<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 1995.
REGISTRATION NO. 33-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE PITTSTON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
VIRGINIA 1221, 1222, 4731, 5052, 54-1317776
(STATE OR OTHER JURISDICTION OF 5085, 7381 AND 7382 (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBERS)
</TABLE>
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
(203) 978-5200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AUSTIN F. REED, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE PITTSTON COMPANY
100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902
(203) 978-5211
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
DAVID G. ORMSBY, ESQ.
CRAVATH, SWAINE & MOORE
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after approval by shareholders.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(2)
<S> <C> <C> <C> <C>
Pittston Brink's Group
Common Stock, par value
$1.00 per share............. 42,000,000 shares -- -- $ 100.00
Pittston Burlington Group
Common Stock, par value
$1.00 per share............. 21,500,000 shares -- -- --
</TABLE>
(1) If the Brink's Stock Proposal described herein is approved by shareholders,
shares of the Registrant's existing Services Stock, par value $1.00 per
share (the 'Services Stock'), will be redesignated as Pittston Brink's Group
Common Stock and the shares of Pittston Burlington Common Stock being
registered will be distributed to holders of the Services Stock on the basis
of one-half of one share for each share of such Services Stock held. The
amount being registered, which is based on the 41,573,743 shares of Services
Stock issued and outstanding at September 30, 1995, is subject to possible
increase or decrease due to any change in the number of such issued and
outstanding shares of Services Stock between October 10, 1995, and the
effectiveness of the Brink's Stock Proposal and includes aggregated
fractional shares of Pittston Burlington Group Common Stock that may be sold
by brokers and nominees.
(2) The shares will be distributed to shareholders without consideration.
Accordingly, pursuant to Section 6(b) of the Securities Act of 1933, the
amount of the Registration Fee is $100. The Registrant has simultaneously
paid a filing fee of $125 upon filing of the Proxy Statement included in
this Registration Statement. In accordance with Rule 0-11 (a) (2) under the
Securities Exchange Act of 1934, the above fee is reduced by the fee paid in
connection with the filing of the Proxy Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
THE PITTSTON COMPANY
CROSS REFERENCE SHEET TO FORM S-4
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
<TABLE>
<CAPTION>
LOCATION OR HEADING IN
ITEM OF FORM S-4 PROXY STATEMENT/PROSPECTUS
- ------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus.......................................... Facing Page; Cross-Reference Sheet;
Outside Front Cover Page and Page 2
of Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus....... Available Information; Incorporation of
Certain Documents by Reference; Table
of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information................................................. Outside Front Cover Page; Proxy
Statement Summary; Summary Comparison
of Terms of Existing Common Stock
with Terms of Brink's Stock,
Burlington Stock and Minerals Stock;
Price Range of Services Stock and
Minerals Stock and Dividends;
Pittston Brink's Group -- Selected
Financial Data; Pittston Burlington
Group -- Selected Financial Data; The
Pittston Company and
Subsidiaries -- Selected Financial
Data
4. Terms of the Transaction...................................... Proxy Statement Summary; Summary
Comparison of Terms of Existing
Common Stock with Terms of Brink's
Stock, Burlington Stock and Minerals
Stock
5. Pro Forma Financial Information............................... Pittston Brink's Group -- Selected
Financial Data; Pittston Burlington
Group -- Selected Financial Data;
Pittston Brink's Group -- Financial
Information -- (Annex V); Pittston
Burlington Group -- Financial
Information (Annex VII)
6. Material Contracts with the Company Being Acquired............ *
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters........................... *
8. Interests of Named Experts and Counsel........................ Experts; Legal Opinions
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.................................. *
- ------------
* Omitted because the answer is negative or the Item is not applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OR HEADING IN
ITEM OF FORM S-4 PROXY STATEMENT/PROSPECTUS
- ------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C>
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants................... Available Information; Incorporation of
Certain Documents by Reference;
Pittston Brink's Group -- Financial
Information (Annex V); Pittston
Burlington Group -- Financial
Information (Annex VII); The Pittston
Company and Subsidiaries --
Consolidated Financial Information
(Annex IX)
11. Incorporation of Certain Information by Reference............. Available Information; Incorporation of
Certain Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants............ *
13. Incorporation of Certain Information by Reference............. *
14. Information with Respect to Registrants Other Than S-3 or S-2
Registrants................................................. *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies..................... *
16. Information with Respect to S-2 or S-3 Companies.............. *
17. Information with Respect to Companies Other Than S-3 or S-2
Companies................................................... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are to be
Solicited................................................... Outside Front Cover Page; Incorporation
of Certain Documents by Reference;
Proxy Statement Summary; General;
Other Information
19. Information if Proxies, Consents or Authorizations are not to
be Solicited or in an Exchange Offer........................ *
- ------------
</TABLE>
* Omitted because the answer is negative or the Item is not applicable.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- OCTOBER 10, 1995
PRELIMINARY COPY
<TABLE>
<S> <C>
[PITTSTON Logo] The Pittston Company
JOSEPH C. FARRELL 100 First Stamford Place
Chairman and Chief Executive Officer P.O. Box 120070
Stamford, CT 06912-0070
</TABLE>
November , 1995
To Our Shareholders:
You are cordially invited to attend a special meeting of Pittston's
shareholders to be held at the Company's executive offices, 100 First Stamford
Place, Seventh Floor, Stamford, Connecticut, on , December ,
1995, at 10:00 a.m., Eastern Standard Time.
At the meeting you will be asked to consider and approve a proposal to
redesignate the Company's Services Stock as Pittston Brink's Group Common Stock,
on a share-for-share basis, establish a new class of Common Stock designated as
Pittston Burlington Group Common Stock and distribute to existing holders of
Services Stock one-half of one share of Burlington Stock for each outstanding
share of Services Stock (the 'Brink's Stock Proposal'). Brink's Stock and
Burlington Stock are intended to reflect the separate performance of the
Company's security services and home security businesses in the case of Brink's
Stock, and the Company's global freight transportation and logistics management
services business in the case of the Burlington Stock.
Adoption of the Brink's Stock Proposal also would increase the number of
shares of authorized Common Stock from 120 million to 170 million, consisting of
100 million shares of Brink's Stock, 50 million shares of Burlington Stock and
20 million shares of Minerals Stock. Holders of Minerals Stock will not receive
any shares of Burlington Stock in the transaction. THE BRINK'S STOCK PROPOSAL
WILL NOT ALTER MINERALS STOCK (OR THE PITTSTON MINERALS GROUP) EXCEPT FOR
CERTAIN ADJUSTMENTS DESIGNED TO CONFORM THE TERMS OF THE MINERALS STOCK TO THE
EXISTENCE OF BRINK'S STOCK AND BURLINGTON STOCK AND IS DESIGNED NOT TO HAVE ANY
ADVERSE EFFECT ON THE HOLDERS OF MINERALS STOCK. THE BRINK'S STOCK PROPOSAL WILL
ALSO HAVE NO EFFECT ON THE COMPANY'S PREFERRED STOCK UNLESS THE PREFERRED STOCK
IS CONVERTED AFTER AN EXCHANGE OF MINERALS STOCK FOR BRINK'S STOCK, IN WHICH
CASE A HOLDER OF PREFERRED STOCK WOULD, UPON CONVERSION, RECEIVE SHARES OF
BRINK'S STOCK IN LIEU OF MINERALS STOCK OTHERWISE ISSUABLE UPON SUCH CONVERSION.
The Brink's Stock Proposal is intended to provide Services shareholders
with separate securities reflecting the two major business groups comprising the
Pittston Services Group. Services shareholders would have the ability to retain
or sell either or both securities depending on their investment objectives. The
Brink's Stock Proposal preserves the benefit for holders of Services and
Minerals Stocks and the Preferred Stock of remaining a single corporation and
the Company's ability to implement future restructuring options. A short summary
of the Brink's Stock Proposal commences on page 5 of the accompanying proxy
statement.
If the Brink's Stock Proposal is adopted by shareholders, the Board of
Directors currently intends to pay dividends on Brink's Stock at an initial
annual rate of $0.10 per share and on Burlington Stock at an initial annual rate
of $0.24 per share, payable quarterly, which would be equivalent to an annual
dividend of $0.22 per share of Services Stock. The Board expects to continue to
pay a quarterly dividend at the annual rate of $0.65 per share on the Minerals
Stock and regular quarterly dividends on the Company's Preferred Stock.
<PAGE>
Under the Virginia Stock Corporation Act and the Company's Charter, the
Brink's Stock Proposal must be approved by (i) a majority of the outstanding
shares of Services Stock and Minerals Stock voting as a single class, (ii) a
majority of the outstanding shares of Services Stock voting as a single class,
(iii) two-thirds of the outstanding shares of Minerals Stock voting as a single
class and (iv) a majority of the outstanding shares of Preferred Stock voting as
a single class. EVERY VOTE IS IMPORTANT. AFTER CAREFUL CONSIDERATION, THE BOARD
OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSAL AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE PROPOSAL.
It is important that you vote, and you are urged to complete, sign and date
the enclosed proxy card or cards and mail it or them at your earliest
convenience in the return envelope provided.
Your prompt cooperation will be greatly appreciated.
Sincerely,
J. FARRELL
<PAGE>
PITTSTON
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER , 1995
------------------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of THE
PITTSTON COMPANY will be held on , December , 1995, at 10:00 a.m.,
Eastern Standard Time, at the Company's executive offices, 100 First Stamford
Place, Seventh Floor, Stamford, Connecticut, for the following purposes:
1. To consider the Brink's Stock Proposal which, if approved, would
constitute (a) the adoption of certain amendments to the Restated Articles
of Incorporation of the Company (i) increasing the number of shares of
authorized common stock from 120 million to 170 million, consisting of 100
million shares of Pittston Brink's Group Common Stock, par value $1.00 per
share ('Brink's Stock'), 50 million shares of Pittston Burlington Group
Common Stock par value $1.00 per share ('Burlington Stock') and 20 million
shares of Pittston Minerals Group Common Stock, par value $1.00 per share
('Minerals Stock'), (ii) redesignating each outstanding share of Pittston
Services Group Common Stock, par value $1.00 per share ('Services Stock')
as a share of Brink's Stock, (iii) establishing the preferences,
limitations and relative rights of the Brink's Stock and the Burlington
Stock, (iv) modifying certain provisions of the Company's $31.25 Series C
Cumulative Convertible Preferred Stock to conform to the existence of the
Brink's Stock and the Burlington Stock and (v) adjusting the current voting
and liquidation rights of the Minerals Stock to assure their proportionate
continuation immediately following the transaction; (b) the approval of the
distribution of Burlington Stock to the holders of Services Stock on the
basis of one-half of one share of Burlington Stock for each outstanding
share of Services Stock; and (c) the adoption of certain related amendments
to, and the approval of certain actions adjusting, the Company's stock
option and employee benefit plans and outstanding stock options.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on November , 1995, has been fixed as the record
date for determining the shareholders entitled to notice of and to vote at the
meeting.
If you do not expect to attend the special meeting in person, please
complete, date and sign the enclosed proxy or proxies and return it or them in
the enclosed envelope, which requires no postage if mailed in the United States.
Prompt response is helpful and your cooperation will be appreciated.
AUSTIN F. REED
Secretary
November , 1995
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY
CARD(S) AND RETURN IT OR THEM IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING. IF YOU RECEIVE MORE THAN ONE PROXY, PLEASE BE
SURE TO COMPLETE AND RETURN EACH OF THEM.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
Proxy Statement and Prospectus.................................................................... 1
Available Information........................................................................ 3
Incorporation of Certain Documents by Reference.............................................. 3
Proxy Statement Summary...................................................................... 5
Special Meeting.............................................................................. 5
The Brink's Stock Proposal................................................................... 5
Summary Comparison of Terms of Existing Common Stock with Terms of Brink's Stock, Burlington
Stock and Minerals Stock.................................................................... 12
Price Range of Services Stock and Minerals Stock and Dividends............................... 15
Pittston Brink's Group -- Selected Financial Data............................................ 16
Pittston Burlington Group -- Selected Financial Data......................................... 18
The Pittston Company and Subsidiaries -- Selected Financial Data............................. 20
General...................................................................................... 23
The Brink's Stock Proposal................................................................... 23
General................................................................................. 23
Reasons for the Brink's Stock Proposal.................................................. 25
Recommendation of the Board............................................................. 26
Risk Factors............................................................................ 26
Dividend Policy......................................................................... 31
Description of Brink's Stock, Burlington Stock and Minerals Stock....................... 31
Certain Management Policies............................................................. 37
Accounting Matters and Policies......................................................... 38
Stock Transfer Agent and Registrar...................................................... 39
Stock Exchange Listings................................................................. 39
Dissenters' Rights...................................................................... 39
Financial Advisor....................................................................... 39
Certain Federal Income Tax Considerations............................................... 39
Amendments to Stock Option and Employee Benefit Plans and Adjustments to Outstanding
Options................................................................................. 40
Effects on Preferred Stock.............................................................. 42
Amended and Restated Rights Agreement................................................... 42
Possible Antitakeover Effects........................................................... 44
Other Information............................................................................ 45
Experts...................................................................................... 45
Legal Opinions............................................................................... 46
ANNEX I -- Glossary of Certain Terms........................................................ I-1
ANNEX II -- Articles of Amendment to the Restated Articles of Incorporation of The Pittston
Company........................................................................ II-1
ANNEX III-A -- Amendments to the Non-Employee Directors' Stock Option Plan...................... III-A-1
ANNEX III-B -- Amendments to the 1988 Stock Option Plan......................................... III-B-1
ANNEX IV -- Pittston Brink's Group -- Description of Business................................ IV-1
ANNEX V -- Pittston Brink's Group -- Financial Information.................................. V-1
ANNEX VI -- Pittston Burlington Group -- Description of Business............................. VI-1
ANNEX VII -- Pittston Burlington Group -- Financial Information............................... VII-1
ANNEX VIII -- The Pittston Company and Subsidiaries -- Description of Business................. VIII-1
ANNEX IX -- The Pittston Company and Subsidiaries -- Consolidated Financial Information...... IX-1
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- OCTOBER 10, 1995
PRELIMINARY COPY
THE PITTSTON COMPANY
PROXY STATEMENT AND PROSPECTUS
100 FIRST STAMFORD PLACE
P.O. BOX 120070
STAMFORD, CT 06912-0070
(203) 978-5200
------------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
AT 10:00 A.M., EASTERN STANDARD TIME,
ON , DECEMBER , 1995
------------------------
This Proxy Statement and Prospectus (hereinafter 'Proxy Statement') is
being furnished to the shareholders of The Pittston Company, a Virginia
corporation ('Pittston' or the 'Company'), in connection with the solicitation
of proxies by the Board of Directors of Pittston ('Board') from holders of
outstanding shares of Pittston Services Group Common Stock, par value $1.00 per
share ('Services Stock'), Pittston Minerals Group Common Stock, par value $1.00
per share ('Minerals Stock'), and from the beneficial owners of Pittston $31.25
Series C Cumulative Convertible Preferred Stock, par value $10.00 per share
('Preferred Stock'), for use at the Special Meeting of Shareholders of Pittston
to be held at 10:00 a.m., Eastern Standard Time, on , December ,
1995, and at any adjournment thereof (the 'Meeting'). A Glossary showing the
pages on which certain terms used in this Proxy Statement are defined is
attached as Annex I.
Holders of Services Stock, Minerals Stock and Preferred Stock will be asked
at the Meeting to vote upon a proposal to change the capitalization of the
Company (the 'Brink's Stock Proposal'). Under the Brink's Stock Proposal,
Services Stock will be redesignated as Pittston Brink's Group Common Stock, par
value $1.00 per share ('Brink's Stock'), on a share-for-share basis, and a new
class of common stock designated as Pittston Burlington Group Common Stock, par
value $1.00 per share ('Burlington Stock'), will be authorized and thereafter
distributed to holders of Services Stock on the Effective Date (as defined
below) in the ratio of one half of one share of Burlington Stock for each
outstanding share of Services Stock. The Brink's Stock Proposal will not alter
Minerals Stock or the Pittston Minerals Group (as defined below) or the rights
of holders of Minerals Stock except as otherwise described herein with respect
to certain adjustments designed to conform the terms of the Minerals Stock to
the existence of Brink's Stock and Burlington Stock and the continuing periodic
adjustments to the voting rights of the Minerals Stock. Holders of Minerals
Stock will not receive any shares of Burlington Stock in connection with the
transaction. If the Brink's Stock Proposal is approved, the Company's Common
Stock will consist of three classes, viz., Brink's Stock, Burlington Stock and
Minerals Stock. The Brink's Stock Proposal will have no effect on the Company's
Preferred Stock except that if any Preferred Stock is converted after an
exchange of Minerals Stock for Brink's Stock, the holder of such Preferred Stock
would, upon conversion, receive shares of Brink's Stock in lieu of shares of
Minerals Stock otherwise issuable upon such conversion.
Brink's Stock and Burlington Stock are designed to provide holders of
Services Stock with separate securities reflecting the different business
activities of the Company's Services Group ('Pittston Services Group') without
diminishing to holders of Services Stock or holders of Minerals Stock the
benefits of remaining a single corporation or precluding future transactions
affecting the Company or any Group (as defined below). Brink's Stock and
Burlington Stock are designed to reflect the separate performance of the
Company's security services and home security businesses ('Pittston Brink's
Group'), in the case of Brink's Stock, and global freight transportation and
logistics management services businesses ('Pittston Burlington Group'), in the
case of Burlington Stock, and to provide shareholders with an opportunity to
separately evaluate and invest in each such class of Common Stock. Holders of
Services Stock would have the ability to retain or sell either or both
securities depending on their investment objectives. Pittston Brink's Group,
Pittston Burlington Group and the Company's coal and minerals businesses
('Pittston Minerals Group') are sometimes herein referred to individually as a
'Group' or
<PAGE>
collectively as the 'Groups'. The Board intends to declare and pay dividends on
Brink's Stock and Burlington Stock based primarily on the earnings, financial
condition, cash flow and business requirements of Pittston Brink's Group and
Pittston Burlington Group, respectively. Future dividends will be payable when,
as and if declared by the Board on the Brink's Stock and/or the Burlington Stock
out of all funds of the Company legally available therefor. The Company will
separately report the financial results of Pittston Brink's Group and Pittston
Burlington Group and will continue to separately report the financial results of
Pittston Minerals Group. The redesignation of Services Stock as Brink's Stock
and the distribution of Burlington Stock will not result in any transfer of
assets and liabilities of the Company or any of its subsidiaries. Descriptions
of the businesses of Pittston Brink's Group, Pittston Burlington Group and
Pittston Minerals Group are set forth in Annexes IV, VI and VIII, respectively.
The Company has most recently paid dividends on its Services Stock at the
annual rate of $0.20 per share, payable quarterly. If the Brink's Stock Proposal
is adopted, the Board currently intends to pay dividends on Brink's Stock at an
initial annual rate of $0.10 per share and on Burlington Stock at an initial
annual rate of $0.24 per share, payable quarterly, which would be equivalent to
an annual dividend of $0.22 per share of Services Stock. Subject to the
continued availability of an Available Minerals Dividend Amount (as defined in
the Company's Restated Articles of Incorporation (the 'Articles of
Incorporation') -- see Annex II), the Board expects to continue to pay a
quarterly dividend at the annual rate of $0.65 per share on the Minerals Stock.
Beneficial owners of the Company's Preferred Stock will continue to receive
quarterly dividends at the annual rate of $3.125 per share.
Initially, holders of Brink's Stock, Burlington Stock and Minerals Stock
will have approximately 55%, 28% and 17%, respectively, of the total voting
power of all the outstanding shares of all classes of common stock. Brink's
Stock will have one vote per share at all times. Upon implementation of the
proposal, Burlington Stock will have one vote per share, and Minerals Stock will
have 1.5 votes per share. Commencing January 1, 1996, the relative voting rights
of the Burlington Stock and the Minerals Stock will be adjusted every two years
in such a manner that each class' share of the aggregate voting power at such
time will be equal to that class' share of the Company's aggregate market
capitalization at such time. In the event of the liquidation of the Company,
holders of Brink's Stock, Burlington Stock and Minerals Stock will initially
share on a per share basis an aggregate amount equal to 55%, 28% and 17%,
respectively, of the funds, if any, remaining for distribution to common
shareholders, subject to adjustment based on relative changes in the number of
shares of such classes as more fully described herein. These features, as well
as other factors, are discussed under 'The Brink's Stock Proposal -- Risk
Factors'.
The Board has adopted a resolution, subject to approval by the shareholders
of the Brink's Stock Proposal, authorizing the redesignation of Services Stock
as Brink's Stock and declaring a distribution of one half of one share of
Burlington Stock on each outstanding share of Services Stock to holders of
record of Services Stock at the close of business on the date (the 'Effective
Date') on which the State Corporation Commission of Virginia issues a
certificate of amendment with respect to the Articles of Amendment (the
'Articles of Amendment') to the Articles of Incorporation, which date is
expected to be December , 1995.
The Board has unanimously approved the Brink's Stock Proposal and
recommends that shareholders vote FOR the Proposal.
There has been no prior market for either Brink's Stock or Burlington
Stock. Subject to shareholder approval, the New York Stock Exchange ('NYSE') has
approved the redesignation of Services Stock as Brink's Stock and the
distribution and listing of Burlington Stock, subject to official notice of
issuance.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
Dated: November , 1995.
2
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH THE
OFFERING AND SOLICITATION MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY STATEMENT, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION OR FROM ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO THIS PROXY
STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN OR IN THE AFFAIRS OF PITTSTON
SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Pittston is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, Suite 1300, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Documents filed by the Company can
also be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
Pittston has filed a Registration Statement on Form S-4 (the 'Registration
Statement') with the Commission pursuant to the Securities Act of 1933, as
amended (the 'Securities Act'), covering the shares of Brink's Stock and
Burlington Stock issuable in connection with the Brink's Stock Proposal. This
Proxy Statement, which also constitutes the Prospectus of Pittston filed as part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement and the exhibits thereto, to which reference is
hereby made. The principal office of Pittston is located at 100 First Stamford
Place, Stamford, Connecticut 06902 (telephone (203) 978-5200).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to Section 13 of the Exchange Act are incorporated herein by reference: (i) the
Annual Report on Form 10-K for the year ended December 31, 1994 (the '1994 Form
10-K'), (ii) the Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 1995 and (iii) the Current Report on Form 8-K dated as of September
15, 1995.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Proxy Statement and prior to the date of the Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and other documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy Statement, to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
3
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THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING
ANY BENEFICIAL HOLDER, TO WHOM A PROXY STATEMENT IS DELIVERED, ON THE WRITTEN OR
ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE INFORMATION
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT (INCLUDING THE 1994 FORM
10-K), OTHER THAN EXHIBITS TO SUCH INFORMATION (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THIS PROXY
STATEMENT INCORPORATES). REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO AUSTIN
F. REED, VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, THE PITTSTON COMPANY,
100 FIRST STAMFORD PLACE, P.O. BOX 120070, STAMFORD, CONNECTICUT 06912-0070
(TELEPHONE (203) 978-5200). IN ORDER TO ALLOW TIMELY DELIVERY OF THE DOCUMENT,
ANY REQUEST SHOULD BE MADE BY NOVEMBER , 1995.
------------------------
If you require additional copies of the Proxy Statement or the Proxy Card,
please contact Kissel-Blake Inc. at 1-800-554-7733 (toll free).
4
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PROXY STATEMENT SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained, or incorporated by
reference, in this Proxy Statement and the Annexes hereto. Unless otherwise
defined herein, capitalized terms used in this Summary have the respective
meanings ascribed to them elsewhere in this Proxy Statement. See Annex
I -- Glossary of Certain Terms. Shareholders are urged to read this Proxy
Statement and the Annexes hereto in their entirety.
SPECIAL MEETING
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DATE, TIME AND PLACE OF MEETING.............. The Special Meeting of Shareholders will be held on ,
December , 1995, at 10:00 a.m., Eastern Standard Time, in the
Company's executive offices, Seventh Floor, 100 First Stamford
Place, Stamford, Connecticut.
PROPOSAL TO BE CONSIDERED AT THE MEETING..... The Brink's Stock Proposal will be the only proposal considered at
the Meeting.
MEETING RECORD DATE.......................... November , 1995 (the 'Record Date').
VOTING....................................... Each holder of Services Stock, each holder of Minerals Stock and
each beneficial owner of Preferred Stock is entitled to one vote
for each share held of record or beneficially owned, as the case
may be, at the close of business on November , 1995. The
affirmative vote of the following groups of the holders of the
Company's securities are each required for approval of the
Brink's Stock Proposal:
(1) holders of a majority of the outstanding shares of
Services Stock and Minerals Stock voting as a single
class;
(2) holders of a majority of the outstanding shares of
Services Stock voting as a single class;
(3) holders of two-thirds of the outstanding shares of
Minerals Stock voting as a single class; and
(4) holders of a majority of the outstanding shares of
Preferred Stock voting as a single class.
THE BRINK'S STOCK PROPOSAL
GENERAL...................................... The shareholders of the Company are being asked to vote in favor
of the Brink's Stock Proposal which, if approved, would have the
following effects (collectively, the 'Transaction'):
amend the Company's Articles of Incorporation to increase
the shares of authorized common stock from 120 million to
170 million, consisting of 100 million shares of Brink's
Stock, 50 million shares of Burlington Stock and 20 million
shares of Minerals Stock;
amend the Company's Articles of Incorporation to make
certain adjustments to the rights of holders of Minerals
Stock with respect to voting, exchanges and liquidation,
including initially increasing the number of votes per share
of Minerals Stock from one vote per share to 1.5 votes per
share (which adjustment is intended to ensure that the
holders of Minerals Stock have the same aggregate voting
power immediately following implementation of the
Transaction as they did prior thereto);
redesignate each outstanding share of Services Stock as one
share of Brink's Stock;
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approve the distribution to holders of Services Stock of one
half of one share of Burlington Stock for each outstanding
share of Services Stock; and
approve certain related actions adjusting the Company's
stock option and employee benefit plans and outstanding
stock options.
IF THE BRINK'S STOCK PROPOSAL IS NOT ADOPTED BY SHAREHOLDERS,
SERVICES STOCK WILL NOT BE REDESIGNATED AS BRINK'S STOCK,
BURLINGTON STOCK WILL NOT BE CREATED AND DISTRIBUTED, NO
AMENDMENTS TO THE ARTICLES OF INCORPORATION WILL BE MADE, THE
RELATED STOCK OPTION AND EMPLOYEE BENEFIT PLANS AND OUTSTANDING
STOCK OPTIONS WILL NOT BE AMENDED OR ADJUSTED PURSUANT TO THE
BRINK'S STOCK PROPOSAL AND THE DIVIDEND POLICY CONTEMPLATED BY
THE BRINK'S STOCK PROPOSAL WILL NOT BE IMPLEMENTED.
REASONS FOR THE BRINK'S
STOCK PROPOSAL............................. Brink's Stock and Burlington Stock are designed to reflect the
separate performance of the Company's security services and home
security businesses in the case of Brink's Stock, and its global
freight transportation and logistics management services
business in the case of Burlington Stock. The Proposal is
intended to enhance shareholder value by creating two separately
traded securities, one of which will be linked to the Company's
higher growth security services and home security business, and
the other will represent a targeted investment in the global
transportation business. Holders of Services Stock will have the
ability to retain or sell either or both securities depending
upon their investment objectives. Separate equity securities
could also afford increased flexibility to raise capital and/or
make acquisitions for the Brink's Group and the Burlington
Group, respectively, with an equity security related
specifically to that Group. The Proposal is also designed to
create separate equity securities which will provide enhanced
management incentive programs tied more directly to the business
results and stock price performance of the Group in which
management is employed. The Proposal is designed to have no
adverse effect on the holders of the Company's Minerals Stock
and Preferred Stock.
RECOMMENDATION OF THE BOARD.................. THE BOARD HAS UNANIMOUSLY APPROVED THE BRINK'S STOCK PROPOSAL AND
BELIEVES THAT ITS ADOPTION IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD RECOMMENDS
THAT ALL SHAREHOLDERS VOTE IN FAVOR OF THE ADOPTION OF THE
PROPOSAL.
RISK FACTORS................................. When evaluating the Brink's Stock Proposal, shareholders of the
Company should be aware of the factors set forth below, which
are more fully described in 'The Brink's Stock Proposal -- Risk
Factors'.
Financial Impacts of One Group Could Affect the Other Groups.
Although Brink's Stock and Burlington Stock are designed to
reflect the operations of Pittston Brink's Group and Pittston
Burlington Group, respectively, and Minerals Stock will continue
to reflect the operations of Pittston Minerals Group, holders of
Brink's Stock, Burlington Stock and Minerals Stock will be
shareholders of
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6
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<S> <C>
the Company, which will continue to be responsible for all its
liabilities. Financial developments affecting Pittston Brink's
Group, Pittston Burlington Group or Pittston Minerals Group that
affect the Company's financial condition could affect the
results of operations and the financial condition of all three
Groups. In addition, any net losses of Pittston Brink's Group,
Pittston Burlington Group or Pittston Minerals Group will reduce
the legally available funds of the Company available for the
payment of dividends on each of Brink's Stock, Burlington Stock
and Minerals Stock. Accordingly, the financial information of
each of the Groups must be read in conjunction with the
Company's consolidated financial information.
In addition, since Pittston Brink's Group and Pittston Burlington
Group will be distinct Groups with separate financial
statements, an event affecting one Group which might not have
been material to Pittston Services Group could be material with
respect to that Group and could adversely affect that Group's
results of operations. Since financial developments within one
Group can affect other Groups, all shareholders of the Company
could be adversely affected by any such event.
No Prior Market for Brink's Stock or Burlington Stock; Relative
Prices To Be Determined by the Market. Although Services Stock
has been publicly traded on the NYSE since July 1993, there has
been no prior market for either Brink's Stock or Burlington
Stock. As a result, there can be no assurance as to the
liquidity of the trading markets that will develop for Brink's
Stock or Burlington Stock or that the combined market values of
Brink's Stock and Burlington Stock held by a shareholder of
Services Stock will equal or exceed the market value of Services
Stock held by such shareholder prior to the Company's
announcement of the Transaction, and such combined market values
could be less than such market value of Services Stock. In
addition, until an orderly market develops for Brink's Stock and
Burlington Stock, their respective trading prices may fluctuate
significantly.
Voting Power; Effects on Holders of Brink's Stock and Burlington
Stock. When holders of Brink's Stock, Burlington Stock and
Minerals Stock vote together as a single voting group, the
holders of one class of common stock may be in a position to
control the outcome of such vote if such class has more than the
required number of votes. Initially, holders of Brink's Stock,
Burlington Stock and Minerals Stock will have approximately 55%,
28% and 17%, respectively, of the total voting power of all the
outstanding shares of all classes of common stock. The voting
rights of holders of Minerals Stock will be adjusted such that
the aggregate voting power of holders of Minerals Stock will be
unchanged as a result of the Brink's Stock Proposal. Brink's
Stock will have one vote per share at all times. Immediately
following the consummation of the Transaction, Burlington Stock
will have one vote per share, and Minerals Stock will have 1.5
votes per share, in either case subject to adjustment on January
1, 1996, and on January 1 every two years thereafter in such a
manner that each class' share of the aggregate voting power at
such time will be equal to that class' share of the Company's
aggregate market capitalization at such time. While the
aggregate voting power of holders of Minerals Stock will be
unaffected by the Brink's Stock Proposal, such voting power is
expected to decrease, independent
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7
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<S> <C>
of the Brink's Stock Proposal, on January 1, 1996 (the first
adjustment date) based upon the current market value of Minerals
Stock relative to the current market value of Services Stock. In
addition, the voting power of Minerals Stock could be further
affected in the event that the combined market values of Brink's
Stock and Burlington Stock exceed the market value of Services
Stock. See 'Price Range of Services Stock and Minerals Stock and
Dividends'.
Subject to NYSE rules governing the issuance of additional shares
of any class of common stock, no Group voting separately will
have the right under Virginia law to approve the issuance of
additional shares of its class of common stock. Since holders of
Brink's Stock, Burlington Stock and Minerals Stock generally
vote together as a single voting group, any issuance of shares
of any class requiring shareholder approval under NYSE rules
will require approval by holders of Brink's Stock, Burlington
Stock and Minerals Stock voting together. See 'Description of
Brink's Stock, Burlington Stock and Minerals Stock -- Voting'.
Fiduciary Duties of the Board; No Definitive Precedent Under
Virginia Law. Under principles of Virginia law, each member of
the Board must act in accordance with his good faith business
judgment of the best interests of the Company, taking into
consideration the interests of all shareholders regardless of
class. However, the Company is not aware of any precedent under
Virginia law concerning the manner in which such principles
would be applied in the context of the capital structure
contemplated by the Brink's Stock Proposal.
Potential Conflicts of Interest. The existence of separate classes
of common stock of the Company may give rise to occasions when
the interests of the holders of Brink's Stock, Burlington Stock
and Minerals Stock may diverge or appear to diverge. For
example, such conflicts could arise with respect to the payment
of dividends on the respective classes of common stock,
decisions with respect to the repurchase of shares, the exchange
of outstanding shares of Burlington Stock or Minerals Stock for
shares of Brink's Stock and the disposition of assets of
Pittston Burlington Group, Pittston Minerals Group or Pittston
Brink's Group. The Board will resolve any conflicts in
accordance with its good faith business judgment of the
Company's best interests.
DIVIDEND POLICY.............................. The Company has most recently paid dividends on its Services Stock
at the annual rate of $0.20 per share, payable quarterly. If the
Brink's Stock Proposal is adopted, the Board initially intends
to pay dividends on Brink's Stock at an initial annual rate of
$0.10 per share and on Burlington Stock at an initial annual
rate of $0.24 per share, payable quarterly, which, after giving
effect to the Transaction, would be equivalent to an annual
dividend of $0.22 per share of Services Stock. The Board has the
discretion to reduce these intended dividends, or to pay no
dividends at all. The Board intends to continue its existing
policies with respect to the declaration and payment of
dividends on Minerals Stock.
The Board intends to declare and pay dividends on Brink's Stock
and Burlington Stock based primarily upon the earnings,
financial condition, cash flow and business requirements of
Pittston Brink's Group and Pittston
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8
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<TABLE>
<S> <C>
Burlington Group, respectively. Since the Company remains
subject to Virginia law limitations on dividends and to dividend
restrictions in its public debt and bank credit agreements,
losses by one Group could affect the Company's ability to pay
dividends in respect of stock relating to another Group. For
information concerning restrictions on the funds from which
dividends on Brink's Stock, Burlington Stock and Minerals Stock
may be paid, see 'The Brink's Stock Proposal -- Dividend Policy'
and 'Description of Brink's Stock, Burlington Stock and Minerals
Stock -- Dividends'.
DESCRIPTION OF BRINK'S STOCK,
BURLINGTON STOCK
AND MINERALS STOCK......................... Dividends. Dividends on Brink's Stock and Burlington Stock will be
limited as prescribed by Virginia law and are also restricted by
covenants in the Company's public debt indenture and bank credit
agreements, the most restrictive of which would have allowed, as
of June 30, 1995, dividends of up to $201 million to have been
paid on all classes of capital stock.
The dividend policies and limitations applicable to Minerals Stock
will not be altered by the Brink's Stock Proposal.
Exchange. The Brink's Stock Proposal will permit the Company, at
any time, to exchange each outstanding share of Burlington Stock
for shares of Brink's Stock (or, if no Brink's Stock is then
outstanding, Minerals Stock) having a Fair Market Value (as
defined at page 39) equal to 115% of the Fair Market Value of
one share of Burlington Stock. In addition, upon the disposition
of all or substantially all of the properties and assets of
Pittston Burlington Group to any person (with certain excep-
tions), the Company is required to exchange each outstanding
share of Burlington Stock for shares of Brink's Stock (or, if no
Brink's Stock is then outstanding, Minerals Stock) having a Fair
Market Value equal to 115% of the Fair Market Value of one share
of Burlington Stock.
The Company will also have the right, at any time, to exchange
each outstanding share of Minerals Stock, which was previously
subject to exchange for shares of Services Stock, for shares of
Brink's Stock (or, if no Brink's Stock is then outstanding,
Burlington Stock) having a Fair Market Value equal to 115% of
the Fair Market Value of one share of Minerals Stock. In
addition, upon the disposition of all or substantially all of
the properties and assets of Pittston Minerals Group to any
person (with certain exceptions), the Company is required to
exchange each outstanding share of Minerals Stock for shares of
Brink's Stock (or, if no Brink's Stock is then outstanding,
Burlington Stock) having a Fair Market Value equal to 115% of
the Fair Market Value of one share of Minerals Stock. If any
shares of the Company's Preferred Stock are converted after an
exchange of Minerals Stock for Brink's Stock (or Burlington
Stock), the holder of such Preferred Stock would, upon conver-
sion, receive shares of Brink's Stock (or Burlington Stock) in
lieu of shares of Minerals Stock otherwise issuable upon such
conversion.
The ability to effect such exchanges provides the Company with
flexibility to alter its capital structure if warranted by
future facts and circumstances. Shares of Brink's Stock are not
subject to either optional or mandatory exchange.
