the first six
months of 2001, compared with $8.4 million for the same period in 2000. Both
years reflected net borrowings under the Facility (described below) as well as
repayments of a portion of the long-term debt of Brink's France and Venezuela in
2000. In January 2001, the Company completed a $75.0 million private placement
of Senior Notes. The proceeds from issuance of the Senior Notes were used to
repay borrowings under the Facility (described below). The Company intends to
fund future capital expenditures through cash flow from operating activities or
through operating leases if the latter are financially attractive. Any
additional funding that may be required is expected to be financed through the
Company's revolving credit agreements or other borrowing arrangements.
The Company has a $370.0 million revolving credit agreement with a syndicate of
banks (the "Facility"). Under the Facility, the Company may borrow up to $185
million over a three-year term ending October 3, 2003 and up to $185 million
over a one-year term ending October 2, 2001. The Company is currently in
discussions to renew the one-year facility. As of June 30, 2001 and December 31,
2000, borrowings of $185.0 million were outstanding under the long-term loan
portion of the Facility. As of June 30, 2001, borrowings of $28.0 million were
outstanding under the one-year portion of the Facility. At December 31, 2000,
the Company classified the $59.8 million outstanding under the one-year portion
of the Facility as long-term debt, reflecting the refinancing of those
borrowings with proceeds from a private placement of Senior Notes in January
2001, as discussed above.
Market Risks and Hedging and Derivative Activities
The Company has activities in well over 100 countries and a number of different
industries. These operations expose the Company to a variety of market risks,
including the effects of changes in foreign currency exchange rates and interest
rates. In addition, the Company consumes and sells certain commodities in its
businesses, exposing it to the effects of changes in the prices of such
commodities. These financial and commodity exposures are monitored and managed
by the Company as an integral part of its overall risk management program. The
diversity of foreign operations helps to mitigate a portion of the impact that
foreign currency rate fluctuations may have in any one country on the
consolidated translated results. The Company's risk management program considers
this favorable diversification effect as it measures the Company's exposure to
financial markets and as appropriate, seeks to reduce the potentially adverse
effects that the volatility of certain markets may have on its operating
results. In addition, the Company, in some cases, is able
16
to adjust its pricing to cover a portion of the increase in the cost of certain
commodities (primarily jet fuel). The Company has not had any material change in
its market risk exposures since December 31, 2000.
Capitalization
As of June 30, 2001, the Company had the remaining authority to purchase over
time up to 1 million shares of Pittston Common Stock and any or all of the
issued and outstanding shares of its $31.25 Series C Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock") with an aggregate purchase
price limitation of $30 million for all such purchases. No purchases were made
under the authority in the first half of 2001.
Dividends
During the first six months of 2001 and 2000, the Board declared and the Company
paid cash dividends of $0.05 per share of Pittston Common Stock. Dividends paid
on the Company's Convertible Preferred Stock in the first six months of 2001 and
2000 were $0.3 million and $0.5 million, respectively. Future dividends, if any,
on the Company's Common Stock are dependent on the earnings, financial
condition, cash flow and business requirements of the Company, as determined by
the Board. On July 13, 2001, the Board declared its regular quarterly dividend
of $0.025 per share on its Common Stock and $7.8125 per share on its Convertible
Preferred Stock.
Pending Accounting Changes
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" were
issued in July 2001. SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
SFAS No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but be tested for impairment at least annually.
SFAS No. 141 will be adopted in the third quarter of 2001 and SFAS No. 142 will
be adopted in the first quarter of 2002. Because of the extensive effort needed
to comply with adopting SFAS No. 141 and 142, it is not practicable to
reasonably estimate the impact of adopting these statements on the Company's
financial statements at the date of this report.
Forward-Looking Information
Certain of the matters discussed herein, including statements regarding the
timing and outcome of the sale of the coal business, expected proceeds from the
sale of the coal business, the retention of certain assets and liabilities
following the sale of the coal assets, the Company's ongoing expenses associated
with its Coal Operations, the impact of SFAS No. 141 and SFAS No. 142 on the
Company's consolidated financial statements, the timing of funding and source of
funds for the VEBA, the amount and timing of FBLET refunds, the impact of the
loss of business and the continuing labor dispute in Canada on Brink's operating
profit in the second half of 2001, the effect on Brink's international operating
results of the euro currency introduction, the timing of the payment of
severance costs and other cash charges relating to the BAX Global restructuring,
future effective tax rates and projected capital spending, involve
forward-looking information which is subject to known and unknown risks,
uncertainties, and contingencies, many of which are beyond the control of the
Company and its subsidiaries, that could cause actual results, performance or
achievements to differ materially from those that are anticipated. Such risks,
uncertainties and contingencies include, but are not limited to, the ultimate
outcome of efforts to sell the coal business, the completion of sales of coal
assets on mutually agreeable terms, the parties that purchase the coal assets,
variations in the price of coal, variations in the number of people entitled to
retiree medical benefits arising from Coal Operations, the interpretation of, or
the effect of adopting SFAS No. 141 and SFAS No. 142 on the Company's carrying
value of its goodwill and other intangibles, the position taken by the Internal
Revenue Service with respect to the timing and amount of FBLET refunds, Brink's
ability to replace the lost Canadian business, the timing and ultimate outcome
of Brink's labor dispute in Canada, Brink's ability to cost effectively
participate in the euro currency introduction in Europe while maintaining
current service levels, demand for Brink's armored car services in connection
with the introduction of the euro, the allocation of funds to pay the charges
relating to the BAX Global restructuring, the expansion of any of the operating
segments into new markets, overall economic and business conditions, the
domestic and international demand for the Company's products and services,
pricing and other competitive factors in the Company's businesses, labor
relations, new government regulations and legislative initiatives, variations in
costs or expenses and performance delays by any public or private sector
supplier, service provider or customer.
17
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
(a) The Registrant's annual meeting of shareholders was held on May 4,
2001.
(b) Not required.
(c) The following persons were elected for terms expiring in 2004, by the
following votes:
For Withheld
James R. Barker 46,963,196.073 1,284,909.176
James L. Broadhead 46,960,462.073 1,287,643.176
Michael T. Dan 46,952,307.455 1,295,797.794
Ronald M. Gross 46,967,349.994 1,280,755.255
The selection of KPMG LLP as independent certified public accountants
to audit the accounts of the Registrant and its subsidiaries for the
year 2001 was approved by the following vote:
For Against Abstentions
47,016,201.336 975,547.806 256,356.107
18
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(b) There were no reports on Form 8-K filed during the second quarter of
2001.
19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PITTSTON COMPANY
August 8, 2001 By: /s/ Robert T. Ritter
---------------------------------
Robert T. Ritter
(Vice President -
Chief Financial Officer)
20