SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 23, 1997
THE PITTSTON COMPANY
(Exact Name of registrant as specified in its charter)
Virginia 1-9148 54-1317776
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
1000 Virginia Center Parkway
P. O. Box 4229
Glen Allen, VA 23058-4229
(Address of principal (Zip Code)
executive offices)
(804)553-3600
(Registrant's telephone number, including area code)
Item 5. Other Events
The Pittston Company has announced earnings for the
third quarter of 1997 for its Brink's Group, Burlington Group and
Minerals Group. Press releases dated October 23, 1997, are filed
as exhibits to this report and are incorporated herein by
reference.
EXHIBITS
99(a) Registrant's Brink's Group press release dated October
23, 1997.
99(b) Registrant's Burlington Group press release dated
October 23, 1997.
99(c) Registrant's Minerals Group press release dated October
23, 1997.
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 hereunto duly authorized.
THE PITTSTON COMPANY
(Registrant)
By
Vice President - Corporate
Finance and Treasurer
Dated: October 23, 1997
EXHIBITS
Exhibit Description
99(a) Registrant's Brink's Group
press release dated October 23, 1997
99(b) Registrant's Burlington Group
press release dated October 23, 1997
99(c) Registrant's Minerals Group
press release dated October 23, 1997
Pittston Brink's Group Earns
$.51 Per Share in the Third Quarter
Richmond, VA - October 23, 1997 - Pittston Brink's Group reported net
income of $19.4 million, or $.51 per share, in the third quarter ended September
30, 1997, a 23% increase over the $15.8 million, or $.41 per share, earned in
the third quarter of 1996. Combined third quarter revenues of Brink's,
Incorporated and Brink's Home Security, Inc. increased 21% to $280.1 million.
For the first nine months of 1997, Pittston Brink's Group generated net income
of $52.4 million ($1.37 per share) compared to $41.7 million ($1.09 per share)
for the comparable period in 1996. Combined revenues for the first nine months
were up 20% to $800.2 million.
Brink's, Incorporated (Brink's)
Brink's worldwide consolidated revenues increased 22% to $234.0 million in
the quarter. Operating profits amounted to $20.9 million, 30% greater than
recorded in the prior year's quarter due to improvements in both North American
and international operations. For the first nine months of 1997, Brink's
worldwide consolidated revenues increased 21% to $667.8 million and operating
profits climbed 47% to $55.8 million.
Revenues from North American operations (United States and Canada) amounted
to $123.4 million in the quarter, 16% higher than in the comparable period in
1996. Operating profits for the quarter increased 16% to $10.8 million primarily
due to the improved results achieved by armored car operations, which includes
ATM services. For the first nine months of 1997, North American operating
profits were $28.2 million, a 21% increase over the comparable 1996 period.
Consolidated international subsidiaries recorded revenues of $110.6 million
in the quarter, 28% higher than the $86.3 million generated in the prior year's
quarter. About three-fourths of the increase in revenues reflects the
acquisition, in the first quarter of 1997, of a majority interest in Brink's
Venezuelan affiliate, in which Brink's previously owned a 15% interest. Brink's
now owns 61% of this affiliate. Operating profits from international
subsidiaries and affiliates amounted to $10.1 million, about 50% higher than the
$6.7 million earned in the prior year's quarter. The improvement in operating
profits was largely attributable to increased ownership positions in the
Venezuelan and Peruvian affiliates and improved operations. Operational
improvements in Colombia, Brazil, Chile and the Netherlands were partially
offset by lower results in France and expenses associated with a start-up
operation in Argentina. Interest expense and minority interest associated with
the acquisitions in Venezuela and Peru offset approximately one-half of the
higher international operating profits.
For the first nine months of 1997, operating profits from international
subsidiaries and affiliates totaled $27.6 million, nearly 90% higher than the
$14.6 million earned in the first nine months of 1996 due in large part to the
increased ownership of affiliates in Venezuela and Peru. Interest expense and
minority interest associated with the acquisitions offset more than half of the
higher operating profits. Better results in Colombia and Chile were largely
offset by lower profits in Brazil, Mexico (20% owned) and expenses associated
with the start-up operation in Argentina. Europe's results were much improved in
most countries, but those gains were partially offset by lower results from the
38% owned affiliate in France.
Brink's Home Security, Inc. (BHS)
Brink's Home Security's revenues totaled $46.1 million in the third quarter
1997, a 17% increase over the comparable period in 1996. Operating profits
increased 16% to $13.4 million. For the nine months ended September 30, 1997,
revenues and operating profits increased 15% and 16% respectively, to $132.5
million and $39.5 million.
Brink's Home Security installed approximately 28,000 new subscribers during
the quarter and the subscriber base now exceeds 500,000 customers, a 17%
increase compared to a year ago. As a result, annualized service revenues
increased 23% to $149.5 million as of September 30, 1997. Brink's Home
Security's disconnect rate for the first nine months was 7.5%, which Brink's
Home Security believes may be one of the lowest in the industry.
Based on demonstrated retention of customers, Brink's Home Security
adjusted its annual depreciation rate for capitalized subscribers' installation
costs beginning in 1997. This change more accurately matches depreciation
expense with monthly recurring revenue generated from customers. This change in
accounting estimate reduced depreciation expense for capitalized installation
costs for the quarter and nine months ended September 30, 1997 by approximately
$2.3 million and $6.5 million, respectively.
As a result of aggressive pricing and marketing by competitors, Brink's
Home Security is experiencing lower installation fees and higher marketing and
sales costs. As a result, operating profit was negatively impacted by
approximately $2.1 million from 1996's third quarter. Monitoring revenues
increased as a result of a greater number of subscribers and higher monitoring
fees per subscriber.
Brink's Home Security is planning to occupy its new state-of-the-art
national monitoring, customer service and corporate center in Irving, Texas, by
the end of 1997. This custom designed 91,000 sq. ft. facility will allow Brink's
Home Security to consolidate its operations from three buildings into one,
resulting in greater operating efficiencies. Brink's Home Security entered the
Calgary market in Alberta, Canada, and the Hartford, Connecticut market during
the quarter.
Financial - Consolidated
The Pittston Company (the "Company") reported consolidated revenues of
$870.5 million in the third quarter ended September 30, 1997 compared to $782.4
million for the comparable period in 1996. Net income was $36.3 million compared
to $29.2 million in the prior year's quarter. For the first nine months of 1997,
consolidated revenues were $2,478 million and net income was $72.3 million. A
year ago, consolidated revenues for the nine month period were $2,271 million
and net income was $73.1 million. Consolidated cash flow from operating
activities totaled $136.0 million for the nine months ended September 30, 1997.
Total debt at September 30, 1997 was $313.2 million. In July, The Pittston
Company's corporate credit and senior unsecured ratings were raised to 'BBB' by
Standard & Poor's.
During the quarter, the Company purchased 1,515 shares of its Series C
Convertible Preferred Stock and 200,200 shares of Pittston Burlington Group
Common Stock at a total cost of $.6 million and $4.8 million, respectively. The
Company has remaining authority to purchase over time 1 million shares of
Pittston Minerals Group Common Stock, 1.1 million shares of Pittston Brink's
Group Common Stock, 1.1 million shares of Pittston Burlington Group Common Stock
and an additional $24.4 million of the Series C Convertible Preferred Stock.
* * * * * * * * * *
Pittston Brink's Group Common Stock (NYSE-PZB), Pittston Burlington Group
Common Stock (NYSE- PZX) and Pittston Minerals Group Common Stock (NYSE-PZM)
represent the three classes of common stock of The Pittston Company, a
diversified company with interests in security services through Brink's,
Incorporated and Brink's Home Security, Inc. (Pittston Brink's Group), global
freight transportation and logistics management services through BAX Global Inc.
(Pittston Burlington Group) and mining and minerals exploration through Pittston
Coal Company and Pittston Mineral Ventures (Pittston Minerals Group). Copies of
the Pittston Burlington Group and Pittston Minerals Group earnings releases are
available upon request.