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9
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The net proceeds of any disposition of properties and assets of
Pittston Brink's Group will be attributed to Pittston Brink's
Group. In the case of a disposition of all or substantially all
the properties and assets of any other Group, the net proceeds
will be attributed to the Group the shares of which have been
issued in exchange for shares of the disposing Group.
Voting. The Brink's Stock Proposal provides that holders of
Brink's Stock will at all times have one vote per share, and
initially holders of Burlington Stock and Minerals Stock will
have one and 1.5 votes per share, respectively. The votes of
holders of Burlington Stock and Minerals Stock will be subject
to adjustment on January 1, 1996, and on January 1 every two
years thereafter in such a manner that each class' share of the
aggregate voting power at such time will be equal to that class'
share of the Company's aggregate market capitalization at such
time. Accordingly, on each adjustment date, each share of
Burlington Stock and Minerals Stock may have more than, less
than or continue to have the number of votes per share as they
initially will have following the implementation of the
Transaction. While the aggregate voting power of holders of
Minerals Stock will be unaffected by the Brink's Stock Proposal,
the aggregate voting power of the Minerals Stock is expected to
decrease on January 1, 1996 (the first adjustment date) based
upon the current market value of Minerals Stock relative to the
current market value of Services Stock. Holders of Brink's
Stock, Burlington Stock and Minerals Stock will vote together as
a single voting group on all matters as to which all common
shareholders are entitled to vote. The voting rights of the
Preferred Stock are not affected by the Brink's Stock Proposal.
As prescribed by Virginia law, certain amendments to the Articles
of Incorporation affecting, among other things, the designation,
rights, preferences or limitations of one class of stock, or
certain mergers or statutory share exchanges, must be approved
by the holders of such class of stock, voting as a separate
voting group, and, in certain circumstances, may also have to be
approved by the holders of the other classes of stock, voting as
separate voting groups.
Liquidation. Under the Brink's Stock Proposal, in the event of a
dissolution, liquidation or winding up of the Company, the
holders of Brink's Stock, Burlington Stock and Minerals Stock
will share on a per share basis an aggregate amount equal to
55%, 28% and 17%, respectively, of the funds, if any, remaining
for distribution to the common shareholders, subject to
adjustment as described below. In the case of Minerals Stock,
such percentage has been set, using a nominal number of shares
of Minerals Stock of (the 'Nominal Shares') in excess of
the actual number of shares of Minerals Stock outstanding, to
ensure that the holders of Minerals Stock are entitled to the
same share of any such funds immediately following the
implementation of the Transaction as they were prior thereto.
These liquidation percentages are subject to adjustment in the
future based upon the total number of shares of Brink's Stock,
Burlington Stock and Minerals Stock, as the case may be, then
outstanding compared to the total number of shares of all
classes of common stock then outstanding (which totals,
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10
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in the case of Minerals Stock, shall include the Nominal
Shares).
NYSE LISTING................................. Subject to shareholder approval, the NYSE has approved the
redesignation of Services Stock as Brink's Stock and the
distribution of Burlington Stock and their listing under the
symbols 'PZB' and 'PZX', respectively, subject to official
notice of issuance. For further information, see 'The Brink's
Stock Proposal -- Stock Exchange Listings'.
DISSENTERS' RIGHTS........................... Under the Virginia Stock Corporation Act, no shareholders have
dissenters' rights in connection with the Brink's Stock
Proposal.
TAX CONSIDERATIONS........................... The Company has been advised by tax counsel that no gain or loss
will be recognized by the shareholders or the Company in
connection with the Transaction; however, there are no court
decisions bearing directly on the Brink's Stock Proposal and the
Internal Revenue Service has had under study since 1987 the
Federal income tax consequences of transactions similar to the
Brink's Stock Proposal. See 'The Brink's Stock
Proposal -- Certain Federal Income Tax Considerations'.
FRACTIONAL SHARES............................ Fractional shares of Burlington Stock will not be issued. If the
number of shares of Burlington Stock to be issued to any holder
of Services Stock includes a fraction of a whole share, the
Company will pay to such holder, within 60 trading days after
the Effective Date, the cash value of such fractional share
based on the average of the high and low sales prices of
Burlington Stock during the first three trading days following
the Effective Date.
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SUMMARY COMPARISON OF TERMS OF EXISTING COMMON STOCK
WITH TERMS OF BRINK'S STOCK, BURLINGTON STOCK AND MINERALS STOCK
The following summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Proxy Statement. See 'The Brink's Stock Proposal'. Capitalized
terms used in this Summary have the respective meanings ascribed to them
elsewhere in this Proxy Statement. See Annex I -- Glossary of Certain Terms.
<TABLE>
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EXISTING COMMON STOCK BRINK'S STOCK PROPOSAL
------------------------------------------ ----------------------------------------------------------------
PITTSTON SERVICES PITTSTON MINERALS PITTSTON BRINK'S PITTSTON BURLINGTON PITTSTON MINERALS
GROUP GROUP GROUP GROUP GROUP
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
-------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Business: Security services Coal and minerals Security services Global freight Coal and minerals
and home security businesses through and home security transportation and businesses through
businesses through Pittston Coal Compa- businesses through logistics management Pittston Coal Compa-
Brink's, ny and Pittston Brink's, services through ny and Pittston
Incorporated and Mineral Ventures. Incorporated and Burlington Air Mineral Ventures.
Brink's Home Se- Brink's Home Se- Express Inc.
curity, Inc. and curity, Inc.
global freight
transportation and
logistics manage-
ment services
through Burlington
Air Express Inc.
Distribution: -- -- Existing shares of Shareholders of Ser- --
Services Stock will vices Stock will re-
be redesignated as ceive a distribution
Brink's Stock on a of one-half of one
share-for-share share of Burlington
basis. Stock for each share
of Services Stock.
Number of Shares
Outstanding as of
November , 1995: (based on the number (based on the number
of shares of of shares of
Services Stock out- Services Stock out-
standing as of standing as of
November , 1995). November , 1995).
Number of Authorized
Shares: 100,000,000 20,000,000 100,000,000 50,000,000 20,000,000
Voting Rights: Holders of Services Holders of Minerals Except as otherwise Except as otherwise Except as otherwise
Stock generally vote Stock generally vote described herein, described herein, described herein,
with holders of with holders of Ser- holders of Brink's holders of holders of Minerals
Minerals Stock as a vices Stock as a Stock will vote with Burlington Stock Stock will vote with
single voting group. single voting group. holders of will vote with holders of Brink's
Services Stock has Minerals Stock has Burlington Stock and holders of Brink's Stock and Burlington
one vote per share. one vote per share, Minerals Stock as a Stock and Minerals Stock as a single
subject to single voting group. Stock as a single voting group.
adjustment on Janua- Brink's Stock will voting group. Minerals Stock will
ry 1, 1996, and on have one vote per Burlington Stock have 1.5 votes per
January 1 every two share. will have one vote share (which
years thereafter per share, subject adjustment is
based upon the to adjustment on necessary so that
relative Fair Mar- January 1, 1996, and Minerals Stock has
ket Values (as on each January 1 the same aggregate
defined at page 34) every two years voting
of one share of thereafter in such a power immediately
Minerals Stock and manner that following the imple-
one share of Burlington Group's mentation of the
Services Stock. share of the Transaction as it
aggregate voting did prior thereto),
power at such time subject to
will be equal to its adjustment on Jan-
relative share of uary 1, 1996, and on
the Company's aggre- each January 1 every
gate market two years thereafter
capitalization at in such a manner
such time. that Minerals
Group's share of the
aggregate voting
power at such time
will be equal to its
relative share of
the Company's aggre-
gate market
capitalization at
such time.
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12
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<CAPTION>
EXISTING COMMON STOCK BRINK'S STOCK PROPOSAL
------------------------------------------ ----------------------------------------------------------------
PITTSTON SERVICES PITTSTON MINERALS PITTSTON BRINK'S PITTSTON BURLINGTON PITTSTON MINERALS
GROUP GROUP GROUP GROUP GROUP
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
-------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Dividends: The Company cur- The Company cur- The Company cur- The Company cur- Unchanged from that
rently pays rently pays rently intends to rently intends to applicable to
dividends on dividends on pay an initial pay an initial existing Minerals
Services Stock at an Minerals Stock at an dividend on Brink's dividend on Stock.
annual rate of $0.20 annual rate of $0.65 Stock at an annual Burlington Stock at
per share, payable per share, payable rate of $0.10 per an annual rate of
quarterly, at the quarterly, at the share, payable $0.24 per share,
discretion of the discretion of the quarterly. payable quarterly.
Board based Board based Thereafter, Thereafter,
primarily upon the primarily upon the dividends on Brink's dividends on
earnings, financial earnings, financial Stock will be paid Burlington Stock
condition, cash flow condition, cash flow at the discretion of will be paid at the
and business re- and business re- the Board based discretion of the
quirements of quirements of primarily upon the Board based pri-
Pittston Services Pittston Minerals earnings, financial marily upon the
Group. Group. Dividends are condition, cash flow earnings, financial
payable out of the and business re- condition, cash flow
lesser of (i) all quirements of and business
funds of the Company Pittston Brink's requirements of
legally available Group. Pittston Burlington
for the payment of Group.
dividends and (ii)
the Available
Minerals Dividend
Amount.
Exchanges: None. The Company may, at None. The Company may, at The Company may, at
any time, exchange any time, exchange any time, exchange
each outstanding each outstanding each outstanding
share of Minerals share of Burlington share of Minerals
Stock for shares of Stock for shares of Stock for shares of
Services Stock Brink's Stock (or, Brink's Stock (or,
having a Fair Market if no Brink's Stock if no Brink's Stock
Value (as defined at is then outstanding, is then outstanding,
page 34) equal to Minerals Stock) Burlington Stock)
115% of the Fair having a Fair Market having a Fair Market
Market Value of one Value equal to 115% Value equal to 115%
share of Minerals of the Fair Market of the Fair Market
Stock. In addition, Value of one share Value of one share
if the Company sells of Burlington Stock. of Minerals Stock.
all or substantially In addition, if the In addition, if the
all of the Company sells all or Company sells all or
properties and substantially all of substantially all of
assets of Pittston the properties and the properties and
Minerals Group, the assets of Pittston assets of Pittston
Company must Burlington Group, Minerals Group, the
exchange each the Company must Company must ex-
outstanding share of exchange each change each
Minerals Stock for outstanding share of outstanding share of
shares of Services Burlington Stock for Minerals Stock for
Stock having a Fair shares of Brink's shares of Brink's
Market Value equal Stock (or, if no Stock (or, if no
to 115% of the Fair Brink's Stock is Brink's Stock is
Market Value of one then outstanding, then outstanding,
share of Minerals Minerals Stock) Burlington Stock)
Stock. having a Fair Market having a Fair Market
Value equal to 115% Value equal to 115%
of the Fair Market of the Fair Market
Value of one share Value of one share
of Burlington Stock. of Minerals Stock.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXISTING COMMON STOCK BRINK'S STOCK PROPOSAL
------------------------------------------ ----------------------------------------------------------------
PITTSTON SERVICES PITTSTON MINERALS PITTSTON BRINK'S PITTSTON BURLINGTON PITTSTON MINERALS
GROUP GROUP GROUP GROUP GROUP
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
-------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Liquidation: In the event of the In the event of the In the event of the In the event of the In the event of the
liquidation of the liquidation of the liquidation of the liquidation of the liquidation of the
Company, holders of Company, holders of Company, holders of Company, holders of Company, holders of
Services Stock will Minerals Stock will Brink's Stock will Burlington Stock Minerals Stock will
share the funds, if share the funds, if initially share on a will initially share initially share on a
any, remaining for any, remaining for per share basis an on a per share basis per share basis an
distribution to distribution to aggregate amount an aggregate amount aggregate amount
common shareholders common shareholders equal to equal to equal to
on a per share basis on a per share basis approximately 55% of approximately 28% of approximately 17% of
in proportion to the in proportion to the the funds, if any, the funds, if any, the funds, if any,
total number of total number of remaining for remaining for remaining for
shares of Services shares of Minerals distribution to distribution to distribution to
Stock then outstand- Stock then outstand- common shareholders, common shareholders, common shareholders.
ing to the total ing to the total which percentage which percentage Such percentage has
number of shares of number of shares of shall be subject to shall be subject to been set to ensure
all classes of all classes of adjustment in the adjustment in the that the holders of
common stock then common stock then future based upon future based on the Minerals Stock are
outstanding (which outstanding (which the total number of total number of entitled to the same
as of the Record as of the Record shares of Brink's shares of Burlington share of any such
Date represents a Date represents a Stock then outstand- Stock then outstand- funds immediately
share of approxi- share of approxi- ing as compared to ing as compared to following the con-
mately 83% of such mately 17% of such the total number of the total number of summation of the
funds). funds). shares of all shares of all Transaction as they
classes of common classes of common were prior thereto.
stock then stock then Thereafter, the
outstanding outstanding Minerals Stock's
(including the (including the share of such funds
Nominal Shares). Nominal Shares). shall be subject to
adjustment in the
future based on the
total number of
shares of Minerals
Stock then outstand-
ing (including the
Nominal Shares) as
compared to the
total number of
shares of all
classes of common
stock then
outstanding
(including the Nomi-
nal Shares).
Listing: NYSE under the sym- NYSE under the sym- NYSE under the sym- NYSE under the sym- NYSE under the sym-
bol 'PZS'. bol 'PZM'. bol 'PZB'. bol 'PZX'. bol 'PZM'.
</TABLE>
14
<PAGE>
PRICE RANGE OF SERVICES STOCK AND MINERALS STOCK AND DIVIDENDS
Services Stock and Minerals Stock have been listed on the NYSE since July
6, 1993. The following table sets forth the range of high and low sales prices
of Services Stock and Minerals Stock on the NYSE Composite Tape ('Composite
Tape') and the quarterly cash dividends declared and paid per share of Services
Stock and Minerals Stock, since that time.
<TABLE>
<CAPTION>
PER SHARE OF SERVICES STOCK PER SHARE OF MINERALS STOCK
----------------------------- -----------------------------
FISCAL YEAR ENDED CASH CASH
DECEMBER 31 HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- --------------------------------------------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1993
Third Quarter (commencing July 6)............. $22.00 $14.50 $0.05 $24.50 $11.50 $ .1625
Fourth Quarter................................ 29.75 21.00 0.05 24.25 20.50 .1625
1994
First Quarter................................. 31.25 21.38 0.05 30.50 17.50 .1625
Second Quarter................................ 31.13 21.63 0.05 22.00 17.25 .1625
Third Quarter................................. 31.25 27.00 0.05 24.25 17.75 .1625
Fourth Quarter................................ 29.00 23.13 0.05 26.38 20.63 .1625
1995
First Quarter................................. 27.75 23.75 0.05 26.00 17.25 .1625
Second Quarter................................ 29.50 22.50 0.05 18.13 9.50 .1625
Third Quarter (through November , 1995)..... -- -- -- -- -- --
</TABLE>
On September 14, 1995, the day before the public announcement of the
Brink's Stock Proposal, the last reported sales prices of Services Stock and
Minerals Stock on the Composite Tape were $27.00 per share and $11.875 per
share, respectively. On November , 1995, the last full day before the printing
of this Proxy Statement, the last reported sales prices of Services Stock and
Minerals Stock on the Composite Tape were $ per share and $ per
share, respectively. On November , 1995, there were approximately
holders of record of Services Stock, approximately holders of
record of Minerals Stock and approximately beneficial owners of Preferred
Stock.
15
<PAGE>
PITTSTON BRINK'S GROUP
SELECTED FINANCIAL DATA
The following Selected Financial Data reflect the results of operations and
financial position of the businesses which comprise Pittston Brink's Group and
should be read in connection with the Pittston Brink's Group's financial
statements set forth in Annex V hereto. The financial information of the
Pittston Brink's Group, Pittston Burlington Group and Pittston Minerals Group
supplements the consolidated financial information of the Company and, taken
together, includes all accounts which comprise the corresponding consolidated
financial information of the Company.
FIVE YEARS IN REVIEW
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-----------------------------
1995 1994
------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C>
Sales and Income:
Operating revenues........................................................ $ 365,006 $304,654
Income before extraordinary credit and cumulative effect of accounting
changes................................................................. 21,511(b) 16,951(b)
Extraordinary credit...................................................... -- --
Cumulative effect of accounting changes................................... -- --
Net income................................................................ $ 21,511(b) $ 16,951(b)
Financial Position:
Net property, plant and equipment......................................... $ 191,889 $165,244
Total assets.............................................................. 437,637 392,123
Long-term debt, less current maturities................................... 6,971 10,737
Shareholder's equity...................................................... $ 231,322 $192,284
Pro Forma Financial Information (unaudited)(a):
Average Pittston Brink's Group Common Shares outstanding(a)............... 37,912 37,715
Pittston Brink's Group Common Shares outstanding(a)....................... 41,571 41,567
Per Pittston Brink's Group Common Share(a):
Income before extraordinary credit and cumulative effect of accounting
changes................................................................. $ .57(b) $ .45(b)
Extraordinary credit...................................................... -- --
Cumulative effect of accounting changes................................... -- --
Net income................................................................ .57(b) $ .45(b)
Cash dividends............................................................ .05 .05
Book value................................................................ $ 6.11 $ 5.09
</TABLE>
16
<PAGE>
PITTSTON BRINK'S GROUP
SELECTED FINANCIAL DATA (CONTINUED)
FIVE YEARS IN REVIEW
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1994 1993 1992 1991 1990
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales and Income:
Operating revenues..................... $656,993 $570,953 $514,823 $471,353 $428,921
Income before extraordinary credit and
cumulative effect of accounting
changes.............................. 41,489(b) 31,650(b) 23,953(b) 14,919 13,027
Extraordinary credit................... -- -- -- -- 5,574
Cumulative effect of accounting
changes.............................. -- -- -- (1,019)(c) --
Net income.................................. $ 41,489(b) $ 31,650(b) $ 23,953(b) $ 13,900 $ 18,601
Financial Position:
Net property, plant and equipment...... $180,930 $156,976 $142,648 $131,614 $126,039
Total assets........................... 426,887 377,923 347,015 318,109 294,286
Long-term debt, less current
maturities........................... 7,990 12,649 22,734 28,411 35,125
Shareholder's equity................... $215,531 $175,219 $147,582 $136,562 $ 80,092
Pro Forma Financial Information
(unaudited)(a):
Average Pittston Brink's Group Common
Shares outstanding(a)................ 37,784 36,907 37,081 37,284 37,282
Pittston Brink's Group Common Shares
outstanding(a)....................... 41,595 41,429 40,533 37,317 37,278
Per Pittston Brink's Group Common Share(a):
Income before extraordinary credit and
cumulative effect of accounting
changes.............................. $ 1.10(b) $ .86(b) $ .65(b) $ .40 $ .35
Extraordinary credit................... -- -- -- -- .15
Cumulative effect of accounting
changes.............................. -- -- -- (.03)(c) --
Net income............................. 1.10(b) .86(b) .65(b) .37 .50
Cash dividends......................... .09 .09 .07 .05 .05
Book value............................. $ 5.70 $ 4.66 $ 4.03 $ 3.66 $ 2.15
</TABLE>
- ------------
(a) All share and per share data presented assume the completion of the Brink's
Stock Proposal transaction. The number of shares of Brink's Stock is
assumed to be the same as the total corresponding number of shares of
Services Stock. Shares outstanding at the end of the period include shares
outstanding under the Company's Employee Benefits Trust of 3,684 shares and
3,793 shares at June 30, 1995 and 1994, respectively, and 3,779 shares,
3,854 shares and 3,951 shares at December 31, 1994, 1993 and 1992,
respectively. Average shares outstanding do not include these shares.
Dividends paid by the Company have been attributed to the Pittston Brink's
Group in relation to the initial dividend to be paid on the Brink's Stock.
Book value per share is calculated based on the number of shares assumed to
be outstanding at the end of the period, excluding shares outstanding under
the Company's Employee Benefits Trust.
(b) As of January 1, 1992, Brink's Home Security, Inc. ('BHS') elected to
capitalize categories of costs not previously capitalized for home security
installations to more accurately reflect subscriber installation costs. The
effect of this change in accounting principle was to increase income before
extraordinary credit and cumulative effect of accounting changes and net
income by $1,171 or $.03 per share in the first six months of 1995, $1,292
or $.03 per share in the first six months of 1994, $2,486 or $.07 per share
in 1994, $2,435 or $.07 per share in 1993 and $2,596 or $.07 per share in
1992.
(c) As of January 1, 1991, the Pittston Brink's Group adopted Statement of
Financial Accounting Standards No. 106, 'Employers' Accounting for
Postretirement Benefits Other Than Pensions', and Statement of Financial
Accounting Standards No. 109, 'Accounting for Income Taxes'.
17
<PAGE>
PITTSTON BURLINGTON GROUP
SELECTED FINANCIAL DATA
The following Selected Financial Data reflect the results of operations and
financial position of the businesses which comprise Pittston Burlington Group
and should be read in connection with the Pittston Burlington Group's financial
statements set forth in Annex VII hereto. The financial information of the
Pittston Burlington Group, Pittston Brink's Group and Pittston Minerals Group
supplements the consolidated financial information of the Company and, taken
together, includes all accounts which comprise the corresponding consolidated
financial information of the Company.
FIVE YEARS IN REVIEW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------
1995 1994
-------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C>
Sales and Income:
Operating revenues................................................................ $665,894 $563,750
Income (loss) before extraordinary credit and cumulative effect of accounting
changes.......................................................................... 12,058 14,848
Extraordinary credit.............................................................. -- --
Cumulative effect of accounting changes........................................... -- --
Net income........................................................................ $ 12,058 $ 14,848
Financial Position:
Net property, plant and equipment................................................. $ 62,629 $ 36,735
Total assets...................................................................... 551,623 455,735
Long-term debt, less current maturities........................................... 49,689 38,964
Shareholder's equity.............................................................. $252,628 $217,989
Pro Forma Financial Information (unaudited)(a):
Average Pittston Burlington Group Common Shares outstanding(a).................... 18,956 18,858
Pittston Burlington Group Common Shares outstanding(a)............................ 20,786 20,784
Per Pittston Burlington Group Common Share(a):
Income (loss) before extraordinary credit and cumulative effect of accounting
changes.......................................................................... $ .64 $ .79
Extraordinary credit.............................................................. -- --
Cumulative effect of accounting changes........................................... -- --
Net income........................................................................ .64 .79
Cash dividends.................................................................... .11 .11
Book value........................................................................ $ 13.34 $ 11.54
</TABLE>
18
<PAGE>
PITTSTON BURLINGTON GROUP
SELECTED FINANCIAL DATA (CONTINUED)
FIVE YEARS IN REVIEW
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1994 1993 1992 1991 1990
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales and Income:
Operating revenues......................... $1,215,284 $998,079 $900,347 $830,955 $823,588
Income (loss) before extraordinary credit
and cumulative effect of accounting
changes.................................. 38,356 15,476 3,324 5,922 (1,391)
Extraordinary credit....................... -- -- -- -- 5,573
Cumulative effect of accounting changes.... -- -- -- 1,330(b) --
Net income................................. $ 38,356 $ 15,476 $ 3,324 $ 7,252 $ 4,182
Financial Position:
Net property, plant and equipment.......... $ 44,442 $ 31,100 $ 27,088 $ 29,169 $ 32,112
Total assets............................... 521,516 432,236 424,023 413,864 425,018
Long-term debt, less current maturities.... 41,906 45,460 68,474 43,551 69,584
Shareholder's equity....................... $ 240,880 $203,150 $181,576 $223,251 $277,766
Pro Forma Financial Information (unaudited)(a):
Average Pittston Burlington Group Common
Shares outstanding(a).................... 18,892 18,454 18,541 18,642 18,641
Pittston Burlington Group Common Shares
outstanding(a)........................... 20,798 20,715 20,267 18,659 18,639
Per Pittston Burlington Group Common Share(a):
Income (loss) before extraordinary credit
and cumulative effect of accounting
changes.................................. $ 2.03 $ .84 $ .18 $ .32 $ (.07)
Extraordinary credit....................... -- -- -- -- .29
Cumulative effect of accounting changes.... -- -- -- .07(b) --
Net income................................. 2.03 .84 .18 .39 .22
Cash dividends............................. .22 .21 .17 .13 .13
Book value................................. $ 12.74 $ 10.81 $ 9.93 $ 11.96 $ 14.90
</TABLE>
- ------------
(a) All share and per share data presented assume the completion of the Brink's
Stock Proposal transaction. The number of shares of Burlington Stock is
assumed to be one-half of the number of shares of the Services Stock.
Shares outstanding at the end of the period include shares outstanding
under the Company's Employee Benefits Trust of 1,842 shares and 1,897
shares at June 30, 1995 and 1994, respectively, and 1,890 shares, 1,927
shares and 1,976 shares at December 31, 1994, 1993 and 1992, respectively.
Average shares outstanding do not include these shares. Dividends paid by
the Company have been attributed to the Pittston Burlington Group in
relation to the initial dividend to be paid on the Burlington Stock. Book
value per share is calculated based on the number of shares assumed to be
outstanding at the end of the period, excluding shares outstanding under
the Company's Employee Benefits Trust.
(b) As of January 1, 1991, the Pittston Burlington Group adopted Statement of
Financial Accounting Standards No. 106, 'Employers' Accounting for
Postretirement Benefits Other Than Pensions', and Statement of Financial
Accounting Standards No. 109, 'Accounting for Income Taxes'.
19
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following Selected Financial Data reflect the results of operations and
financial position of the businesses which comprise the Company and should be
read in connection with the Company's financial statements set forth in Annex IX
hereto. The financial information of the Pittston Brink's Group, Pittston
Burlington Group and Pittston Minerals Group supplements the consolidated
financial information of the Company and, taken together, includes all accounts
which comprise the corresponding consolidated financial information of the
Company.
FIVE YEARS IN REVIEW
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
--------------------------------------------
1995 1994
-------------------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C>
Sales and Income:
Net sales and operating revenues...................................... $1,410,851 $1,247,295
Income (loss) before extraordinary credit and cumulative effect of
accounting changes.................................................. 37,497 (37,793)
Extraordinary credit.................................................. -- --
Cumulative effect of accounting changes............................... -- --
Net income (loss)..................................................... $ 37,497(b) (37,793)(b)
Financial Position:
Net property, plant and equipment..................................... $ 462,630 $ 419,286
Total assets.......................................................... 1,759,666 1,640,024
Long-term debt, less current maturities............................... 162,532 137,224
Shareholders' equity.................................................. $ 471,249 $ 392,891
Average Common Shares Outstanding(a):
Pittston Services Group............................................... 37,912 37,715
Pittston Minerals Group............................................... 7,764 7,565
Per Pittston Services Group Common Share(a):
Income before extraordinary credit and cumulative effect of accounting
changes............................................................. $ .89(b) $ .84(b)
Extraordinary credit.................................................. -- --
Cumulative effect of accounting changes............................... -- --
Net income............................................................ .89(b) .84(b)
Cash dividends........................................................ .10 .10
Book value............................................................ $ 12.77(c) $ 10.86(c)
Per Pittston Minerals Group Common Share(a):
Income (loss) before extraordinary credit and cumulative effect of
accounting changes.................................................. $ .51 $ (9.20)
Extraordinary credit.................................................. -- --
Cumulative effect of accounting changes............................... -- --
Net income (loss)..................................................... .51 (9.20)
Cash dividends........................................................ .3250 .3250
Book value............................................................ $ (10.18)(c) $ (12.45)(c)
</TABLE>
20
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA (CONTINUED)
FIVE YEARS IN REVIEW
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------------------------
1994 1993 1992 1991 1990
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales and Income:
Net sales and operating revenues... $2,667,275 $2,256,121 $2,073,041 $1,884,408(a) $1,806,050
Income (loss) before extraordinary
credit and cumulative effect of
accounting changes............... 26,897(b) 14,146(b) 49,087(b) (28,835) 46,192
Extraordinary credit............... -- -- -- -- 14,876
Cumulative effect of accounting
changes.......................... -- -- -- (123,017)(b) --
Net income (loss).................. $ 26,897(b) $ 14,146(b) $ 49,087(b) $ (151,852) $ 61,068
Financial Position:
Net property, plant and
equipment........................ $ 445,834 $ 369,821 $ 376,872 $ 332,232 $ 319,348
Total assets....................... 1,737,778 1,361,501 1,322,288 1,240,085 1,120,471
Long-term debt, less current
maturities....................... 138,071 58,388 91,208 71,962 110,709
Shareholders' equity............... $ 477,815 $ 353,512 $ 341,460 $ 316,515 $ 479,732
Average Common Shares Outstanding(a):
Pittston Services Group............ 37,784 36,907 37,081 37,284 37,282
Pittston Minerals Group............ 7,594 7,381 7,416 7,457 7,456
Per Pittston Services Group Common
Share(a):
Income before extraordinary credit
and cumulative effect of
accounting changes............... $ 2.11(b) $ 1.28(b) $ .74(b) $ .56 $ .31
Extraordinary credit............... -- -- -- -- .30
Cumulative effect of accounting
changes.......................... -- -- -- .01(d) --
Net income......................... 2.11(b) 1.28(b) .74(b) .57 .61
Cash dividends..................... .20 .1909 .1515 .1212 .1212
Book value......................... $ 12.07(c) $ 10.07(c) $ 9.00(c) $ 9.64 $ 9.60
Per Pittston Minerals Group Common
Share(a):
Income (loss) before extraordinary
credit and cumulative effect of
accounting changes............... $ (7.50) $ (4.47) $ 2.94 $ (6.66) $ 4.63
Extraordinary credit............... -- -- -- -- .50
Cumulative effect of accounting
changes.......................... -- -- -- (16.54)(c) --
Net income (loss).................. (7.50) (4.47) 2.94 (23.20) 5.13
Cash dividends..................... .65 .6204 .4924 .3939 .3939
Book value......................... $ (10.74)(c) $ (3.31)(c) $ 1.68(c) $ (5.80) $ 16.35
</TABLE>
(footnotes on next page)
21
<PAGE>
(footnotes from previous page)
(a) For purposes of computing net income (loss) per common share and book value
per share for Pittston Services Group and Pittston Minerals Group for the
periods prior to July 1, 1993, the number of shares of Services Stock is
assumed to be the same as the total corresponding number of shares of the
Company's common stock. The number of shares of Minerals Stock is assumed
to equal one-fifth of the number of shares of the Company's common stock.
The initial dividends on the Services Stock and Minerals Stock were paid on
September 1, 1993. Dividends paid by the Company prior to September 1,
1993, have been attributed to the Pittston Services and Pittston Minerals
Groups in relation to the initial dividends paid on the Services Stock and
Minerals Stock.
(b) As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security installations to more accurately
reflect subscriber installation costs. The effect of this change in
accounting principle was to increase income (loss) before extraordinary
credit and cumulative effect of accounting changes and net income (loss) of
the Company and the Pittston Services Group by $1,171 or $.03 per share of
Services Stock in the first six months of 1995, $1,292 or $.03 per share of
Services Stock in the first six months of 1994, $2,486 or $.07 per share of
Services Stock in 1994, $2,435 or $.07 per share of Services Stock in 1993
and $2,596 or $.07 per share of Services Stock in 1992.
(c) Calculated based on the number of shares outstanding at the end of the
period, excluding shares outstanding under the Company's Employee Benefits
Trust.
(d) As of January 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106, 'Employers' Accounting for Postretirement
Benefits Other Than Pensions', and Statement of Financial Accounting
Standards No. 109, 'Accounting for Income Taxes'.
22
<PAGE>
GENERAL
This statement is furnished in connection with the solicitation by the
Board of proxies from holders of Services Stock, Minerals Stock and Preferred
Stock to be voted at the Special Meeting of Shareholders to be held on December
, 1995, at 10:00 a.m., Eastern Standard Time, in the Company's executive
offices, Seventh Floor, 100 First Stamford Place, Stamford, Connecticut (and at
any adjournment thereof) for the purposes set forth in the accompanying Notice
of the Meeting.
On November , 1995, the Company had outstanding , shares of its
Services Stock, shares of its Minerals Stock and shares of its
Preferred Stock, the holders (or beneficial owners in the case of the Preferred
Stock) of each being entitled to one vote per share on all matters.
The close of business on November , 1995, has been fixed as the record
date for determining the shareholders entitled to notice of and to vote at the
Meeting, and only shareholders of record at the close of business on that date
will be entitled to vote at the Meeting and any adjournment thereof. This Proxy
Statement and the accompanying form of proxy are being mailed to shareholders
commencing on or about November , 1995. The address of the principal executive
offices of the Company is 100 First Stamford Place, P.O. Box 120070, Stamford,
Connecticut 06912-0070.
The Brink's Stock Proposal is the only matter which will be presented for
consideration at the Meeting. As to any other business that may properly come
before the Meeting, it is intended that proxies in the enclosed form will be
voted in respect thereof in accordance with the judgment of the person voting
the proxies.
The Company's bylaws provide that the chairman of the Meeting shall
determine the order of business at the Meeting and the voting and other
procedures to be observed. The chairman is authorized to declare whether any
business has been properly brought before the Meeting and business not properly
brought before the Meeting may not be transacted.
The shares represented by proxies solicited by the Board will be voted in
accordance with the recommendations of the Board unless otherwise specified in
the proxy, and where the person solicited specifies a choice with respect to any
matter to be acted upon, the shares will be voted in accordance with the
specification so made. A shareholder may appoint a person as proxy pursuant to a
proxy in a form different from that enclosed, provided such proxy is otherwise
in proper form.
The enclosed proxy is revocable at any time prior to its being voted by
filing an instrument of revocation or a duly executed proxy bearing a later
date. A proxy may also be revoked by attendance at the Meeting and voting in
person. Attendance at the Meeting will not by itself constitute a revocation.
Votes cast by shareholders will be treated as confidential in accordance
with a policy approved by the Board. Shareholder votes at the Meeting will be
tabulated by the Company's transfer agent, Chemical Mellon Shareholder Services.
THE BRINK'S STOCK PROPOSAL
GENERAL
The Brink's Stock Proposal will be presented to the Meeting by the Board.
Under the requirements of the Virginia Stock Corporation Act and the Company's
Restated Articles of Incorporation the Brink's Stock Proposal must receive the
affirmative vote of (1) holders of a majority of the outstanding shares of
Services Stock and Minerals Stock voting together as a single class; (2) holders
of a majority of the outstanding shares of Services Stock voting as a single
class; (3) holders of two-thirds of the outstanding shares of Minerals Stock
voting as a single class; and (4) beneficial owners of a majority of the
outstanding shares of Preferred Stock voting as a single class. Abstentions and
Broker Shares voted as to any matter presented at the Meeting will be included
in determining the number of votes present or represented at the meeting. Broker
Shares that are not voted on any matter presented at the Meeting will not be
included in determining the number of shares present or represented at the
Meeting and will have the effect of a negative vote as to such matter.
The holders of Services Stock, Minerals Stock and Preferred Stock are being
asked to consider the Brink's Stock Proposal which, if approved, would
constitute (a) the adoption of certain amendments to
23
<PAGE>
the Articles of Incorporation (a copy of which Articles of Amendment are annexed
to this Proxy Statement as Annex II) increasing the number of shares of
authorized common stock of the Company from 120 million to 170 million,
consisting of 100 million shares of Brink's Stock, 50 million shares of
Burlington Stock and 20 million shares of Minerals Stock, redesignating each
outstanding share of Services Stock as one share of Brink's Stock, establishing
the preferences, limitations and relative rights of Brink's Stock and Burlington
Stock and modifying certain provisions of the Preferred Stock to conform to the
existence of the Brink's Stock and the Burlington Stock; (b) the approval of the
distribution of one-half of one share of Burlington Stock for each outstanding
share of Services Stock; (c) certain adjustments to the current voting and
liquidation rights of Minerals Stock intended to assure their proportionate
continuation immediately following implementation of the proposal and (d) the
adoption of certain related amendments to, and the approval of certain actions
adjusting, the Company's stock option and employee benefit plans and outstanding
stock options.
Subject to approval of the Brink's Stock Proposal by shareholders, the
Board has authorized the distribution of Burlington Stock to holders of record
of outstanding Services Stock at the close of business on the Effective Date on
the basis of one-half of one share of Burlington Stock for each share of
outstanding Services Stock. Such distribution ratio was determined by the Board
in consultation with CS First Boston Corporation ('CS First Boston'), the
Company's financial advisor in connection with the Brink's Stock Proposal. The
methodology used to determine an appropriate distribution ratio assumed, first,
that one share of Burlington Stock would be distributed in respect of a certain
number of full shares of Brink's Stock (which in turn was based on redesignating
the Services Stock as Brink's Stock on a one-for-one basis). Second, CS First
Boston pointed out the desirability of having a liquid trading market for shares
of Burlington Stock and, hence, of distributing a sufficient number of shares of
Burlington Stock which would be consistent with a trading range that would not
involve legal or policy inhibitions on institutional investors relating to
low-priced equity shares, i.e., shares trading in single digit dollar amounts
per share. Third, using the accounting policies and attribution of assets and
liabilities described elsewhere in the Proxy Statement, the Company estimated
the net income of Pittston Burlington Group for 1995. Fourth, CS First Boston
determined the range of then current price-earnings multiples for publicly-held
air freight and logistics management services companies considered to be
comparable to Pittston Burlington Group. Finally, such estimated net income was
multiplied by such range of multiples to determine a range of numbers of shares
that would be consistent with the criteria set forth above.
The Company's estimate of the net income of Pittston Burlington Group for
1995 is inherently subject to numerous uncertainties affecting its predictive
value. Significant economic and competitive uncertainties and contingencies
which are beyond the Company's control may well cause the actual results of
Pittston Burlington Group for 1995 to be higher or lower than the estimate used
for this purpose. Moreover, the range of implied price-earnings multiples used
is also subject to numerous uncertainties, and actual multiples could be subject
to change as a result of governmental fiscal and monetary policies, competitors'
actions and other events affecting not only the air freight and logistics
management services industry but also the economy and financial markets
generally. SHAREHOLDERS SHOULD NOT, THEREFORE, RELY ON THE DISTRIBUTION RATIO
SELECTED AS ANY ASSURANCE THAT THE OBJECTIVES SOUGHT TO BE ACHIEVED WILL IN FACT
BE REALIZED. See 'Risk Factors -- No Prior Market for Brink's Stock or
Burlington Stock; Relative Prices to be Determined by the Market'.
CS First Boston advised the Company generally with regard to the terms and
structure of the Brink's Stock Proposal, and outlined the steps necessary to
implement the transaction. See ' Reasons for the Brink's Stock Proposal'.
IF THE BRINK'S STOCK PROPOSAL IS NOT ADOPTED BY THE SHAREHOLDERS, SERVICES
STOCK WILL NOT BE REDESIGNATED AS BRINK'S STOCK, BURLINGTON STOCK WILL NOT BE
CREATED AND DISTRIBUTED, NO AMENDMENTS TO THE ARTICLES OF INCORPORATION WILL BE
MADE, THE RELATED STOCK OPTION AND EMPLOYEE BENEFIT PLANS AND OUTSTANDING STOCK
OPTIONS WILL NOT BE AMENDED OR ADJUSTED PURSUANT TO THE BRINK'S STOCK PROPOSAL
AND THE
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DIVIDEND POLICY CONTEMPLATED BY THE BRINK'S STOCK PROPOSAL WILL NOT BE
IMPLEMENTED.
If the Brink's Stock Proposal is approved by the shareholders at the
Meeting on December , 1995, the Company anticipates that the Articles of
Amendment will be filed and become effective on that date, and that certificates
representing Burlington Stock will be mailed promptly thereafter. On the
Effective Date, certificates formerly representing shares of Services Stock that
are held by shareholders will be deemed to represent an equal number of shares
of Brink's Stock. New certificates representing shares of Brink's Stock will be
issued in replacement of certificates formerly representing shares of Services
Stock as such certificates are received and canceled by the transfer agent as a
result of trading activities. At any time prior to filing the Articles of
Amendment with the State Corporation Commission of Virginia, including after
adoption by the shareholders of the Company, the Board may abandon the Brink's
Stock Proposal in whole, but not in part, without further action by the
shareholders.
Fractional shares of Burlington Stock will not be issued in the
distribution. If more than one share of Services Stock is held by the same
holder of record, the Company will aggregate the number of shares of Burlington
Stock issuable to such holder upon such distribution (including any fractions of
shares). If the number of shares of Burlington Stock to be issued to any holder
of record of Services Stock includes a fraction of a whole share, the Company
will pay the cash value of such fractional share, within 60 trading days of the
Effective Date, based upon the average of the high and low sales prices of
Burlington Stock during the first three trading days following the Effective
Date. Shareholders who own their stock beneficially through brokers or other
nominees listed as holders of record will have their fractional shares handled
according to the practices of such broker or nominee which may result in such
shareholders receiving a price which is higher or lower than the price paid by
the Company to holders of record. If the necessary trading of Burlington Stock
does not occur within 20 trading days after the Effective Date, the Board will
determine the fair value of a share of Burlington Stock and the amount to be
paid in lieu of fractional shares.
Authorized but unissued shares of Brink's Stock and Burlington Stock will
be available for issuance from time to time by the Board for any proper
corporate purpose, which could include raising capital, payment of dividends,
providing compensation or benefits to employees or acquiring companies or
businesses. The issuance of such additional shares of Brink's Stock or
Burlington Stock would not be subject to approval by the shareholders of the
Company unless deemed advisable by the Board or required by applicable laws,
regulations or stock exchange listing requirements.
If the Brink's Stock Proposal is approved, the Company will set forth the
amount of outstanding Brink's Stock, Burlington Stock and Minerals Stock in its
periodic reports on Forms 10-K and 10-Q filed pursuant to the Exchange Act and
will disclose in its proxy statements the number of outstanding shares and per
share voting rights of Brink's Stock, Burlington Stock and Minerals Stock.
Certain holders of Brink's Stock and certain holders of Burlington Stock will
have reporting obligations under Sections 13 and 16 of the Exchange Act (as do
certain present holders of Minerals Stock). Executive compensation disclosure
will continue to be provided by the Company in its annual proxy statements for
its five highest paid executive officers; additional disclosure of compensation
of other officers principally connected with either Pittston Brink's Group,
Pittston Burlington Group or Pittston Minerals Group will not be provided.
REASONS FOR THE BRINK'S STOCK PROPOSAL
In mid-1995, the Board authorized management to explore a plan intended to
provide holders of Services Stock with separate securities reflecting the
different business activities of the Pittston Services Group. The Board
initially considered various aspects of the Brink's Stock Proposal at its
meeting on May 5, 1995. The subject was also discussed on July 7, 1995, and,
having reviewed extensive background materials in advance of such meeting, again
on September 15, 1995.
The Company believes that, by implementing the Brink's Stock Proposal,
shareholder value can be enhanced because values inherent in the Company's
higher growth security services and home security businesses, as suggested by
higher relative price-earnings multiples typically associated with high growth
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businesses, could be realized through the creation of separately traded
securities, one of which will be linked to the performance of the Company's
security services and home security businesses. The other security will
represent a targeted investment in the global freight transportation and
logistics management services business which the Company believes could be a
unique publicly traded security. The Brink's Stock Proposal also preserves a
single corporate form, permitting the Company to enjoy lower borrowing and
operating costs than would three separate entities, while preserving the
Company's ability to engage in additional restructuring options at such time as
these options may become desirable. However, since holders of shares of each
Group will continue to be shareholders of the Company, the performance of which
will be affected by the performance of each Group, poor performance by one Group
can adversely affect the performance of the stock of the other Groups. Brink's
Stock and Burlington Stock are designed to reflect the separate performance of
the Company's security services and home security businesses, in the case of
Brink's Stock, and its global freight transportation and logistics management
services businesses, in the case of Burlington Stock, and provide holders of
Services Stock with an opportunity to separately evaluate and invest in each.
Holders of Services Stock would have the ability to retain or sell either or
both securities depending on their investment objectives. The proposal does not
preclude further restructuring steps should the Board consider such action
desirable. There are not any operations or business activities included in
Pittston Brink's Group, Pittston Burlington Group or Pittston Minerals Group
which, in the judgment of the Board, lend themselves to further separation at
this time. Careful studies would be required to determine whether at some future
time any operations included in Pittston Brink's Group, Pittston Burlington
Group or Pittston Minerals Group could lend themselves to separation by spinoff
or otherwise.
In arriving at its recommendation and determination that the Brink's Stock
Proposal is in the best interests of the Company and its shareholders, the Board
considered the advice and assistance of its financial and legal advisors. Among
the principal factors considered by the Board were the following:
(1) separate equity securities would enable investors to gain a better
understanding of Pittston Brink's Group and Pittston Burlington Group,
and the separate reporting of their results would create a framework
for increased and more focused equity research coverage by the
investment community;
(2) separate equity securities could afford increased flexibility to raise
capital and/or make acquisitions for each Group with an equity security
related specifically to that Group;
(3) separate equity securities would provide a framework for structuring
employee incentive plans for employees of each Group that can be tied
directly to both the business results and the stock price performance
of the Group in which they were employed;
(4) the Brink's Stock Proposal is designed to avoid any adverse effect on
the holders of either Minerals Stock or the Preferred Stock;
(5) counsel advised that the distribution of Burlington Stock to Services
Stock shareholders could be effected tax-free and without the necessity
of any actual transfer of assets and liabilities; and
(6) the Brink's Stock Proposal would retain for the Board the flexibility
to consider possible future restructuring options.
RECOMMENDATION OF THE BOARD
THE BOARD HAS UNANIMOUSLY APPROVED THE BRINK'S STOCK PROPOSAL AND BELIEVES
THAT ITS ADOPTION IS IN THE BEST INTERESTS OF THE COMPANY AND ALL ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD RECOMMENDS THAT ALL SHAREHOLDERS VOTE IN
FAVOR OF THE ADOPTION OF THE PROPOSAL.
RISK FACTORS
Financial Impacts of One Group Could Affect the Other Groups
If the Brink's Stock Proposal is approved, the Company will provide to
holders of Brink's Stock and Burlington Stock separate financial statements,
Management's Discussions and Analyses,
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descriptions of business and other relevant information for Pittston Brink's
Group and Pittston Burlington Group, respectively. Notwithstanding the
attribution of corporate assets and liabilities between Pittston Brink's Group
and Pittston Burlington Group for the purpose of preparing their respective
financial statements, the change in the capital structure of the Company
contemplated by the Brink's Stock Proposal will not result in any transfer of
assets or liabilities of the Company or any of its subsidiaries. The Brink's
Stock Proposal will not affect the rights of holders of indebtedness of the
Company or any of its subsidiaries. The Brink's Stock Proposal will not affect
the rights of holders of the Company's Preferred Stock except that, if any
shares of Preferred Stock are converted after an exchange of Minerals Stock for
Brink's Stock, the holder of such shares of Preferred Stock would, upon
conversion, receive shares of Brink's Stock in lieu of shares of Minerals Stock
upon such conversion. Although Brink's Stock and Burlington Stock will reflect
the operations of Pittston Brink's Group and Pittston Burlington Group,
respectively, and Minerals Stock will continue to reflect the operations of
Pittston Minerals Group, holders of Brink's Stock, Burlington Stock and Minerals
Stock will be shareholders of the Company, which will continue to be responsible
for all its liabilities. Moreover, an event affecting either the Pittston
Brink's Group or the Pittston Burlington Group which might not have been
material to the Pittston Services Group could now be material with respect to
that Group and could adversely affect that Group's results of operations. Since
financial developments within the one Group can affect other Groups, all
shareholders of the Company could be adversely affected by any such event. In
addition, any net losses of Pittston Brink's Group, Pittston Burlington Group or
Pittston Minerals Group will reduce the legally available funds of the Company
available for the payment of dividends on each of Brink's Stock, Burlington
Stock and Minerals Stock. Accordingly, the financial information of each of the
Groups should be read in conjunction with the Company's consolidated financial
information.
HOLDERS OF BRINK'S STOCK, BURLINGTON STOCK AND MINERALS STOCK WILL BE
SHAREHOLDERS OF THE COMPANY, WHICH WILL CONTINUE TO BE RESPONSIBLE FOR ALL OF
ITS LIABILITIES. RISKS ASSOCIATED WITH THE COMPANY AS A WHOLE WILL THEREFORE BE
RISKS BORNE BY HOLDERS OF BRINK'S STOCK, BURLINGTON STOCK AND MINERALS STOCK.
FOR THIS REASON, CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY WILL CONTINUE
TO BE PUBLISHED AND DISTRIBUTED.
Most financial activities are managed by the Company on a centralized
consolidated basis. Changes in the Company's total debt that are caused by the
cash flows of one Group could affect the weighted average interest rate which
will be used to charge interest expense to all Groups having attributed debt,
and to that extent could affect the interest expense charged to the other Groups
in respect of their attributed debt. In obtaining financing through increases of
its attributed debt, one Group could receive a 'benefit' or 'detriment' to the
extent that such weighted average rate is lower or higher, respectively, than
the 'market' rate for a hypothetical borrowing by such Group if such Group were
a separate corporation. The Company will continue to prepare consolidated
financial statements and also provide such consolidated financial statements to
the holders of Brink's Stock, Burlington Stock and Minerals Stock. The Company's
consolidated financial information must be read in connection with Pittston
Brink's Group's, Pittston Burlington Group's and Pittston Mineral Group's
financial information. See 'Accounting Matters and Policies', Pittston Brink's
Group's Financial Statements and Notes thereto and 'Management's Discussion and
Analysis of Results of Operations and Financial Condition' in Annex V, Pittston
Burlington Group's Financial Statements and Notes thereto and 'Management's
Discussion and Analysis of Results of Operations and Financial Condition' in
Annex VII, Pittston Minerals Group's Financial Statements and Notes thereto and
'Management's Discussion and Analysis of Results of Operations and Financial
Condition' incorporated by reference herein and Pittston's Consolidated
Financial Statements and Notes thereto and 'Management's Discussion and Analysis
of Results of Operations and Financial Condition' in Annex VIII.
No Prior Market for Brink's Stock or Burlington Stock; Relative Prices to be
Determined by the Market
Although Services Stock has been publicly traded on the NYSE since July
1993, there has been no prior market for either Brink's Stock or Burlington
Stock. As a result, there can be no assurance as to the liquidity of the trading
markets that will develop for Brink's Stock or Burlington Stock or that the
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combined market values of Brink's Stock and Burlington Stock held by a holder of
Services Stock will equal or exceed the market value of Services Stock held by
such shareholder prior to the Company's announcement of the Transaction, and
such combined market values could be less than such market value of Services
Stock. See 'Price Range of Services Stock and Minerals Stock and Dividends'.
Until an orderly market develops for Brink's Stock and Burlington Stock,
their respective trading prices may fluctuate significantly. The prices at which
Brink's Stock and Burlington Stock trade will be determined in the trading
markets and may be influenced by many factors, including the consolidated
financial results of the Company, the performance of Pittston Brink's Group,
Pittston Burlington Group and Pittston Minerals Group, investors' expectations
for the Company and each Group, trading volume and general economic and equity
market conditions. There is no assurance that investors will assign value to
Brink's Stock and Burlington Stock based on their respective reported financial
results and fundamental operating prospects. In addition, the Company cannot
predict the impact on the market values of Brink's Stock and Burlington Stock of
certain terms of those securities, such as the ability of the Company to
exchange outstanding shares of Burlington Stock for shares of Brink's Stock, the
discretion of the Board to make various determinations affecting one or the
other classes of common stock or the impact on the market value of Burlington
Stock of its lesser aggregate voting power relative to that of Brink's Stock.
See 'Risk Factors -- Fiduciary Duties of the Board; No Definitive Precedent
Under Virginia Law' and ' -- Voting Power, Effects on Holders of Brink's Stock,
Burlington Stock and Minerals Stock'.
Voting Power; Effects on Holders of Brink's Stock, Burlington Stock and
Minerals Stock
The voting rights of Brink's Stock and Burlington Stock are described below
under 'Description of Brink's Stock, Burlington Stock and Minerals
Stock -- Voting'. In general, the holders of Brink's Stock, Burlington Stock and
Minerals Stock vote together as a single voting group, except as to certain
mergers and statutory share exchanges and to certain amendments to the Articles
of Incorporation affecting, among other things, the designation, rights,
preferences or limitations of one class of common stock, in which case a
separate vote of the particular voting group affected by any such merger,
statutory share exchange or amendment would also be required. Accordingly, if a
separate vote by the holders of Brink's Stock, Burlington Stock or Minerals
Stock is not required and if the Board does not require a separate vote,
shareholder action could be taken upon receiving an affirmative vote of the
holders of the majority of the outstanding shares of Brink's Stock, Burlington
Stock and Minerals Stock voting together as a single voting group. This is
significant because, upon the approval of the Brink's Stock Proposal, the
holders of Brink's Stock and Burlington Stock initially will have approximately
83% of the total voting power of all the outstanding shares of common stock, and
holders of Brink's Stock alone will have approximately 55% of such total voting
power. However, as required by Virginia law, certain amendments to the Articles
of Incorporation affecting, among other things, the designation, rights,
preferences or limitations of one class of common stock, and certain mergers or
statutory share exchanges, must be approved by the holders of such class of
common stock, voting as a separate voting group. In certain circumstances,
approval of the holders of two-thirds of that class may be required. In such
instance, the holders of Brink's Stock, Burlington Stock or Minerals Stock, as
the case may be, could prevent adoption of such amendment, notwithstanding the
fact that the holders of a majority of the total number of outstanding shares of
all classes of common stock, voting as a group, had voted in favor of it.
The voting power of holders of Minerals Stock initially will be unchanged
by the Brink's Stock Proposal. Brink's Stock will have one vote per share at all
times. Immediately following the consummation of the Transaction, Burlington
Stock will have one vote per share, and Minerals Stock will have 1.5 votes per
share, in either case subject to adjustment as set forth below. Upon the first
such adjustment on January 1, 1996, the voting power of Minerals Stock is
expected to decrease based upon the current market capitalization of Minerals
Stock relative to the current market capitalization of Services Stock. In
addition, in the event that the combined market capitalization of Brink's Stock
and Burlington Stock exceed the market capitalization of Services Stock, the
voting power of Minerals Stock will, upon such adjustment, be subject to further
reduction. See 'Price Range of Services Stock and Minerals Stock and Dividends'.
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As discussed in 'Description of Brink's Stock, Burlington Stock and
Minerals Stock -- Voting', on January 1, 1996, and on January 1 every two years
thereafter, the number of votes to which the holders of each share of Burlington
Stock and each share of Minerals Stock will be entitled will be adjusted and
fixed for two-year periods, based on the relative Fair Market Values (as defined
at page 34) of the outstanding shares of Brink's Stock, Burlington Stock and
Minerals Stock, in such a manner that each class' share of the aggregate voting
power at such time will be equal to that class' share of the Company's aggregate
market capitalization at such time. For example, assuming that Minerals Stock's
share of the Company's aggregate market capitalization on January 1, 1996, is
$20 million, that of Burlington Stock on such date is $50 million and that of
Brink's Stock is $100 million and the Company's aggregate market capitalization
on such date is $170 million, holders of Minerals Stock, Burlington Stock and
Brink's Stock would have approximately 12%, 29% and 59%, respectively, of the
aggregate voting power from January 1, 1996, to and including December 31, 1997.
Adjustments to the number of votes per share of Minerals Stock and Burlington
Stock affect the relative voting rights of holders of Minerals Stock and
Burlington Stock as compared to the voting rights of Brink's Stock.
Fiduciary Duties of the Board; No Definitive Precedent Under Virginia Law
Under Virginia law, each member of the Board must act in accordance with
their good faith business judgment of the best interests of the Company, which
would include the interests of all the shareholders, including the holders of
Brink's Stock, the holders of Burlington Stock and the holders of Minerals
Stock. The Brink's Stock Proposal may give rise to occasions when the interests
of the holders of Brink's Stock, the holders of Burlington Stock and the holders
of Minerals Stock may diverge or appear to diverge. Although the Company is not
aware of any precedent concerning the manner in which principles of Virginia law
would be applied in the context of the capital structure contemplated by the
Brink's Stock Proposal, principles of Virginia law provide that a board of
directors must act in accordance with its good faith business judgment of the
corporation's best interests, taking into consideration the interests of all
common shareholders regardless of class or series. Under these principles of
Virginia law, a good faith determination made by a disinterested and adequately
informed Board with respect to any matter having a disparate impact upon the
holders of Brink's Stock, the holders of Burlington Stock and the holders of
Minerals Stock would be a defense to any challenge to such determination made by
or on behalf of any such group of holders. Nevertheless, a Virginia court
hearing a case involving such a challenge may decide to apply principles of
Virginia law other than those discussed above, or may fashion new principles of
Virginia law, in order to decide such a case, which would be a case of first
impression. The Articles of Amendment provide that Board determinations made by
a majority of disinterested directors (as defined therein) are final and binding
on all shareholders of the Company (see 'Description of Brink's Stock and
Burlington Stock -- Determinations by the Board').
The Brink's Stock Proposal does not create any new rights for holders of
Brink's Stock, Burlington Stock or Minerals Stock, except to the extent provided
in the Articles of Amendment or the Virginia Stock Corporation Act, nor does
that Proposal create any new obligations of the Board to one Group as opposed to
the other Groups.
The Board has approved the policies described in this Proxy Statement with
regard to payment of dividends, allocation of indebtedness, corporate expenses
and pension liabilities, tax-sharing arrangements and other matters. In
implementing those policies and in dealing with matters involving any actual or
potential conflict of interest between different classes of stock, the Board may
solicit advice from legal counsel and other advisors relating to the discharge
of its fiduciary duties to the common shareholders. The Board may change any of
such approved policies in any respect, although it has no present intention to
do so.
Potential Conflicts of Interest
The existence of separate classes of common stock of the Company may give
rise to occasions when the interests of the holders of Brink's Stock, the
holders of Burlington Stock and the holders of Minerals Stock may diverge or
appear to diverge. As further described below, examples include determinations
by the Board to (i) pay or omit the payment of dividends, (ii) exchange each
outstanding share of
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Burlington Stock or Minerals Stock for shares of Brink's Stock at a premium and
(iii) approve dispositions of assets and properties of Pittston Burlington Group
or Pittston Minerals Group.
No Assurance of Payment of Dividends. Subject to limitations of Virginia
law and the Articles of Incorporation, the Board may, in its sole discretion,
declare and pay dividends on Brink's Stock, Burlington Stock, Minerals Stock and
Preferred Stock in any amount, and may decide not to declare and pay dividends
on any one or all classes, notwithstanding the amount of funds available for
dividends on each class, the amount of prior dividends declared on each class or
any other factor. See 'Dividend Policy' and 'Description of Brink's Stock,
Burlington Stock and Minerals Stock -- Dividends'.
Optional Exchanges of Burlington Stock or Minerals Stock for Brink's Stock.
The Board may, in its sole discretion, determine to exchange each outstanding
share of Burlington Stock for shares of Brink's Stock (or, if no Brink's Stock
is then outstanding, Minerals Stock) at a 15% premium. Such an exchange could be
effected at any time, including immediately prior to a disposition of all or
substantially all of the properties and assets of Pittston Burlington Group
which would otherwise give rise to a mandatory exchange of such shares
immediately following such disposition as required by the Articles of Amendment.
The Board may also, in its sole discretion, determine to exchange each
outstanding share of Minerals Stock for shares of Brink's Stock (or, if no
Brink's Stock is then outstanding, Burlington Stock) at a 15% premium. Such an
exchange could be effected at any time, including immediately prior to a
disposition of all or substantially all of the properties and assets of Pittston
Minerals Group which would otherwise give rise to a mandatory exchange of such
shares immediately following such disposition, as required by the Articles of
Amendment. Any such exchange at such premium would dilute the interests of the
holders of Brink's Stock and would preclude holders of Burlington Stock or the
holders of Minerals Stock, as the case may be, from retaining their investment
in a security separately reflecting the Company's minerals businesses, in the
case of Minerals Stock, or the Company's global freight transportation and
logistics management services businesses, in the case of Burlington Stock. Since
the authority of the Board to require an exchange is discretionary, it could be
exercised at a time when such exchange might be disadvantageous to the holders
of Brink's Stock, Burlington Stock or Minerals Stock; however, the Board must
act in accordance with its fiduciary duties. See 'Description of Brink's Stock,
Burlington Stock and Minerals Stock -- Exchange'. For a discussion of the effect
of any such exchange of Minerals Stock for Brink's Stock (or Burlington Stock)
upon the conversion rights of the Preferred Stock, see 'The Brink's Stock
Proposal -- Effects on Preferred Stock'.
Dispositions of Pittston Burlington Group or Pittston Minerals Group
Assets. The Board may, in its sole discretion, approve sales and other
dispositions of any amount of the properties and assets of Pittston Burlington
Group or Pittston Minerals Group without shareholder approval, because under
Virginia law shareholder approval is only required for a sale or other
disposition of all or substantially all of the properties and assets of the
entire Company. The Articles of Amendment, however, contain provisions which
require the Company to exchange each outstanding share of Burlington Stock or
Minerals Stock, as the case may be, for shares of Brink's Stock at a 15% premium
following a disposition of all or substantially all (viz., 80% or more as
specified in such Articles) of the properties and assets of Pittston Burlington
Group or Pittston Minerals Group, as the case may be, but do not require the
Company to do so upon sales or other dispositions of less than substantially all
of such properties and assets. See 'Description of Brink's Stock, Burlington
Stock and Minerals Stock -- Exchange'. The appropriate disposition of any
disposition proceeds would be subject to determination by the Board in
accordance with approved accounting policies and in the exercise of its
fiduciary duties. See 'Risk Factors -- Fiduciary Duties of the Board; No
Definitive Precedent Under Virginia Law'.
In certain instances the potential conflicts of interest described above
would call for careful balancing of the respective interests of the holders of
Brink's Stock, Burlington Stock and Minerals Stock. The Board has been and
intends to continue to be diligent in observing its fiduciary duties, and
believes that it will be feasible to perform those duties in a manner consistent
with the best interests of the Company and all its shareholders.
Management and Accounting Policies Subject to Change
As stated below, the Board has approved certain management and accounting
policies with respect to Pittston Brink's Group and Pittston Burlington Group.
See 'Certain Management Policies' and
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'Accounting Matters and Policies'. The Board may in its discretion determine to
change any of those policies at any time, subject to compliance with the Board's
fiduciary duties and to generally accepted accounting principles. For example,
such principles require that any new or modified accounting policy be consistent
with such principles and preferable to the policy previously established.
DIVIDEND POLICY
The Company has most recently paid dividends on its Services Stock at the
annual rate of $0.20 per share, payable quarterly. If the Brink's Stock Proposal
is adopted, the Board initially intends to pay dividends on Brink's Stock and
Burlington Stock at annual rates of $0.10 per share and $0.24 per share,
respectively, payable quarterly, which, after giving effect to the Transaction,
would be equivalent to an annual dividend of $0.22 per share of Services Stock.
Subject to the continued availability of an Available Minerals Dividend Amount,
the Board expects to continue to pay a quarterly dividend at an annual rate of
$0.65 per share on the Minerals Stock. The Board has the discretion to reduce
these intended dividends, or to pay no dividends at all.
The amount of the initial dividend on Brink's Stock and on Burlington Stock
was determined in accordance with the factors referred to below and on the
advice of the Company's financial advisor as to dividends paid by companies
comparable to the business units comprising the Brink's Group and Burlington
Group, respectively.
The Board intends to declare and pay dividends on Brink's Stock and
Burlington Stock and to continue to pay dividends on Minerals Stock based
primarily upon the respective earnings, financial condition, cash flow and
business requirements of the respective Groups. Since the Company remains
subject to Virginia law limitations on dividends and to dividend restrictions in
its public debt and bank credit agreements, losses by one Group could affect the
Company's ability to pay dividends in respect of stock relating to the other
Groups. In making its dividend decisions, the Board will rely on the financial
statements of Pittston Brink's Group, Pittston Burlington Group and Pittston
Minerals Group, respectively. See Annexes V, VII and VIII for the historical
Financial Statements of Pittston Brink's Group, the historical Financial
Statements of Pittston Burlington Group and the historical Consolidated
Financial Statements of the Pittston Company and Subsidiaries, respectively. For
information concerning restrictions on the funds out of which dividends on
Brink's Stock, Burlington Stock and Minerals Stock may be paid, see 'Description
of Brink's Stock, Burlington Stock and Minerals Stock -- Dividends'.
DESCRIPTION OF BRINK'S STOCK, BURLINGTON STOCK AND MINERALS STOCK
THE FOLLOWING DESCRIPTIONS ARE QUALIFIED BY REFERENCE TO ANNEX II TO THIS
PROXY STATEMENT, WHICH CONTAINS THE FULL TEXT OF THE ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION.
Authorized Capital Stock
The Articles of Incorporation currently provide that the Company is
authorized to issue 122 million shares of capital stock, of which 2 million
shall be shares of preferred stock, and 120 million shall be shares of common
stock, consisting of 100 million shares of Services Stock and 20 million shares
of Minerals Stock. If the Brink's Stock Proposal is adopted, the Articles of
Incorporation will be amended to authorize the issuance of 172 million shares of
capital stock, of which 2 million shall be shares of preferred stock and 170
million shall be shares of different classes of common stock, consisting of 100
million shares of Brink's Stock, 50 million shares of Burlington Stock and 20
million shares of Minerals Stock. Authorized but unissued shares of common
stock, including Brink's Stock, Burlington Stock and Minerals Stock, will be
available for issuance by the Company from time to time, as determined by the
Board, for any proper corporate purpose, which could include raising capital,
payment of stock dividends, providing compensation for benefits to employees or
acquiring other companies or businesses. From time to time the Company receives
or initiates proposals for possible acquisitions of businesses or companies on
terms which could include issuance of shares of common or preferred stock of the
Company.
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The issuance of shares of Brink's Stock, Burlington Stock or Minerals Stock
would not be subject to approval by the shareholders of the Company unless
deemed advisable by the Board or required by applicable law, regulation or stock
exchange voting requirements. As indicated under 'Certain Management Policies',
any net proceeds from the issuance by the Company of additional shares of
Brink's Stock, Burlington Stock or Minerals Stock will be applied to the
respective business activities of Pittston Brink's Group, Pittston Burlington
Group or Pittston Minerals Group, as the case may be, and invested in the
businesses or used to reduce liabilities attributed to the respective Groups.
Structure of Groups
The structure of Pittston Burlington Group was determined functionally, the
underlying concept being the aggregation of all the Company's global freight
transportation and logistics management services businesses. Thus, investors
with a positive view of these businesses will be able to target their
investments more precisely than is the case under the Company's present
structure. The structure of Pittston Brink's Group is designed to encompass the
Company's security services and home security businesses. The structure of
Pittston Minerals Group continues to aggregate the Company's coal and mineral
related business currently operated by Pittston Coal Company and Pittston
Mineral Ventures Company. Allocation of assets and liabilities to Pittston
Burlington Group and Pittston Brink's Group was in most instances based on the
association of those assets and liabilities with the underlying businesses of
the respective Groups. See Annexes IV and VI for a description of the businesses
of each of Pittston Brink's Group and Pittston Burlington Group.
Dividends
Dividends on Brink's Stock and Burlington Stock will be subject to the same
limitations as dividends on the existing Services Stock, which are limited to
legally available funds (as prescribed by Virginia law) and subject to the prior
payment of dividends on outstanding shares of preferred stock, if any, including
the Preferred Stock. Such dividends are also restricted by covenants in the
Company's public debt indenture and bank credit agreements, the most restrictive
of which would have allowed, as of June 30, 1995, dividends of up to $201
million to have been paid on all classes of the Company's capital stock. The
dividend policies and limitations applicable to Minerals Stock will not be
altered by the Brink's Stock Proposal.
With regard to dividend limitations imposed by Virginia law on Pittston,
the Board may base a determination that a proposed dividend distribution is from
funds legally available therefor under Virginia law either on financial
statements prepared on the basis of accounting practices and principles that are
reasonable in the circumstances or on a fair valuation of the Company's total
net assets or other methods that are reasonable in the circumstances.
The Board, subject to the limitations on dividends with respect to each of
Brink's Stock, Burlington Stock and Minerals Stock set forth above, may, in its
sole discretion, declare and pay dividends exclusively on Brink's Stock,
exclusively on Burlington Stock or exclusively on Minerals Stock, or on such
classes in equal or unequal amounts, notwithstanding the respective amounts of
funds available for dividends on each class, the respective voting and
liquidation rights of each class, the amount of prior dividends declared on each
class or any other factor. See 'Dividend Policy'.
Exchange
The Brink's Stock Proposal will permit the exchange of outstanding shares
of Burlington Stock or Minerals Stock, as the case may be, for shares of Brink's
Stock upon the terms described below. The ability to effect such exchanges
provides the Company with flexibility to alter its capital structure if
warranted by future facts and circumstances. Accordingly, if deemed desirable at
a future date by the Board, the Company could retire all the outstanding shares
of Burlington Stock or Minerals Stock through such an exchange, thus resulting
in the Company having only one or two, as the case may be, classes of common
stock outstanding instead of three such classes. The Company cannot predict the
effect on the respective market prices for Brink's Stock, Burlington Stock and
Minerals Stock of its ability to effect the exchanges described below. For
information concerning the effect of any such
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exchange of outstanding Minerals Stock for Brink's Stock upon the conversion
rights of the Preferred Stock, see 'The Brink's Stock Proposal -- Effects on
Preferred Stock'.
Brink's Stock. Shares of Brink's Stock are not subject to either optional
or mandatory exchange by the Board.
Burlington Stock. The Board may, at any time and in its sole discretion,
declare that each outstanding share of Burlington Stock shall be exchanged for
fully paid and non-assessable shares of Brink's Stock (or, if there are no
shares of Brink's Stock outstanding, shares of Minerals Stock) having a Fair
Market Value equal to 115% of the Fair Market Value of one share of Burlington
Stock, as of the date of the first public announcement by the Company of such
exchange. Such an exchange could be effected at any time, including immediately
prior to a disposition of all or substantially all of the properties and assets
of Pittston Burlington Group which would otherwise give rise to a mandatory
exchange of such shares immediately following such disposition as required by
the Articles of Amendment (which is discussed below). Any optional exchange at
the 15% premium would dilute the interests of the holders of Brink's Stock and
would preclude holders of Burlington Stock from retaining investment in a
security separately reflecting the Company's global freight transportation and
logistics management services businesses. Since the authority of the Board to
require an exchange is discretionary, it could be exercised at a time when such
exchange might be disadvantageous to the holders of either Brink's Stock or
Burlington Stock; however, the Board must act in accordance with its fiduciary
duties.
In addition, upon the sale, offer, assignment or other disposition (whether
by merger, consolidation, sale or contribution of assets or stock or otherwise
(a 'Disposition') in one transaction or a series of related transactions by the
Company of all or substantially all of the properties and assets of Pittston
Burlington Group (other than in connection with the Disposition by the Company
of all of its properties and assets in one transaction) to any person, entity or
group (other than (a) holders of all outstanding shares of Burlington Stock on a
pro rata basis or (b) a person, entity or group in which the Company, directly
or indirectly, owns a majority equity interest), the Company is required,
effective on or prior to the first Business Day following the 60th day following
the consummation of such Disposition, to exchange each outstanding share of
Burlington Stock for fully paid and nonassessable shares of Brink's Stock (or,
if there are no shares of Brink's Stock outstanding, shares of Minerals Stock)
having a Fair Market Value equal to 115% of the Fair Market Value of one share
of Burlington Stock, as of the date of the first public announcement by the
Company of such Disposition.
Minerals Stock. The Board may, at any time and in its sole discretion,
declare that each outstanding share of Minerals Stock shall be exchanged for
fully paid and non-assessable shares of Brink's Stock (or, if there are no
shares of Brink's Stock outstanding, shares of Burlington Stock) having a Fair
Market Value equal to 115% of the Fair Market Value of one share of Minerals
Stock, as of the date of the first public announcement by the Company of such
exchange. Such an exchange could be effected at any time, including immediately
prior to a disposition of all or substantially all of the properties and assets
of Pittston Minerals Group which would otherwise give rise to a mandatory
exchange of such shares immediately following such disposition as required by
the Articles of Amendment (which is discussed below). Any optional exchange at
the 15% premium would dilute the interests of the holders of Brink's Stock and
would preclude holders of Minerals Stock from retaining investment in a security
separately reflecting the Company's natural resources businesses. Since the
authority of the Board to require an exchange is discretionary, it could be
exercised at a time when such exchange might be disadvantageous to the holders
of either Brink's Stock or Minerals Stock; however, the Board must act in
accordance with its fiduciary duties.
In addition, upon a Disposition in one transaction or a series of related
transactions by the Company of all or substantially all of the properties and
assets of Pittston Minerals Group (other than in connection with the Disposition
by the Company of all of its properties and assets in one transaction) to any
person, entity or group (other than (a) holders of all outstanding shares of
Minerals Stock on a pro rata basis or (b) a person, entity or group in which the
Company, directly or indirectly, owns a majority equity interest), the Company
is required, effective on or prior to the first Business Day following the 60th
day following the consummation of such Disposition, to exchange each outstanding
share of Minerals Stock for fully paid and nonassessable shares of Brink's Stock
(or, if there are no
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shares of Brink's Stock outstanding, shares of Burlington Stock) having a Fair
Market Value equal to 115% of the Fair Market Value of one share of Minerals
Stock, as of the date of the first public announcement by the Company of such
Disposition.
Under Section 13.1-724 of the Virginia Stock Corporation Act, approval of
the holders of Minerals Stock, of Burlington Stock or Brink's Stock, as the case
may be, for the sale of all or substantially all of the properties and assets
attributable to Pittston Minerals Group, Pittston Burlington Group or Pittston
Brink's Group, as the case may be, would not be required. That Section would
require approval of the holders of Minerals Stock, Burlington Stock and Brink's
Stock voting as a single voting group only if all or substantially all of the
Company's properties and assets were to be sold.
Since it is the intention of the Company to manage the businesses of each
Group for the benefit of the holders of the class of stock relating to that
Group, asset acquisitions and dispositions will be directly attributed to the
appropriate Group and their effect reflected in such Group's financial
statements. Subject to the right of management to establish indebtedness between
the respective Groups in appropriate circumstances, the net proceeds of asset
dispositions will be attributed to the relevant Group.