Pittston Brink's Group
Supplemental Financial Data
(Unaudited)
BRINK'S, INCORPORATED
Three Months Nine Months
Ended September 30 Ended
September 30
(In thousands) 1997 1996 1997 1996
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OPERATING REVENUES
North America (United States & Canada) $ 123,363 106,156 351,752 308,271
International subsidiaries 110,641 86,335 316,001
243,485
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Total operating revenues $ 234,004 192,491 667,753 551,756
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OPERATING PROFIT
North America (United States & Canada) $ 10,783 9,292 28,195 23,383
International operations 10,078 6,741 27,610 14,552
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Total operating profit $ 20,861 16,033 55,805 37,935
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DEPRECIATION AND AMORTIZATION $ 10,410 6,484 24,768 18,221
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BRINK'S HOME SECURITY, INC.
Three Months Nine Months
Ended September 30 Ended September 30
(Dollars in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES $ 46,071 39,531 132,481 114,881
- ------------------
OPERATING PROFIT $ 13,402 11,509 39,454 34,012
- ----------------
DEPRECIATION AND AMORTIZATION $ 7,880 7,839 21,662 22,083
- -----------------------------
Annualized recurring revenues* $ 149,524 121,254
Number of Subscribers:
Beginning of period 482,065 412,591 446,505 378,659
Installations 28,000 23,327 80,388 72,030
Disconnects (9,691) (8,125) (26,519) (22,896)
- ------------------------------------------------------------------------------------------------------------------------------------
End of period 500,374 427,793 500,374 427,793
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------
* Annualized 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.
Pittston Brink's Group
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per share data) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Operating revenues $ 280,075 232,022 800,234 666,637
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Operating expenses 207,882 174,979 593,531 506,987
Selling, general and administrative
expenses 40,287 33,706 116,646 95,065
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Total costs and expenses 248,169 208,685 710,177 602,052
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Other operating income, net 645 1,648 141 1,478
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Operating profit 32,551 24,985 90,198 66,063
Interest income 639 719 1,845 1,708
Interest expense (2,971) (424) (7,874) (1,410)
Other expense, net (422) (1,462) (3,527) (3,634)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 29,797 23,818 80,642 62,727
Provision for income taxes 10,425 7,977 28,225 21,013
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 19,372 15,841 52,417 41,714
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Net income per common share $ .51 .41 1.37 1.09
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Average common shares outstanding 38,309 38,264 38,243 38,158
- -----------------------------------------------------------------------------------------------------------------------------------
SEGMENT INFORMATION
Operating revenues:
Brink's $ 234,004 192,491 667,753 551,756
BHS 46,071 39,531 132,481 114,881
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Total operating revenues $ 280,075 232,022 800,234 666,637
- -----------------------------------------------------------------------------------------------------------------------------------
Operating profit:
Brink's $ 20,861 16,033 55,805 37,935
BHS 13,402 11,509 39,454 34,012
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Segment operating profit 34,263 27,542 95,259 71,947
General corporate expense (1,712) (2,557) (5,061) (5,884)
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating profit $ 32,551 24,985 90,198 66,063
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
Pittston Brink's Group
CONDENSED BALANCE SHEETS
September 30 December 31
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 33,415 20,012
Accounts receivable, net of estimated amounts
uncollectible 156,112 124,928
Inventories and other current assets 37,165 45,117
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 226,692 190,057
Property, plant and equipment, at cost, net of
accumulated depreciation and amortization 333,798 256,759
Intangibles, net of amortization 18,659 28,162
Other assets 76,167 76,687
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Total assets $ 655,316 551,665
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Liabilities and Shareholder's Equity
Current liabilities $ 163,289 139,392
Long-term debt, less current maturities 38,521 5,542
Other liabilities 94,434 93,353
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Total liabilities 296,244 238,287
Shareholder's equity 359,072 313,378
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 655,316 551,665
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See accompanying notes.
Pittston Brink's Group
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 52,417 41,714
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 46,787 40,415
Other, net 16,173 6,195
Changes in operating assets and liabilities net of effects of acquisitions
and dispositions:
Increase in receivables (18,055) (10,745)
Increase in inventories and other current assets (448) (2,114)
(Decrease) increase in current liabilities (2,075) 5,574
Other, net (1,599) (2,887)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 93,200 78,152
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (89,577) (71,146)
Proceeds from disposal of property, plant and equipment 1,372 1,540
Acquisitions, net of cash acquired (55,349) -
Other, net 7,110 1,068
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (136,444) (68,538)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 44,574 1,882
Reductions of debt (3,472) (6,916)
Payments from Minerals Group 20,300 2,163
Share and other equity activity (4,755) (3,145)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 56,647 (6,016)
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Net increase in cash and cash equivalents 13,403 3,598
Cash and cash equivalents at beginning of period 20,012 21,977
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 33,415 25,575
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per share amounts) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 150,998 177,195 467,693 522,715
Operating revenues 719,503 605,199 2,010,638 1,747,973
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales and operating revenues 870,501 782,394 2,478,331 2,270,688
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of sales 144,338 167,907 451,586 533,236
Operating expenses 583,027 497,743 1,655,280 1,454,058
Restructuring and other credits,
including litigation accrual - - - (37,758)
Selling, general and administrative
expenses 85,478 74,711 255,576 218,033
- -----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 812,843 740,361 2,362,442 2,167,569
- -----------------------------------------------------------------------------------------------------------------------------------
Other operating income, net 2,898 3,684 9,349 13,742
- -----------------------------------------------------------------------------------------------------------------------------------
Operating profit 60,556 45,717 125,238 116,861
Interest income 1,067 880 3,077 2,216
Interest expense (7,282) (3,409) (19,268) (10,533)
Other expense, net (810) (2,506) (5,098) (6,912)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 53,531 40,682 103,949 101,632
Provision for income taxes 17,194 11,638 31,608 28,542
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 36,337 29,044 72,341 73,090
Preferred stock dividends, net (789) 146 (2,592) (773)
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Net income attributed to common shares $ 35,548 29,190 69,749 72,317
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Pittston Brink's Group:
Net income attributed to common shares $ 19,372 15,841 52,417 41,714
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per common share $ .51 .41 1.37 1.09
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Average common shares outstanding 38,309 38,264 38,243 38,158
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Burlington Group:
Net income attributed to common
shares $ 15,993 10,705 19,168 23,214
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Net income per common share:
Primary $ .82 .56 .99 1.21
Fully diluted .79 .56 (a) .95 1.21 (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 19,470 19,283 19,449 19,161
Fully diluted 20,140 19,283 20,125 19,161
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Pittston Minerals Group:
Net income (loss) attributed to common
shares: $ 183 2,644 (1,836) 7,389
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Net income (loss) per common share:
Primary $ .02 .33 (.23) .94
Fully diluted .02 (a) .25 (.23) (a) .82
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 8,096 7,926 8,055 7,872
Fully diluted 9,899 9,819 9,885 9,920
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
(a) Fully diluted net income per share is considered to be the same as primary
since the effect of common stock equivalents was either antidilutive or
insignificant.
The Pittston Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 59,992 41,217
Accounts receivable, net of estimated amounts uncollectible 550,132 475,859
Inventories and other current assets 144,798 121,338
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 754,922 638,414
Property, plant and equipment, at cost, net of accumulated
depreciation, depletion and amortization 636,289 540,851
Intangibles, net of amortization 302,937 317,062
Other assets 321,899 336,276
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,016,047 1,832,603
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities $ 622,285 588,691
Long-term debt, less current maturities 269,146 158,837
Postretirement benefits other than pensions 231,211 226,697
Workers' compensation and other claims 110,515 116,893
Other liabilities 129,542 134,778
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,362,699 1,225,896
Shareholders' equity 653,348 606,707
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,016,047 1,832,603
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 72,341 73,090
Adjustments to reconcile net income to net cash
provided by operating activities:
Noncash charges and other write-offs - 29,948
Depreciation, depletion and amortization 96,467 83,315
Provision for aircraft heavy maintenance 25,009 23,980
Provision for deferred income taxes 5,306 10,496
Other, net 18,743 10,393
Changes in operating assets and liabilities net of effects of acquisitions
and dispositions:
Increase in receivables (58,484) (20,199)
(Increase) decrease in inventories and other current assets (20,516) 3,894
Increase (decrease) in current liabilities 16,389 (22,851)
Other, net (19,276) (66,380)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 135,979 125,686
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (133,911) (116,294)
Proceeds from disposal of property, plant and equipment 5,455 11,732
Aircraft heavy maintenance (24,790) (15,215)
Acquisitions and related contingent payments,
net of cash acquired (65,271) (971)
Other, net 8,925 6,519
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (209,592) (114,229)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 134,137 20,375
Reductions of debt (21,090) (9,510)
Share and other equity activity (20,659) (20,522)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 92,388 (9,657)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 18,775 1,800
Cash and cash equivalents at beginning of period 41,217 52,823
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 59,992 54,623
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
Pittston Brink's Group
NOTES TO FINANCIAL INFORMATION
(1) The Pittston Company (the "Company") has three classes of common stock:
Pittston Brink's Group Common Stock ("Brink's Stock"), Pittston Burlington
Group Common Stock ("Burlington Stock") and Pittston Minerals Group Common
Stock ("Minerals Stock"), which were designed to provide shareholders with
separate securities reflecting the performance of the Pittston Brink's
Group (the "Brink's Group"), Pittston Burlington Group (the "Burlington
Group") and Pittston Minerals Group (the "Minerals Group"), respectively,
without diminishing the benefits of remaining a single corporation or
precluding future transactions affecting any of the Groups.