'Fair Market Value' of shares of any class of common stock on any date
means the average of the daily closing prices thereof for the 10 consecutive
Business Days commencing on the 30th Business Day prior to the date in question
(e.g., the date of the first public announcement by the Company of certain
action or a January 1 of any year in which a voting adjustment will occur). The
closing price for each Business Day shall be (i) if such shares are listed or
admitted to trading on a national securities exchange, the closing price on the
Composite Tape (or any successor composite tape reporting transactions on
national securities exchanges) or, if such Composite Tape shall not be in use or
shall not report transactions in such shares, the last reported sales price
regular way on the principal national securities exchange on which such shares
are listed or admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of stock has been traded during
such 10 consecutive Business Days), or, if there is no transaction on any such
Business Day in any such situation, the mean of the bid and asked prices on such
Business Day, or (ii) if such shares are not listed or admitted to trading on
any such exchange, the closing price, if reported, or, if the closing price is
not reported, the average of the closing bid and asked prices as reported by the
National Association of Securities Dealers Automated Quotations System or a
similar source selected from time to time by the Company for this purpose. In
the event such closing prices are unavailable, the Fair Market Value of such
shares shall be determined by the Board.
'Substantially all of the properties and assets' of Pittston Burlington
Group or Pittston Minerals Group, as the case may be, as of any date, shall mean
a portion of such properties and assets that represents at least 80% of either
of the then-current market value, as determined by the Board based on opinions,
appraisals or such other evidence as the Board shall consider relevant, of, or
the aggregate reported net sales for the immediately preceding twelve fiscal
quarterly periods of the Company derived from, the properties and assets of
Pittston Burlington Group or Pittston Minerals Group, as the case may be, as of
such date (excluding the properties and assets of any person, entity or group in
which the Company, directly or indirectly, owns less than a majority equity
interest).
'Business Day' means each weekday other than any day on which Brink's
Stock, Burlington Stock or Minerals Stock is not traded on any national
securities exchange or the National Association of Securities Dealers Automated
Quotations System or in the over-the-counter market.
General Exchange Provisions. In the event of any exchange described above,
the Company shall cause to be given to each holder of Burlington Stock or
Minerals Stock, as the case may be, a notice stating (A) that shares of
Burlington Stock or Minerals Stock, as the case may be, shall be exchanged, (B)
the date of the exchange, (C) the kind and amount of shares of capital stock to
be received by such holder with respect to each share of Burlington Stock or
Minerals Stock, as the case may be, held by such holder, including details as to
the calculation thereof, (D) the place or places where certificates for shares
of Burlington Stock or Minerals Stock, as the case may be, properly endorsed or
assigned for transfer (unless the Company waives such requirement), are to be
surrendered for delivery of certificates of shares of such capital stock and (E)
that, except as provided in the following paragraph, dividends on Burlington
Stock or Minerals Stock, as the case may be, will cease to be paid as of such
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exchange date. Such notice shall be sent by first-class mail, postage prepaid,
not less than 30 nor more than 60 days prior to the exchange date and in any
case to each holder of Burlington Stock or Minerals Stock, as the case may be,
at such holder's address as the same appears on the stock transfer books of the
Company. Neither the failure to mail such notice to any particular holder of
Burlington Stock or Minerals Stock, as the case may be, nor any defect therein
shall affect the sufficiency thereof with respect to any other holder of
Burlington Stock or Minerals Stock, as the case may be. Under the terms of the
Preferred Stock, the Company is also required to give 30 days' prior notice to
holders of Preferred Stock of its intention to take any action that would result
in an exchange of outstanding shares of Minerals Stock for shares of Brink's
Stock (or Burlington Stock).
The Company expects to set a record date in advance of any exchange of
shares of Burlington Stock or Minerals Stock, as the case may be, in order to
facilitate orderly trading in such shares in the event of any such exchange. No
adjustments in respect of dividends shall be made upon the exchange of any
shares of Burlington Stock or Minerals Stock, as the case may be; provided,
however, that, if such shares are exchanged by the Company after the record date
for determining holders of Burlington Stock or Minerals Stock, as the case may
be, entitled to any dividend or distribution thereon, such dividend or
distribution shall be payable to the holders of such shares at the close of
business on such record date notwithstanding such exchange.
Before any holder of shares of Burlington Stock or Minerals Stock, as the
case may be, shall be entitled to receive certificates representing shares of
any kind of capital stock to be received by such holder with respect to any
exchange of such shares of Burlington Stock or Minerals Stock, such holder shall
surrender at such office as the Company shall specify certificates for such
shares of Burlington Stock or Minerals Stock, properly endorsed or assigned for
transfer (unless the Company shall waive such requirement). As soon as
practicable after surrender of certificates for such shares of Burlington Stock
or Minerals Stock, the Company will deliver to the holder of such shares so
surrendered the certificates representing the number of whole shares of the kind
of capital stock to which such holder is entitled, together with any fractional
payment referred to below.
The Company shall not be required to issue or deliver fractional shares of
any class of capital stock to any holder of Burlington Stock or Minerals Stock,
as the case may be, upon any exchange described above. If the number of shares
of any class of capital stock remaining to be issued or delivered to any holder
of Burlington Stock or Minerals Stock, is a fraction, the Company shall pay a
cash adjustment in respect of such fraction in an amount equal to the fair
market value of such fraction on the date such payment is to be made.
Shareholders who own their stock beneficially through brokers or other
nominees listed as holders of record will have their fractional shares handled
according to the practices of such broker or nominee which may result in such
shareholders receiving a price which is higher or lower than the price paid by
the Company to holders of record.
Voting
The Brink's Stock Proposal provides that holders of Brink's Stock at all
times will have one vote per share, and initially holders of Burlington Stock
and Minerals Stock will have one and 1.5 votes per share, respectively. The
votes of holders of Burlington Stock and Minerals Stock will be subject to
adjustment on January 1, 1996, and on January 1 every two years thereafter in
such a manner so that each class' share of the aggregate voting power at such
time will be equal to that class' share of the Company's aggregate market
capitalization at such time. Accordingly, beginning on January 1, 1996, each
share of Burlington Stock and Minerals Stock may have more than, less than or
continue to have the number of votes per share as they initially will following
the consummation of the Transaction. The periodic adjustments in the number of
votes to which holders of Burlington Stock and Minerals Stock will be entitled
will limit the ability of investors in one class to acquire for the same
consideration relatively greater or lesser voting power per share than investors
in the other classes. Because the adjustment of voting powers will occur only
biennially, substantial disparity in the voting power purchasable for a
specified amount may exist among the three Groups' shares from time to time.
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Holders of Brink's Stock, Burlington Stock and Minerals Stock will vote
together as a single voting group on all matters as to which all common
shareholders are entitled to vote. In addition, as prescribed by Virginia law,
certain amendments to the Articles of Incorporation affecting, among other
things, the designation, rights, preferences or limitations of one class of
common stock, or certain mergers or statutory share exchanges, must be approved
by the holders of such class of common stock, voting as a separate voting group,
and, in certain circumstances, may also have to be approved by the holders of
each of the other classes of common stock, voting as separate voting groups.
Amendments to the Articles of Incorporation that would affect or would otherwise
adjust the voting rights of the holders of Minerals Stock are required to be
approved by the holders of two-thirds of the outstanding shares of Minerals
Stock, voting separately as a separate voting group. Because most matters
brought to a shareholder vote will only require the approval of a majority of
all the Company's outstanding common stock entitled to vote on such matters
(including Brink's Stock, Burlington Stock and Minerals Stock) voting together
as a single voting group, if holders of Brink's Stock, Burlington Stock or
Minerals Stock would have more than the number of votes required to approve any
such matter, those holders would be in a position to control the outcome of the
vote on such matter. See 'Risk Factors -- Voting Power; Effects on Holders of
Brink's Stock, Burlington Stock and Minerals Stock'.
The Articles of Amendment reserve to the Board the right to condition the
submission of a particular matter on receipt of a separate vote of the holders
of outstanding shares of Brink's Stock, Burlington Stock or Minerals Stock. The
Board has no present intention of imposing such a separate vote requirement on
any matter which it can now foresee. However, should the Board, in the exercise
of its fiduciary duties and its good faith judgment of the best interests of the
Company, conclude that such a separate vote is necessary or desirable, it has
reserved the right to so require.
Only one annual meeting of shareholders will be held in 1996 and subsequent
years. Holders of Brink's Stock, Burlington Stock and Minerals Stock will
receive a notice of each annual meeting and will be entitled to vote at such
meeting. Any such holder may also submit a shareholder proposal for inclusion in
the Company's annual proxy statement to the extent such holder meets certain
eligibility requirements specified under the Federal securities law. Such law
currently provides that, among other things, at the time such holder submits
such a proposal, such holder shall be a record or beneficial owner of at least
one percent or $1,000 in market value of securities entitled to be voted on the
proposal at the meeting of shareholders and have held such securities for at
least one year, and such holder must also continue to own such securities
through the date on which such meeting is held. The Company intends to apply
this requirement at the Company level so that a holder of shares of Brink's
Stock, Burlington Stock or Minerals Stock, or any combination of the three,
aggregating at least one percent or $1,000 in market value of all classes
combined will have the right to submit such a proposal.
Liquidation
Under the Brink's Stock Proposal, in the event of a dissolution,
liquidation or winding up of the Company the holders of outstanding Brink's
Stock, the holders of outstanding Burlington Stock and the holders of
outstanding Minerals Stock will initially share on a per share basis an
aggregate amount equal to approximately 55%, 28% and 17%, respectively, of the
funds, if any, remaining for distribution to common shareholders. In the case of
Minerals Stock, such percentage has been set to ensure that the holders of
Minerals Stock are entitled to the same share of any such funds immediately
following implementation of the Proposal as they were prior thereto,
notwithstanding the fact that immediately following implementation of the
Proposal the actual proportion of the number of shares of Minerals Stock to the
total number of shares of common stock will equal approximately 12%. Maintaining
the 17% Minerals Stock liquidation percentage has been accomplished by providing
in the Articles of Amendment that in any determination of the amounts available
in liquidation for holders of Minerals Stock the number of Minerals Stock shall
be deemed to include an additional shares (the 'Nominal Shares'). Following
implementation of the Proposal, each class's share of such funds shall be
subject to adjustment in the future based upon the total number of shares of
Brink's Stock, Burlington Stock or Minerals Stock, as the case may be, then
outstanding as compared to the total number of shares of all classes of common
stock then outstanding (totals, in the case of Minerals Stock, shall include the
Nominal Shares). Thus, the liquidation rights of the holders of the respective
classes may
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not bear any relation to the relative market values or the relative voting
rights of the three classes. The Company considers that its complete liquidation
is a remote contingency, and its financial advisor believes that, in general,
these liquidation provisions are immaterial to trading in Brink's Stock,
Burlington Stock and Minerals Stock. Further, tax counsel has advised the
Company that this liquidation provision is preferable from a tax point of view.
Subdivision or Combination
If the Company subdivides (by stock split, stock dividend or otherwise) or
combines (by reverse stock split or otherwise) the outstanding shares of Brink's
Stock, Burlington Stock or Minerals Stock, the voting and liquidation rights of
shares of Minerals Stock and Burlington Stock relative to Brink's Stock will be
appropriately adjusted. For example, in case the Company were to effect a
two-for-one split of Brink's Stock, the per share voting rights of Burlington
Stock and Minerals Stock would be multiplied by two in order to avoid dilution
in the aggregate voting rights of the holders of each such class. Similarly, the
per share liquidation rights of Burlington Stock and Minerals Stock would be
multiplied by two in order to avoid dilution in the aggregate liquidation rights
of holders of Burlington Stock and Minerals Stock.
Determinations by the Board
Any determinations made by the Board or any committee of the Board, a
majority of whose members are 'disinterested' directors, under any of the
provisions described above under 'Description of Brink's Stock, Burlington Stock
and Minerals Stock' will be final and binding on all shareholders of the
Company. For this purpose, any director who is not an employee of, or a
consultant to, the Company and who is not, directly or indirectly, the
beneficial owner of 1% or more of the outstanding shares of all common stock of
the Company shall be considered 'disinterested', even though such director may
beneficially own a greater amount of one class of common stock than of the other
classes of common stock.
CERTAIN MANAGEMENT POLICIES
In connection with the Brink's Stock Proposal, the Company intends to
formally adopt by Board resolution certain policies with respect to Pittston
Brink's Group, Pittston Burlington Group and Pittston Minerals Group, including,
without limitation, the intention to: (i) sell assets among Pittston Minerals
Group, Pittston Burlington Group and Pittston Brink's Group only on an
arm's-length basis, (ii) treat funds generated by the sale of Brink's Stock,
Burlington Stock or Minerals Stock and securities convertible into any such
stocks as assets of Pittston Brink's Group, Pittston Burlington Group or
Pittston Minerals Group, as the case may be, and apply such funds to acquire
assets or reduce liabilities attributed to Pittston Brink's Group, Pittston
Burlington Group or Pittston Minerals Group, respectively, and (iii) treat funds
generated by the sale of properties or assets as assets of Pittston Brink's
Group, Pittston Burlington Group or Pittston Minerals Group, as the case may be,
and utilize such funds in the business activities of, or to reduce liabilities
attributed to, Pittston Brink's Group, Pittston Burlington Group or Pittston
Minerals Group, respectively. These policies may be modified or rescinded by
action of the Board, or the Board may adopt additional policies, without the
approval of the shareholders, although the Board has no present intention to do
so. Any determination of the Board to modify or rescind such policies, or to
adopt additional policies, including any such determination that would have
disparate impacts upon the respective holders of Brink's Stock, Burlington Stock
and Minerals Stock, would be made by the Board in its good faith business
judgment of the Company's best interests. See 'Risk Factors -- Fiduciary Duties
of the Board; No Definitive Precedent Under Virginia Law'. The Company has no
present intention of selling securities of any class of capital stock. Copies of
these policies will be available for shareholder review at the principal
executive offices of the Company, 100 First Stamford Place, Stamford,
Connecticut.
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ACCOUNTING MATTERS AND POLICIES
The Company will prepare Pittston Brink's Group's, Pittston Burlington
Group's and Pittston Minerals Group's respective financial statements in
accordance with generally accepted accounting principles, and these financial
statements, when taken together, will comprise all the accounts included in the
corresponding consolidated financial statements of Pittston. The financial
statements of Pittston Brink's Group, Pittston Burlington Group and Pittston
Minerals Group principally reflect the financial position and results of
operations for the businesses included therein. Consistent with the Articles of
Amendment and related policies, such financial statements also include portions
of certain corporate assets and liabilities (including contingent liabilities).
Principal corporate activities reflected in such financial statements are:
Corporate financial activities, including investment of surplus cash;
issuance, repayment and repurchase of short-term and long-term debt; and
the issuance and repurchase of common stock, essentially all of which are
managed on a centralized, consolidated basis. Such activities are reflected
in the financial statements of Pittston Brink's Group, Pittston Burlington
Group and Pittston Minerals Group based upon their respective cash flows
and earnings and after giving consideration to the historical debt and
equity structure of the Company. In addition, certain financial activities
have been directly attributed to each Group and included in their entirety
in the respective Group combined financial statements; following the
Effective Date, financial activities which will be directly attributable to
the appropriate Group will include transactions related to securities
convertible solely into Brink's Stock, solely into Burlington Stock or
solely into Minerals Stock.
To the extent borrowings are deemed to occur among Pittston Brink's Group,
Pittston Burlington Group and Pittston Minerals Group, intercompany
accounts will be established bearing interest at the rate in effect from
time to time under the Company's unsecured credit lines or, if no such
credit lines exist, at the prime rate charged by Chemical Bank (or such
other bank as may be designated by the Board of Directors) from time to
time.
The Company's corporate and general and administrative expenses and other
shared services have been allocated to each Group based upon utilization of
such services by each Group.
Following the Effective Date, financial statement impacts of dividends paid
to holders of Brink's Stock, Burlington Stock and Minerals Stock and
purchases and issuances of Brink's Stock, Burlington Stock and Minerals
Stock will be reflected in their entirety in Pittston Brink's Group's
financial statements if they relate to Brink's Stock, in their entirety in
Pittston Burlington Group's financial statements if they relate to
Burlington Stock and in their entirety in Pittston Mineral Group's
financial statements if they relate to Minerals Stock.
Income taxes, which are determined on a consolidated basis, are allocated
to each Group in accordance with the Company's tax allocation policy and
reflected in the financial statements for each Group. In general, the
consolidated tax provision and related tax payments or refunds are
allocated between the Groups, for Group financial statement purposes, based
principally upon the income reported for financial purposes, taxable
income, credits and other amounts directly related to the respective Group.
Tax benefits that cannot be used by the Group generating such attributes,
but can be used on a consolidated basis, are allocated to the Group that
generated such benefits with an intercompany account being established for
the benefit of the Group generating the attribute. As a result, the
allocated Group amounts of taxes payable or refundable are not necessarily
comparable to those that would have resulted if the Groups had filed
separate tax returns. See the Notes to the Financial Statements of each of
Pittston Brink's Group and Pittston Burlington Group and the Consolidated
Financial Statements of The Pittston Company and Subsidiaries in Annexes V,
VII and VIII, respectively.
These policies may be modified or rescinded by action of the Board, or the
Board may adopt additional policies, without approval of the shareholders,
although the Board has no present plans to do so. In the event of any such
modification or addition, in taking any such action the Board will be guided by
its fiduciary duties described above. In addition, generally accepted accounting
principles require that any modified or new accounting policy be preferable (in
accordance with such principles) to the policy
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previously established. See ' Risk Factors -- Fiduciary Duties of the Board; No
Definitive Precedent Under Virginia Law'. For further information regarding the
basis of presentation and corporate activities, see Notes 1 and 2 to the
Financial Statements of each of Pittston Brink's Group and Pittston Burlington
Group and the Consolidated Financial Statements of The Pittston Company and
Subsidiaries in Annexes V, VII and VIII, respectively.
Notwithstanding the attribution of corporate assets and liabilities among
Pittston Brink's Group, Pittston Burlington Group and Pittston Minerals Group
for the purpose of preparing their respective financial statements, the change
in the capital structure of the Company contemplated by the Brink's Stock
Proposal will not result in any transfer of assets or liabilities of the Company
or any of its subsidiaries. The Company will continue to be responsible for its
liabilities (including contingent liabilities) and will continue to prepare
consolidated financial statements.
STOCK TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services, 450 West 33rd Street, New York, New
York 10001-2697, will act as Stock Transfer Agent and Registrar for each of
Brink's Stock, Burlington Stock and Minerals Stock.
STOCK EXCHANGE LISTINGS
Subject to shareholder approval, the NYSE has approved the reclassification
of Services Stock as Brink's Stock and the distribution of Burlington Stock and
for their listings under the symbols 'PZB' and 'PZX', respectively, subject to
official notice of issuance. The Company cannot predict to what extent active
trading markets will develop for the shares of Brink's Stock or Burlington Stock
or the prices at which the shares of Brink's Stock or Burlington Stock may trade
in such markets or otherwise.
DISSENTERS' RIGHTS
Under the Virginia Stock Corporation Act, holders of Services Stock,
Minerals Stock and Preferred Stock do not have dissenters' rights in connection
with the Brink's Stock Proposal.
FINANCIAL ADVISOR
CS First Boston has acted as financial advisor to the Company in connection
with the Brink's Stock Proposal. The Company has paid to CS First Boston a
$125,000 advisory fee and will pay to CS First Boston, upon the distribution of
Burlington Stock to the shareholders, an additional $500,000 transaction fee.
The Company has also agreed to reimburse CS First Boston for its reasonable
out-of-pocket expenses and to indemnify it against certain liabilities and to
provide contribution in respect thereof.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Company has received an opinion from its counsel, Cravath, Swaine &
Moore, that, for Federal income tax purposes:
(1) the Transaction will not result in income, gain or loss to the
Company or any shareholder;
(2) a shareholder's tax basis for Services Stock will be allocated
between Brink's Stock and Burlington Stock received in the Transaction in
proportion to their relative fair market values at the time of the
Transaction;
(3) a shareholder's holding period for Brink's Stock and Burlington
Stock received in the Transaction will include such shareholder's holding
period for Services Stock surrendered therefor, assuming such Services
Stock was a capital asset at the time of the Transaction;
(4) neither Brink's Stock nor Burlington Stock will be 'section 306
stock';
(5) a shareholder receiving cash in lieu of a fractional share of
Brink's Stock or Burlington Stock will recognize gain or loss (capital gain
or loss if the Services Stock is held as a capital asset)
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equal to the difference between the amount received and the basis for the
fractional share, determined as aforesaid;
(6) a holder of Burlington Stock or Minerals Stock, as the case may
be, will not recognize any gain or loss or derive any taxable income upon
the exchange of Burlington Stock or Minerals Stock, as the case may be, for
Brink's Stock, either pursuant to the Company's option or upon the
Disposition of all or substantially all of the assets of Pittston
Burlington Group or Pittston Minerals Group, as the case may be; and
(7) the tax basis of Brink's Stock received in such exchange will be
the tax basis of Burlington Stock or Minerals Stock, as the case may be,
exchanged therefor, and, assuming such Burlington Stock or Minerals Stock,
as the case may be, is a capital asset, the holding period of such Brink's
Stock will include the holding period of such Burlington Stock or Minerals
Stock, as the case may be.
Such counsel have noted that the Internal Revenue Service will not rule on
the tax consequences of transactions like the Transaction and may take the
position that (a) Brink's Stock or Burlington Stock is stock of a separate
corporation, not stock of the Company, (b) the Transaction is a taxable event to
the Company and its shareholders and (c) any later exchange of Minerals Stock or
Burlington Stock, as the case may be, for Brink's Stock is a taxable event to
shareholders. As indicated above, counsel are of the opinion that the Internal
Revenue Service should not prevail in any such assertion.
The foregoing is included for general information only. Shareholders should
consult their own tax advisors as to the Federal, state, local and foreign tax
consequences of the Transaction and of the holding or disposition of Brink's
Stock, Burlington Stock and Minerals Stock.
AMENDMENTS TO STOCK OPTION AND EMPLOYEE BENEFIT PLANS AND ADJUSTMENTS TO
OUTSTANDING OPTIONS
The 1988 Stock Option Plan, as approved by the shareholders in 1988 and
amended in 1992, 1993 and 1994 with their approval (the '1988 Plan'), authorizes
grants of stock options only with respect to either Services Stock or Minerals
Stock, or both. As part of the Brink's Stock Proposal, it is proposed to amend
the 1988 Plan so as to permit option grants to be made on and after the
Effective Date to optionees with respect to Brink's Stock, Burlington Stock or
Minerals Stock, or any combination of the three. In general, it is anticipated
that employees in Pittston Brink's Group will be granted options only with
respect to Brink's Stock, employees in Pittston Burlington Group will be granted
options only with respect to Burlington Stock and employees in Pittston Minerals
Group will be granted options only with respect to Minerals Stock. Options
granted to employees having Company-wide responsibilities may be divided among
Brink's Stock, Burlington Stock and Minerals Stock on such basis as the Board or
the Compensation Committee determines. A total of shares of Brink's Stock,
shares of Burlington Stock and shares of Minerals Stock will be
reserved for future option grants under the 1988 Plan. The amounts reserved are
proportionately related to the number of shares of Services Stock and Minerals
Stock available at November , 1995, for grants under the 1988 Plan. The text of
the 1988 Plan showing the proposed amendments is set forth in Annex III-B.
At November , 1995, a total of shares of Services Stock and Minerals
Stock were subject to options outstanding under the 1988 Plan and two other
option plans of the Company under which no further options may be granted.
Pursuant to antidilution provisions in the option agreements covering such
Services Stock options, the Board or the Compensation Committee will convert
these options into options for shares of Brink's Stock or Burlington Stock, or
both, depending primarily on the employment status and responsibilities of the
particular optionee. In the case of optionees having responsibilities in both
the Pittston Brink's Group and Pittston Burlington Group, each outstanding
option for Services Stock will be converted into an option for Brink's Stock and
an option for Burlington Stock, by allocating the spread on the Services Stock
option immediately prior to the Transaction between the Brink's Stock option and
the Burlington Stock option. In the case of other optionees, each outstanding
option will be converted into a new option for only Brink's Stock or Burlington
Stock, as the case may be, following the Effective Date. The Board believes that
conversion on the basis described above will encourage each optionee to fulfill
his or her responsibilities as an
40
<PAGE>
employee in a manner expected to best serve the interests of the Company and its
shareholders. The options granted pursuant to such conversions will preserve the
value of the options being converted but are not intended to provide additional
benefits to the optionees.
The Non-Employee Directors' Stock Option Plan approved by the shareholders
in 1988 and amended in 1993 authorizes automatic grants of stock options only
with respect to Services Stock and Minerals Stock. Such grants consist of 10,000
shares of Services Stock and 2,000 shares of Minerals Stock upon initial
election as a director and 1,000 shares of Services Stock and 200 shares of
Minerals Stock annually thereafter. The Brink's Stock Proposal contemplates that
any initial grant to any Non-Employee Director after the Effective Date will
consist of three options, one for 10,000 shares of Brink's Stock, one for 5,000
shares of Burlington Stock and one for 2,000 shares of Minerals Stock.
Subsequent annual grants would be for 1,000 shares of Brink's Stock, 500 shares
of Burlington Stock and 200 shares of Minerals Stock. Pursuant to antidilution
provisions in the option agreements applicable to options outstanding on the
Effective Date, such options will be converted into three options in the manner
described above which will preserve the value of the options being converted but
without providing any additional benefits to the optionees. A total of
shares of Brink's Stock, shares of Burlington Stock and shares of
Minerals Stock will be reserved for future option grants. The amounts reserved
are proportionately related to the number of shares of Services Stock and
Minerals Stock available at November , 1995, for grant under the Plan.
In 1992 the shareholders approved, and in 1993, 1994 and 1995 amended, the
Key Employees' Deferred Compensation Program (the 'Program') by which eligible
employees may defer (a) receipt of all or any part of any cash incentive payment
awarded under the Key Employees Incentive Plan of The Pittston Company, (b) up
to 50% of the employee's base salary (determined prior to reduction for any
contributions made on a salary reduction basis) and (c) amounts that are not
permitted to be deferred under the Savings-Investment Plan of The Pittston
Company and its Subsidiaries (the 'Savings Plan') as a result of limits imposed
by the Code and have a matching contribution credited with respect to such
Savings Plan deferral. Such deferred amounts are currently allocated as the
participant elects between amounts to be deferred in the form of Minerals Units
('Minerals Units') and/or Services Units ('Services Units'). Each unit is the
equivalent of one share of Minerals Stock or one share of Services Stock. In the
event of a deferral, the Company provides a matching contribution equal to 100%
of the first 10% of his or her (a) cash incentive payment and (b) salary (earned
after June 1, 1995 for the 1995 year), but in no event does the matching
contribution exceed the amount deferred. Such matching contributions credited on
behalf of an employee employed by a subsidiary in the Pittston Services Group or
the Pittston Minerals Group are converted into Services Units or Minerals Units,
as the case may be. Such matching contributions allocated on behalf of an
employee of The Pittston Company are converted into Services Units and Minerals
Units in the proportion that the fair market value of each of the Services Stock
and Minerals Stock bears to the total fair market value of both Services Stock
and Minerals Stock as of the last day of the year for which the incentive
payment was made or in which the deferred salary was earned. The Program
provides that the aggregate value of the Minerals Stock and Services Stock and
cash distributed to a participant in respect of all Units standing to his or her
credit in his or her incentive account attributable to the deferral of incentive
payments and the deferral of salary shall not be less than the aggregate amount
of incentive payments, salary and related dividends in respect of which such
Units were initially credited. This guarantee does not apply to Company-matching
contributions or dividends attributable to such contributions. As part of the
Brink's Stock Proposal, the Compensation Committee has determined, pursuant to
the Program, that each Services Stock unit held in the incentive account of a
participating employee at the Effective Date will constitute one share of
Brink's Stock and one-half of one share of Burlington Stock, and has amended the
Program, subject to approval of the Brink's Stock Proposal by the shareholders,
so as to provide that any participating employee may elect that units credited
after the Effective Date be credited with respect to either Brink's Stock,
Burlington Stock or Minerals Stock or any combination of the three, as specified
by the employee, unless the Compensation Committee otherwise determines.
Incentive accounts invested in Minerals Stock Units will be unaffected by the
Brink's Stock Proposal.
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EFFECTS ON PREFERRED STOCK
The Brink's Stock Proposal will have no effect on the conversion rights,
voting rights or liquidation rights of the Preferred Stock.
If any Preferred Stock is converted after all the outstanding Minerals
Stock has been exchanged for Brink's Stock, the holder of such Preferred Stock
would, upon conversion, receive shares of Brink's Stock in lieu of shares of
Minerals Stock otherwise issuable. For example, if each outstanding share of
Minerals Stock were to be exchanged for one share of Brink's Stock, and if the
holder of Preferred Stock would have been entitled to receive upon conversion
immediately prior to such exchange 100 shares of Minerals Stock at the
conversion rate then in effect, such holder would automatically receive the
equivalent value in Brink's Stock instead of 100 shares of Minerals Stock upon
subsequent conversion. See 'Description of Brink's Stock, Burlington Stock and
Minerals Stock -- Exchange'.
AMENDED AND RESTATED RIGHTS AGREEMENT
Pursuant to the Rights Agreement, as previously amended (the 'Rights
Agreement'), between the Company and Chemical Bank, as Rights Agent (the 'Rights
Agent'), Minerals Rights and Services Rights were issued by the Board to holders
of Minerals Stock and Services Stock, respectively. If the shareholders approve
the Brink's Stock Proposal, the Rights Agreement (including the form of rights
provided for therein) will be amended and restated to reflect the change in the
capital structure of the Company and the Board will declare a distribution to
holders of Burlington Stock of one Pittston Burlington Group right (a
'Burlington Right'), for each outstanding share of Burlington Stock. Each
existing Services Right will, in connection with the reclassification of
Services Stock as Brink's Stock, become a Pittston Brink's Group Right (a
'Brink's Right'). The Rights Agreement, as amended and restated (the 'Restated
Rights Agreement'), will provide that each Brink's Right and Burlington Right
(each, a 'Right'), when it becomes exercisable, will entitle the registered
holder to purchase from the Company (i) in the case of a Brink's Right, one
one-thousandth (1/1000th) of a share of Series A Participating Cumulative
Preferred Stock, par value $10 per share (the 'Series A Shares'), at a purchase
price, of $ , subject to adjustment (the 'Series A Purchase Price'), and
(ii) in the case of a Burlington Right one one-thousandth (1/1000th) of a share
of Series D Participating Cumulative Preferred Stock, par value $10 per share
(the 'Series D Shares'), at a purchase price of $ , subject to adjustment
(the 'Series D Purchase Price'). Mineral Rights will be unaffected by the
Brink's Stock Proposal and will not be amended by the Restated Rights Agreement.
The Restated Rights Agreement will provide that, prior to a Rights
distribution date, Brink's Rights and Burlington Rights will be attached to all
certificates representing shares of Brink's Stock and Burlington Stock,
respectively, then outstanding, and no separate Rights certificates will be
distributed. Each share of Brink's Stock will represent one Brink's Right and
each share of Burlington Stock will represent one Burlington Right. Brink's
Stock, Burlington Stock and Minerals Stock are sometimes hereinafter
collectively referred to as the 'Voting Stock'. The Rights will separate from
the Voting Stock and a Rights distribution date (a 'Distribution Date') will
occur upon the earlier of (i) the tenth day after the first public disclosure
that a person or group (including any affiliate or associate of such person or
group) (an 'Acquiring Person') has acquired, or obtained the right to acquire,
beneficial ownership of Voting Stock representing 20% or more of the total
voting rights of all outstanding shares of Voting Stock (the 'Share Acquisition
Date'), or (ii) the tenth day after the commencement of a tender or exchange
offer for shares of Voting Stock representing 30% or more of the total voting
rights of all outstanding shares of Voting Stock. For purposes of the Restated
Rights Agreement, total voting rights of Voting Stock shall be determined based
upon the fixed voting rights of holders of outstanding shares of Brink's Stock,
Burlington Stock and Minerals Stock in effect on any such Distribution Date. See
'Description of Brink's Stock and Burlington Stock -- Voting'.
In the event the Company is acquired in a merger or other business
combination or 50% or more of its assets or assets representing 50% or more of
its earning power are sold, leased, exchanged or otherwise transferred (in one
or more transactions) to a publicly traded corporation, each Brink's Right, each
Minerals Right and each Burlington Right will entitle its holder to purchase,
for the Series A Purchase Price, Series B Purchase Price and Series D Purchase
Price, respectively, that number of common shares of such corporation which at
the time of the transaction would have a market value of
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twice the applicable Purchase Price. Similarly, in the event the Company is
acquired in a merger or other business combination or 50% or more of its assets
or assets representing 50% or more of the earning power of the Company are sold,
leased, exchanged or otherwise transferred (in one or more transactions) to an
entity that is not a publicly traded corporation, each Right will entitle its
holder to purchase, for the applicable Purchase Price, at such holder's option,
(i) that number of shares of such entity (or, at such holder's option, of the
surviving corporation in such acquisition, which could be the Company) which at
the time of the transaction would have a book value of twice the applicable
Purchase Price or (ii) if such entity has an affiliate which has publicly traded
common shares, that number of common shares of such affiliate which at the time
of the transaction would have a market value of twice the applicable Purchase
Price.
In the event an Acquiring Person (i) shall acquire beneficial ownership of
shares of Voting Stock representing 30% or more of the total voting rights of
all outstanding shares of Voting Stock or (ii) engages in one or more
'self-dealing' transactions with the Company as set forth in the Restated Rights
Agreement (any such event being called a 'Triggering Event'), (a) each Brink's
Right will entitle its holder to purchase, at the Series A Purchase Price, that
number of one one-thousandths (1/1000th) of a Series A Share equivalent to the
number of shares of Brink's Stock which at the time of the transaction would
have a market value of twice the Series A Purchase Price, (b) each Minerals
Right will entitle its holder to purchase, at the Series B Purchase Price, that
number of one one-thousandths (1/1000th) of a Series B Share equivalent to the
number of shares of Minerals Stock which at the time of the transaction would
have a market value of twice the Series B Purchase Price and (c) each Burlington
Right will entitle its holder to purchase, at the Series D Purchase Price, that
number of one one-thousandths (1/1000th) of a Series D Share equivalent to the
number of shares of Burlington Stock which at the time of the transaction would
have a market value of twice the Series D Purchase Price.
In the event the Company merges with an Acquiring Person and the Company is
the surviving corporation and all the Voting Stock remains outstanding and
unchanged (any such event being called an 'Affiliate Merger'), (a) each Brink's
Right will entitle its holder to purchase, at the Series A Purchase Price, that
number of shares of Brink's Stock which at the time of the transaction would
have a market value of twice the Series A Purchase Price, (b) each Minerals
Right will entitle its holder to purchase, at the Series B Purchase Price, that
number of shares of Minerals Stock which at the time of the transaction would
have a market value of twice the Series B Purchase Price and (c) each Burlington
Right will entitle its holder to purchase, at the Series D Purchase Price, that
number of shares of Burlington Stock which at the time of the transaction would
have a market value of twice the Series D Purchase Price.
Under no circumstances may a Right be transferred to an Acquiring Person or
an affiliate or associate of an Acquiring Person or to any person who
subsequently becomes an Acquiring Person or affiliate or associate, and any
purported transfer of Rights to any such person shall be, and shall render the
Rights purported to be transferred, null and void.
At any time prior to the earliest of (i) the tenth day following the Share
Acquisition Date, (ii) the occurrence of a Triggering Event or (iii) September
25, 1997 (the 'Expiration Date'), the Board may redeem the Rights in whole, but
not in part, at a price (in cash or securities deemed by the Board to be
equivalent in value) of $.01 per Right (the 'Redemption Price'). However, once
an Acquiring Person becomes an Acquiring Person, the Rights may thereafter be
redeemed only if the Board, with the concurrence of a majority of the
Disinterested Directors (as defined in the Restated Rights Agreement),
determines that such redemption is in the best interests of the Company and its
shareholders.
Immediately upon the action of the Board electing to redeem the Rights, and
upon such election, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
At any time prior to the Distribution Date, the Company may, without the
approval of any holder of the Rights, supplement or amend any provision of the
Restated Rights Agreement (including the date on which the Distribution Date
shall occur), except that no supplement or amendment shall be
43
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made which reduces the Redemption Price or provides for an earlier Expiration
Date. However, at any time when there is an Acquiring Person, the Restated
Rights Agreement may be supplemented or amended only if the Board, with the
concurrence of a majority of the Disinterested Directors, determines that such
supplement or amendment is in the best interests of the Company and its
shareholders.
A copy of the form of the Restated Rights Agreement (which includes as
Exhibit B-1 the Form of Rights Certificate for Brink's Rights, as Exhibit B-2
the Form of Rights Certificate for Minerals Rights and as Exhibit B-3 the Form
of Rights Certificate for Burlington Rights) has been filed with the Commission
as an exhibit to the Registration Statement to which this Proxy Statement
relates and is incorporated herein by reference. A copy of the Restated Rights
Agreement is available free of charge from the Rights Agent. The foregoing
description of the Rights is a summary only and is qualified in its entirety by
reference to the Restated Rights Agreement.