The financial information for the Brink's Group includes the results of the
Company's Brink's, Incorporated ("Brink's") and Brink's Home Security, Inc.
("BHS") businesses. It is prepared using the amounts included in the
Company's consolidated financial statements. Accordingly, the Company's
consolidated financial statements must be read in connection with the
Brink's Group's financial data.
(2) In 1988, the trustees of certain pension and benefit trust funds (the
"Trust Funds") established under collective bargaining agreements with the
United Mine Workers of America ("UMWA") brought an action (the "Evergreen
Case") against the Company and a number of its coal subsidiaries, claiming
that the defendants were obligated to contribute to such Trust Funds in
accordance with the provisions of the 1988 and subsequent National
Bituminous Coal Wage Agreements, to which neither the Company nor any of
its subsidiaries were a signatory. In 1993, the Company recognized in its
consolidated financial statements the potential liability that might have
resulted from an ultimate adverse judgement in the Evergreen Case.
In March 1996, a settlement was reached in the Evergreen Case. Under the
terms of the settlement, the coal subsidiaries which had been signatories
to earlier National Bituminous Coal Wage Agreements agreed to make various
lump sum payments in full satisfaction of all amounts allegedly due to the
Trust Funds through January 31, 1996, to be paid over time as follows:
approximately $25.8 million upon dismissal of the Evergreen Case and the
remainder of $24 million in installments of $7.0 million in 1996 and $8.5
million in each of 1997 and 1998. The first payment was entirely funded
through an escrow account previously established by the Company. The second
payment of $7.0 million was paid in 1996 and was funded from cash provided
by operating activities. The third payment of $8.5 million was paid in
August, 1997 and was funded from cash provided by operating activities. In
addition, the coal subsidiaries agreed to future participation in the UMWA
1974 Pension Plan.
As a result of the settlement of the Evergreen Case at an amount lower than
previously accrued, the Company recorded a pretax gain of $35.7 million
($23.2 million after tax) in the first quarter of 1996 in its consolidated
financial statements.
(3) In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires companies
to review assets for impairment whenever circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121, resulted
in a pretax charge to earnings in the first quarter of 1996 for the Company
and the Minerals Group of $29.9 million ($19.5 million after-tax), of which
$26.3 million was included in cost of sales and $3.6 million was included
in selling, general and administrative expenses. SFAS No. 121 had no impact
on the Brink's Group.
(4) Based on demonstrated retention of customers, BHS adjusted its annual
depreciation rate for capitalized subscribers' installation costs beginning
in 1997. This change more accurately matches depreciation expense with
monthly recurring revenue generated from customers. This change in
accounting estimate reduced depreciation expense for capitalized
installation costs by $2.3 million and $6.5 million in the quarter and nine
months ended September 30, 1997, respectively.
(5) During the three months ended September 30, 1997 and 1996, the Company
purchased no shares of Brink's Stock; 200,200 shares (at a cost of $4.8
million) and 15,300 shares (at a cost of $0.3 million), respectively, of
Burlington Stock; and no shares of Minerals Stock under the share
repurchase program authorized by the Board of Directors of the Company (the
"Board"). During the nine months ended September 30, 1997 and 1996, the
Company purchased 166,000 shares (at a cost of $4.3 million) and no shares,
respectively, of Brink's Stock; 332,300 shares (at a cost of $7.4 million)
and 20,300 shares (at a cost of $0.4 million), respectively, of Burlington
Stock; and no shares of Minerals Stock under the share repurchase program.
(6) During the quarter and nine months ended September 30, 1997, the Company
purchased 1,515 shares (at a cost of $0.6 million) of its Series C
Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock"),
respectively. During the quarter and nine months ended September 30, 1996,
the Company purchased 10,320 shares (at a cost of $3.9 million) and 20,920
shares (at a cost of $7.9 million) of the Convertible Preferred Stock,
respectively. Preferred dividends included on the Company's Statement of
Operations for the quarter and nine months ended September 30, 1997 are net
of $0.1 million, which is the excess of the carrying amount of the
Convertible Preferred Stock over the cash paid to holders of the stock.
(7) Certain prior period amounts have been reclassified to conform to the
current period's financial statement presentation.
(8) Financial information for the Minerals Group, which includes the results of
the Pittston Coal Company and Pittston Mineral Ventures operations, and the
Burlington Group which includes the results of the Company's BAX Global
Inc. business, is available upon request.
Pittston Burlington Group Earns
$.79 Per Share in the Third Quarter
Richmond, VA - October 23, 1997 - Pittston Burlington Group reported net
income of $16.0 million, or $.79 per fully diluted share ($.82 primary), in the
third quarter ended September 30, 1997. Included in the quarter was a one-time
estimated benefit of approximately $.08 per share resulting from a strike at
United Parcel Service (UPS) in August. A year ago, net income was $10.7 million,
or $.56 per share. Consolidated worldwide revenues totaled $439.4 million, an
18% increase over the $373.2 million reported in the prior year's quarter.
For the first nine months of 1997, worldwide revenues increased 12% to
$1,210 million compared to $1,081 million for the comparable period in 1996. Net
income was $27.1 million, or $1.36 per share (fully diluted), excluding special
second quarter consulting expenses of $.41 per share, for the first nine months
of 1997. A year ago, net income was $23.2 million, or $1.21 per share.
Reflecting the company's global orientation and expanded services, on
October 1, 1997, Burlington Air Express Inc. changed its name to BAX Global Inc.
The new BAX Global name reflects the evolution of the company over the last 25
years from a domestic air freight forwarder to its current position as one of
the world's leading international freight transportation and logistics
companies.
"During our 25 year history, BAX Global has emerged as a truly global
provider of transportation and logistics solutions to the world's most important
companies," said Joseph C. Farrell, Chairman and Chief Executive Officer. "At
BAX Global, this milestone comes at a time when revolutionary changes are being
implemented which are intended to dramatically improve the way we conduct our
business."
"It is also important to recognize that today, BAX Global is much more than
an air freight carrier," added Farrell. "Our services range from freight
forwarding to total logistics management for many of the world's largest
companies, including many Fortune 500 companies. Today, BAX Global has the
capability to ship virtually any cargo, anywhere throughout the world, via
ground, air and ocean, with a broad range of value-added services available to
satisfy our customers' shipping needs in an efficient and cost-effective
manner."
International
BAX Global's international revenues rose 14% in the third quarter to $261.3
million from $229.5 million in the comparable 1996 period due primarily to
strong growth in Asia/Pacific markets. International expedited freight services
revenues increased 12% to $196.8 million, reflecting higher volumes and higher
average yields. Other international revenues, primarily customs clearance and
ocean services, rose 20% to $64.5 million in the third quarter as compared to
$53.9 million in the prior year quarter. International operating profits
amounted to $12.0 million in the third quarter, a 38% increase over the $8.7
million earned in the third quarter of 1996. For the first nine months of 1997
excluding the special second quarter consulting expenses, international
operating profits totaled $27.1 million , a 36% increase over the $20.0 million
recorded a year earlier.
In September, BAX Global (BAX) acquired the remaining 50% share holding of
its South African joint venture partner. Primarily an inbound market, South
Africa plays a strategic role in the BAX network. Earlier this year, BAX added
expedited scheduled service to Johannesburg, and surrounding cities, several
times each week from four U.S. gateways: New York City, Los Angeles, Chicago and
Atlanta.
Domestic
In the third quarter, BAX Global's domestic expedited freight services
revenues increased 24% to $176.3 million, reflecting higher volumes and higher
average yields. Domestic operating profits were $16.9 million in the third
quarter compared to $11.8 million in the same period a year ago. Third quarter
operating profits are believed to have benefited by approximately $2.6 million
from the strike at UPS. Third quarter domestic expedited freight services
average yield (revenue per pound) increased 6% over the 1996 third quarter,
while domestic shipments, which were impacted by a significant increase in small
package shipments due to the UPS strike, increased 59%. For the first nine
months of 1997 excluding the special second quarter consulting expenses,
domestic operating profits were $24.6 million compared to $25.5 million a year
earlier.
As previously reported, a Global Innovation Team has been formed to
redesign BAX Global's business processes, including its information systems, and
further enhance service quality and improve efficiencies. A comprehensive plan
is being developed for worldwide implementation over the next two to three years
to assure delivery of state-of-the-art information systems for both customer and
operations requirements.
Joseph C. Farrell, Chairman and CEO said "We continue to be optimistic
about the outlook for BAX Global's business for the balance of 1997 and beyond.
Our strong third quarter results have positioned us well to help us reach our
full year goal of $1.90 - $2.00 earnings per share exclusive of any special
expenses."
Financial - Consolidated
The Pittston Company (the "Company") reported consolidated revenues of
$870.5 million in the third quarter ended September 30, 1997 compared to $782.4
million for the comparable period in 1996. Net income was $36.3 million compared
to $29.2 million in the prior year's quarter. For the first nine months of 1997,
consolidated revenues were $2,478 million and net income was $72.3 million. A
year go, consolidated revenues for the nine month period were $2,271 million and
net income was $73.1 million. Consolidated cash flow from operating activities
totaled $136.0 million for the nine months ended September 30, 1997. Total debt
at September 30, 1997 was $313.2 million. In July, The Pittston Company's
corporate credit and senior unsecured ratings were raised to 'BBB' by Standard &
Poor's.
During the quarter the Company purchased 1,515 shares of its Series C
Convertible Preferred Stock and 200,200 shares of Pittston Burlington Group
Common Stock at a total cost of $.6 million and $4.8 million respectively. The
Company has remaining authority to purchase over time 1 million shares of
Pittston Minerals Group Common Stock, 1.1 million shares of Pittston Brink's
Common Stock, 1.1 million shares of Pittston Burlington Group Common Stock and
an additional $24.4 million of The Pittston Company Series C Convertible
Preferred Stock.
This release contains both historical and forward looking information. In
particular, statements herein regarding earnings projections and the benefits
from the redesign initiatives, new business contracts and implementation of
recent acquisitions on financial results are subject to known and unknown risks,
uncertainties and contingencies, many of which are beyond the control of BAX
Global and which may cause actual results, performance or achievements to differ
materially from those which are anticipated. Factors that might affect such
forward looking statements include, among others, overall economic and business
conditions, the demand for BAX Global's services, pricing and other competitive
factors in the industry, new government regulations, and uncertainty about the
implementation of systems initiatives and the integration of acquisitions.
* * * * * * * * * *
Pittston Burlington Group Common Stock (NYSE-PZX), Pittston Brink's Group
Common Stock (NYSE-PZB) and Pittston Minerals Group Common Stock (NYSE-PZM)
represent the three classes of common stock of The Pittston Company, a
diversified company with interests in global freight transportation and
logistics management services through BAX Global Inc. (Pittston Burlington
Group), security services through Brink's, Incorporated and Brink's Home
Security, Inc. (Pittston Brink's Group), and in coal through Pittston Coal
Company and in gold mining and metals exploration through Pittston Mineral
Ventures (Pittston Minerals Group). Copies of the Pittston Brink's Group and
Pittston Minerals Group earnings releases are available upon request.
Pittston Burlington Group
Supplemental Financial Data
(Unaudited)
BAX GLOBAL INC.
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per pound/shipment amounts) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES
Domestic U.S.
Expedited freight services $ 176,332 142,506 457,672 405,238
Other 1,761 1,216 5,372 3,318
- -------------------------------------------------------------------------------------------------------------------------
Total Domestic U.S. 178,093 143,722 463,044 408,556
International
Expedited freight services $ 196,829 175,516 570,451 517,692
Customs clearances 32,096 30,017 91,396 88,793
Ocean and other 32,410 23,922 85,513 66,295
- -------------------------------------------------------------------------------------------------------------------------
Total International 261,335 229,455 747,360 672,780
Total operating revenues $ 439,428 373,177 1,210,404 1,081,336
- -------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT
Domestic U.S. $ 16,938 11,783 24,553 25,520
International 11,988 8,683 27,064 19,959
Other (a) - - (12,500) -
- -------------------------------------------------------------------------------------------------------------------------
Total operating profit $ 28,926 20,466 39,117 45,479
- -------------------------------------------------------------------------------------------------------------------------
Expedited freight services
shipment growth rate 41.8% (.5%) 13.5% 2.8%
Expedited freight services weight growth rate:
Domestic U.S. 16.5% 6.7% 7.1% 5.0%
International 14.5% (1.7%) 8.3% 4.5%
Worldwide 15.5% 2.2% 7.7% 4.7%
- -------------------------------------------------------------------------------------------------------------------------
Expedited freight services
weight (millions of pounds) 418.1 362.0 1,141.2 1,059.2
Expedited freight services
shipments (thousands) 1,836 1,294 4,441 3,914
- -------------------------------------------------------------------------------------------------------------------------
Expedited freight services average:
Yield (revenue per pound) $ .893 .879 .901 .871
Revenue per shipment $ 203 246 232 236
Weight per shipment (pounds) 228 280 257 271
- -------------------------------------------------------------------------------------------------------------------------
(a) Consulting expenses related to the redesign of BAX Global Inc.'s business
processes and new information systems architecture.
Pittston Burlington Group
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per share amounts) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
Operating revenues $ 439,428 373,177 1,210,404 1,081,336
- --------------------------------------------------------------------------------------------------------------------------------
Operating expenses 375,145 322,763 1,061,749 947,071
Selling, general and administrative
expenses 37,423 32,730 116,446 95,636
- --------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 412,568 355,493 1,178,195 1,042,707
- --------------------------------------------------------------------------------------------------------------------------------
Other operating income, net 351 224 1,859 966
- --------------------------------------------------------------------------------------------------------------------------------
Operating profit 27,211 17,908 34,068 39,595
Interest income 124 628 599 2,177
Interest expense (1,558) (944) (3,570) (2,984)
Other expense, net (390) (597) (671) (1,939)
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 25,387 16,995 30,426 36,849
Provision for income taxes 9,394 6,290 11,258 13,635
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 15,993 10,705 19,168 23,214
- --------------------------------------------------------------------------------------------------------------------------------
Net income per common share:
Primary $ .82 .56 .99 1.21
Fully diluted .79 .56 (a) .95 1.21 (a)
- --------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 19,470 19,283 19,449 19,161
Fully diluted 20,140 19,283 20,125 19,161
- --------------------------------------------------------------------------------------------------------------------------------
SEGMENT INFORMATION
Operating revenues:
BAX Global Inc. $ 439,428 373,177 1,210,404 1,081,336
- --------------------------------------------------------------------------------------------------------------------------------
Operating profit:
BAX Global Inc. $ 28,926 20,466 39,117 45,479
General corporate expense (1,715) (2,558) (5,049) (5,884)
- --------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 27,211 17,908 34,068 39,595
- --------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
(a) Fully diluted net income per share is considered to be the same as primary
since the effect of common stock equivalents was either antidilutive or
insignificant.