POSSIBLE ANTITAKEOVER EFFECTS
The Virginia Stock Corporation Act ('SCA'), the Restated Rights Agreement,
the Articles of Incorporation and the Company's bylaws contain provisions which
may serve to discourage or make more difficult a change in control of the
Company without the support of the Board or without meeting various other
conditions. The principal provisions of the Restated Rights Agreement are
described above, and the more important provisions of the SCA and the other
aforementioned corporate governance documents are outlined below.
Under Section 13.1-725 of the SCA, certain 'affiliated transactions' with a
person owning 10% or more of any class of a corporation's outstanding voting
shares must be approved by a majority of the disinterested directors and by a
two-thirds vote of the shareholders other than such person for a period of three
years after the date on which such person became a 10% owner. 'Affiliated
transactions' include mergers, statutory share exchanges for any class of stock,
recapitalizations and sales of assets other than in the ordinary course of
business. The Brink's Stock Proposal would reduce the number of shares that an
acquirer could purchase without triggering the 'affiliated transactions'
provisions, unless such acquirer were to purchase up to 10% of the shares of
each of Brink's Stock, Burlington Stock and Minerals Stock. In addition, the SCA
provides that a person acquiring voting shares within certain specified ranges
(beginning with 20%) of a corporation's shares entitled to vote in the election
of directors does not have voting rights with respect to the acquired shares
unless such rights are approved by a majority of shareholders other than such
acquiring person.
The Articles of Incorporation and the Company's bylaws also contain
provisions which could make a change in control of the Company more difficult.
For example, such Articles provide for a classified Board under which one-third
of the total number of directors are elected each year and prohibit removal of
directors for other than cause. The provision for a classified Board can be
amended only by an 80% shareholder vote. In addition, the Articles of
Incorporation authorize the issue of 2,000,000 shares of preferred stock, of
which shares would be reserved for issue in accordance with the Restated
Rights Agreement. Under the Articles of Incorporation, the Board is authorized,
without further action by the shareholders of the Company, to establish the
preferences, limitations and relative rights of the preferred stock. The issue
and sale of shares of preferred stock could occur in connection with an attempt
to acquire control of the Company, and the terms of such shares could be
designed in part to impede the acquisition of such control. The Company's bylaws
provide that only the Board or the Chairman may call special meetings of
shareholders and the SCA requires only that not more than 15 months elapse
between annual meetings. The Company's bylaws also contain provisions regulating
the procedure by which shareholders may nominate directors and bring business
before a meeting of shareholders.
The Company believes that the Brink's Stock Proposal, if approved by the
shareholders, should not make a change in control of the Company more difficult.
Each share of Brink's Stock and Burlington Stock will initially have one vote
per share. Implementation of the Brink's Stock Proposal will require the
issuance of shares of Burlington Stock in an amount equal to 50% of the number
of shares of Brink's Stock that will replace, share-for-share, the presently
outstanding Services Stock. Although the number of outstanding shares would
initially increase by 50%, the cost to an acquiring person of
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obtaining majority control would depend on the market value of each class. The
Company cannot predict whether, to what extent or during what periods of time
such cost may increase or decrease, nor can the Company predict the effect of
the proposed provisions for periodic adjustment of voting rights (see
'Description of Brink's Stock, Burlington Stock and Minerals Stock -- Voting').
Under the Rights Agreement (which is currently in effect), the purchase price
for each one one-thousandth (1/1000th) of a Preferred Share (as defined therein)
is $40. Under the Restated Rights Agreement, however, the purchase price for
each one one-thousandth (1/1000th) of a Series A Share, Series B Share and
Series D Share would be $ , which reflects a purchase price reduction of
% (from $40 to $ ) to reflect the 50% increase in the aggregate number
of outstanding shares of Common Stock.
Nevertheless, the existence of three classes of common stock could in
certain circumstances pose obstacles, financial and otherwise, to an acquiring
person with particular objectives in mind. For example, the effect of the
provisions for variable voting rights and the requirement that Minerals Stock,
Brink's Stock and Burlington Stock vote as a single voting group might
discourage a potential acquire from initiating a proxy contest or tender offer
as a result of the complexities involved in acquiring a majority of the voting
stock of the Company.
The Brink's Stock Proposal includes provisions by which the authorized
Brink's Stock, Burlington Stock and Minerals Stock would aggregate 170 million
shares, as compared with 120 million shares of common stock currently authorized
(of which approximately million are outstanding as of November , 1995). The
increased availability of shares for possible future issuance without approval
of shareholders would not, in the Company's view, make a change in control of
the Company materially more difficult.
OTHER INFORMATION
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Company. In
addition to soliciting proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
by telephone, telegram, in person or by other means. Arrangements also will be
made with brokerage firms and other custodians, nominees and fiduciaries to
forward proxy solicitation material to the beneficial owners of Services Stock,
Minerals Stock and the Preferred Stock held of record by such persons and the
Company will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith. The Company has retained Kissel-Blake Inc. to perform various proxy
advisory and solicitation services. The fee of Kissel-Blake Inc. is currently
estimated to be approximately $ , plus reimbursement of out-of-pocket
expenses.
EXPERTS
The Consolidated Financial Statements and Schedules of the Company, the
Financial Statements and Schedules of Pittston Brink's Group, the Financial
Statements and Schedules of Pittston Burlington Group and the Financial
Statements of Pittston Minerals Group as of December 31, 1994 and 1993, and for
each of the three years in the period ended December 31, 1994, included or
incorporated by reference in this Proxy Statement, have been so included or
incorporated in reliance on the reports of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
The reports of KPMG Peat Marwick LLP covering the Financial Statements of
Pittston Brink's Group, the Financial Statements of Pittston Burlington Group
and the Financial Statements of Pittston Minerals Group as of December 31, 1994
and 1993, and for each of the three years in the period ended December 31, 1994,
contain an explanatory paragraph that states that the Financial Statements of
Pittston Brink's Group, the Financial Statements of Pittston Burlington Group
and the Financial Statements of Pittston Minerals Group should be read in
connection with the audited Consolidated Financial Statements of the Company.
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LEGAL OPINIONS
The validity of the reclassification of Services Stock as Brink's Stock and
the issuance of Burlington Stock will be passed upon for the Company by Hunton &
Williams, Richmond, Virginia. Certain tax matters will be passed upon for the
Company by Cravath, Swaine & Moore, New York, New York.
By order of the Board of Directors,
AUSTIN F. REED,
Secretary
Dated: November , 1995
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ANNEX I
GLOSSARY OF CERTAIN TERMS
<TABLE>
<CAPTION>
PAGE ON WHICH TERM IS
DEFINED IN THE PROXY
TERM STATEMENT
- ------------------------------------------------------------------------------------------ ---------------------
<S> <C>
Aggregate Market Capitalization........................................................... II-6
Available Minerals Dividend Amount........................................................ II-7
Articles of Amendment..................................................................... 2
Articles of Incorporation................................................................. 2
BHS....................................................................................... 17
Board..................................................................................... 1
Brink's Stock............................................................................. 1
Brink's Stock Proposal.................................................................... 1
Burlington Stock.......................................................................... 1
Business Day.............................................................................. 34, II-7
Commission................................................................................ 3
Company................................................................................... 1
Composite Tape............................................................................ 15
CS First Boston........................................................................... 24
Disposition............................................................................... 33, II-7
Effective Date............................................................................ 2, II-7
Exchange Act.............................................................................. 3
Fair Market Value......................................................................... 34, II-7
Group..................................................................................... 1
Groups.................................................................................... 1
Meeting................................................................................... 1
Minerals Net Income....................................................................... II-8
Minerals Stock............................................................................ 1
NYSE...................................................................................... 2
Nominal Shares............................................................................ 10
Pittston.................................................................................. 1
Pittston Brink's Group.................................................................... 1, II-8
Pittston Burlington Group................................................................. 1, II-8
Pittston Minerals Group................................................................... 1, II-8
Pittston Services Group................................................................... 1
1988 Plan................................................................................. 40
Preferred Stock........................................................................... 1
Program................................................................................... 41
Proxy Statement........................................................................... 1
Record Date............................................................................... 5
Registration Statement.................................................................... 3
Rights Agreement.......................................................................... 42
Securities Act............................................................................ 3
Services Stock............................................................................ 1
Transaction............................................................................... 5
</TABLE>
I-1
________________________________________________________________________________
<PAGE>
ANNEX II
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
THE PITTSTON COMPANY
Pursuant to Section 13.1-710 of the Virginia Stock Corporation Act, The
Pittston Company, a corporation organized and existing under the laws of
Virginia, in accordance with Section 13.1-604 of the Virginia Stock Corporation
Act, DOES HEREBY CERTIFY as follows:
FIRST: The name of the Corporation is The Pittston Company (the
'Corporation').
SECOND: Pursuant to resolutions duly adopted by all the directors of
the Corporation, resolutions were duly adopted setting forth a proposed
amendment to the Restated Articles of Incorporation of the Corporation,
declaring said amendment to be advisable, directing that said amendment be
considered at a special meeting of the shareholders of the Corporation and
reserving unto the Board the power to abandon the proposal notwithstanding
shareholder approval thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Board of Directors of this Corporation hereby
declares it advisable and recommends to the shareholders that the
Pittston Services Group Common Stock, par value $1.00 per share (the
'Services Stock'), be reclassified and that, in order to effect such
reclassification, (A) shares of Burlington Stock be distributed to the
holders of Services Stock on the basis of one-half of one share of
Burlington Stock for each outstanding share of Services Stock and (B)
the Restated Articles of Incorporation of the Corporation be amended by:
(i) deleting the introductory paragraph and Division I of Article III in
their entirety and substituting in lieu thereof the following:
The total number of shares of capital stock which the
Corporation shall have authority to issue is one hundred seventy-two
million (172,000,000), of which two million (2,000,000) shares shall
be shares of Preferred Stock, par value $10.00 per share (hereinafter
called 'Preferred Stock'), one hundred million (100,000,000) shares
shall be shares of a class of common stock designated as Pittston
Brink's Group Common Stock, par value $1.00 per share ('Brink's
Stock'), fifty million (50,000,000) shares shall be shares of a class
of common stock designated as Pittston Burlington Group Common Stock,
par value $1.00 per share ('Burlington Stock'), and twenty million
(20,000,000) shares shall be shares of Pittston Minerals Group Common
Stock, par value $1.00 per share ('Minerals Stock'). Brink's Stock,
Burlington Stock and Minerals Stock shall hereinafter collectively be
called 'Common Stock'.
DIVISION I
The preferences, limitations and relative rights of the shares of each
class of Common Stock are as follows:
1. Dividend Rights. (a) Subject to the express terms of any
outstanding series of Preferred Stock, dividends may be declared and paid
upon Brink's Stock, Burlington Stock and Minerals Stock upon the terms
provided for below with respect to each such class:
(i) Dividends on Brink's Stock and Burlington Stock. Dividends on
Brink's Stock and/or Burlington Stock may be declared and paid out of
funds of the Corporation legally available therefor. Subject to the
foregoing, the declaration and payment of dividends on Brink's Stock and
Burlington Stock, and the amount thereof, shall at all times be solely
in the discretion of the Board of Directors.
(ii) Dividends on Minerals Stock. Dividends on Minerals Stock may
be declared and paid only out of the lesser of (A) funds of the
Corporation legally available therefor and (B) the Available Minerals
Dividend Amount. Subject to the foregoing, the declaration and payment
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of dividends on Minerals Stock, and the amount thereof, shall at all
times be solely in the discretion of the Board of Directors.
(b) Discrimination Among Brink's Stock, Burlington Stock and Minerals
Stock. The Board of Directors, subject to the provisions of Sections
1(a)(i) and 1(a)(ii), may, in its sole discretion, declare and pay
dividends exclusively on Brink's Stock, exclusively on Burlington Stock,
exclusively on Minerals Stock or on any combination or all of such classes
in equal or unequal amounts, notwithstanding the amounts of funds available
for dividends on each class, the respective voting and liquidation rights
of each class, the amount of prior dividends declared on each class or any
other factor.
(c) Distribution Determination. Pursuant to Section 13.1-653 of the
Virginia Stock Corporation Act, the Board of Directors may base a
determination that a proposed dividend distribution is out of funds legally
available therefor under Virginia law either on financial statements
prepared on the basis of accounting practices and principles that are
reasonable in the circumstances or on a fair valuation of the Corporation's
total net assets or other method that is reasonable in the circumstances.
2. Exchange. Shares of Brink's Stock, Burlington Stock and Minerals
Stock are subject to exchange upon the terms provided below:
(a) Exchange of Brink's Stock. Outstanding shares of Brink's Stock
shall not be subject to either optional or mandatory exchange by the
Board of Directors.
(b) Exchange of Burlington Stock. (i) In the event of the
Disposition, in one transaction or a series of related transactions, by
the Corporation of all or substantially all of the properties and assets
of Pittston Burlington Group (other than in connection with the
Disposition by the Corporation of all or substantially all of its
properties and assets in one transaction) to any person, entity or group
(other than (A) the holders of all outstanding shares of Burlington
Stock on a pro rata basis or (B) any person, entity or group in which
the Corporation, directly or indirectly, owns a majority equity
interest), the Corporation shall, on or prior to the first Business Day
following the 60th day following the consummation of such Disposition,
exchange each outstanding share of Burlington Stock for fully paid and
nonassessable shares of Brink's Stock (or, if there are no shares of
Brink's Stock outstanding on the Exchange Date, of Minerals Stock, or,
if there are no shares of Minerals Stock outstanding on the Exchange
Date and shares of another class or classes of Common Stock (other than
Burlington Stock) are then outstanding, of such other class of Common
Stock as then has the largest Aggregate Market Capitalization) having a
Fair Market Value equal to 115% of the Fair Market Value of one share of
Burlington Stock, as of the date of the first public announcement by the
Corporation of such Disposition.
(ii) The Board of Directors may, by a majority vote of the
directors then in office, at any time in its sole discretion declare
that each outstanding share of Burlington Stock shall be exchanged, on
an Exchange Date set forth in a notice to holders of Burlington Stock
pursuant to Section 2(e)(i), for fully paid and nonassessable shares of
Brink's Stock (or, if there are no shares of Brink's Stock outstanding
on the Exchange Date, of Minerals Stock, or, if there are no shares of
Minerals Stock outstanding and shares of another class or classes of
Common Stock (other than Burlington Stock) are then outstanding, of such
other class of Common Stock as then has the largest Aggregate Market
Capitalization) having a Fair Market Value equal to 115% of the Fair
Market Value of one share of Burlington Stock, as of the date of the
first public announcement by the Corporation of such exchange.
(iii) After any Exchange Date on which all outstanding shares of
Burlington Stock were exchanged, any share of Burlington Stock that is
issued on conversion or exercise of any Convertible Securities shall,
immediately upon issuance pursuant to such conversion or exercise and
without any notice or any other action on the part of the Corporation or
its Board of Directors or the holder of such share of Burlington Stock,
be exchanged for the amount of shares of Brink's Stock or another class
of Common Stock that a holder of such Convertible Security would have
been entitled to receive pursuant to the terms of such Convertible
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Security had such terms provided that the conversion privilege in effect
immediately prior to any exchange by the Corporation of any shares of
its Burlington Stock for shares of any other capital stock of the
Corporation would be adjusted so that the holder of any such Convertible
Security thereafter surrendered for conversion would be entitled to
receive the number of shares of capital stock of the Corporation he or
she would have owned immediately following such action had such
Convertible Security been converted immediately prior thereto. The
provisions of this Section 2(b)(iii) shall not apply to the extent that
equivalent adjustments are otherwise made pursuant to the provisions of
such Convertible Securities.
(c) Exchange of Minerals Stock. (i) In the event of the
Disposition, in one transaction or a series of related transactions, by
the Corporation of all or substantially all of the properties and assets
of Pittston Minerals Group (other than in connection with the
Disposition by the Corporation of all or substantially all of its
properties and assets in one transaction) to any person, entity or group
(other than (A) the holders of all outstanding shares of Minerals Stock
on a pro rata basis or (B) any person, entity or group in which the
Corporation, directly or indirectly, owns a majority equity interest),
the Corporation shall, on or prior to the first Business Day following
the 60th day following the consummation of such Disposition, exchange
each outstanding share of Minerals Stock for fully paid and
nonassessable shares of Brink's Stock (or, if there are no shares of
Brink's Stock outstanding on the Exchange Date, of Burlington Stock, or,
if there are no shares of Burlington Stock outstanding on the Exchange
Date and shares of another class or classes of Common Stock (other than
Minerals Stock) are then outstanding, of such other class of Common
Stock as then has the largest Aggregate Market Capitalization) having a
Fair Market Value equal to 115% of the Fair Market Value of one share of
Minerals Stock, as of the date of the first public announcement by the
Corporation of such Disposition.
(ii) The Board of Directors may, by a majority vote of the
directors then in office, at any time in its sole discretion declare
that each outstanding share of Minerals Stock shall be exchanged, on an
Exchange Date set forth in a notice to holders of Minerals Stock
pursuant to Section 2(e)(i), for fully paid and nonassessable shares of
Brink's Stock (or, if there are no shares of Brink's Stock outstanding
on the Exchange Date, of Burlington Stock, or, if there are no shares of
Burlington Stock outstanding on the Exchange Date and shares of another
class or classes of Common Stock (other than Minerals Stock) are then
outstanding, of such other class of Common Stock as then has the largest
Aggregate Market Capitalization) having a Fair Market Value equal to
115% of the Fair Market Value of one share of Minerals Stock, as of the
date of the first public announcement by the Corporation of such
exchange.
(iii) After any Exchange Date on which all outstanding shares of
Minerals Stock were exchanged, any share of Minerals Stock that is
issued on conversion or exercise of any Convertible Securities shall,
immediately upon issuance pursuant to such conversion or exercise and
without any notice or any other action on the part of the Corporation or
its Board of Directors or the holder of such share of Minerals Stock, be
exchanged for the amount of shares of Brink's Stock or another class of
Common Stock that a holder of such Convertible Security would have been
entitled to receive pursuant to the terms of such Convertible Security
had such terms provided that the conversion privilege in effect
immediately prior to any exchange by the Corporation of any shares of
its Minerals Stock for shares of any other capital stock of the
Corporation would be adjusted so that the holder of any such Convertible
Security thereafter surrendered for conversion would be entitled to
receive the number of shares of capital stock of the Corporation he or
she would have owned immediately following such action had such
Convertible Security been converted immediately prior thereto. The
provisions of this Section 2(c)(iii) shall not apply to the extent that
equivalent adjustments are otherwise made pursuant to the provisions of
such Convertible Securities.
(d) Certain Definitions. For purposes of Sections 2(b)(i) and
2(c)(i):
(i) as of any date, 'substantially all of the properties and
assets' of Pittston Burlington Group or Pittston Minerals Group, as
the case may be, shall mean a portion of such properties and assets
that represents at least 80% of either of the then-current
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market value, as determined by the Board of Directors based on
opinions, appraisals or such other evidence as the Board shall
consider relevant, of, or the aggregate reported net sales for the
immediately preceding twelve fiscal quarterly periods of the
Corporation derived from, the properties and assets of Pittston
Burlington Group or Pittston Minerals Group, respectively, as of such
date (excluding the properties and assets of any person, entity or
group in which the Corporation, directly or indirectly, owns less
than a majority equity interest);
(ii) if immediately after any event, the Corporation, directly
or indirectly, owns less than a majority equity interest in any
person, entity or group in which the Corporation, directly or
indirectly, owned a majority equity interest immediately prior to the
occurrence of such event, a Disposition of all of the properties and
assets of Pittston Burlington Group or Pittston Minerals Group,
respectively, owned by such person, entity or group shall be deemed
to have occurred; and
(iii) in the case of a Disposition of properties and assets in a
series of related transactions, such Disposition shall not be deemed
to have been consummated until the consummation of the last of such
transactions.
(e) General Exchange Provisions. (i) In the event of any exchange
pursuant to Sections 2(b)(i) and (ii) or 2(c)(i) and (ii), the
Corporation shall cause to be given to each holder of Burlington Stock
or Minerals Stock, respectively, a notice stating (A) that shares of
Burlington Stock or Minerals Stock, respectively, shall be exchanged,
(B) the Exchange Date, (C) the kind and amount of shares of capital
stock to be received by such holder with respect to each share of
Burlington Stock or Minerals Stock, respectively, held by such holder,
including details as to the calculation thereof, (D) the place or places
where certificates for shares of Burlington Stock or Minerals Stock,
respectively, properly endorsed or assigned for transfer (unless the
Corporation shall waive such requirement), are to be surrendered for
delivery of certificates for shares of such capital stock and (E) that,
subject to Section 2(e)(iii), dividends on Burlington Stock or Minerals
Stock, respectively, will cease to be paid as of such Exchange Date.
Such notice shall be sent by first-class mail, postage prepaid, not less
than 30 nor more than 60 days prior to the Exchange Date and in any case
to each holder of Burlington Stock or Minerals Stock, respectively, at
such holder's address as the same appears on the stock transfer books of
the Corporation. Neither the failure to mail such notice to any
particular holder of Burlington Stock or Minerals Stock, respectively,
nor any defect therein shall affect the sufficiency thereof with respect
to any other holder of Burlington Stock or Minerals Stock, respectively.
(ii) The Corporation shall not be required to issue or deliver
fractional shares of any class of capital stock to any holder of
Burlington Stock or Minerals Stock, as the case may be, upon any
exchange pursuant to this Section 2. If the number of shares of any
class of capital stock remaining to be issued to any holder of
Burlington Stock or Minerals Stock is a fraction, the Corporation shall,
if such fraction is not issued or delivered to such holder, pay a cash
adjustment in respect of such fraction in an amount equal to the Fair
Market Value of such fraction on the date such payment is to be made.
(iii) No adjustments in respect of dividends shall be made upon the
exchange of any shares of Burlington Stock or Minerals Stock, as the
case may be; provided, however, that, if the Exchange Date with respect
to Burlington Stock or Minerals Stock, as the case may be, shall be
subsequent to the record date for the payment of a dividend or other
distribution thereon or with respect thereto, the holders of such shares
of Burlington Stock or Minerals Stock, respectively, at the close of
business on such record date shall be entitled to receive the dividend
or other distribution payable on or with respect to such shares on the
date set for payment of such dividend or other distribution,
notwithstanding the exchange of such shares or the Corporation's default
in payment of the dividend or distribution due on such date.
(iv) Before any holder of shares of Burlington Stock or Minerals
Stock, as the case may be, shall be entitled to receive certificates
representing shares of any capital stock to be received by such holder
with respect to such shares of Burlington Stock or Minerals Stock,
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respectively, pursuant to this Section 2, such holder shall surrender at
such office as the Corporation shall specify certificates for such
shares of Burlington Stock or Minerals Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such
requirement). The Corporation will as soon as practicable after such
surrender of certificates representing shares of Burlington Stock or
Minerals Stock deliver to the person for whose account such shares of
Burlington Stock or Minerals Stock were so surrendered, or to his or her
nominee or nominees, certificates representing the number of whole
shares of the kind of capital stock to which he or she shall be entitled
as aforesaid, together with any fractional payment contemplated by
Section 2(e)(ii).
(v) From and after any applicable Exchange Date, all rights of a
holder of shares of Burlington Stock or Minerals Stock, as the case may
be, that were exchanged shall cease except for the right, upon surrender
of the certificates representing such shares of Burlington Stock or
Minerals Stock, respectively, to receive certificates representing
shares of the capital stock for which such shares were exchanged
together with any fractional payment contemplated by Section 2(e)(ii)
and rights to dividends as provided in Section 2(e)(iii). No holder of a
certificate that immediately prior to the applicable Exchange Date for
Burlington Stock or Minerals Stock, as the case may be, represented
shares of Burlington Stock or Minerals Stock, respectively, shall be
entitled to receive any dividend or other distribution with respect to
shares of any kind of capital stock into which Burlington Stock or
Minerals Stock, respectively, was exchanged until surrender of such
holder's certificate for a certificate or certificates representing
shares of such kind of capital stock. Upon such surrender, there shall
be paid to the holder the amount of any dividends or other distributions
(without interest) which theretofore became payable with respect to a
record date after the Exchange Date, but that were not paid by reason of
the foregoing, with respect to the number of whole shares of the kind of
capital stock represented by the certificate or certificates issued upon
such surrender. From and after an Exchange Date for Burlington Stock or
Minerals Stock, the Corporation shall, however, be entitled to treat the
certificates for Burlington Stock or Minerals Stock, respectively, that
have not yet been surrendered for exchange as evidencing the ownership
of the number of whole shares of the kind of capital stock for which the
shares of Burlington Stock or Minerals Stock represented by such
certificates shall have been exchanged, notwithstanding the failure to
surrender such certificates.
(vi) The Corporation will pay any and all documentary, stamp or
similar issue or transfer taxes that may be payable in respect of the
issue or delivery of any shares of capital stock on exchange of shares
of Burlington Stock or Minerals Stock pursuant hereto. The Corporation
shall not, however, be required to pay any tax that may be payable in
respect of any transfer involved in the issue and delivery of any shares
of capital stock in a name other than that in which the shares of
Burlington Stock or Minerals Stock so exchanged were registered, and no
such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the amount of any such
tax, or has established to the satisfaction of the Corporation that such
tax has been paid.
3. Voting Rights. (a) The holders of Brink's Stock, Burlington Stock
and Minerals Stock shall vote together as a single voting group on all
matters; provided, however, that, except as provided below with respect to
amending voting rights of Minerals Stock, the holders of Brink's Stock,
Burlington Stock or Minerals Stock, as the case may be, voting separately
as a separate voting group, shall be entitled to approve by the vote of a
majority of the shares of Brink's Stock, Burlington Stock or Minerals
Stock, as the case may be, then outstanding any proposed amendment to these
Restated Articles of Incorporation to the extent prescribed by Section
13.1-708 of the Virginia Stock Corporation Act. Each holder of Brink's
Stock shall be entitled to one vote, in person or by proxy, for each share
of Brink's Stock standing in his or her name on the stock transfer books of
the Corporation. Except as otherwise provided below and subject to the
provisions of Section 5, each holder of Burlington Stock and each holder of
Minerals Stock shall be entitled to one vote and 1.5 votes, respectively,
in person or by proxy, for each share of Burlington Stock or Minerals
Stock, respectively, standing in his or her name on the stock transfer
books of the Corporation from the Effective Date to and including December
31, 1995. On January 1, 1996, and
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on each January 1 every two years thereafter, the number of votes to which
the holder of each share of Burlington Stock and the holder of each share
of Minerals Stock shall be entitled shall be adjusted and fixed for
two-year periods to equal the quotient of (i) the quotient of (x) the
Aggregate Market Capitalization of Burlington Stock or Minerals Stock,
respectively, on each such date and (y) the Aggregate Market Capitalization
of the Company on each such date, divided by (ii) the number of shares of
Burlington Stock or Minerals Stock, respectively, outstanding on each such
date. Any proposed amendment to these Restated Articles of Incorporation
that would affect or otherwise adjust the voting rights of the holders of
Minerals Stock shall be approved by the affirmative vote of the holders of
two-thirds of the outstanding shares of Minerals Stock, voting separately
as a separate voting group. The Board of Directors shall take such action
to implement such changes in the voting rights of Burlington Stock or
Minerals Stock as may be required pursuant to this Section 3(a).
(b) Unless the Board of Directors conditions its submission of a
particular matter on receipt of a greater vote or on any other basis
permitted by applicable law, the vote of the holders of a majority of the
outstanding shares of Brink's Stock, Burlington Stock and Minerals Stock,
voting together as a single voting group, is required for approval of any
of the following that by applicable law are required to be submitted to
shareholders for their approval: (i) any amendment or restatement of these
Articles of Incorporation, except as otherwise provided in Section 3(a) or
prescribed by Section 13.1-708 of the Virginia Stock Corporation Act; (ii)
a plan of merger; (iii) a plan of share exchange, except as otherwise
provided in Section 2; (iv) the sale, lease, exchange or other disposition
of all or substantially all the property of the Corporation otherwise than
in the usual and regular course of its business; or (v) a proposal to
dissolve the Corporation. The foregoing provisions shall not be construed
to alter or modify in any respect the voting requirements prescribed by the
Virginia Stock Corporation Act which would in the absence of such
provisions be applicable to approval of any affiliated transaction (as
defined in said Act) or any amendment of the Restated Articles of
Incorporation of the Corporation relating to the vote required for approval
of any affiliated transaction.
4. Liquidation Rights. Subject to the provisions of Section 5, in the
event of the dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, after there shall have been paid or set
apart for the holders of Preferred Stock the full preferential amounts to
which they are entitled, (a) the holders of Brink's Stock shall be entitled
to receive, on a per share basis in proportion to the total number of then
outstanding shares of Brink's Stock to the Total Liquidation Shares, (b)
the holders of Burlington Stock shall be entitled to receive, on a per
share basis in proportion to the total number of then outstanding shares of
Burlington Stock to the Total Liquidation Shares and (c) the holders of
Minerals Stock shall be entitled to receive, on a per share basis in
proportion to the then outstanding shares of Minerals Stock increased by
the Nominal Shares to the Total Liquidation Shares, in each case determined
as of the fifth Business Day prior to the date of the public announcement
of (i) a voluntary dissolution, liquidation or winding up of the
Corporation or (ii) the institution of a proceeding for the involuntary
dissolution, liquidation or winding up of the Corporation, the funds of the
Corporation remaining for distribution to its common shareholders.
5. Subdivision or Combination. If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by
reverse stock split or otherwise) the outstanding shares of any of Brink's
Stock, Burlington Stock or Minerals Stock, the voting and liquidation
rights of Burlington Stock and Minerals Stock relative to Brink's Stock
shall be appropriately adjusted so as to avoid any dilution in the
aggregate voting or liquidation rights of any class.
6. Definitions. As used in this Division I, the following terms shall
have the following meanings (with each term defined in the singular having
the comparable meaning when used in the plural and vice versa), unless
another definition is provided or the context otherwise requires:
'Aggregate Market Capitalization' shall mean, with respect to the
Company or any class of Common Stock as of any date of determination,
the product of (i) the Fair Market Value of all classes of Common Stock
or any such class, as the case may be, as of such date and (ii) the
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number of shares of all such classes of Common Stock or of any such
class, as the case may be, issued and outstanding as of such date.
'Available Minerals Dividend Amount', on any date, shall mean the
greatest of (a) an amount equal to (i) $50 million, increased or
decreased, as appropriate, to reflect (A) Minerals Net Income from the
close of business on June 30, 1993, (B) any dividends or other
distributions declared or paid with respect to, or repurchases or
issuances of, any shares of Minerals Stock or any shares of Preferred
Stock attributed to Pittston Minerals Group and (C) any other
adjustments to shareholders' equity of Pittston Minerals Group made in
accordance with generally accepted accounting principles, less (ii) the
aggregate stated capital of any outstanding shares of Preferred Stock
attributed to Pittston Minerals Group; (b) in the discretion of the
Board of Directors, the excess of the fair value of the net assets of
Pittston Minerals Group, as determined by the Board of Directors on a
basis corresponding to one of those set forth in Section 13.1-643 of the
Virginia Stock Corporation Act with respect to a single corporation,
over the aggregate stated capital of any outstanding shares of Preferred
Stock attributed to Pittston Minerals Group; or (c) an amount equal to
Minerals Net Income (if positive) for the fiscal year in which the
dividend is declared and/or the preceding fiscal year.
'Business Day' shall mean each weekday other than any day on which
Brink's Stock, Burlington Stock or Minerals Stock is not traded on any
national securities exchange or the National Association of Securities
Dealers Automated Quotations System or in the over-the-counter market.
'Convertible Securities' shall mean any securities of the
Corporation that are convertible into or evidence the right to purchase
any shares of Brink's Stock, Burlington Stock or Minerals Stock,
pursuant to antidilution provisions of such securities or otherwise.
'Disposition' shall mean the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) of properties or assets.
'Effective Date' shall mean the close of business on the date on
which the State Corporation Commission of Virginia issues a certificate
of amendment relating to these Articles of Amendment to the Restated
Articles of Incorporation.
'Exchange Date' shall mean any date fixed for an exchange of shares
of Burlington Stock or Minerals Stock, as the case may be, as set forth
in a notice to holders of Burlington Stock or Minerals Stock,
respectively, pursuant to Section 2(e)(i).
'Fair Market Value' of shares of any class of Common Stock on any
date means the average of the daily closing prices thereof for the 10
consecutive Business Days commencing on the 30th Business Day prior to
the date in question. The closing price for each Business Day shall be
(i) if such shares are listed or admitted to trading on a national
securities exchange, the closing price on the New York Stock Exchange
Composite Tape (or any successor composite tape reporting transactions
on national securities exchanges) or, if such New York Stock Exchange
Composite Tape shall not be in use or shall not report transactions in
such shares, the last reported sales price regular way on the principal
national securities exchange on which such shares are listed or admitted
to trading (which shall be the national securities exchange on which the
greatest number of shares of stock has been traded during such 10
consecutive Business Days), or, if there is no transaction on any such
Business Day in any such situation, the mean of the bid and asked prices
on such Business Day, or (ii) if such shares are not listed or admitted
to trading on any such exchange, the closing price, if reported, or, if
the closing price is not reported, the average of the closing bid and
asked prices as reported by the National Association of Securities
Dealers Automated Quotations System or a similar source selected from
time to time by the Corporation for this purpose. In the event such
closing prices are unavailable, the Fair Market Value of such shares
shall be determined by the Board.
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'Minerals Net Income' shall mean the net income or loss of Pittston
Minerals Group determined in accordance with generally accepted
accounting principles, including income and expenses of the Corporation
attributed to the operations of Pittston Minerals Group on a
substantially consistent basis, including, without limitation, corporate
administrative costs, net interest and other financial costs and income
taxes.
'Nominal Shares' shall mean shares of Minerals Stock
which has been used to establish the initial liquidation percentages
among each class of Common Stock as of the Effective Date.
'Pittston Brink's Group' shall mean, at any time all the businesses
in which the Corporation is or has been engaged, directly or indirectly,
and all assets and liabilities of the Corporation, other than any
businesses, assets or liabilities constituting Pittston Burlington Group
or Pittston Minerals Group.
'Pittston Burlington Group' shall mean, at any time, (a) all the
businesses in which Burlington Air Express Inc. and its subsidiaries (or
any of their predecessors) are or have been engaged, directly or
indirectly, (b) all assets and liabilities of the Corporation to the
extent attributed to any of such businesses, whether or not such assets
or liabilities are or were assets and liabilities of such businesses,
and (c) such businesses, assets, and liabilities acquired by the
Corporation for Pittston Burlington Group after the Effective Date and
determined by the Board of Directors to be included in Pittston
Burlington Group.
'Pittston Minerals Group' shall mean, at any time, (a) all the
businesses in which Pittston Coal Company and its subsidiaries (or any
of their predecessors) are or have been engaged, directly or indirectly,
(b) all the businesses in which Pittston Mineral Ventures Company and
its subsidiaries (or any of their predecessors) are or have been
engaged, directly or indirectly, (c) all assets and liabilities of the
Corporation to the extent attributed to any of such businesses, whether
or not such assets or liabilities are or were assets and liabilities of
such businesses, and (d) such businesses, assets, and liabilities
acquired by the Corporation for Pittston Minerals Group after the
Effective Date and determined by the Board of Directors to be included
in Pittston Minerals Group.
'Total Liquidation Shares' shall mean, as of any date, the total
number of outstanding shares of Brink's Stock, Burlington Stock and
Minerals Stock on such date, plus the Nominal Shares.
7. Determinations by the Board of Directors. Any determinations made
by the Board of Directors of the Corporation or any committee of the Board,
a majority of which are 'disinterested directors', under any provision in
this Division I of Article III shall be final and binding on all
shareholders of the Corporation. For this purpose, any director who is not
an employee of or a consultant to the Corporation and who is not, directly
or indirectly, the beneficial owner of 1% or more of the outstanding shares
of Common Stock shall be considered 'disinterested', even though such
director may beneficially own a greater amount of one class of Common Stock
than of the other class of Common Stock.
(ii) deleting Section 4(b) of paragraph C of Division II of Article
III in its entirety and substituting in lieu thereof the following:
4. Mandatory Redemption.
(b) Pittston Minerals Group Special Events. If (i) the Corporation
or any of its Subsidiaries shall enter into a transaction or series of
transactions resulting in the Disposition of all or substantially all of
the properties and assets of Pittston Minerals Group under circumstances
where the Corporation is not required to exchange outstanding shares of
Minerals Stock for shares of Brink's Stock, Burlington Stock or other
common stock (other than Minerals Stock) pursuant to Section 2(b) of
Division I of Article III of these Articles of Incorporation or (ii) the
Corporation shall pay a dividend on, or the Corporation or any of its
Subsidiaries shall consummate a tender offer or exchange offer for,
Minerals Stock, and the aggregate amount of such dividend or the
consideration paid in such tender offer or exchange offer is an amount
equal to the fair market value of all or substantially all of the
properties and assets of Pittston
II-8
<PAGE>
Minerals Group (the events described in clauses (b)(i) and (ii) above
are hereinafter collectively referred to as the 'Pittston Minerals Group
Special Events'), the Corporation shall redeem shares of this Series, in
whole, within 60 days following any such Pittston Minerals Group Special
Event, for cash in the amount equal to the Redemption Price, plus an
amount equal to accrued and unpaid dividends thereon to the date fixed
for redemption. The Redemption Date of shares of this Series pursuant to
this Section 4(b) shall be (A) the consummation date of the Disposition
or the dividend payment date if such Pittston Minerals Group Special
Event involves a Disposition or the payment of a dividend, respectively,
or (B) the consummation date of the tender offer or exchange offer if
such Pittston Minerals Group Special Event involves a tender offer or
exchange offer, respectively. Any redemption pursuant to this Section
4(b) shall be conditioned upon the consummation of such Disposition, the
payment of such dividend or the consummation of such tender offer or
exchange offer, as the case may be.