Pittston Burlington Group
CONDENSED BALANCE SHEETS
September 30 December 31
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 22,653 17,818
Accounts receivable, net of estimated amounts
uncollectible 312,230 262,378
Inventories and other current assets 22,213 22,557
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 357,096 302,753
Property, plant and equipment, at cost, net of
accumulated depreciation and amortization 128,010 113,283
Intangibles, net of amortization 175,432 177,797
Other assets 40,691 41,565
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 701,229 635,398
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholder's Equity
Current liabilities $ 313,423 278,601
Long-term debt, less current maturities 54,183 28,723
Other liabilities 21,196 23,085
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 388,802 330,409
Shareholder's equity 312,427 304,989
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 701,229 635,398
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
Pittston Burlington Group
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 19,168 23,214
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 21,637 16,129
Provision for aircraft heavy maintenance 25,009 23,980
Other, net 4,961 1,550
Changes in operating assets and liabilities net of effects of acquisitions
and dispositions:
Increase in receivables (47,109) (13,197)
(Increase) decrease in inventories and other current assets (108) 721
Increase (decrease) in current liabilities 16,863 (15,855)
Other, net (997) (2,687)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 39,424 33,855
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (22,420) (27,486)
Proceeds from disposal of property, plant and equipment 471 5,899
Aircraft heavy maintenance (24,790) (15,215)
Acquisitions and related contingent payments, net of
cash acquired (9,131) (225)
Other, net 2,664 2,566
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (53,206) (34,461)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 37,984 2,878
Reductions of debt (17,246) (1,361)
Payments from Minerals Group 6,949 554
Share and other equity activity (9,070) (2,795)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 18,617 (724)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 4,835 (1,330)
Cash and cash equivalents at beginning of period 17,818 25,847
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 22,653 24,517
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per share amounts) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 150,998 177,195 467,693 522,715
Operating revenues 719,503 605,199 2,010,638 1,747,973
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales and operating revenues 870,501 782,394 2,478,331 2,270,688
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of sales 144,338 167,907 451,586 533,236
Operating expenses 583,027 497,743 1,655,280 1,454,058
Restructuring and other credits,
including litigation accrual - - - (37,758)
Selling, general and administrative
expenses 85,478 74,711 255,576 218,033
- -----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 812,843 740,361 2,362,442 2,167,569
- -----------------------------------------------------------------------------------------------------------------------------------
Other operating income, net 2,898 3,684 9,349 13,742
- -----------------------------------------------------------------------------------------------------------------------------------
Operating profit 60,556 45,717 125,238 116,861
Interest income 1,067 880 3,077 2,216
Interest expense (7,282) (3,409) (19,268) (10,533)
Other expense, net (810) (2,506) (5,098) (6,912)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 53,531 40,682 103,949 101,632
Provision for income taxes 17,194 11,638 31,608 28,542
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 36,337 29,044 72,341 73,090
Preferred stock dividends, net (789) 146 (2,592) (773)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income attributed to common shares $ 35,548 29,190 69,749 72,317
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Brink's Group:
Net income attributed to common shares $ 19,372 15,841 52,417 41,714
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per common share $ .51 .41 1.37 1.09
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding 38,309 38,264 38,243 38,158
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Burlington Group:
Net income attributed to common
shares $ 15,993 10,705 19,168 23,214
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per common share:
Primary $ .82 .56 .99 1.21
Fully diluted .79 .56 (a) .95 1.21 (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 19,470 19,283 19,449 19,161
Fully diluted 20,140 19,283 20,125 19,161
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Minerals Group:
Net income (loss) attributed to common
shares: $ 183 2,644 (1,836) 7,389
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share:
Primary $ .02 .33 (.23) .94
Fully diluted .02 (a) .25 (.23) (a) .82
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 8,096 7,926 8,055 7,872
Fully diluted 9,899 9,819 9,885 9,920
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
(a) Fully diluted net income per share is considered to be the same as primary
since the effect of common stock equivalents was either antidilutive or
insignificant.
The Pittston Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 59,992 41,217
Accounts receivable, net of estimated amounts uncollectible 550,132 475,859
Inventories and other current assets 144,798 121,338
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 754,922 638,414
Property, plant and equipment, at cost, net of accumulated
depreciation, depletion and amortization 636,289 540,851
Intangibles, net of amortization 302,937 317,062
Other assets 321,899 336,276
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,016,047 1,832,603
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities $ 622,285 588,691
Long-term debt, less current maturities 269,146 158,837
Postretirement benefits other than pensions 231,211 226,697
Workers' compensation and other claims 110,515 116,893
Other liabilities 129,542 134,778
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,362,699 1,225,896
Shareholders' equity 653,348 606,707
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,016,047 1,832,603
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 72,341 73,090
Adjustments to reconcile net income to net cash
provided by operating activities:
Noncash charges and other write-offs - 29,948
Depreciation, depletion and amortization 96,467 83,315
Provision for aircraft heavy maintenance 25,009 23,980
Provision for deferred income taxes 5,306 10,496
Other, net 18,743 10,393
Changes in operating assets and liabilities net of effects of acquisitions
and dispositions:
Increase in receivables (58,484) (20,199)
(Increase) decrease in inventories and other current assets (20,516) 3,894
Increase (decrease) in current liabilities 16,389 (22,851)
Other, net (19,276) (66,380)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 135,979 125,686
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (133,911) (116,294)
Proceeds from disposal of property, plant and equipment 5,455 11,732
Aircraft heavy maintenance (24,790) (15,215)
Acquisitions and related contingent payments,
net of cash acquired (65,271) (971)
Other, net 8,925 6,519
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (209,592) (114,229)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 134,137 20,375
Reductions of debt (21,090) (9,510)
Share and other equity activity (20,659) (20,522)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 92,388 (9,657)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 18,775 1,800
Cash and cash equivalents at beginning of period 41,217 52,823
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 59,992 54,623
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
Pittston Burlington Group
NOTES TO FINANCIAL INFORMATION
(1) The Pittston Company (the "Company") has three classes of common stock:
Pittston Brink's Group Common Stock ("Brink's Stock"), Pittston Burlington
Group Common Stock ("Burlington Stock") and Pittston Minerals Group Common
Stock ("Minerals Stock"), which were designed to provide shareholders with
separate securities reflecting the performance of the Pittston Brink's
Group (the "Brink's Group"), Pittston Burlington Group (the "Burlington
Group") and Pittston Minerals Group (the "Minerals Group"), respectively,
without diminishing the benefits of remaining a single corporation or
precluding future transactions affecting any of the Groups.
The financial information for the Burlington Group includes the results of
the Company's BAX Global Inc. business. It is prepared using the amounts
included in the Company's consolidated financial statements. Accordingly,
the Company's consolidated financial statements must be read in connection
with the Burlington Group's financial data.
(2) In 1988, the trustees of certain pension and benefit trust funds (the
"Trust Funds") established under collective bargaining agreements with the
United Mine Workers of America ("UMWA") brought an action (the "Evergreen
Case") against the Company and a number of its coal subsidiaries, claiming
that the defendants were obligated to contribute to such Trust Funds in
accordance with the provisions of the 1988 and subsequent National
Bituminous Coal Wage Agreements, to which neither the Company nor any of
its subsidiaries were a signatory. In 1993, the Company recognized in its
consolidated financial statements the potential liability that might have
resulted from an ultimate adverse judgement in the Evergreen Case.
In March 1996, a settlement was reached in the Evergreen Case. Under the
terms of the settlement, the coal subsidiaries which had been signatories
to earlier National Bituminous Coal Wage Agreements agreed to make various
lump sum payments in full satisfaction of all amounts allegedly due to the
Trust Funds through January 31, 1996, to be paid over time as follows:
approximately $25.8 million upon dismissal of the Evergreen Case and the
remainder of $24 million in installments of $7.0 million in 1996 and $8.5
million in each of 1997 and 1998. The first payment was entirely funded
through an escrow account previously established by the Company. The second
payment of $7.0 million was paid in 1996 and was funded from cash provided
by operating activities. The third payment of $8.5 million was paid in
August, 1997 and was funded from cash provided by operating activities. In
addition, the coal subsidiaries agreed to future participation in the UMWA
1974 Pension Plan.
As a result of the settlement of the Evergreen Case at an amount lower than
previously accrued, the Company recorded a pretax gain of $35.7 million
($23.2 million after tax) in the first quarter of 1996 in its consolidated
financial statements.
(3) In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires companies
to review assets for impairment whenever circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121, resulted
in a pretax charge to earnings in the first quarter of 1996 for the Company
and the Minerals Group of $29.9 million ($19.5 million after-tax), of which
$26.3 million was included in cost of sales and $3.6 million was included
in selling, general and administrative expenses. SFAS No. 121 had no impact
on the Burlington Group.
(4) During the three months ended September 30, 1997 and 1996, the Company
purchased no shares of Brink's Stock; 200,200 shares (at a cost of $4.8
million) and 15,300 shares (at a cost of $0.3 million), respectively, of
Burlington Stock; and no shares of Minerals Stock under the share
repurchase program authorized by the Board of Directors of the Company (the
"Board"). During the nine months ended September 30, 1997 and 1996, the
Company purchased 166,000 shares (at a cost of $4.3 million) and no shares,
respectively, of Brink's Stock; 332,300 shares (at a cost of $7.4 million)
and 20,300 shares (at a cost of $0.4 million), respectively, of Burlington
Stock; and no shares of Minerals Stock under the share repurchase program.
(5) During the quarter and nine months ended September 30, 1997, the Company
purchased 1,515 shares (at a cost of $0.6 million) of its Series C
Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock").
During the quarter and nine months ended September 30, 1996, the Company
purchased 10,320 shares (at a cost of $3.9 million) and 20,920 shares (at a
cost of $7.9 million) of the Convertible Preferred Stock, respectively.
Preferred dividends included on the Company's Statement of Operations for
the quarter and nine months ended September 30, 1997 are net of $0.1
million, which is the excess of the carrying amount of the Convertible
Preferred Stock over the cash paid to holders of the stock.
(6) Certain prior period amounts have been reclassified to conform to the
current period's financial statement presentation.
(7) Financial information for the Minerals Group, which includes the results of
the Company's Coal and Mineral Ventures operations, and the Brink's Group,
which includes the results of the Company's Brink's, Incorporated and
Brink's Home Security, Inc. businesses, is available upon request.
Pittston Minerals Group
Reports Third Quarter Results
Richmond, VA - October 23, 1997 - Pittston Minerals Group reported net
income of $1.0 million, or $.02 per share (primary and fully diluted), in the
third quarter ended September 30, 1997. A year earlier, net income was $2.5
million, or $.25 per fully diluted share ($.33 primary). Through the first nine
months of 1997, net income was $.8 million, compared to $8.2 million in the same
period a year ago. After preferred dividends, the 1997 year-to-date loss per
share was $.23 (primary and fully diluted) compared to earnings of $.82 per
fully diluted share ($.94 primary), in the 1996 period.
Pittston Coal Company
The coal segment's operating profit was $2.6 million in the third quarter
compared to $5.4 million in the same period in 1996. Third quarter coal sales
volume was 4.9 million tons compared to 5.8 million tons in the prior year
quarter. Steam and metallurgical coal sales amounted to 3.0 million and 1.9
million tons compared to 3.8 million and 2.0 million tons, respectively, in last
year's third quarter. Coal production totaled 4.3 million tons in the quarter,
up from 4.1 million tons a year earlier. Surface production accounted for 62% of
total production compared to 69% in the third quarter of 1996. Coal margins for
the quarter and year-to-date were $2.52 and $2.26 per ton, respectively compared
to $2.45 and $1.84 per ton in 1996.
A realignment of coal's operating units was undertaken in the quarter to
bring more focus to the metallurgical and steam coal business units. The
realignment, which streamlines the two business units, is expected to help
reduce future costs.
Pittston Mineral Ventures
Pittston Mineral Ventures (PMV) reported a $0.3 million operating loss in
the third quarter, the same as a year earlier. The Stawell gold mine in western
Victoria, Australia, in which PMV has a 67% direct and indirect interest,
produced approximately 23,000 ounces of gold in the third quarter compared to
approximately 21,500 ounces in the prior year quarter. The average cash cost per
ounce sold was US $263 in the third quarter of 1997 compared to US $319 in the
prior year quarter due in large part to lower mining operating expenses. PMV's
year-to-date operating loss was $2.1 million compared to an operating profit of
$1.4 million for the first nine months of 1996.
The current quarter's results include a write-off of $1.0 million (PMV's
share) of the capital cost of a new ventilation shaft which collapsed, during
construction, in the second quarter. Operations at Stawell returned to near
normal levels in the third quarter.
The Silver Swan nickel mine continues to operate according to expectations.
Delays in concentrate shipments due to problems at the customer's smelter have
deferred the anticipated positive financial impact from this operation. These
problems have now been rectified, and a regular shipping schedule is anticipated
beginning in the fourth quarter. PMV is continuing gold exploration projects in
Nevada and Australia with its joint venture partner.
Financial - Consolidated
The Pittston Company (the "Company") reported consolidated revenues of
$870.5 million in the third quarter ended September 30, 1997 compared to $782.4
million for the comparable period in 1996. Net income was $36.3 million compared
to $29.2 million in the prior year's quarter. For the first nine months of 1997,
consolidated revenues were $2,478 million and net income was $72.3 million. A
year ago, consolidated revenues for the nine month period were $2,271 million
and net income was $73.1 million. Consolidated cash flow from operating
activities totaled $136.0 million for the nine months ended September 30, 1997.
Total debt at September 30, 1997 was $313.2 million. In July, The Pittston
Company's corporate credit and senior unsecured ratings were raised to 'BBB' by
Standard & Poor's.
During the quarter the Company purchased 1,515 shares of its Series C
Convertible Preferred Stock and 200,200 shares of Pittston Burlington Group
Common Stock at a total cost of $.6 million and $4.8 million, respectively. The
Company has remaining authority to purchase over time 1 million shares of
Pittston Minerals Group Common Stock, 1.1 million shares of Pittston Brink's
Group Common Stock, 1.1 million shares of Pittston Burlington Group Common Stock
and an additional $24.4 million of the Pittston Company Series C Convertible
Preferred Stock.
* * * * * * * * * *
Pittston Minerals Group Common Stock (NYSE-PZM), Pittston Brink's Group
Common Stock (NYSE-PZB) and Pittston Burlington Group Common Stock (NYSE-PZX)
represent the three classes of common stock of The Pittston Company, a
diversified company with interests in mining and minerals exploration through
Pittston Coal Company and Pittston Mineral Ventures (Pittston Minerals Group),
security services through Brink's, Incorporated and Brink's Home Security, Inc.
(Pittston Brink's Group) and global freight transportation and logistics
management services through BAX Global Inc. (Pittston Burlington Group). Copies
of the Pittston Brink's Group and Pittston Burlington Group earnings releases
are available upon request.
Pittston Minerals Group
Supplemental Financial Data
(Unaudited)
PITTSTON COAL COMPANY
Three Months Nine Months
Ended September 30 Ended September 30
(In thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Net sales $ 145,616 172,603 454,282 507,967
Operating profit $ 2,640 5,393 7,495 14,960
COAL SALES (Tons)
Metallurgical 1,863 1,979 5,577 5,978
Utility and industrial 3,046 3,837 9,569 11,240
- ---------------------------------------------------------------------------------------------------------------------------
Total coal sales 4,909 5,816 15,146 17,218
- ---------------------------------------------------------------------------------------------------------------------------
PRODUCTION/PURCHASED (Tons)
Deep 1,320 924 3,746 2,977
Surface 2,594 2,764 7,991 8,351
Contract 352 408 1,090 1,261
- ---------------------------------------------------------------------------------------------------------------------------
4,266 4,096 12,827 12,589
Purchased 769 1,380 3,072 4,365
- ---------------------------------------------------------------------------------------------------------------------------
Total 5,035 5,476 15,899 16,954
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
(In thousands) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
Net coal sales (a) $ 143,958 170,301 447,959 502,759
Current production cost
of coal sold (a) 131,591 156,027 413,717 471,050
- --------------------------------------------------------------------------------------------------------------------------
Coal margin 12,367 14,274 34,242 31,709
Non-coal margin 436 620 1,681 1,476
Other operating income, net 2,320 2,026 8,103 10,930
- --------------------------------------------------------------------------------------------------------------------------
Margin and other income 15,123 16,920 44,026 44,115
- --------------------------------------------------------------------------------------------------------------------------
Other costs and expenses:
Idle equipment and closed mines 623 266 1,180 729
Inactive employee cost 6,851 6,275 20,631 20,758
Selling, general and
administrative expenses 5,009 4,986 14,720 15,478
- --------------------------------------------------------------------------------------------------------------------------
Total other costs and expenses 12,483 11,527 36,531 36,965
- --------------------------------------------------------------------------------------------------------------------------
Operating profit (before
restructuring and other
credits and SFAS 121) (b) $ 2,640 5,393 7,495 7,150
- --------------------------------------------------------------------------------------------------------------------------
Coal margin per ton:
Realization $ 29.33 29.28 29.58 29.20
Current production costs 26.81 26.83 27.32 27.36
- --------------------------------------------------------------------------------------------------------------------------
Coal margin $ 2.52 2.45 2.26 1.84
- --------------------------------------------------------------------------------------------------------------------------
(a) Excludes non-coal components.