In the event of a Disposition by the Corporation of any equity
interest in any person, entity or group in which the Corporation,
directly or indirectly, owned a majority equity interest as of the date
of such Disposition, which person, entity or group owned properties and
assets of Pittston Minerals Group as of such date (a 'Pittston Minerals
Group Company'), to holders of all outstanding shares of Minerals Stock
on a pro rata basis, solely for the purpose of determining whether a
Disposition of all or substantially all of the properties and assets of
Pittston Minerals Group pursuant to clause (b)(i) above has occurred, a
Disposition of the properties and assets of such Pittston Minerals Group
Company shall only be deemed to have occurred if the Corporation,
directly or indirectly, owns less than 20% of the entire equity interest
in such Company immediately after the occurrence of such Disposition.
If the Corporation exchanges all outstanding shares of Minerals
Stock for shares of Brink's Stock, Burlington Stock or other Common
Stock (other than Minerals Stock) pursuant to Section 2 of Division I of
Article III of these Articles of Incorporation and, subsequent to such
exchange, any event substantially similar to any Pittston Minerals Group
Special Event occurs in respect of Brink's Stock or Burlington Stock, at
which time there is another class of Common Stock outstanding other than
Brink's Stock or Burlington Stock, the Corporation shall redeem the
shares of this Series, in whole, for cash in the amount equal to the
Redemption Price, plus an amount equal to accrued and unpaid dividends
thereon to the date fixed for redemption. The Redemption Date shall
occur, and the conditions in respect thereof, shall be determined in the
manner described above with respect to any redemption resulting from any
substantially similar Pittston Minerals Group Special Event.
(iii) deleting Section 6(k) of paragraph C of Division II of Article
III in its entirety and substituting in lieu thereof the following:
(k) The Corporation shall cause to be filed with the Transfer Agent
and shall cause to be mailed to the holders of shares of this Series at
their addresses as shown on the stock transfer books of the Corporation
notice of its intention (i) to cause to occur, or to take any action
that would result in, any Pittston Minerals Group Special Event or (ii)
to exchange outstanding shares of Minerals Stock for shares of Brink's
Stock, Burlington Stock or any other Common Stock pursuant to Section 2
of Division I of Article III of these Articles of Incorporation (which
notice shall include the date on which an exchange of outstanding shares
of Minerals Stock for shares of such Common Stock is expected to become
effective and the date as of which it is expected that holders of record
of Minerals Stock shall be entitled to exchange their shares of Minerals
Stock for shares of such Common Stock), not less than (A) 45 days prior
to the date selected by the Board of Directors for the consummation of
the Disposition or the payment of a dividend in connection with any
Pittston Minerals Group Special Event involving a Disposition or the
payment of a dividend, respectively, (B) 30 days prior to the
consummation of any tender offer or exchange offer in connection with
any Pittston Minerals Group Special Event involving a tender offer or
exchange offer, respectively, or (C) 30 days prior to the exchange date
for any such exchange. In addition, from and after any such exchange of
outstanding shares of Minerals Stock for shares of Brink's Stock,
Burlington Stock
II-9
<PAGE>
or any other Common Stock, the Corporation shall be required, in
connection with the redemption requirement specified in the third
paragraph of Section 4(b), to give a comparable notice of its intention
to take actions with respect to Brink's Stock, Burlington Stock or any
other Common Stock substantially similar to any Pittston Minerals Group
Special Event. In the event of any conflict between the notice
provisions of this Section 6(k) and Section 6(j) above, the notice
provisions of this Section 6(k) shall govern.
THIRD: Upon the effectiveness of these Articles of Amendment, each
share of Pittston Services Group Common Stock, par value $1.00 per share
(the 'Services Stock'), that is issued and outstanding shall be
redesignated and reclassified, ipso facto and without any other action on
the part of the respective shareholders thereof, into one share of Pittston
Brink's Group Common Stock, par value $1.00 per share.
FOURTH: The amendments set forth in paragraph SECOND (the
'Amendments') were submitted to the following shareholders of the
Corporation by the Board of Directors of the Corporation in accordance with
the Virginia Stock Corporation Act and were duly adopted by such
shareholders at a meeting held on December , 1995. The following
shareholders were entitled to vote on the Amendments:
(a) Holders of Services Stock, of which shares were
outstanding on the record date, each of whom was entitled to cast one
vote for each share of such stock, were entitled to vote separately as a
group on the Amendments. The number of undisputed votes cast in favor of
the Amendments by such shareholders was , such number of
votes being sufficient for approval of the Amendments by such
shareholders;
(b) Holders of Services Stock and Minerals Stock, of which
shares were outstanding on the record date, each of whom was
entitled to cast one vote for each share of such stock, were entitled to
vote as a group on the Amendments. The number of undisputed votes cast
in favor of the Amendments by such shareholders was , such
number of votes being sufficient for approval of the Amendments by such
shareholders;
(c) Holders of Minerals Stock, of which shares were
outstanding on the record date, each of whom was entitled to cast one
vote for each share of such stock, were entitled to vote as a group on
the Amendments. The number of undisputed votes cast in favor of the
Amendments by such shareholders was , such number of votes
being sufficient for approval of the Amendments by such shareholders;
and
(d) Holders of the Preferred Stock, of which shares
were outstanding on the record date, each of whom was entitled to cast
one vote for each share of such stock, were entitled to vote as a group
on the Amendments. The number of undisputed votes cast in favor of the
Amendments by such shareholders was , such number of votes
being sufficient for approval of the Amendments by such shareholders.
FIFTH: These Articles of Amendments to the Restated Articles of
Incorporation shall be effective as of the close of business on the date on
which the State Corporation Commission of Virginia issues a certificate of
amendment relating to these Articles of Amendment to the Restated Articles
of Incorporation.
II-10
<PAGE>
IN WITNESS WHEREOF, The Pittston Company has caused these Articles of
Amendment to be duly executed in its corporate name on this day of December,
1995.
THE PITTSTON COMPANY,
By
...................................
NAME: JOSEPH C. FARRELL
TITLE: CHAIRMAN OF THE BOARD
Attest:
.....................................
NAME: AUSTIN F. REED
TITLE: SECRETARY
II-11
<PAGE>
ANNEX III-A
AMENDMENTS TO THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Set forth below are the amendments that will be made to The Pittston
Company Non-Employee Directors' Stock Option Plan if the Brink's Stock Proposal
is approved by the shareholders:
1. The first sentence of Article I is amended by (i) deleting the word
'both' and by substituting therefor 'all three', (ii) deleting the word
'Services' and by substituting therefor 'Brink's' and (iii) adding ',
Pittston Burlington Group Common Stock' before the reference to 'and
Pittston Minerals Group Common Stock'.
2. Section 2 of Article III is amended by (i) deleting the word
'Services' and by substituting therefor 'Brink's', (ii) deleting the word
'and' appearing before the reference to '(b)' and (iii) adding the words
'in the case of Burlington Group Common Stock, 100,000 shares, and (c)'
after the reference to '(b)'.
3. Section 1 of Article IV is amended by deleting the word 'both' and
by substituting therefor 'all three'.
4. Section 2 of Article IV is amended by (i) deleting the word
'Services' and by substituting therefor 'Brink's', (ii) deleting the word
'and' appearing before the reference to '(b)' and by substituting therefor
',' and (iii) adding the words 'an option for 5,000 shares of Pittston
Burlington Group Common Stock and (c)' after the reference to '(b)'.
5. Section 3 of Article IV is amended by (i) deleting the word
'Services' and by substituting therefor 'Brink's' and (ii) adding the words
', an option to purchase 500 shares of Pittston Burlington Group Common
Stock' before the reference to 'and an option to purchase 200 shares of
Pittston Minerals Group Common Stock'.
6. Section 2 of Article VI is amended by adding the words 'the same
class of' in the fourth line immediately preceding the words 'Common
Stock'.
Set forth below is the text of The Pittston Company Non-Employee Directors'
Stock Option Plan, as proposed to be amended by the Brink's Stock Proposal.
Material to be added upon shareholder approval of the Brink's Stock Proposal is
shown in boldface type.
THE PITTSTON COMPANY
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Non-Employee Directors' Stock Plan (this 'Plan') is to
attract and retain the services of experienced independent directors for The
Pittston Company (the 'Company') by encouraging them to acquire a proprietary
interest in the Company in the form of shares of ALL THREE CLASSES OF the
Company's Common Stock (the 'Common Stock'), viz., Pittston BRINK'S Group Common
Stock, PITTSTON BURLINGTON GROUP COMMON STOCK and Pittston Minerals Group Common
Stock. Unless otherwise indicated, references in this Plan to Common Stock shall
be construed to refer to the class of Common Stock covered by the particular
option. The Company intends this Plan to provide those directors with additional
incentive to further the best interests of the Company and its shareholders.
ARTICLE II
ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Board of Directors of the Company
(the 'Board'). The Board is authorized to interpret this Plan and may from time
to time adopt such rules and regulations for carrying out this Plan as it deems
best. All determinations by the Board pursuant to the provisions of this Plan
shall be made in accordance with and subject to applicable provisions of the
Company's bylaws, and all such determinations and related orders or resolutions
of the Board shall be final, conclusive and binding on all persons. All
authority of the Board provided for in or pursuant to this
III-A-1
<PAGE>
Plan, including, without limitation, the authority set forth in Articles III and
IX may also be exercised by the Compensation and Benefits Committee of the Board
or by such other committee of the Board as the Board may designate for the
purpose.
ARTICLE III
ELIGIBILITY; NUMBER AND PRICE OF OPTION SHARES
SECTION 1. Options shall be granted only to directors ('Non-Employee
Directors') who are not also employees of the Company or any of its
Subsidiaries.
SECTION 2. Subject to the provisions of Section 4 of this Article III, the
maximum number of shares of Common Stock which may be issued pursuant to options
granted under this Plan shall be (a) in the case of Pittston BRINK'S Group
Common Stock, 200,000 shares, (b) IN THE CASE OF PITTSTON BURLINGTON GROUP
COMMON STOCK, 100,000 SHARES, AND (c) in the case of Pittston Minerals Group
Common Stock, 40,000 shares.
SECTION 3. The purchase price per share of Common stock under each option
shall be 100% of the Fair Market Value of a share of Common Stock covered by
such option at the time such option is granted.
SECTION 4. In the event of any dividend payable in any class of Common
Stock or any split or combination of any class of Common Stock, (a) the number
of shares of such class which may be issued under this Plan shall be
proportionately increased or decreased, as the case may be, (b) the number of
shares of such class (including shares subject to options not then exercisable)
deliverable pursuant to grants theretofore made shall be proportionately
increased or decreased, as the case may be, and (c) the aggregate purchase price
of shares subject to any such grant shall not be changed. Any option
subsequently granted pursuant to Sections 2 and 3 of Article IV shall be for a
number of shares reflecting such increase or decrease. In the event of any other
recapitalization, reorganization, extraordinary dividend or distribution or
restructuring transaction (including any distribution of shares of stock of any
Subsidiary or other property to holders of shares of any class of Common Stock)
affecting any class of Common Stock, the number of shares of such class issuable
pursuant to any option theretofore granted (whether or not then exercisable),
and/or the option price per share of such option, shall be subject to
appropriate adjustment; provided, however, that such option shall be subject to
only such adjustment as shall be necessary to maintain the proportionate
interest of the optionee and preserve, without exceeding, the value of such
option. In the event of a merger or share exchange in which the Company will not
survive as an independent, publicly owned corporation, or in the event of a
consolidation or of a sale of all or substantially all of the Company's assets,
provision shall be made for the protection and continuation of any outstanding
options by the substitution, on an equitable basis, of such shares of stock,
other securities, cash, or any combination thereof, as shall be appropriate;
provided, however, that such options shall be subject to only such adjustment as
shall be necessary to maintain the proportionate interest of the optionee and
preserve, without exceeding, the value of such options.
ARTICLE IV
GRANT OF OPTIONS
SECTION 1. Grants under this Plan shall relate to ALL THREE classes of the
Company's Common Stock. Each option shall constitute a nonqualified stock option
not intended to qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (the 'Code').
SECTION 2. Each Non-Employee Director elected as a member of the Board
shall automatically be granted (a) an option for 10,000 shares of Pittston
BRINK'S Group Common Stock, (b) AN OPTION FOR 5,000 SHARES OF PITTSTON
BURLINGTON GROUP COMMON STOCK AND (c) an option for 2,000 shares of Pittston
Minerals Group Common Stock (or, in case of an adjustment pursuant to Section 4
of Article III, the number of shares of each respective class of Common Stock
determined as provided in said Section 4) on the first business day after the
meeting of shareholders or of the Board, as the case may be, at which such
Director shall have first been elected. Each such option shall be exercisable
immediately as to one-
III-A-2
<PAGE>
third of the shares covered thereby, as to an additional one-third on and after
the first anniversary of the date of grant and as to the remaining shares on and
after the second anniversary of such date.
SECTION 3. On August 1, 1993, and on July 1 of each subsequent year, each
Non-Employee Director who is a member of the Board as of each such date shall
automatically be granted an option to purchase 1,000 shares of Pittston BRINK'S
Group Common Stock, AN OPTION TO PURCHASE 500 SHARES OF PITTSTON BURLINGTON
GROUP COMMON STOCK and an option to purchase 200 shares of Pittston Minerals
Group Common Stock (or, in the case of an adjustment pursuant to Section 4 of
Article III, the number of shares of each respective class of Common Stock
determined as provided in said Section 4). Each such option shall become
exercisable in full six months after the date of grant.
SECTION 4. All instruments evidencing options granted under this Plan shall
be in such form, consistent with this Plan, as the Board shall determine.
ARTICLE V
NON-TRANSFERABILITY OF OPTIONS
No option granted under this Plan shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution, and any such
option shall be exercised during the lifetime of the optionee only by the
optionee or the optionee's duly appointed legal representative.
ARTICLE VI
EXERCISE OF OPTIONS
SECTION 1. Each option granted under this Plan shall terminate on the tenth
anniversary of the date of grant, unless sooner terminated as provided in this
Plan. Except in cases provided for in Article VII, each option may be exercised
only while the optionee is a Non-Employee Director.
SECTION 2. A person electing to exercise an option shall give written
notice to the Company of such election and of the number of shares of Common
Stock such person has elected to purchase, and shall tender the full purchase
price of such shares, which tender shall be made in cash or cash equivalent
(which may be such person's personal check) at the time of purchase or in shares
of THE SAME CLASS OF Common Stock already owned by such person (which shares
shall be valued for such purpose on the basis of their Fair Market Value on the
date of exercise), or in any combination thereof. The Company shall have no
obligation to deliver shares of Common Stock pursuant to the exercise of any
option, in whole or in part, until the Company receives payment in full of the
purchase price thereof. No optionee or legal representative, legatee or
distributee of such optionee shall be or be deemed to be a holder of any shares
of Common Stock subject to such option or entitled to any rights as a
shareholder of the Company in respect of any shares of Common Stock covered by
such option until such shares have been paid for in full and issued by the
Company.
ARTICLE VII
TERMINATION OF OPTIONS
SECTION 1. In the case of a Non-Employee Director who (i) ceases to serve
as such for any reason other than voluntary resignation or failure to stand for
reelection notwithstanding an invitation to continue to serve as a Non-Employee
Director and (ii) is entitled to receive a pension from the Company in
accordance with the Company's pension arrangements for Non-Employee Directors,
all the Non-Employee Director's options shall be terminated except that any
option to the extent exercisable at the date of ceasing so to serve may be
exercised within three years after such cessation, but not later than the
termination date of the option.
SECTION 2. In the case of a Non-Employee Director who dies while serving as
such, all the Non-Employee Director's options shall be terminated except that
any option to the extent exercisable by the Non-Employee Director at the date of
death, together with the unmatured installment, if any, of the option which at
such date is next scheduled to become exercisable, may be exercised within one
year
III-A-3
<PAGE>
after such date, but not later than the termination date of the option, by the
Non-Employee Director's estate or by the person designated in the Non-Employee
Director's last will and testament.
SECTION 3. In the case of a Non-Employee Director who dies after ceasing to
serve as such, all the Non-Employee Director's options shall be terminated
except that any option to the extent exercisable by the Non-Employee Director at
the date of ceasing so to serve may be exercised within one year after the date
of death, but not later than the termination date of the option, by the
Non-Employee Director's estate or by the person designated in the Non-Employee
Director's last will and testament.
SECTION 4. In the case of a Non-Employee Director (other than one to whom
Section 1, 2 or 3 of this Article VII is applicable) who ceases to serve as such
for any reason, all the Non-Employee Director's options shall be terminated
except that any option to the extent exercisable at the date of ceasing so to
serve may be exercised within one year after such date, but not later than the
termination date of the option.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. Each option shall be subject to the requirement that, if at any
time the Board shall determine that the listing, registration or qualification
of the shares of Common Stock subject to such option upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issue of Common Stock
pursuant thereto, no option may be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free from any conditions not reasonably acceptable to the
Board.
SECTION 2. The Company may establish appropriate procedures to ensure
payment or withholding of such income or other taxes, if any, as may be provided
by law to be paid or withheld in connection with the issue of shares of Common
Stock under this Plan.
SECTION 3. Nothing in this Plan shall be construed either to give any
Non-Employee Director any right to be retained in the service of the Company or
to limit the power of the Board to adopt additional compensation arrangements
(either generally or in specific instances) for directors of the Company or to
change such arrangements as in effect at any time.
ARTICLE IX
PLAN TERMINATION AND AMENDMENTS
SECTION 1. The Board may terminate this Plan at any time, but this Plan
shall in any event terminate on May 11, 1998, and no options may thereafter be
granted, unless the shareholders shall have approved its extension. Options
granted in accordance with this Plan prior to the date of its termination may
extend beyond that date.
SECTION 2. The Board may from time to time amend, modify or suspend this
Plan, but no such amendment or modification without the approval of the
shareholders shall
(a) increase the maximum number (determined as provided in this Plan)
of shares of any class of Common Stock which may be issued (i) to any one
Non-Employee Director or (ii) pursuant to all options granted under this
Plan;
(b) permit the grant of any option at a purchase price less than 100%
of the Fair Market Value of the Common Stock covered by such option at the
time such option is granted;
(c) permit the exercise of an option unless arrangements are made to
ensure that the full purchase price of the shares as to which the option is
exercised is paid at the time of exercise; or
(d) extend beyond May 11, 1998, the period during which options may be
granted.
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<PAGE>
ARTICLE X
DEFINITIONS
Wherever used in this Plan, the following terms shall have the meanings
indicated:
Fair Market Value: With respect to shares of any class of Common
Stock, the average of the high and low quoted sale price of a share of such
Stock on the date in question (or, if there is no reported sale on such
date, on the last preceding date on which any reported sale occurred) on
the New York Stock Exchange Composite Transactions Tape.
Subsidiary: Any corporation of which stock representing at least 50%
of the ordinary voting power is owned, directly or indirectly, by the
Company.
III-A-5
<PAGE>
ANNEX III-B
Set forth below is the text of The Pittston Company 1988 Stock Option Plan,
as proposed to be amended by The Brink's Stock Proposal. Material to be added
upon shareholder approval of The Brink's Stock Proposal is shown in boldface
type:
THE PITTSTON COMPANY
1988 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
This 1988 Stock Option Plan (this 'Plan') contains provisions designed to
enable key employees of The Pittston Company (the 'Company') and its
Subsidiaries to acquire a proprietary interest in the Company in the form of
shares of ANY OF THE classes of its Common Stock, viz., Pittston BRINK'S Group
Common Stock, PITTSTON BURLINGTON GROUP COMMON STOCK and Pittston Minerals Group
Common Stock. The Company intends this Plan to encourage those individuals who
are expected to contribute significantly to the Company's success to accept
employment or continue in the employ of the Company and its Subsidiaries, to
enhance their incentive to perform at the highest level, and, in general, to
further the best interests of the Company and its shareholders.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 1. Subject to the authority as described herein of the Board of
Directors of the Company (the 'Board'), this Plan shall be administered by a
committee (the 'Committee') designated by the Board, which shall be composed of
at least three members of the Board, all of whom are Disinterested Persons and
satisfy the requirements for an outside director pursuant to Section 162(m) of
the Internal Revenue Code of 1986, as amended (the 'Code'), and any regulations
issued thereunder. Until otherwise determined by the Board, the Compensation and
Benefits Committee designated by the Board shall be the Committee under this
Plan. The Committee is authorized to interpret this Plan as it deems best. All
determinations by the Committee shall be made by the affirmative vote of a
majority of its members, but any determination reduced to writing and signed by
a majority of its members shall be fully as effective as if it had been made by
a majority vote at a meeting duly called and held. Subject to any applicable
provisions of the Company's bylaws or of this Plan, all determinations by the
Committee or by the Board pursuant to the provisions of this Plan, and all
related orders or resolutions of the Committee or the Board, shall be final,
conclusive and binding on all persons, including the Company and its
shareholders and those receiving options under this Plan.
SECTION 2. All authority of the Committee provided for in or pursuant to
this Plan, including that referred to in Section 1 of this Article II, may also
be exercised by the Board. No action of the Board taken pursuant to the
provisions of this Plan shall be effective unless at the time both a majority of
the Board and a majority of the directors acting in the matter are Disinterested
Persons. In the event of any conflict or inconsistency between determinations,
orders, resolutions or other actions of the Committee and the Board taken in
connection with this Plan, the actions of the Board shall control.
ARTICLE III
ELIGIBILITY
Only persons who are Employees, including individuals who have agreed to
become Employees as provided in Article XII, shall be eligible to receive option
grants under this Plan. Neither the members of the Committee nor any member of
the Board who is not an Employee shall be eligible to receive any such grant.
III-B-1
<PAGE>
ARTICLE IV
STOCK SUBJECT TO GRANTS UNDER THIS PLAN
SECTION 1. Grants under this Plan shall relate to ANY OF THE classes of
Common Stock ('Common Stock') of the Company and may be made in the form of
incentive stock options or nonqualified stock options. Unless otherwise
indicated, references in this Plan to Common Stock shall be construed to refer
to the class of Common Stock covered by the particular option.
SECTION 2. Subject to Section 3 of this Article IV, the maximum number of
shares of Common Stock which may be issued pursuant to options exercised under
this Plan shall be (a) in the case of Pittston Brink's Group Common Stock,
1,600,000 shares plus the number of shares of such Stock issuable pursuant to
options outstanding under this Plan on [EFFECTIVE DATE], 1995, (b) IN THE CASE
OF PITTSTON BURLINGTON GROUP COMMON STOCK, 800,000 SHARES PLUS THE NUMBER OF
SHARES OF SUCH STOCK ISSUABLE PURSUANT TO OPTIONS OUTSTANDING UNDER THIS PLAN ON
[EFFECTIVE DATE], 1995, AND (C) in the case of Pittston Minerals Group Common
Stock, 225,000 shares plus the number of shares of such Stock issuable pursuant
to options outstanding under this Plan on May 6, 1994. Such number of shares of
Common Stock referred to in clause (a), (b) OR (c) shall be reduced by the
aggregate number of shares of such Common Stock covered by options purchased
pursuant to Section 3 or Section 4 of Article VI. NOTWITHSTANDING THE FOREGOING,
IN NO EVENT WILL ANY EMPLOYEE BE GRANTED OPTIONS TO PURCHASE MORE THAN 167,000
SHARES OF PITTSTON BRINK'S GROUP COMMON STOCK, 83,000 SHARES OF PITTSTON
BURLINGTON GROUP COMMON STOCK OR 200,000 SHARES OF PITTSTON MINERALS GROUP
COMMON STOCK IN ANY CALENDAR YEAR.
SECTION 3. In the event of any dividend payable in any class of Common
Stock or any split or combination of any class of Common Stock, (a) the number
of shares of such class which may be issued under this Plan shall be
proportionately increased or decreased, as the case may be, (b) the number of
shares of such class (including shares subject to options not then exercisable)
deliverable pursuant to grants theretofore made shall be proportionately
increased or decreased, as the case may be, and (c) the aggregate purchase price
of shares of such class subject to any such grant shall not be changed. In the
event of any other recapitalization, reorganization, extraordinary dividend or
distribution or restructuring transaction (including any distribution of shares
of stock of any Subsidiary or other property to holders of shares of any class
of Common Stock) affecting any class of Common Stock, the number of shares of
such class issuable under this Plan shall be subject to such adjustment as the
Committee or the Board may deem appropriate, and the number of shares of such
class issuable pursuant to any option theretofore granted (whether or not then
exercisable) and/or the option price per share of such option, shall be subject
to such adjustment as the Committee or the Board may deem appropriate with a
view toward preserving the value of such option. In the event of a merger or
share exchange in which the Company will not survive as an independent, publicly
owned corporation, or in the event of a consolidation or of a sale of all or
substantially all of the Company's assets, provision shall be made for the
protection and continuation of any outstanding options by the substitution, on
an equitable basis, of such shares of stock, other securities, cash, or any
combination thereof, as shall be appropriate.
ARTICLE V
PURCHASE PRICE OF OPTIONED SHARES
Unless the Committee shall fix a greater purchase price, the purchase price
per share of Common Stock under any option shall be 100% of the Fair Market
Value of a share of Common Stock covered by such option at the time such option
is granted.
ARTICLE VI
GRANT OF OPTIONS
SECTION 1. Each option granted under this Plan shall constitute either an
incentive stock option, intended to qualify under Section 422 of the Code or a
nonqualified stock option, not intended to qualify under said Section 422, as
determined in each case by the Committee.
III-B-2
<PAGE>
SECTION 2. The Committee shall from time to time determine the Employees to
be granted options, it being understood that options may be granted at different
times to the same Employees. In addition, the Committee shall determine (a) the
number and class of shares of Common Stock subject to each option, (b) the time
or times when the options will be granted, (c) the purchase price of the shares
subject to each option, which price shall be not less than that specified in
Article V, and (d) the time or times when each option may be exercised within
the limits stated in this Plan, which except as provided in the following
sentence shall in no event be less than six months after the date of grant. All
options granted under this Plan shall become exercisable in their entirety at
the time of any Change in Control of the Company.
SECTION 3. In connection with any option granted under this Plan the
Committee in its discretion may grant a stock appreciation right (a 'Stock
Appreciation Right'), providing that at the election of the holder of a Stock
Appreciation Right (which election shall, unless the Committee otherwise
consents, be made only during an Election Period), the Company shall purchase
all or any part of the related option to the extent that such option is
exercisable at the date of such election for an amount (payable in the form of
cash, shares of Common Stock or any combination thereof, all as the Committee
shall in its discretion determine) equal to the excess of the Fair Market Value
of the shares of Common Stock covered by such option or part thereof so
purchased on the date such election shall be made over the purchase price of
such shares so covered. A Stock Appreciation Right may also provide that the
Committee or the Board reserves the right to determine, in its discretion, the
date (which shall be subsequent to six months after the date of grant of such
option) on which such Right shall first become exercisable in whole or in part.
SECTION 4. In connection with any option granted under this Plan the
Committee in its discretion may grant a limited right (a 'Limited Right')
providing that the Company shall, at the election of the holder of a Limited
Right (which election may be made only during the period beginning on the first
day following the date of expiration of any Offer and ending on the forty-fifth
day following such date), purchase all or any part of such option, for an amount
(payable entirely in cash) equal to the excess of the Offer Price of the shares
of Common Stock covered by such purchase on the date such election shall be made
over the purchase price of such shares so purchased. Notwithstanding any other
provision of this Plan, no Limited Right may be exercised within six months of
the date of its grant.
SECTION 5. The authority with respect to the grant of options and the
determination of their provisions contained in Sections 1 through 4 of this
Article VI may be delegated by the Board to one or more officers of the Company,
on such conditions and limitations as the Board shall approve; provided,
however, that no such authority shall be delegated with respect to the grant of
options to any officer or director of the Company or with respect to the
determination of any of the provisions of any of such options.
ARTICLE VII
NON-TRANSFERABILITY OF OPTIONS
No option or Stock Appreciation Right (including any Limited Rights)
granted under this Plan shall be transferable by the optionee otherwise than by
will or by the laws of descent and distribution, and any such option or Stock
Appreciation Right (including any Limited Rights) shall be exercised during the
lifetime of the optionee only by the optionee or the optionee's duly appointed
legal representative.
ARTICLE VIII
EXERCISE OF OPTIONS
SECTION 1. Each incentive stock option granted under this Plan shall
terminate not later than ten years from the date of grant. Each nonqualified
stock option granted under this Plan shall terminate not later than ten years
and two days from the date of grant.
SECTION 2. Except in cases provided for in Article IX, each option granted
under this Plan may be exercised only while the optionee is an Employee. An
Employee's right to exercise any incentive stock option shall be subject to the
provisions of Section 422 of the Code restricting the exercisability of such
option during any calendar year.
III-B-3
<PAGE>
SECTION 3. A person electing to exercise an option shall give written
notice to the Company of such election and of the number AND CLASS of shares of
Common Stock such person has elected to purchase, and shall tender the full
purchase price of such shares, which tender shall be made in cash or cash
equivalent (which may be such person's personal check) at the time of purchase
or in accordance with cash payment arrangements acceptable to the Company for
payment prior to delivery of such shares or, if the Committee so determines
either generally or with respect to a specified option or group of options, in
shares of THE SAME CLASS OF Common Stock already owned by such person (which
shares shall be valued for such purpose on the basis of their Fair Market Value
on the date of exercise), or in any combination thereof. The Company shall have
no obligation to deliver shares of Common Stock pursuant to the exercise of any
option, in whole or in part, until the Company receives payment in full of the
purchase price thereof. No optionee or legal representative, legatee or
distributee of such optionee shall be or be deemed to be a holder of any shares
of Common Stock subject to such option or entitled to any rights as a
shareholder of the Company in respect of any shares of Common Stock covered by
such option until such shares have been paid for in full and issued by the
Company. A person electing to exercise a Stock Appreciation Right or Limited
Right then exercisable shall give written notice to the Company of such election
and of the option or part thereof which is to be purchased by the Company.
ARTICLE IX
TERMINATION OF OPTIONS
SECTION 1. If an optionee shall cease to be an Employee for any reason
other than death or retirement under the Company's Pension-Retirement Plan or
any other pension plan sponsored by the Company or a Subsidiary, all of the
optionee's options shall be terminated except that any option, Stock
Appreciation Right or Limited Right to the extent then exercisable may be
exercised within three months after cessation of employment, but not later than
the termination date of the option or in the case of a Limited Right not later
than the expiration date of such Right.
SECTION 2. If and when an optionee shall cease to be an Employee by reason
of the optionee's early, normal or late retirement under the Company's
Pension-Retirement Plan or any such other pension plan, all of the optionee's
options shall be terminated except that (a) any Stock Appreciation Right or
Limited Right to the extent then exercisable may be exercised within three
months after such retirement, but not later than the termination date of the
option or in the case of a Limited Right not later than the expiration date of
such Right, and (b) any option to the extent then exercisable may, unless it
otherwise provides, be exercised within three years after such retirement, but
not later than the termination date of the option, unless within 45 days after
such retirement the Committee determines, in its discretion, that such option
may be exercised only within a period of shorter duration (not less than three
months following notice of such determination to the optionee) to be specified
by the Committee.
SECTION 3. If an optionee shall die while an Employee, all of the
optionee's options shall be terminated except that any option (but not any Stock
Appreciation Right or Limited Right) to the extent then exercisable by the
optionee at the time of death, together with the unmatured installment, if any,
of the option which at that time is next scheduled to become exercisable, may be
exercised within one year after the date of such death, but not later than the
termination date of the option, by the optionee's estate or by the person
designated in the optionee's last will and testament.
SECTION 4. If an optionee shall die after ceasing to be an Employee, all of
the optionee's options shall be terminated except that any option (but not any
Stock Appreciation Right or Limited Right) to the extent exercisable by the
optionee at the time of death may be exercised within one year after the date of
death, but not later than the termination date of the option, by the optionee's
estate or by the person designated in the optionee's last will and testament.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1. Each option grant under this Plan shall be subject to the
requirement that, if at any time the Committee shall determine that the listing,
registration or qualification of the shares of
III-B-4
<PAGE>
Common Stock subject to such grant upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
making of such grant or the issue of Common Stock pursuant thereto, then,
anything in this Plan to the contrary notwithstanding, no option may be
exercised in whole or in part, and no shares of Common Stock shall be issued,
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free from any conditions not reasonably acceptable to
the Committee.
SECTION 2. The Company may establish appropriate procedures to ensure
payment or withholding of such income or other taxes as may be provided by law
to be paid or withheld in connection with the issue of shares of Common Stock
under this Plan or the making of any payments pursuant to Section 3 or 4 of
Article VI, and to ensure that the Company receives prompt advice concerning the
occurrence of an Income Recognition Date or any other event which may create, or
affect the timing or amount of, any obligation to pay or withhold any such taxes
or which may make available to the Company any tax deduction resulting from the
occurrence of such event. Such procedures may include arrangements for payment
or withholding of taxes by retaining shares of Common Stock otherwise issuable
to the optionee in accordance with the provisions of this Plan or by accepting
already owned shares, and by applying the Fair Market Value of such shares to
the withholding taxes payable or to the amount of tax liability in excess of
withholding taxes which arises from the delivery of such shares.
SECTION 3. Any question as to whether and when there has been a retirement
under the Company's Pension-Retirement Plan or any other pension plan sponsored
by the Company or a Subsidiary or a cessation of employment for any other reason
shall be determined by the Committee, and any such reasonable determination
shall be final.
SECTION 4. All instruments evidencing options granted shall be in such
form, consistent with this Plan and any applicable determinations or other
actions of the Committee and the Board, as the officers of the Company shall
determine.
SECTION 5. The grant of an option to an Employee shall not be construed to
give such Employee any right to be retained in the employ of the Company or any
of its Subsidiaries.
ARTICLE XI
PLAN TERMINATION AND AMENDMENTS
SECTION 1. The Board may terminate this Plan at any time, but this Plan
shall in any event terminate on May 11, 1998, and no options may thereafter be
granted, unless the shareholders shall have approved its extension. Options
granted in accordance with this Plan prior to the date of its termination may
extend beyond that date.
SECTION 2. The Board or the Committee may from time to time amend, modify
or suspend this Plan, but no such amendment or modification without the approval
of the shareholders shall
(a) increase the maximum number (determined as provided in this Plan)
of shares of any class of Common Stock which may be issued pursuant to
options granted under this Plan;
(b) permit the grant of any option at a purchase price less than 100%
of the Fair Market Value of the Common Stock covered by such option at the
time such option is granted;
(c) permit the exercise of an option unless arrangements are made to
ensure that the full purchase price of the shares as to which the option is
exercised is paid prior to delivery of such shares; or
(d) extend beyond May 11, 1998, the period during which option grants
may be made.
ARTICLE XII
DEFINITIONS
Wherever used in this Plan, the following terms shall have the meanings
indicated:
Change in Control: A Change in Control shall be deemed to have
occurred if either (a) any person, or any two or more persons acting as a
group, and all affiliates of such person or persons, shall own beneficially
more than 20% of the total voting power in the election of directors of the
Company of all classes of Common Stock outstanding (exclusive of shares
held by the Company's
III-B-5
<PAGE>
Subsidiaries) pursuant to a tender offer, exchange offer or series of
purchases or other acquisitions, or any combination of those transactions,
or (b) there shall be a change in the composition of the Board at any time
within two years after any tender offer, exchange offer, merger,
consolidation, sale of assets or contested election, or any combination of
those transactions (a 'Transaction'), so that (i) the persons who were
directors of the Company immediately before the first such Transaction
cease to constitute a majority of the Board of Directors of the corporation
which shall thereafter be in control of the companies that were parties to
or otherwise involved in such first Transaction, or (ii) the number of
persons who shall thereafter be directors of such corporation shall be
fewer than two-thirds of the number of directors of the Company immediately
prior to such first Transaction. A Change in Control shall be deemed to
take place upon the first to occur of the events specified in the foregoing
clauses (a) and (b).
Disinterested Persons: Such term shall have the meaning ascribed
thereto in Rule 16B-3(c)(2)(i) under the Securities Exchange Act of 1934,
AS AMENDED.
Election Period: The period beginning on the third business day
following a date on which the Company releases for publication its
quarterly or annual summary statements of sales and earnings, and ending on
the twelfth business day following such date.
Employee: Any officer and any other employee of the Company or a
Subsidiary, including (a) any director who is also an employee of the
Company or a Subsidiary and (b) an employee or salaried employee on
approved leave of absence provided such employee's right to continue
employment with the Company or a Subsidiary upon expiration of such
employee's leave of absence is guaranteed either by statute or by contract
with or by a policy of the Company or a Subsidiary. For purposes of
eligibility for the grant of a nonqualified stock option, such term shall
include any individual who has agreed in writing to become an officer or
other salaried employee of the Company or a Subsidiary within 30 days
following the date on which an option is granted to such individual.