(b) Restructuring and other credits in the nine months ended September 30, 1996
consist of an impairment loss related to the adoption of SFAS No. 121 of $29,948
($26,312 in cost of sales and $3,636 in selling, general and administrative
expenses), a gain from the settlement of the Evergreen Case of $35,650 and a
benefit from excess restructuring liabilities of $2,108. Both the gain from the
Evergreen Case and the benefit from excess restructuring liabilities are
included in the operating profit of the Pittston Coal Company as "Restructuring
and other credits, including litigation accrual".
PITTSTON MINERAL VENTURES COMPANY
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
ounce and per ounce data) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Stawell Gold Mine:
Gold sales $ 5,396 4,566 13,395 14,671
Other (expense) revenue (14) 26 16 77
- -------------------------------------------------------------------------------------------------------------------------
Net sales 5,382 4,592 13,411 14,748
Cost of sales (a) 4,021 3,657 11,319 10,761
Selling, general and
administrative expenses (a) 331 323 1,010 857
- -------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 4,352 3,980 12,329 11,618
- -------------------------------------------------------------------------------------------------------------------------
Operating profit - Stawell
Gold Mine 1,030 612 1,082 3,130
Other operating expense, net (1,377) (936) (3,194) (1,705)
- -------------------------------------------------------------------------------------------------------------------------
Operating (loss) profit $ (347) (324) (2,112) 1,425
- -------------------------------------------------------------------------------------------------------------------------
Stawell Gold Mine:
Mineral Ventures' 50%
direct share:
Ounces sold 11,176 10,775 31,417 35,375
Ounces produced 11,516 10,756 31,782 34,738
Average per ounce sold (US$):
Realization $ 483 (b) 424 426 (b) 415
Cash cost 263 319 318 288
- -------------------------------------------------------------------------------------------------------------------------
(a) Excludes $30 and $97, and $924 and $2,343, of non-Stawell related cost of
sales and selling, general and administrative expenses for the quarter and nine
months ended September 30, 1997, respectively. Excludes $722 and $1,926 of
non-Stawell related selling, general and administrative expenses for the quarter
and nine months ended September 30, 1996, respectively. Such costs are
reclassified to cost of sales and selling, general and administrative expenses
in the Minerals Group income statement.
(b) Includes allocation of the proceeds from the liquidation of a gold forward
sale hedge position in July 1997.
Pittston Minerals Group
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per share data) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
Net sales $ 150,998 177,195 467,693 522,715
- --------------------------------------------------------------------------------------------------------------------------------
Cost of sales 144,338 167,907 451,586 533,236
Restructuring and other credits,
including litigation accrual - - - (37,758)
Selling, general and
administrative expenses 7,768 8,275 22,484 27,332
- --------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 152,106 176,182 474,070 522,810
Other operating income, net 1,902 1,812 7,349 11,298
- --------------------------------------------------------------------------------------------------------------------------------
Operating profit 794 2,825 972 11,203
Interest income 361 187 978 507
Interest expense (2,810) (2,694) (8,169) (8,315)
Other income (expense), net 2 (449) (900) (1,339)
- --------------------------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes (1,653) (131) (7,119) 2,056
Credit for income taxes (2,625) (2,629) (7,875) (6,106)
- --------------------------------------------------------------------------------------------------------------------------------
Net income 972 2,498 756 8,162
Preferred stock dividends, net (789) 146 (2,592) (773)
- --------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributed to
common shares $ 183 2,644 (1,836) 7,389
- --------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share:
Primary $ .02 .33 (.23) .94
Fully diluted $ .02 (a) .25 (.23) (a) .82
- --------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 8,096 7,926 8,055 7,872
Fully diluted 9,899 9,819 9,885 9,920
- --------------------------------------------------------------------------------------------------------------------------------
SEGMENT INFORMATION
Net sales:
Coal Operations $ 145,616 172,603 454,282 507,967
Mineral Ventures 5,382 4,592 13,411 14,748
- --------------------------------------------------------------------------------------------------------------------------------
Net sales $ 150,998 177,195 467,693 522,715
- -------------------------------------------------------------------------------------------------------------------
Operating profit (loss):
Coal Operations $ 2,640 5,393 7,495 14,960
Mineral Ventures (347) (324) (2,112) 1,425
- --------------------------------------------------------------------------------------------------------------------------------
Segment operating profit 2,293 5,069 5,383 16,385
General corporate expense (1,499) (2,244) (4,411) (5,182)
- --------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 794 2,825 972 11,203
- --------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
(a) Fully diluted net income per share is considered to be the same as primary
since the effect of common stock equivalents and the assumed conversion of
preferred stock was either antidilutive or insignificant.
Pittston Minerals Group
CONDENSED BALANCE SHEETS
September 30 December 31
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,924 3,387
Accounts receivable, net of estimated
amounts uncollectible 81,790 88,552
Inventories and other current assets 104,914 67,691
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 190,628 159,630
Property, plant and equipment, at cost, net
of accumulated depreciation, depletion
and amortization 174,481 170,809
Coal supply contracts, net of amortization 44,457 52,696
Intangibles, net of amortization 108,846 111,103
Other assets 201,960 212,743
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 720,372 706,981
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholder's Equity
Current liabilities $ 165,067 184,725
Long-term debt, less current maturities 176,442 124,572
Postretirement benefits other than pensions 223,692 219,717
Workers' compensation and other claims 99,118 105,837
Other liabilities 74,204 83,790
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 738,523 718,641
Shareholder's equity (18,151) (11,660)
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 720,372 706,981
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
Pittston Minerals Group
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 756 8,162
Adjustments to reconcile net income to net
cash provided by operating activities:
Noncash charges and other write-offs - 29,948
Depreciation, depletion and amortization 28,043 27,674
Provision for deferred income taxes 5,137 15,130
Other, net (2,222) (1,986)
Changes in operating assets and liabilities net of effects of acquisitions
and dispositions:
Decrease in receivables 6,680 3,743
(Increase) decrease in inventories and other current assets (19,960) 5,287
Increase (decrease) in current liabilities 1,601 (12,570)
Other, net (16,680) (60,806)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,355 14,582
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (21,913) (17,662)
Proceeds from disposal of property, plant
and equipment 3,612 3,390
Acquisitions and related contingent payments (791) (746)
Other, net (850) 2,885
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (19,942) (12,133)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 51,579 15,615
Reductions of debt (372) (1,233)
Payments to - Burlington Group/Brink's Group (27,249) (2,717)
Share and other equity activity (6,834) (14,582)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 17,124 (2,917)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 537 (468)
Cash and cash equivalents at beginning of period 3,387 4,999
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,924 4,531
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
(In thousands, except Ended September 30 Ended September 30
per share amounts) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 150,998 177,195 467,693 522,715
Operating revenues 719,503 605,199 2,010,638 1,747,973
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales and operating revenues 870,501 782,394 2,478,331 2,270,688
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of sales 144,338 167,907 451,586 533,236
Operating expenses 583,027 497,743 1,655,280 1,454,058
Restructuring and other credits,
including litigation accrual - - - (37,758)
Selling, general and administrative
expenses 85,478 74,711 255,576 218,033
- -----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 812,843 740,361 2,362,442 2,167,569
- -----------------------------------------------------------------------------------------------------------------------------------
Other operating income, net 2,898 3,684 9,349 13,742
- -----------------------------------------------------------------------------------------------------------------------------------
Operating profit 60,556 45,717 125,238 116,861
Interest income 1,067 880 3,077 2,216
Interest expense (7,282) (3,409) (19,268) (10,533)
Other expense, net (810) (2,506) (5,098) (6,912)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 53,531 40,682 103,949 101,632
Provision for income taxes 17,194 11,638 31,608 28,542
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 36,337 29,044 72,341 73,090
Preferred stock dividends, net (789) 146 (2,592) (773)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income attributed to common shares $ 35,548 29,190 69,749 72,317
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Brink's Group:
Net income attributed to common shares $ 19,372 15,841 52,417 41,714
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per common share $ .51 .41 1.37 1.09
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding 38,309 38,264 38,243 38,158
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Burlington Group:
Net income attributed to common
shares $ 15,993 10,705 19,168 23,214
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per common share:
Primary $ .82 .56 .99 1.21
Fully diluted .79 .56 (a) .95 1.21 (a)
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 19,470 19,283 19,449 19,161
Fully diluted 20,140 19,283 20,125 19,161
- -----------------------------------------------------------------------------------------------------------------------------------
Pittston Minerals Group:
Net income (loss) attributed to common
shares: $ 183 2,644 (1,836) 7,389
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share:
Primary $ .02 .33 (.23) .94
Fully diluted .02 (a) .25 (.23) (a) .82
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Primary 8,096 7,926 8,055 7,872
Fully diluted 9,899 9,819 9,885 9,920
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
(a) Fully diluted net income per share is considered to be the same as primary
since the effect of common stock equivalents was either antidilutive or
insignificant.
The Pittston Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 59,992 41,217
Accounts receivable, net of estimated amounts uncollectible 550,132 475,859
Inventories and other current assets 144,798 121,338
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 754,922 638,414
Property, plant and equipment, at cost, net of accumulated
depreciation, depletion and amortization 636,289 540,851
Intangibles, net of amortization 302,937 317,062
Other assets 321,899 336,276
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,016,047 1,832,603
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities $ 622,285 588,691
Long-term debt, less current maturities 269,146 158,837
Postretirement benefits other than pensions 231,211 226,697
Workers' compensation and other claims 110,515 116,893
Other liabilities 129,542 134,778
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,362,699 1,225,896
Shareholders' equity 653,348 606,707
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,016,047 1,832,603
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 72,341 73,090
Adjustments to reconcile net income to net cash
provided by operating activities:
Noncash charges and other write-offs - 29,948
Depreciation, depletion and amortization 96,467 83,315
Provision for aircraft heavy maintenance 25,009 23,980
Provision for deferred income taxes 5,306 10,496
Other, net 18,743 10,393
Changes in operating assets and liabilities net of effects of acquisitions
and dispositions:
Increase in receivables (58,484) (20,199)
(Increase) decrease in inventories and other current assets (20,516) 3,894
Increase (decrease) in current liabilities 16,389 (22,851)
Other, net (19,276) (66,380)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 135,979 125,686
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (133,911) (116,294)
Proceeds from disposal of property, plant and equipment 5,455 11,732
Aircraft heavy maintenance (24,790) (15,215)
Acquisitions and related contingent payments,
net of cash acquired (65,271) (971)
Other, net 8,925 6,519
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (209,592) (114,229)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 134,137 20,375
Reductions of debt (21,090) (9,510)
Share and other equity activity (20,659) (20,522)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 92,388 (9,657)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 18,775 1,800
Cash and cash equivalents at beginning of period 41,217 52,823
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 59,992 54,623
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
The Pittston Company and Subsidiaries
Pittston Minerals Group
NOTES TO FINANCIAL INFORMATION
(1) The Pittston Company (the "Company") has three classes of common stock:
Pittston Brink's Group Common Stock ("Brink's Stock"), Pittston Burlington
Group Common Stock ("Burlington Stock") and Pittston Minerals Group Common
Stock ("Minerals Stock"), which were designed to provide shareholders with
separate securities reflecting the performance of the Pittston Brink's
Group (the "Brink's Group"), Pittston Burlington Group (the "Burlington
Group") and Pittston Minerals Group (the "Minerals Group"), respectively,
without diminishing the benefits of remaining a single corporation or
precluding future transactions affecting any of the Groups.
The financial information for the Minerals Group includes the results of
the Coal and Minerals Ventures operations of the Company. It is prepared
using the amounts included in the Company's consolidated financial
statements. Accordingly, the Company's consolidated financial statements
must be read in connection with the Minerals Group's financial data.
(2) In 1988, the trustees of certain pension and benefit trust funds (the
"Trust Funds") established under collective bargaining agreements with the
United Mine Workers of America ("UMWA") brought an action (the "Evergreen
Case") against the Company and a number of its coal subsidiaries, claiming
that the defendants were obligated to contribute to such Trust Funds in
accordance with the provisions of the 1988 and subsequent National
Bituminous Coal Wage Agreements, to which neither the Company nor any of
its subsidiaries were a signatory. In 1993, the Company recognized in its
consolidated financial statements the potential liability that might have
resulted from an ultimate adverse judgement in the Evergreen Case.
In March 1996, a settlement was reached in the Evergreen Case. Under the
terms of the settlement, the coal subsidiaries which had been signatories
to earlier National Bituminous Coal Wage Agreements agreed to make various
lump sum payments in full satisfaction of all amounts allegedly due to the
Trust Funds through January 31, 1996, to be paid over time as follows:
approximately $25.8 million upon dismissal of the Evergreen Case and the
remainder of $24 million in installments of $7.0 million in 1996 and $8.5
million in each of 1997 and 1998. The first payment was entirely funded
through an escrow account previously established by the Company. The second
payment of $7.0 million was paid in 1996 and was funded from cash provided
by operating activities. The third payment of $8.5 million was paid in
August, 1997 and was funded from cash provided by operating activities. In
addition, the coal subsidiaries agreed to future participation in the UMWA
1974 Pension Plan.
As a result of the settlement of the Evergreen Case at an amount lower than
previously accrued, the Company recorded a pretax gain of $35.7 million
($23.2 million after tax) in the first quarter of 1996 in its consolidated
financial statements and the financial statements of the Minerals Group.
(3) In 1996, the Company implemented a new accounting standard, Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". SFAS No. 121 requires companies to review assets for impairment
whenever circumstances indicate that the carrying amount of an asset may
not be recoverable. SFAS No. 121 resulted in a pretax charge to earnings in
the first quarter of 1996 for the Minerals Group's Coal Operations of $29.9
million ($19.5 million after tax), of which $26.3 million was included in
cost of sales and $3.6 million was included in selling, general and
administrative expenses. Assets for which the impairment loss was
recognized consisted of property, plant and equipment, advanced royalties
and goodwill.
(4) During the three months ended September 30, 1997 and 1996, the Company
purchased no shares of Brink's Stock; 200,200 shares (at a cost of $4.8
million) and 15,300 shares (at a cost of $0.3 million), respectively, of
Burlington Stock; and no shares of Minerals Stock under the share
repurchase program authorized by the Board of Directors of the Company (the
"Board"). During the nine months ended September 30, 1997 and 1996, the
Company purchased 166,000 shares (at a cost of $4.3 million) and no shares,
respectively, of Brink's Stock; 332,300 shares (at a cost of $7.4 million)
and 20,300 shares (at a cost of $0.4 million), respectively, of Burlington
Stock; and no shares of Minerals Stock under the share repurchase program.
(5) During the quarter and nine months ended September 30, 1997, the Company
purchased 1,515 shares (at a cost of $0.6 million) of its Series C
Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock").
During the quarter and nine months ended September 30, 1996, the Company
purchased 10,320 shares (at a cost of $3.9 million) and 20,920 shares (at a
cost of $7.9 million) of the Convertible Preferred Stock, respectively.
Preferred dividends included on the Company's Statement of Operations for
the quarter and nine months ended September 30, 1997 are net of $0.1
million, which is the excess of the carrying amount of the Convertible
Preferred Stock over the cash paid to holders of the stock.
(6) Certain prior period amounts have been reclassified to conform to the
current period's financial statement presentation.
(7) Financial information for the Brink's Group, which includes the results of
the Company's Brink's, Incorporated and Brink's Home Security, Inc.
businesses, and the Burlington Group, which includes the results of the
Company's BAX Global Inc. business, is available upon request.