Fair Market Value: With respect to shares of any class of Common
Stock, the average of the high and low quoted sale prices of a share of
such Stock on the date in question (or, if there is no reported sale on
such date, on the last preceding date on which any reported sale occurred)
on the New York Stock Exchange Composite Transactions Tape.
Income Recognition Date: With respect to the exercise of any option,
the later of (a) the date of such exercise or (b) the date on which the
rights of the holder of such option in the shares of Common Stock covered
by such exercise become transferable and not subject to a substantial risk
of forfeiture (within the meaning of Section 83 of the Code); provided,
however, that, if such holder shall make an election pursuant to Section
83(b) of the Code with respect to such exercise, the Income Recognition
Date with respect thereto shall be the date of such exercise.
Offer: Any tender offer, exchange offer or series of purchases or
other acquisitions, or any combination of those transactions, as a result
of which any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, shall own beneficially more than 30%
of the total voting power in the election of directors of the Company of
all classes of Common Stock outstanding (exclusive of shares held by the
Company's Subsidiaries).
Offer Price: The highest price per share of Common Stock paid in any
Offer which is in effect at any time beginning on the ninetieth day prior
to the date on which a Limited Right is exercised. Any securities or
property which are part or all of the consideration paid for shares of
Common Stock in the Offer shall be valued in determining the Offer Price at
the higher of (a) the valuation placed on such securities or property by
the person or persons making such Offer or (b) the valuation of such
securities or property as may be determined by the Committee.
Subsidiary: Any corporation of which stock representing at least 50%
of the ordinary voting power is owned, directly or indirectly, by the
Company.
III-B-6
ANNEX IV
PITTSTON BRINK'S GROUP
Description of Businesses
Pittston Brink's Group (the "Brink's Group") consists of the armored car
business of Brink's, Incorporated and the home security business of Brink's Home
Security ("BHS"), both wholly owned subsidiaries of The Pittston Company
("Pittston" or the "Company"). The information set forth herein is as of June
30, 1995 except where an earlier or later date is expressly stated.
BRINK'S
General
- -------
The major activities of Brink's are contract-carrier armored car, automated
teller machine ("ATM"), air courier, coin wrapping, and currency and deposit
processing services. Brink's serves customers through 145 branches in the United
States and 39 branches in Canada. Service is also provided through subsidiaries,
affiliates and associated companies in 45 countries outside the United States
and Canada. These international operations contributed approximately 40% of
Brink's total reported 1994 operating profit. Brink's ownership interest in
these companies varies from approximately 5% to 100%; in some instances local
laws limit the extent of Brink's interest.
Representative customers include banks, commercial establishments, industrial
facilities, investment banking and brokerage firms and government agencies.
Brink's provides its individualized services under separate contracts designed
to meet the distinct transportation and security requirements of its customers.
These contracts are usually for an initial term of one year or less, but
generally continue in effect thereafter until canceled by either party.
Brink's armored car services include transportation of money from industrial and
commercial establishments to banks for deposit, and transportation of money,
securities and other negotiable items and valuables between commercial banks,
Federal Reserve Banks and their branches and correspondents, and brokerage
firms. Brink's also transports new currency, coins and precious metals for the
United States Mint, the Federal Reserve System and the Bank of Canada. For
transporting money and other valuables over long distances, Brink's offers a
combined armored car and air courier service linking many cities in the United
States and abroad. Brink's does not own or operate any aircraft, but uses
regularly scheduled or chartered aircraft in connection with its air courier
services.
In addition to its armored car pickup and delivery services, Brink's provides
payroll services, change services, coin wrapping services, currency and deposit
processing services, automated teller machine services, safes and safe control
services, check cashing and pickup and delivery of valuable air cargo shipments.
In certain geographic areas, Brink's transports canceled checks between banks or
between a clearing house and its member banks. Brink's is developing a product
called CompuSafe (Trademark) designed to streamline the handling and management
of cash receipts for the convenience store and gas station market. Pilot tests
are under way in several test markets in the United States.
Brink's operates a worldwide specialized diamond and jewelry transportation
business and has offices in the major diamond and jewelry centers of the world,
including Antwerp, Tel Aviv, Hong Kong, New York, Bombay and Tokyo.
A wholly owned subsidiary, Brink's SFB Solutions, Inc., operates a business,
acquired in 1992, that develops highly flexible deposit processing and vault
management software systems for the financial service industry and its own
locations. Brink's offers a total processing package and the ability to tie
together a full range of cash vault, ATM, transportation, storage, processing,
<PAGE>
inventory management and reporting services. Brink's believes that its
processing and information capabilities differentiate its currency and deposit
processing services from its competitors and enable Brink's to take advantage of
the trend by banks, retail business establishments and others to outsource
vaulting and cash room operations.
Brink's activities outside of North America are organized into three regions:
Europe, Latin America and Asia/Pacific. In Europe, wholly owned subsidiaries of
Brink's operate in Switzerland and the United Kingdom and in the diamond and
jewelry business in Belgium, Italy and the United Kingdom. Brink's has a 70%
interest in a subsidiary in Israel, a 65% general partnership interest in
Brink's-Nedlloyd VOF in the Netherlands and a majority interest in a subsidiary
in Greece. Brink's also has ownership interests ranging from 24.5% to 50% in
affiliates operating in Belgium, France, Germany, Ireland, Italy, Jordan and
Luxembourg. In Latin America, a wholly owned subsidiary operates in Brazil.
Brink's owns a 60% interest in subsidiaries in Chile and Bolivia and a 20%
interest in a Mexican company, Servicio Pan Americano de Proteccion, S.A., which
operates one of the world's largest security transportation services, with over
1,700 armored vehicles. Brink's also has ownership interests ranging from 5% to
49% in affiliates operating in Colombia, Panama, Peru and Venezuela. In the
Asia/Pacific region, a wholly owned subsidiary of Brink's operates in Australia,
and majority owned subsidiaries operate in Hong Kong, Japan and Singapore.
Brink's also has minority interests in affiliates in India, Pakistan and
Thailand and a 50% ownership interest in an affiliate in Taiwan.
Competition
- -----------
Brink's is the oldest and largest armored car service company in the United
States and most of the countries it operates in. The foreign subsidiaries,
affiliates and associates of Brink's compete with numerous armored car and
courier service companies in many areas of operation. In the United States,
Brink's presently competes with two companies which operate numerous branches
nationally and with many regional and smaller local companies. Brink's believes
that its service, high quality insurance coverage and company reputation
(including the name "Brink's") are important competitive factors. However, the
cost of service is, in many instances, the controlling factor in obtaining and
retaining customers. While Brink's cost structure is generally competitive,
certain competitors of Brink's have lower costs primarily as a result of lower
wage and benefit levels.
See also "Government Regulation" below.
Service Mark, Patents and Copyrights
- ------------------------------------
Brink's is a registered service mark of Brink's, Incorporated in the United
States and in certain foreign countries. The Brink's mark and name are of
material significance to Brink's business. Brink's owns patents with respect to
certain coin sorting and counting machines and armored truck design. Brink's
holds copyrights on certain software systems developed by Brink's.
Insurance
- ---------
Brinks carries insurance coverage for losses. Insurance policies cover liability
for loss of various types of property entrusted to Brink's from any cause except
war and nuclear risk. The various layers of insurance are covered by different
groups of participating underwriters. Such insurance is obtained by Brink's at
rates and upon terms negotiated periodically with the underwriters. The loss
experience of Brink's and, to some extent, other armored carriers affects
premium rates charged to Brink's. A significant hardening of the insurance
market coupled with industry loss experience in recent years has resulted in
premium increases. The availability of quality and reliable insurance coverage
is an important factor in the ability of Brink's to obtain and retain customers.
Quality insurance is available to Brink's in major markets although the premiums
charged are subject to fluctuations depending on market conditions. Less
expensive armored car and air courier all-risk insurance is available, but these
policies typically contain unacceptable operating warranties and limited
customer protection.
<PAGE>
Government Regulation
- ---------------------
As an interstate carrier, Brink's is subject to regulation in the United States
by the Interstate Commerce Commission ("ICC"). ICC jurisdiction includes, among
other things, authority over the issuance of operating rights to transport
various commodities. The operations of Brink's are also subject to regulation by
the United States Department of Transportation with respect to safety of
operation and equipment. Intrastate and intraprovince operations in the United
States and Canada are subject to regulation by state and by Canadian Dominion
and provincial regulatory authorities. Recent federal legislation may further
ease entry requirements for armored car and other companies in domestic markets
by essentially limiting ICC and State oversight to issues of safety and
financial responsibility.
Employee Relations
- ------------------
Brink's has approximately 7,900 employees in North America (including
approximately 3,200 classified as part-time employees), of whom approximately
60% are members of armored car crews. Brink's has approximately 6,000 employees
outside North America. In the United States, two locations are covered by
collective bargaining agreements. At June 30, 1995, Brink's was a party to two
United States and thirteen Canadian collective bargaining agreements with
various local unions covering approximately 1,195 employees, of whom 1,183 (for
the most part members of unions affiliated with the International Brotherhood of
Teamsters) are employees in Canada. Negotiations are continuing for one
agreement that expired in 1994. One agreement expired in 1995 and the remainder
will expire thereafter.
Brink's experienced a nine-week strike in British Columbia in 1994 which was
settled on favorable terms. Brink's experienced a five day strike in Ontario in
1995 which was settled on favorable terms. Brink's believes that its employee
relations are generally satisfactory.
Properties
- ----------
Brink's owns 24 branch offices and holds under lease an additional 185 branch
offices, located in 38 states, the District of Columbia, the Commonwealth of
Puerto Rico and nine Canadian provinces. Such branches generally include office
space and garage or vehicle terminals, and serve not only the city in which they
are located but also nearby cities. Brink's corporate headquarters in Darien,
Connecticut, is held under a lease expiring in 2000, with an option to renew for
an additional five-year period. The leased branches include 100 facilities held
under long-term leases, while the remaining 85 branches are held under
short-term leases or month-to-month tenancies.
Brink's owns or leases, in the United States and Canada, approximately 1,800
armored vehicles, 230 panel trucks and 225 other vehicles which are primarily
service cars. In addition, approximately 3,100 Brink's-owned safes are located
on customers' premises. The armored vehicles are of bullet-resistant
construction and are specially designed and equipped to afford security for crew
and cargo. Brinks subsidiaries and affiliated and associated companies located
outside the United States and Canada operate approximately 4,300 armored
vehicles.
BHS
General
- -------
BHS is engaged in the business of installing, servicing and monitoring
electronic security systems primarily in owner-occupied, single-family
residences. At June 30, 1995, BHS was monitoring approximately 347,000 systems,
including 38,200 new subscribers since December 31, 1994, and was servicing 48
metropolitan areas in 29 states, the District of Columbia and Canada. One of
these areas was added during 1995.
<PAGE>
BHS markets its alarm systems primarily through media advertising, inbound
telemarketing and a direct sales force. BHS also markets its systems directly to
home builders and has entered into several contracts which extend through 1995.
BHS employees install and service the systems from local BHS branches.
Subcontractors are utilized in some service areas. BHS does not manufacture any
of the equipment used in its security systems; instead, it purchases such
equipment from a small number of suppliers. Equipment inventories are maintained
at each branch office.
BHS's security system consists of sensors and other devices which are installed
at a customer's premises. The equipment is designed to signal intrusion, fire
and medical alerts. When an alarm is triggered, a signal is sent by telephone
line to BHS's central monitoring station near Dallas, Texas. The monitoring
station has been designed and constructed to meet the specifications of
Underwriters' Laboratories, Inc. ("UL") and is UL listed for residential
monitoring. A backup monitoring center in Arlington, Texas, protects against a
catastrophic event at the primary monitoring center. In the event of an
emergency, such as fire, flood, major interruption in telephone service, or any
other calamity affecting the primary facility, monitoring operations can be
transferred to the backup facility.
BHS's alarm service contracts contain provisions limiting BHS's liability to its
customers. Courts have, from time to time, upheld such provisions, but there can
be no assurance that the limitations contained in BHS's agreements will be
enforced according to their terms in any or all cases. The nature of the service
provided by BHS potentially exposes it to greater risks of liability than may be
borne by other service businesses. However, BHS has not experienced any major
liability losses. BHS carries insurance of various types, including general
liability and errors and omissions insurance, to protect it from product
deficiencies and negligent acts of its employees. Certain of BHS's insurance
policies and the laws of some states limit or prohibit insurance coverage for
punitive or certain other kinds of damages arising from employees' misconduct.
Regulation
- ----------
BHS and its personnel are subject to various Federal, state and local consumer
protection, licensing and other laws and regulations. BHS's business relies upon
the use of telephone lines to communicate signals, and telephone companies are
currently regulated by both the Federal and state governments. BHS's wholly
owned Canadian subsidiary, Brink's Home Security Canada Limited, is subject to
the laws of Canada, British Columbia and Vancouver. The alarm service industry
has experienced a high incidence of false alarms in some communities, including
communities in which BHS operates. This has caused some local governments to
impose assessments, fines and penalties on subscribers of alarm companies
(including BHS) based upon the number of false alarms reported. There is a
possibility that at some point some police departments may refuse to respond to
calls from alarm companies which would necessitate that private response forces
be used to respond to alarm signals. Regulation of installation and monitoring
of fire detection devices has also increased in several markets.
Competition
- -----------
BHS competes in many of its markets with numerous small local companies,
regional companies and several large national firms. BHS believes that it is one
of the leading firms engaged in the business of installing, servicing and
monitoring electronic security systems in the single-family home marketplace.
BHS offers a lower initial price than many of its competitors, although, in
recent years competition has greatly intensified in all of BHS markets. Several
significant competitors offer installation prices which match or are less than
BHS prices; however, many of the small local competitors in BHS markets continue
to charge significantly more for installation. The regional telecommunication
companies could become significant competitors in the home security business,
depending on regulatory developments affecting those companies. BHS believes
<PAGE>
that the quality of its service compares favorably with that provided by
competitors and that the Brink's name and reputation also provide an important
competitive advantage.
Employers
- ---------
BHS has approximately 1,400 employees, none of whom is covered by a collective
bargaining agreement. BHS believes that its employee relations are satisfactory.
Properties
- ----------
BHS operates from 41 leased offices and warehouse facilities across the United
States. All premises protected by BHS alarm systems are monitored from its
central monitoring station in suburban Dallas which is held by BHS under a lease
expiring in 1996. The adjacent National Support Center, where administrative,
technical, and marketing services are performed to support branch operations, is
also held under a lease expiring in 1996. The lease for the backup monitoring
center in Arlington, Texas, expires in 1998. BHS retains ownership of nearly all
the approximately 347,000 systems currently being monitored. BHS leases all the
vehicles used for installation and servicing of its security systems.
THE PITTSTON COMPANY AND SUBSIDIARIES
MATTERS RELATED TO FORMER OPERATIONS
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay for 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the clean-up costs, on an undiscounted basis, using
existing technologies to be between $6.7 million and $14.1 million over a period
of up to five years. Management is unable to determine that any amount within
that range is a better estimate due to a variety of uncertainties, which include
the extent of the contamination at the site, the permitted technologies for
remediation and the regulatory standards by which the clean-up will be
conducted. The clean-up estimates have been modified in light of certain
regulatory changes promulgated in December 1994.
The Company commenced an insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws were held by the court to control
the interpretation of the policies), and numerous other factual considerations
which support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
<PAGE>
ANNEX V
PITTSTON BRINK'S GROUP
INDEX TO FINANCIAL INFORMATION
If the Brink's Stock Proposal is approved, The Pittston Company (the "Company")
will provide to holders of Pittston Brink's Common Stock ("Brink's Stock")
separate financial statements, financial review, descriptions of business and
other relevant information for the Pittston Brink's Group (the "Brink's Group").
Notwithstanding the attribution of assets and liabilities (including contingent
liabilities) among the Pittston Minerals Group (the "Minerals Group"), the
Brink's Group and the Pittston Burlington Group (the "Burlington Group") for the
purpose of preparing their respective historical and future financial
statements, this attribution and the change in the capital structure of the
Company contemplated by the Brink's Stock Proposal will not affect legal title
to such assets or responsibility for such liabilities for the Company or any of
its subsidiaries. Holders of Brink's Stock will be common shareholders of the
Company, which will continue to be responsible for all of its liabilities.
Financial impacts arising from one group that affect the Company's financial
condition could affect the results of operations and financial condition of each
of the groups. Accordingly, the Company's consolidated financial statements must
be read in connection with the Brink's Group's financial statements.
Under the Brink's Stock Proposal, dividends to be paid to holders of Brink's
Stock will be limited to funds of the Company legally available for the payment
of dividends. Amounts available for dividends may be further limited by
covenants in the Company's public debt indentures and bank credit agreements.
See the Company's consolidated financial statements and related footnotes set
forth in Annex IX. Subject to these limitations, the Company's Board of
Directors (the "Board"), although there is no requirement to do so, intends to
declare and pay dividends on the Brink's Stock based primarily on the earnings,
financial condition, cash flow and business requirements of the Brink's Group.
The accounting policies applicable to the preparation of the financial
statements of the Brink's Group may be modified or rescinded at the sole
discretion of the Board without approval of shareholders, although there is no
intention to do so.
Page
Financial Statements:
Independent Auditors' Report ....................................... 1
Balance Sheets ..................................................... 2
Statements of Operations ........................................... 3
Statements of Cash Flows ........................................... 4
Notes to Financial Statements ...................................... 5
Management's Discussion and Analysis of
Results of Operations and Financial Condition ...................... 29
<PAGE>
PITTSTON BRINK'S GROUP
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Pittston Company
We have audited the accompanying balance sheets of Pittston Brink's Group (as
described in Note 1) as of December 31, 1994 and 1993, and the related
statements of operations and cash flows for each of the years in the three- year
period ended December 31, 1994. These financial statements are the
responsibility of The Pittston Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements of Pittston Brink's Group present
fairly, in all material respects, the financial position of Pittston Brink's
Group as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1994, in conformity with generally accepted accounting principles.
As more fully discussed in Note 1, the financial statements of Pittston Brink's
Group should be read in connection with the audited consolidated financial
statements of The Pittston Company and subsidiaries.
KPMG Peat Marwick LLP
Stamford, Connecticut
September 29, 1995
<PAGE>
PITTSTON BRINK'S GROUP
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
(Dollars in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 17,254 20,226 17,016
Short-term investments 2,346 2,041 1,881
Accounts receivable:
Trade 91,859 88,347 75,471
Other 6,103 4,561 3,580
- ------------------------------------------------------------------------------------------------------------------
97,962 92,908 79,051
Less estimated amount uncollectible 3,345 3,379 3,796
- ------------------------------------------------------------------------------------------------------------------
94,617 89,529 75,255
Receivable - Pittston Minerals Group (Note 2) 768 705 -
Inventories 2,282 1,971 1,442
Prepaid expenses 12,248 7,021 6,346
Deferred income taxes (Note 7) 11,634 13,670 11,446
- ------------------------------------------------------------------------------------------------------------------
Total current assets 141,149 135,163 113,386
Property, plant and equipment, at cost (Note 4) 390,429 365,041 315,705
Less accumulated depreciation and amortization 198,540 184,111 158,729
- ------------------------------------------------------------------------------------------------------------------
191,889 180,930 156,976
Intangibles, net of amortization (Notes 5 and 10) 29,080 28,106 27,302
Investment in and advances to unconsolidated affiliates 35,988 43,171 39,250
Deferred pension assets (Note 12) 33,094 32,495 31,758
Deferred income taxes (Note 7) 3 - 569
Other assets 6,434 7,022 8,682
- ------------------------------------------------------------------------------------------------------------------
Total assets $437,637 426,887 377,923
==================================================================================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Short-term borrowings $ 7,173 4,544 5,935
Current maturities of long-term debt (Note 8) 4,797 5,256 7,310
Accounts payable 28,078 26,554 23,911
Payable - Pittston Minerals Group (Note 2) - - 2,000
Accrued liabilities:
Taxes 10,054 13,007 16,460
Workers' compensation and other claims 14,668 14,939 14,116
Payrolls 7,255 9,750 7,298
Deferred monitoring revenues 10,239 11,750 11,873
Miscellaneous 27,706 28,591 20,464
- ------------------------------------------------------------------------------------------------------------------
69,922 78,037 70,211
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 109,970 114,391 109,367
Long-term debt, less current maturities (Note 8) 6,971 7,990 12,649
Postretirement benefits other than pensions (Note 12) 3,356 3,280 3,229
Workers' compensation and other claims 10,512 9,929 9,043
Deferred income taxes (Note 7) 39,355 40,245 35,771
Payable - Pittston Minerals Group (Note 2) 11,688 12,750 10,221
Minority interests 16,382 14,471 13,151
Other liabilities 8,081 8,300 9,273
Commitments and contingent
liabilities (Notes 8, 11, and 15)
Shareholder's equity (Note 3) 231,322 215,531 175,219
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $437,637 426,887 377,923
==================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PITTSTON BRINK'S GROUP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands, Six Months Ended June 30 Year Ended December 31
except per share amounts) 1995 1994 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating revenue $365,006 304,654 656,993 570,953 514,823
- ----------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Operating expenses 280,888 233,237 498,185 433,954 397,875
Selling, general and administrative expenses 51,748 45,065 97,245 87,247 82,824
Pension credit (Note 12) - - - - (3,257)
- ----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 332,636 278,302 595,430 521,201 477,442
- ----------------------------------------------------------------------------------------------------------------------------------
Other operating income (Note 13) 1,173 3,104 5,913 6,899 8,403
- ----------------------------------------------------------------------------------------------------------------------------------
Operating profit 33,543 29,456 67,476 56,651 45,784
Interest income 985 655 1,503 1,304 1,490
Interest expense (Note 2) (951) (1,082) (2,450) (2,734) (4,109)
Other income (expense), net (1,242) (2,214) (3,068) (3,970) (5,597)
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 32,335 26,815 63,461 51,251 37,568
Provision for income taxes (Note 7) 10,824 9,864 21,972 19,601 13,615
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 21,511 16,951 41,489 31,650 23,953
==================================================================================================================================
Proforma Financial Information (unaudited) (Note 1):
Net income per common share $ .57 .45 1.10 .86 .65
- ----------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding 37,912 37,715 37,784 36,907 37,081
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PITTSTON BRINK'S GROUP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
(In thousands) 1995 1994 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 21,511 16,951 41,489 31,650 23,953
Adjustments to reconcile net income to net cash
provided by operating activities:
Noncash charges and other write-offs - - - 11 1,260
Depreciation and amortization 20,969 18,428 38,463 34,596 32,845
Provision (credit) for deferred income taxes 875 1,228 4,328 (2,998) (2,654)
Provision (credit) for pensions, noncurrent (57) 690 (169) (240) (5,142)
Provision for uncollectible accounts receivable 1,032 189 1,346 3,403 1,881
Equity in earnings of unconsolidated
affiliates, net of dividends received 291 (2,112) (1,144) (3,596) (4,989)
Gain on sale of property, plant and equipment (166) (62) (186) (174) (135)
Other operating, net 1,120 1,125 2,380 2,763 3,183
Change in operating assets and liabilities, net of
effects of acquisitions and dispositions:
Increase in accounts receivable (6,120) (3,241) (15,620) (8,275) (3,009)
Decrease (increase) in inventories (311) (418) (529) (190) 790
Increase in prepaid expenses (5,227) (2,535) (675) (793) (544)
Increase (decrease) in accounts payable and
accrued liabilities (4,579) (1,310) 15,645 9,958 14,629
Decrease (increase) in other assets 371 (456) (982) (758) (490)
Increase (decrease) in workers' compensation
and other claims, noncurrent 583 (28) 886 744 (61)
Increase (decrease) in other liabilities 774 (1,607) (956) (1,492) (1,350)
Other, net (1,009) (723) (820) 623 437
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 30,057 26,119 83,456 65,232 60,604
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (30,724) (23,449) (56,443) (47,668) (43,606)
Proceeds from disposal of property, plant
and equipment 1,655 249 515 979 3,039
Acquisitions, net of cash acquired, and related
contingency payments - - - - (1,407)
Other, net (59) (3,864) (4,884) (1,454) (3,027)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (29,128) (27,064) (60,812) (48,143) (45,001)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 3,142 1,708 - 4,232 3,356
Reductions of debt (2,195) (3,486) (10,129) (10,587) (8,874)
Payments to Minerals Group (2,063) (2,622) (5,705) - -
Attributed equity transactions:
Repurchase of common stock (1,867) (1,709) (4,146) (616) (7,274)
Proceeds from exercise of stock options 863 2,517 3,730 8,123 821
Proceeds from sale of stock to Savings
Investment Plan - - - 147 -
Proceeds from sale of stock to Minerals Group - 216 216 86 -
Dividends paid (1,781) (1,696) (3,399) (3,175) (2,526)
Cost of Services Stock Proposal - (1) (1) (782) -
Net cash to the Company - - - (6,041) (3,845)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (3,901) (5,073) (19,434) (8,613) (18,342)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,972) (6,018) 3,210 8,476 (2,739)
Cash and cash equivalents at beginning of period 20,226 17,016 17,016 8,540 11,279
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 17,254 10,998 20,226 17,016 8,540
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PITTSTON BRINK'S GROUP
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
Upon approval of the Brink's Stock Proposal (see "The Brink's Stock Proposal" in
the Proxy Statement), the capital structure of The Pittston Company (the
"Company") will be modified to include an additional class of common stock. The
outstanding shares of Pittston Services Group Common Stock ("Services Stock")
will be redesignated as Pittston Brink's Group Common Stock, par value $1.00 per
share ("Brink's Stock"), and one-half of one share of a new class of common
stock identified as Pittston Burlington Group Common Stock, par value $1.00 per
share, ("Burlington Stock") will be distributed for each outstanding share of
Services Stock. Holders of Pittston Minerals Group Common Stock ("Minerals
Stock") will continue to be holders of such stock, which will continue to
reflect the performance of the Pittston Minerals Group (the "Minerals Group").
Brink's Stock is intended to reflect the performance of the Pittston Brink's
Group (the "Brink's Group") and Burlington Stock is intended to reflect the
performance of the Pittston Burlington Group (the "Burlington Group").
The financial statements of the Brink's Group include the balance sheets, the
results of operations and cash flows of the Brink's, Incorporated ("Brink's")
and Brink's Home Security, Inc. ("BHS") operations of the Company, and a portion
of the Company's corporate assets and liabilities and related transactions which
are not separately identified with operations of a specific segment. The Brink's
Group's financial statements are prepared using the amounts included in the
Company's consolidated financial statements. Corporate allocations reflected in
these financial statements are determined based upon methods which management
believes to be a reasonable and equitable allocation of such items (see Note 2).
These financial statements also present the following proforma information
assuming completion of the Brink's Stock Proposal transaction:
* For the purpose of computing net income per common share of Brink's Stock,
the number of shares of Brink's Stock are assumed to be the same as the
total number of shares of Services Stock. Net income per common share is
computed by dividing net income by the weighted average number of common
shares outstanding during the period. The potential dilution from the
exercise of stock options is not material. The shares of Brink's Stock
assumed to be held in The Pittston Company Employee Benefits Trust are
evaluated for inclusion in the calculation of net income per share under
the treasury stock method and had no dilutive effect.
* All financial impacts of purchases and issuances of Services Stock have
been attributed to each Group in relation of their respective common equity
to the Services Group common stock. Dividends paid by the Company were
attributed to the Brink's and Burlington Groups in relation to the initial
dividends to be paid on the Brink's Stock and the Burlington Stock.
<PAGE>
If the Brink's Stock Proposal is approved, the Company will provide to holders
of Brink's Stock separate financial statements, financial review, descriptions
of business and other relevant information for the Brink's Group.
Notwithstanding the attribution of assets and liabilities (including contingent
liabilities) among the Minerals Group, the Brink's Group and the Burlington
Group for the purpose of preparing their respective historical and future
financial statements, this attribution and the change in the capital structure
of the Company contemplated by the Brink's Stock Proposal will not affect legal
title to such assets or responsibility for such liabilities for the Company or
any of its subsidiaries. Holders of Brink's Stock will be common shareholders of
the Company, which will continue to be responsible for all of its liabilities.
Financial impacts arising from one group that affect the Company's financial
condition could affect the results of operations and financial condition of each
of the groups. Since financial developments within one group could affect other
groups, all shareholders of the Company could be adversely affected by an event
directly impacting only one group. Accordingly, the Company's consolidated
financial statements must be read in connection with the Brink's Group's
financial statements.
Under the Brink's Stock Proposal, dividends to be paid to holders of Brink's
Stock will be limited to funds of the Company legally available for the payment
of dividends. Amounts available for dividends may be further limited by
covenants in the Company's public debt indentures and bank credit agreements.
See the Company's consolidated financial statements and related footnotes set
forth in Annex IX. Subject to these limitations, the Company's Board of
Directors (the "Board"), although there is no requirement to do so, intends to
declare and pay dividends on the Brink's Stock based primarily on the earnings,
financial condition, cash flow and business requirements of the Brink's Group.
The accounting policies applicable to the preparation of the financial
statements of the Brink's Group may be modified or rescinded at the sole
discretion of the Board without approval of shareholders, although there is no
intention to do so.
The Brink's Stock Proposal will permit the Company, at any time, to exchange
each outstanding share of Burlington Stock for shares of Brink's Stock (or, if
no Brink's Stock is then outstanding, Minerals Stock) having a fair market value
equal to 115% of the fair market value of one share of Burlington Stock. In
addition, upon the disposition of all or substantially all of the properties and
assets of the Burlington Group to any person (with certain exceptions), the
Company will be required to exchange each outstanding share of Burlington Stock
for shares of Brink's Stock (or, if no Brink's Stock is then outstanding,
Minerals Stock) having a fair market value equal to 115% of the fair market
value of one share of Burlington Stock.
The Brink's Stock Proposal will also permit the Company, at any time, to
exchange each outstanding share of Minerals Stock, which was previously subject
to exchange for shares of Services Stock, for shares of Brink's Stock (or, if no
Brink's Stock is then outstanding, Burlington Stock) having a fair market value
equal to 115% of the fair market value of one share of Minerals Stock. In
addition, upon the disposition of all or substantially all of the properties and
assets of the Minerals Group to any person (with
<PAGE>
certain exceptions), the Company will be required to exchange each outstanding
share of Minerals Stock for shares of Brink's Stock (or, if no Brink's Stock is
then outstanding, Burlington Stock) having a fair market value equal to 115% of
the fair market value of one share of Burlington Stock. If any shares of the
Company's Preferred Stock are converted after an exchange of Minerals Stock for
Brink's Stock (or Burlington Stock), the holder of such Preferred Stock would,
upon conversion, receive shares of Brink's Stock (or Burlington Stock) in lieu
of shares of Minerals Stock otherwise issuable upon such conversion.
Shares of Brink's Stock are not subject to either optional or mandatory
exchange. The net proceeds of any disposition of properties and assets of the
Brink's Group will be attributed to the Brink's Group. In the case of a
disposition of all or substantially all the properties and assets of any other
group, the net proceeds will be attributed to the group the shares of which have
been issued in exchange for shares of the selling group.
The Brink's Stock Proposal provides that holders of Brink's Stock will at all
times have one vote per share, and initially holders of Burlington Stock and
Minerals Stock will have one and 1.4 votes per share, respectively. The votes of
holders of Burlington Stock and Minerals Stock will be subject to adjustment on
January 1, 1996, and on each January 1 every two years thereafter in such a
manner that each class' share of the aggregate voting power at such time will be
equal to that class' share of the Company's aggregate market capitalization at
such time. Accordingly, on each adjustment date, each share of Burlington Stock
and Minerals Stock may have more than, less than or continue to have the number
of votes per share as they initially will have following the consummation of the
transaction. However, the aggregate voting power of the Minerals Stock is
expected to decrease on January 1, 1996, (the first adjustment date) based on
the current market value of Minerals Stock relative to the current market value
of Services Stock. Holders of Brink's Stock, Burlington Stock and Minerals Stock
will vote together as a single voting group on all matters as to which all
common shareholders are entitled to vote. In addition, as prescribed by Virginia
law, certain amendments to the Articles of Incorporation affecting, among other
things, the designation, rights, preferences or limitations of one class of
common stock, or certain mergers or statutory share exchanges, must be approved
by the holders of such class of common stock, voting as a group, and, in certain
circumstances, may also have to be approved by the holders of the other classes
of common stock, voting as separate voting groups. The voting rights of the
Preferred Stock are not affected by the Brink's Stock Proposal.
Under the Brink's Stock Proposal, in the event of a dissolution, liquidation or
winding up of the Company, the holders of Brink's Stock, Burlington Stock and
Minerals Stock will share on a per share basis an aggregate amount equal to 55%,
28% and 17%, respectively, of the funds, if any, remaining for distribution to
the common shareholders. In the case of Minerals Stock, such percentage has been
set, using a nominal number of shares of Minerals Stock of [ ] (the "Nominal
Shares") in excess of the actual number of shares of Minerals Stock outstanding,
to ensure that the holders of Minerals Stock are entitled to the same share of
any such funds immediately following the consummation of the transaction as they
were prior thereto. These liquidation percentages are subject to adjustment in
proportion to the relative change in the total number of shares of Brink's
Stock, Burlington
<PAGE>
Stock and Minerals Stock, as the case may be, then outstanding to the total
number of shares of all other classes of common stock then outstanding (which
total, in the case of Minerals Stock, shall include the Nominal Shares).
Principles of Combination
- -------------------------
The accompanying financial statements reflect the combined accounts of the
businesses comprising the Brink's Group and their majority-owned subsidiaries.
The Brink's Group interests in 20% to 50% owned companies are carried on the
equity method. All material intercompany items and transactions have been
eliminated in combination. Certain prior year amounts have been reclassified to
conform to the current year's financial statement presentation.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand, demand deposits and investments
with original maturities of three months or less.
Short-term Investments
- ----------------------
Short-term investments are those with original maturities in excess of three
months and are carried at cost which approximates market.
Inventories
- -----------
Inventories are stated at cost (determined under the first-in, first-out or
average cost method) or market, whichever is lower.
Property, Plant and Equipment
- -----------------------------
Expenditures for maintenance and repairs are charged to expense, and the costs
of renewals and betterments are capitalized. Depreciation is provided
principally on the straight-line method at varying rates depending upon
estimated useful lives.
Subscriber installation costs for home security systems provided by BHS are
capitalized and depreciated over the estimated life of the assets and are
included in machinery and equipment. The standard security system that is
installed remains the property of BHS and is capitalized at the cost to bring
the revenue producing asset to its intended use. When an installation is
identified for disconnection, the remaining net book value of the installation
is written-off and charged to depreciation.
Intangibles
- -----------
The excess of cost over fair value of net assets of companies acquired is
amortized on a straight-line basis over the estimated periods benefited.
The Brink's Group evaluates the carrying value of intangibles and the periods of
amortization to determine whether events and circumstances warrant revised
estimates of asset value or useful lives. The Brink's Group annually assesses
the recoverability of the excess of cost over net assets acquired by determining
whether the amortization of the asset balance over its remaining life can be
recovered through projected undiscounted future operating cash flows. Evaluation
of asset value as well as periods of amortization are performed on a
disaggregated basis at each of the Brink's Group's operating units.
<PAGE>
Income Taxes
- ------------
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No.109, "Accounting for Income Taxes", which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
See Note 2 for allocation of the Company's U.S. federal income taxes to the
Brink's Group.
Postretirement Benefits Other Than Pensions
- -------------------------------------------
Postretirement benefits other than pensions are accounted for in accordance with
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires employers to accrue
the cost of such retirement benefits during the employees' service with the
Company.
Foreign Currency Translation
- ----------------------------
Assets and liabilities of foreign operations have been translated at current
exchange rates, and related revenues and expenses have been translated at
average rates of exchange in effect during the year. Resulting cumulative
translation adjustments have been included in shareholder's equity. Translation
adjustments relating to operations in countries with highly inflationary
economies are included in net income, along with all transaction gains and
losses for the period.
A portion of the Brink's Group's financial results is derived from activities in
several foreign countries, each with a local currency other than the U.S.
dollar. Because the financial results of the Brink's Group are reported in U.S.
dollars, they are affected by the changes in the value of the various foreign
currencies in relation to the U.S. dollar. However, the Brink's Group's
international activity is not concentrated in any single currency, which reduces
the risks of foreign currency rate fluctuations.
Revenue Recognition
- -------------------
Brink's - Revenues are recognized when services are performed.
BHS - Monitoring revenues are recognized when earned and amounts paid in advance
are deferred and recognized as income over the applicable monitoring period,
which is generally one year or less. Revenues from the sale of equipment, are
recognized, together with related costs, upon completion of the installation.
Connection fee revenues are recognized to the extent of direct selling costs
incurred and expensed. Connection fee revenues in excess of direct selling costs
are deferred and recognized as income on a straight-line basis over ten years.
2. RELATED PARTY TRANSACTIONS
The following policies may be modified or rescinded by action of the Board, or
the Board may adopt additional policies, without approval of the shareholders of
the Company, although the Board has no present intention to
<PAGE>
do so. The Company allocated certain corporate general and administrative
expenses, net interest expense and related assets and liabilities in accordance
with the policies described below. Corporate assets and liabilities are
primarily cash, deferred pension assets, income taxes and accrued liabilities.
Financial
- ---------
As a matter of policy, the Company manages most financial activities of the
Brink's Group, Burlington Group and Minerals Group on a centralized,
consolidated basis. Such financial activities include the investment of surplus
cash; the issuance, repayment and repurchase of short-term and long- term debt;
the issuance and repurchase of common stock and the payment of dividends. In
preparing these financial statements, transactions primarily related to invested
cash, short-term and long-term debt (including convertible debt), related net
interest and other financial costs have been attributed to the Brink's Group
based upon its cash flows for the periods presented after giving consideration
to the debt and equity structure of the Company. At December 31, 1994, none of
the long-term debt of the Company was attributed to the Brink's Group based upon
the purpose for the debt in addition to the cash requirements of the Brink's
Group. The portion of the Company's interest expense allocated to the Brink's
Group for 1994 and 1993 was $176, and $143, respectively. There was no interest
expense allocated to the Brink's Group in 1992. The portion of the Company's
interest expense allocated to the Brink's Group for the six months ended June
30, 1995 and 1994 (unaudited), was $62 and $89, respectively. Management
believes such method of allocation to be equitable and a reasonable estimate of
the cost attributable to the Brink's Group.
To the extent borrowings are deemed to occur between the Brink's Group, the
Burlington Group and the Minerals Group, intergroup accounts are established
bearing interest at the rate in effect from time to time under the Company's
unsecured credit lines or, if no such credit lines exist, at the prime rate
charged by Chemical Bank from time to time. At December 31, 1994, the Minerals
Group owed the Brink's Group $5,705, as the result of borrowings. At December
31, 1993, there were no amounts either owed to or receivable from the Burlington
Group or the Minerals Group. At June 30, 1995 (unaudited), the Minerals Group
owed the Brink's Group $7,768 as the result of borrowings.
Income Taxes
- ------------
The Brink's Group is included in the consolidated U.S. federal income tax return
filed by the Company.
The Company's consolidated provision and actual cash payments for U.S. federal
income taxes are allocated between the Brink's Group, Burlington Group and
Minerals Group in accordance with the Company's tax allocation policy and
reflected in the financial statements for each Group. In general, the
consolidated tax provision and related tax payments or refunds are allocated
among the Groups, for financial statement purposes, based principally upon the
financial income, taxable income, credits and other amounts directly related to
the respective Group. Tax benefits that cannot be used by the Group generating
such attributes, but can be utilized on a consolidated basis, are allocated to
the Group that generated such benefits and an intergroup account is established
for the benefit of the Group generating the attributes. As a result, the
allocated Group amounts of taxes
<PAGE>
payable or refundable are not necessarily comparable to those that would have
resulted if the Groups had filed separate tax returns. At December 31, 1994 and
1993, the Brink's Group owed the Minerals Group $17,750 and $12,221,
respectively, for such tax benefits, of which $12,750 and $10,221, respectively,
were not expected to be paid within one year from such dates in accordance with
the policy.
Shared Services
- ---------------
A portion of the Company's corporate general and administrative expenses and
other shared services has been allocated to the Brink's Group based upon
utilization and other methods and criteria which management believes to be
equitable and a reasonable estimate of the cost attributable to the Brink's
Group. These allocations were $4,666, $4,757 and $4,278 in 1994, 1993 and 1992,
respectively.
Pension
- -------
The Brink's Group's pension cost related to its participation in the Company's
noncontributory defined benefit pension plan is actuarially determined based on
its respective employees and an allocable share of the pension plan assets and
calculated in accordance with Statement of Financial Accounting Standards No. 87
("SFAS 87"). Pension plan assets have been allocated to the Brink's Group based
on the percentage of its projected benefit obligation to the plan's total
projected benefit obligation. Management believes such method of allocation to
be equitable and a reasonable estimate of the cost attributable to the Brink's
Group.
<PAGE>
3. SHAREHOLDER'S EQUITY
The following presents shareholder's equity of the Brink's Group assuming
completion of the Brink's Stock Proposal transaction:
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of period $215,531 175,219 147,582 136,562
Net income 21,511 41,489 31,650 23,953
Foreign currency translation
adjustment (4,457) (25) (3,336) (770)
Attributed equity transactions:
Stock options exercised 863 3,730 8,123 821
Stock released from employee
benefits trust to employee
benefits plan 1,537 899 563 286
Stock sold from employee
benefits trust to employee
benefits plan - - 147 -
Stock issued to employee benefits plan - - - 375
Stock sold to Minerals Group - 216 86 -
Stock repurchases (1,867) (4,146) (616) (7,274)
Dividends declared (1,796) (3,404) (3,175) (2,526)
Cost of Services Stock Proposal - (1) (782) -
Tax benefit of options exercised - 1,554 1,018 -
Net cash to the Company - - (6,041) (3,845)
- ----------------------------------------------------------------------------------------------------
Balance at end of period $231,322 215,531 175,219 147,582
====================================================================================================
</TABLE>
Included in shareholder's equity is the cumulative foreign currency translation
adjustment of $17,693 at June 30, 1995 (unaudited) and $13,236, $13,211 and
$9,875 at December 31, 1994, 1993 and 1992, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, consist of the following:
December 31
1994 1993
- ----------------------------------------------------------------------------
Land $ 4,162 3,618
Buildings 27,753 26,241
Machinery and equipment 333,126 285,846
- ----------------------------------------------------------------------------
$365,041 315,705
============================================================================
<PAGE>
The estimated useful lives for property, plant and equipment are as follows:
Years
----------------------------------------------------------
Buildings 3 to 25
Machinery and equipment 2 to 20
Depreciation of property, plant and equipment aggregated $35,992 in 1994,
$31,973 in 1993 and $30,157 in 1992. For the six months ended June 30, 1995 and
1994 (unaudited), depreciation of property, plant and equipment aggregated
$20,251 and $17,209, respectively.
Changes in capitalized subscriber installation costs for home security systems
included in machinery and equipment were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Capitalized subscriber install-
ation costs - beginning of year $81,445 65,785 54,668 44,842
Capitalized cost of security
system installations 17,320 32,309 23,972 20,694
Capitalized cost of security
systems acquired - - - (143)
Depreciation, including amounts
recognized to fully depreciate
capitalized costs for install-
ations disconnected during the
year (9,840) (16,649) (12,855) (10,725)
- ---------------------------------------------------------------------------------------------------------
Capitalized subscriber install-
ation costs - end of period $88,925 81,445 65,785 54,668
=========================================================================================================
</TABLE>
New subscribers were 75,200 in 1994, 59,700 in 1993 and 51,300 in 1992. For the
six months ended June 30, 1995 (unaudited), new subscribers were 38,300.
As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security system installations. This change in
accounting principle is preferable because it more accurately reflects
subscriber installation costs. The additional costs not previously capitalized
consisted of costs for installation labor and related benefits for supervisory,
installation scheduling, equipment testing and other support personnel (in the
amount of $2,645 in 1994, $2,567 in 1993 and $2,327 in 1992) and costs incurred
in maintaining facilities and vehicles dedicated to the installation process (in
the amount of $1,492 in 1994, $1,484 in 1993 and $1,994 in 1992). The effect of
this change in accounting principle was to increase operating profit of the
Brink's Group and the BHS segment in 1994, 1993 and 1992 by $4,137, $4,051 and
$4,321, respectively, and net income of the Brink's Group in 1994, 1993 and 1992
by $2,486, $2,435 and $2,596, respectively, or by $.07 per share in each year.
The effect of this change in accounting principle was to increase operating
profit of the Brink's Group and the BHS segment for the first six months of 1995
and 1994
<PAGE>
(unaudited), by $1,949 and $2,149, respectively. The effect of this change
increased net income per common share of the Brink's Group for the first six
months of 1995 and 1994 by $.03. Prior to January 1, 1992, the records needed to
identify such costs were not available. Thus, it was impossible to accurately
calculate the effect on retained earnings as of January 1, 1992. However, the
Brink's Group believes the effect on retained earnings as of January 1, 1992,
was immaterial.
Because capitalized subscriber installation costs for prior periods were not
adjusted for the change in accounting principle, installation costs for
subscribers in those years will continue to be depreciated based on the lesser
amounts capitalized in prior periods. Consequently, depreciation of capitalized
subscriber installation costs in the current year and until such capitalized
costs prior to January 1, 1992, are fully depreciated will be less than if such
prior periods' capitalized costs had been adjusted for the change in accounting.
However, the Brink's Group believes the effect on net income in 1994, 1993 and
1992 was immaterial.
5. INTANGIBLES
Intangibles consist entirely of the excess of cost over fair value of net assets
of companies acquired and are net of accumulated amortization of $6,703 at
December 31, 1994, and $5,596 at December 31, 1993. The estimated useful life of
intangibles is generally forty years. Amortization of intangibles aggregated
$882 in 1994, $865 in 1993 and $964 in 1992.
6. FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Brink's Group to
concentrations of credit risk consist principally of cash and cash equivalents,
short-term cash investments and trade receivables. The Brink's Group's cash and
cash equivalents and short-term investments are placed with high credit
qualified financial institutions. Also, by policy, the amount of credit exposure
to any one financial institution is limited. Concentration of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Brink's Group's customer base, and their dispersion across many
geographic areas.
The following details the fair values of financial instruments for which it is
practicable to estimate the value:
Cash and cash equivalents and short-term investments
- ----------------------------------------------------
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Debt
- ----
The aggregate fair value of the Brink's Group's long-term debt obligations,
which is based upon quoted market prices and rates currently available to the
Brink's Group for debt with similar terms and maturities, approximates the
carrying amount.
<PAGE>
Off-balance sheet instruments
- -----------------------------
The Brink's Group utilizes off-balance sheet financial instruments from time to
time to hedge its foreign currency and exposures. The risk that counterparties
to such instruments may be unable to perform is minimized by limiting the
counterparties to major financial institutions. The Brink's Group does not
expect any losses due to such counterparty default.
7. INCOME TAXES
The provision (credit) for income taxes consists of the following:
U.S.
Federal Foreign State Total
- --------------------------------------------------------------------------------
1994:
Current $ 12,085 2,873 2,686 17,644
Deferred 2,188 1,608 532 4,328
- --------------------------------------------------------------------------------
Total $ 14,273 4,481 3,218 21,972
================================================================================
1993:
Current $ 13,118 7,797 1,684 22,599
Deferred 159 (4,537) 1,380 (2,998)
- --------------------------------------------------------------------------------
Total $ 13,277 3,260 3,064 19,601
================================================================================
1992:
Current $ 12,666 1,534 2,069 16,269
Deferred (2,767) 344 (231) (2,654)
- --------------------------------------------------------------------------------
Total $ 9,899 1,878 1,838 13,615
================================================================================
<PAGE>
The significant components of the deferred tax provision (benefit) were as
follows:
1994 1993 1992
- --------------------------------------------------------------------------------
Deferred tax provision (benefit),
exclusive of the components listed
below $ 2,892 (5,548) (1,818)
Investment tax credit carryforwards - - 1,489
Net operating loss carryforwards 449 1,860 (1,062)
Alternative minimum tax credits 1,084 648 (1,316)
Change in the valuation allowance
for deferred tax assets (97) 42 53
- --------------------------------------------------------------------------------
$ 4,328 (2,998) (2,654)
================================================================================
The tax benefit for compensation expense related to the exercise of certain
employee stock options for tax purposes in excess of compensation expense for
financial reporting purposes is recognized as an adjustment to shareholder's
equity.
The components of the net deferred tax liability as of December 31, 1994 and
December 31, 1993 were as follows:
1994 1993
- --------------------------------------------------------------------------------
Deferred tax assets:
Accounts receivable $ 1,310 1,461
Postretirement benefits other than pensions 1,741 1,753
Workers' compensation and other claims 4,974 4,176
Other liabilities and reserves 11,355 11,542
Miscellaneous 727 1,181
Net operating loss carryforwards 2,565 3,014
Alternative minimum tax credits 3,741 4,348
Valuation allowance - (97)
- --------------------------------------------------------------------------------
Total deferred tax asset 26,413 27,378
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 22,125 19,015
Pension assets 14,724 14,056
Other assets 2,844 2,675
Investments in foreign affiliates 11,965 13,044
Miscellaneous 1,330 2,434
- --------------------------------------------------------------------------------
Total deferred tax liability 52,988 51,224
- --------------------------------------------------------------------------------
Net deferred tax liability $26,575 23,846
================================================================================
The recording of deferred federal tax assets is based upon their expected
utilization in the Company's consolidated federal income tax return and the
benefit that would accrue to the Brink's Group under the Company's tax
allocation policy.
The valuation allowance relates to deferred tax assets in certain foreign and
state jurisdictions.
<PAGE>
The following table accounts for the difference between the actual tax provision
and the amounts obtained by applying the statutory U.S. federal income tax rate
of 35% in 1994 and 1993 and 34% in 1992 to the income before income taxes.
<TABLE>
<CAPTION>
Year Ended December 31
1994 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes:
United States $47,419 39,187 31,282
Foreign 16,042 12,064 6,286
- ---------------------------------------------------------------------------------------
$63,461 51,251 37,568
=======================================================================================
Tax provision computed at statutory rate $22,211 17,938 12,772
Increases (reductions) in taxes due to:
State income taxes (net of federal tax
benefit) 2,092 1,992 1,323
Difference between total taxes on foreign
income and the U.S. federal statutory rate (3,259) (633) (1,231)
Miscellaneous 928 304 751
- ---------------------------------------------------------------------------------------
Actual tax provision $21,972 19,601 13,615
=======================================================================================
</TABLE>
It is the policy of the Brink's Group to accrue deferred income taxes on
temporary differences related to the financial statement carrying amounts and
tax bases of investments in foreign subsidiaries and affiliates which are
expected to reverse in the foreseeable future. As of December 31, 1994 and
December 31, 1993, the unrecognized deferred tax liability for temporary
differences of approximately $36,460 and $39,417, respectively, related to
investments in foreign subsidiaries and affiliates that are essentially
permanent in nature and not expected to reverse in the foreseeable future was
approximately $12,761 and $13,796, respectively.
The Brink's Group is included in the Company's consolidated U.S. federal income
tax return. Such returns have been audited and settled with the Internal Revenue
Service through the year 1981.
As of December 31, 1994, the Brink's Group had $3,741 of alternative minimum tax
credits allocated to it under the Company's tax allocation policy. Such credits
are available to offset future U.S. federal income taxes and, under current tax
law, the carryforward period for such credits is unlimited.
The tax benefits of net operating loss carryforwards of the Brink's Group as at
December 31, 1994 were $2,565 and related to various state and foreign taxing
jurisdictions. The expiration periods primarily range from 5 to 15 years.
<PAGE>
8. LONG-TERM DEBT
Total long-term debt of the Brink's Group consists of the following:
As of December 31
1994 1993
- --------------------------------------------------------------------------------
Senior obligations:
U.S. dollar term loan due 1996 to 1997
(6.50% in 1994 and 3.81% in 1993) $3,451 5,321
Dutch guilder term loan due 1995 (6.69% in 1993) - 1,250
U.S. dollar term loan due 1996 (4.06% in 1993) - 1,714
All other 1,882 2,001
- --------------------------------------------------------------------------------
5,333 10,286
Obligations under capital leases (average rates
16.80% in 1994 and 6.25% in 1993) 2,657 2,363
- --------------------------------------------------------------------------------
Total long-term debt, less current maturities $7,990 12,649
================================================================================
For the four years through December 31, 1999, minimum repayments of long-term
debt outstanding are as follows:
1996 $3,499
1997 2,750
1998 881
1999 358
The Dutch guilder loan bears interest based on a Euroguilder rate, or if
converted to a U.S. dollar loan based on prime, Eurodollar or money market
rates. In January 1992, a portion of the guilder loan was converted into a U.S.
dollar term loan. The U.S. dollar term loan due 1996 to 1997 bears interest
based on the Eurodollar rate.
Under the terms of the loans, Brink's has agreed to various restrictions
relating to net worth, disposition of assets and incurrence of additional debt.
In March 1994, the Company entered into a $350,000 credit agreement with a
syndicate of banks (the "New Facility"), replacing the Company's previously
existing $250,000 of revolving credit agreements. The New Facility included a
$100,000 five-year term loan, which originally matured in March 1999. The New
Facility also permitted additional borrowings, repayments and reborrowings of up
to an aggregate of $250,000 initially until March 1999. In March 1995, the New
Facility was amended to extend the maturity of the term loan to May 2000 and to
permit the additional borrowings, repayments and reborrowings until May 2000.
Interest on borrowings under the New Facility is payable at rates based on
prime, certificate of deposit, Eurodollar or money market rates. At December 31,
1994, no borrowings under the New Facility were attributed to the Brink's Group.
<PAGE>
Various international operations maintain lines of credit and overdraft
facilities aggregating approximately $14,000 with a number of banks on either a
secured or unsecured basis.
Under the terms of some of its debt instruments, the Company has agreed to
various restrictions relating to the payment of dividends, the repurchase of
capital stock, the maintenance of consolidated net worth, and the amount of
additional funded debt which may be incurred. See the Company's consolidated
financial statements and related footnotes set forth in Annex IX.
At December 31, 1994, the Company's portion of outstanding unsecured letters of
credit allocated to the Brink's Group was $14,918, primarily supporting the
Brink's Group's obligations under its various self-insurance programs.
9. STOCK OPTIONS
Upon approval of the Brink's Stock Proposal, the Company will convert its stock
options outstanding into options for shares of Brink's Stock or Burlington
Stock, or both, pursuant to provisions in the option agreements covering such
options. See the Company's consolidated financial statements and related
footnotes set forth in Annex IX for information regarding the Company's stock
options.
10. ACQUISITIONS
During 1992, the Brink's Group acquired a business for an aggregate purchase
price of $2,658, including debt of $1,144. The fair value of assets acquired was
$2,690 and liabilities assumed was $32.
The acquisition was accounted for as a purchase and the purchase price for the
acquisition was essentially equal to the fair value of assets acquired. The
results of operations of the acquired company has been included in the Brink's
Group's results of operations from the date of acquisition.
<PAGE>
11. LEASES
The Brink's Group's businesses lease facilities, vehicles, computers and other
equipment under long-term operating leases with varying terms, and most of the
leases contain renewal and/or purchase options. As of December 31, 1994,
aggregate future minimum lease payments under noncancellable operating leases
were as follows:
Equipment
Facilities & Other Total
- --------------------------------------------------------------------------------
1995 $10,301 3,023 13,324
1996 9,202 1,807 11,009
1997 7,666 897 8,563
1998 6,811 598 7,409
1999 5,283 150 5,433
2000 4,679 44 4,723
2001 4,245 2 4,247
2002 3,464 2 3,466
2003 3,179 1 3,180
2004 3,071 0 3,071
Later Years 5,292 0 5,292
- --------------------------------------------------------------------------------
$63,193 6,524 69,717
================================================================================
Rent expense amounted to $17,419 in 1994, $14,908 in 1993 and $13,428 in 1992.
The Brink's Group incurred capital lease obligations of $1,651 in 1994, $1,059
in 1993 and $1,778 in 1992. As of December 31, 1994, the Brink's Group's
obligations under capital leases were not significant.
12. EMPLOYEE BENEFIT PLANS
The Brink's Group's businesses participate in the Company's noncontributory
defined benefit pension plan covering substantially all nonunion employees who
meet certain minimum requirements in addition to sponsoring certain other
defined benefit plans. Benefits of most of the plans are based on salary and
years of service. The Brink's Group's pension cost relating to its participation
in the Company's defined benefit pension plan is actuarially determined based on
its respective employees and an allocable share of the pension plan assets. The
Company's policy is to fund the
<PAGE>
actuarially determined amounts necessary to provide assets sufficient to meet
the benefits to be paid to plan participants in accordance with applicable
regulations. The net pension expense (credit) for 1994, 1993 and 1992 for all
plans is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during year $ 5,551 4,558 4,428
Interest cost on projected benefit obligation 7,838 7,765 7,128
Return on assets - actual (1,750) (18,726) (11,488)
(Loss) return on assets - deferred (10,910) 7,011 (696)
Other amortization, net (472) (274) (4,000)
- ----------------------------------------------------------------------------------------
Net pension expense (credit) $ 257 334 (4,628)
========================================================================================
</TABLE>
The assumptions used in determining the net pension expense (credit) for the
Company's major pension plan were as follows:
1994 1993 1992
- --------------------------------------------------------------------------------
Interest cost on projected benefit obligation 7.5% 9.0% 9.0%
Expected long-term rate of return on assets 10.0% 10.0% 10.0%
Rate of increase in compensation levels 4.0% 5.0% 5.0%
The funded status and prepaid pension expense at December 31, 1994 and 1993 are
as follows:
1994 1993
- --------------------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligation:
Vested $ 78,344 84,190
Nonvested 6,559 5,426
- --------------------------------------------------------------------------------
84,903 89,616
Benefits attributable to projected salaries 14,965 21,192
- --------------------------------------------------------------------------------
Projected benefit obligation 99,868 110,808
Plan assets at fair value 132,736 133,813
- --------------------------------------------------------------------------------
Excess of plan assets over projected
benefit obligation 32,868 23,005
Unamortized initial net asset (3,418) (4,143)
Unrecognized experience loss 604 10,233
Unrecognized prior service cost 1,608 1,860
- --------------------------------------------------------------------------------
Net pension assets 31,662 30,955
Current pension liability 833 803
- --------------------------------------------------------------------------------
Deferred pension asset per balance sheet $ 32,495 31,758
================================================================================
For the valuation of pension obligations and the calculation of the funded
status, the discount rate was 8.75% in 1994 and 7.5% in 1993. The expected
<PAGE>
long-term rate of return on assets was 10% in both years. The rate of increase
in compensation levels used was 4% in 1994 and 1993.
The unrecognized initial net asset at January 1, 1986 (January 1, 1989, for
certain foreign pension plans), the date of adoption of SFAS 87, has been
amortized over the estimated remaining average service life of the employees. As
of December 31, 1994, approximately 65% of plan assets were invested in equity
securities and 35% in fixed income securities.
The Brink's Group also provides certain postretirement health care and life
insurance benefits for eligible active and retired employees in the United
States and Canada.
For the years 1994, 1993 and 1992, the components of periodic expense for these
postretirement benefits were as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Service cost - benefits earned during year $ 86 70 67
Interest cost on accumulated postretirement
benefit obligation 232 256 283
- --------------------------------------------------------------------------------
Total expense $ 318 326 350
================================================================================
Interest costs on the accumulated postretirement benefit obligation were based
upon rates of 7.5% in 1994 and 9% in 1993 and 1992.
At December 31, 1994 and 1993, the actuarial and recorded liabilities for these
postretirement benefits, none of which have been funded, were as follows:
1994 1993
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 1,675 1,558
Fully eligible active plan participants 654 833
Other active plan participants 766 983
- --------------------------------------------------------------------------------
3,095 3,374
Unrecognized experience gain 477 153
- --------------------------------------------------------------------------------
Liability included on the balance sheet 3,572 3,527
Less current portion 292 298
- --------------------------------------------------------------------------------
Noncurrent liability for postretirement
health care and life insurance benefits $ 3,280 3,229
================================================================================
The accumulated postretirement benefit obligation was determined using the unit
credit method and an assumed discount rate of 8.75% in 1994 and 7.5% in 1993.
The postretirement benefit obligation for U.S. salaried employees does not
provide for changes in health care costs since the employer's contribution to
the plan is a fixed amount. The assumed health care cost
<PAGE>
trend rate used in 1994 for employees under a foreign plan was 10% grading down
to 5% in the year 2001.
A percentage point increase each year in the health care cost trend rate used
would have resulted in a $10 increase in the aggregate service and interest
components of expense for the year 1994, and a $66 increase in the accumulated
postretirement benefit obligation at December 31, 1994.
The Brink's Group also participates in the Company's Savings-Investment Plan to
assist eligible employees in providing for retirement or other future financial
needs. Employee contributions are matched at rates of 50% to 125% up to 5% of
compensation (subject to certain limitations imposed by the Internal Revenue
Code of 1986, as amended). Contribution expense under the plan aggregated $2,706
in 1994, $2,153 in 1993 and $2,114 in 1992.
In May 1994, the Company's shareholders approved the Employee Stock Purchase
Plan effective July 1, 1994. See the Company's consolidated financial statements
and related footnotes set forth in Annex IX for information regarding the
Company's Employee Stock Purchase Plan.
13. OTHER OPERATING INCOME
Other operating income includes the Brink's Group's share of net income in
unconsolidated affiliated companies which are carried on the equity method.
Amounts presented include the accounts of the following equity affiliates:
Ownership
At December 31, 1994
- --------------------------------------------------------------------------------
Servicio Pan Americano De Protecion, S.A. (Mexico) 20.0%
Brink's Panama, S.A. 49.0%
Brink's De Colombia S.A. 46.5%
Brink's S.A. (France) 38.0%
Brink's Schenker, GmbH (Germany) 50.0%
Brink's Securmark S.p.A. (Italy) 24.5%
Security Services (Brink's Jordan), W.L.L. 45.0%
Brink's-Allied Limited (Ireland) 50.0%
Brink's Ayra India Private Limited 40.0%
Brink's Pakistan (Pvt.) Limited 49.0%
Brink's Taiwan Limited 50.0%
Brink's (Thailand) Ltd. 40.0%
<PAGE>
The following table presents summarized financial information of these
companies.
1994 1993 1992
- --------------------------------------------------------------------------------
Revenues $ 784,699 688,637 673,671
Gross profit 147,468 140,402 126,831
Net income 22,661 24,739 32,284
The Company's share of net income $ 6,048 6,895 8,133
- --------------------------------------------------------------------------------
Current assets $ 149,367 171,286
Noncurrent assets 291,085 225,238
Current liabilities 135,824 149,482
Noncurrent liabilities 156,375 105,439
Net equity $ 148,253 141,603
Undistributed earnings of such companies approximated $39,673 at December 31,
1994.
14. SEGMENT INFORMATION
Operating revenues by geographic area are as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
United States $406,828 356,869 304,024
Brazil 70,492 43,974 35,135
Other foreign 179,673 170,110 175,664
- --------------------------------------------------------------------------------
$656,993 570,953 514,823
================================================================================
The following is derived from the business segment information in the Company's
consolidated financial statements as it relates to the Brink's Group. See Note
2, Related Party Transactions, for a description of the Company's policy for
corporate allocations.
<PAGE>
The Brink's Group's portion of the Company's operating profit is as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
United States $51,343 43,707 31,348
Brazil 3,162 1,413 (327)
Other foreign 17,637 16,288 15,784
- --------------------------------------------------------------------------------
Brink's Group's portion of the
Company's segment operating profit 72,142 61,408 46,805
Allocated general corporate expense (4,666) (4,757) (4,278)
Pension credit - - 3,257
- --------------------------------------------------------------------------------
Operating profit $67,476 56,651 45,784
================================================================================
The Brink's Group's portion of the Company's assets at year end is as follows:
As of December 31
1994 1993 1992
- --------------------------------------------------------------------------------
United States $203,364 173,416 153,376
Brazil 25,843 20,780 16,739
Other foreign 155,981 145,642 142,314
- --------------------------------------------------------------------------------
Brink's Group's portion of the
Company's assets 385,188 339,838 312,429
Brink's Group's portion of
corporate assets 24,503 23,208 23,284
Deferred tax reclass 17,196 14,877 11,302
- --------------------------------------------------------------------------------
Total assets $426,887 377,923 347,015
================================================================================
<PAGE>
Industry segment information is as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Revenues:
Brink's $547,046 481,904 444,018
BHS 109,947 89,049 70,805
- --------------------------------------------------------------------------------
Total revenues $656,993 570,953 514,823
================================================================================
Operating Profit:
Brink's (a) $ 39,710 35,008 30,354
BHS (b) 32,432 26,400 16,451
- --------------------------------------------------------------------------------
Segment operating profit 72,142 61,408 46,805
Allocated general corporate expense (4,666) (4,757) (4,278)
Pension credit - - 3,257
- --------------------------------------------------------------------------------
Total operating profit $ 67,476 56,651 45,784
================================================================================
(a) Includes equity in net income of unconsolidated foreign affiliates of
$6,048 in 1994, $6,895 in 1993 and $8,133 in 1992.
(b) As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security installations to more accurately
reflect subscriber installation costs. The effect of this change in
accounting principle was to increase operating profit $4,137 in 1994,
$4,051 in 1993 and $4,321 in 1992 (Note 4).
Capital Expenditures:
Brink's $ 23,963 22,209 22,461
BHS 34,071 26,409 22,855
Allocated general corporate 60 32 68
- --------------------------------------------------------------------------------
Total capital expenditures $ 58,094 48,650 45,384
================================================================================
Depreciation and Amortization:
Brink's $ 20,553 20,150 20,531
BHS 17,817 14,357 12,215
Allocated general corporate expense 93 89 99
- --------------------------------------------------------------------------------
Total depreciation and amortization $ 38,463 34,596 32,845
================================================================================
Assets at December 31:
Brink's 297,816 267,229 246,648
BHS 87,372 72,609 65,781
- --------------------------------------------------------------------------------
Identifiable assets 385,188 339,838 312,429
Allocated portion of the Company's
corporate assets 24,503 23,208 23,284
Deferred tax reclass 17,196 14,877 11,302
- --------------------------------------------------------------------------------
Total assets $426,887 377,923 347,015
================================================================================
<PAGE>
15. CONTINGENT LIABILITIES
Under the Coal Industry Retiree Health Benefit Act of 1992 (the "Act"), the
Company and its majority-owned subsidiaries at July 20, 1992, including the
Brink's Group included in these financial statements, are jointly and severally
liable with the Burlington Group and the Minerals Group for the costs of health
care coverage provided for by that Act. For a description of the Act and an
estimate of certain of such costs, see Note 13 to the Company's consolidated
financial statements. At this time, the Company expects the Minerals Group to
generate sufficient cash flow to discharge its obligations under the Act.
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the cleanup costs on an undiscounted basis using
existing technologies to be between $6,700 and $14,100 over a period of up to
five years. Management is unable to determine that any amount within that range
is a better estimate due to a variety of uncertainties, which include the extent
of the contamination at the site, the permitted technologies for remediation and
the regulatory standards by which the clean-up will be conducted. The clean-up
estimates have been modified in light of certain regulatory changes promulgated
in December 1994.
The Company commenced insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws have been found to control the
interpretation of the policies), and numerous other factual considerations which
support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
16. SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31, 1994, 1993 and 1992, cash payments for income
taxes, net of refunds received, were $19,277, $15,595 and $8,060, respectively.
For the six months ended June 30, 1995 and 1994 (unaudited), cash payments for
income taxes, net of refunds received were $10,501 and $10,770, respectively.
<PAGE>
For the years ended December 31, 1994, 1993 and 1992, cash payments for interest
were $2,502, $2,722 and $4,597, respectively. For the six months ended June 30,
1995 and 1994 (unaudited), cash payments for interest were $958 and $1,065,
respectively.
17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Tabulated below are certain data for each quarter of 1994 and 1993.
1st 2nd 3rd 4th
- ------------------------------------------------------------------------------
1994 Quarters:
Operating revenues $149,569 155,085 171,787 180,552
Gross profit 32,850 38,567 43,043 44,348
Net income $ 7,172 9,779 11,576 12,962
Proforma Financial Information:
Per Pittston Brink's Group
Common Share:
Net income $ .19 .26 .31 .34
1993 Quarters:
Operating revenues $132,872 139,886 145,629 152,566
Gross profit 30,718 33,402 34,699 38,180
Net income $ 5,749 8,177 8,513 9,211
Proforma Financial Information:
Per Pittston Brink's Group
Common Share:
Net income $ .16 .22 .23 .25
<PAGE>
PITTSTON BRINK'S GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The financial statements of the Pittston Brink's Group (the "Brink's Group")
include the balance sheets, results of operations and cash flows of Brink's,
Incorporated ("Brink's") and Brink's Home Security, Inc. ("BHS"), and a portion
of The Pittston Company's (the "Company") corporate assets and liabilities and
related transactions which are not separately identified with operations of a
specific segment.
Upon approval of the Brink's Stock Proposal (see "The Brink's Stock Proposal" in
the Proxy Statement), the capital structure of The Pittston Company (the
"Company") will be modified to include an additional class of common stock. The
outstanding shares of Pittston Services Group Common Stock ("Services Stock")
will be redesignated as Pittston Brink's Group Common Stock, par value $1.00 per
share ("Brink's Stock") and [ ] of one share of a new class of common stock
identified as Pittston Burlington Group Common Stock, par value $1.00 per share,
("Burlington Stock") will be distributed for each outstanding share of Services
Stock. Holders of Pittston Minerals Group Common Stock ("Minerals Stock") will
continue to be holders of such stock, which will continue to reflect the
performance of the Pittston Minerals Group (the "Minerals Group"). Brink's Stock
is intended to reflect the performance of the Pittston Brink's Group (the
"Brink's Group") and Burlington Stock is intended to reflect the performance of
the Pittston Burlington Group (the "Burlington Group"). This capital structure
has been reflected in these financial statements.
The Brink's Group's financial statements are prepared using the amounts included
in the Company's consolidated financial statements. Corporate allocations
reflected in these financial statements are determined based upon methods which
management believes to be an equitable allocation of such items. The accounting
policies applicable to the preparation of the Brink's Group's financial
statements may be modified or rescinded at the sole discretion of the Company's
Board of Directors (the "Board") without the approval of the shareholders,
although there is no intention to do so.
If the Brink's Stock Proposal is approved, the Company will provide to holders
of Brink's Stock separate financial statements, financial reviews, descriptions
of business and other relevant information for the Brink's Group in addition to
consolidated financial information of the Company. Notwithstanding the
attribution of assets and liabilities (including contingent liabilities) between
the Minerals Group, the Burlington Group and the Brink's Group for the purpose
of preparing their financial statements, this attribution and the change in the
capital structure of the Company as a result of the approval of the Brink's
Stock Proposal, will not result in any transfer of assets and liabilities of the
Company or any of its subsidiaries. Holders of Brink's Stock will be common
shareholders of the Company, which will continue to be responsible for all its
liabilities. Therefore, financial developments affecting the Minerals Group, the
Burlington Group or the Brink's Group that affect the Company's financial
condition could affect the results of operations and financial condition of each
of the Groups. Since financial developments within one group could affect other
groups, all shareholders of the Company could be adversely
<PAGE>
affected by an event directly impacting only one group. Accordingly, the
Company's consolidated financial statements must be read in connection with the
Brink's Group's financial statements.
The following discussion is a summary of the key factors management considers
necessary in reviewing the Brink's Group's results of operations, liquidity and
capital resources. This discussion should be read in conjunction with the
financial statements and related notes of the Company.
RESULTS OF OPERATIONS
- ---------------------
Net income for the Brink's Group for the first six months of 1995 was $21.5
million compared with $17.0 million in the first six months of 1994. Operating
profit totaled $33.5 million in the first six months of 1995 compared with $29.5
million in the first six months of 1994. Net income and operating profit were
positively impacted by improved results from both the Brink's and BHS
businesses. The 1995 first half was favorably impacted by lower nonoperating and
net interest expenses compared with the same period of the prior year. Revenues
for the first six months of 1995 increased $60.4 million or 20% compared with
the first six months of 1994, of which $51.7 million was from Brink's and $8.7
million was from BHS. Operating expenses and selling, general and administrative
expenses for the first six months of 1995 increased $54.3 million or 20% over
the same period in 1994, of which $48.5 million was from Brink's and $5.8
million from BHS.
Net income for the Brink's Group for 1994 was $41.5 million compared with $31.7
million for 1993. Operating profit for 1994 was $67.5 million compared with
$56.7 million in 1993. Each of the segments of the Brink's Group contributed to
the increase in operating profit for the current year compared with the prior
year. Revenues for 1994 increased $86.0 million compared with 1993, of which
$65.1 million was from Brink's and $20.9 million was from BHS. Operating
expenses and selling, general and administrative expenses for 1994 increased
$74.2 million, of which $59.5 million was from Brink's and $14.9 million was
from BHS.
In 1993, net income increased $7.7 million to $31.7 million from $24.0 million
in 1992. Operating profit for 1993 was $56.7 million compared with $45.8 million
in the prior year. Each of the segments in the Brink's Group contributed to the
increase in operating profit for 1993 compared with 1992. Net income and
operating profit in 1992 were positively impacted by a pension credit of $2.0
million and $3.3 million, respectively, relating to the amortization of the
unrecognized initial net pension asset at the date of adoption of Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions".
This credit was recognized over the estimated remaining average service life of
employees since the date of adoption, which expired at the end of 1992. Revenues
for 1993 increased $56.2 million compared with 1992, of which $37.9 million was
from Brink's and $18.3 million was from BHS. Operating expenses and selling,
general and administrative expenses for 1993 increased $40.5 million, of which
$31.7 million was from Brink's, $8.3 million was from BHS and $.5 million was
due to an increase in the allocation of corporate expenses.
<PAGE>
BRINK'S
The following is a table of selected financial data for Brink's on a comparative
basis:
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) June 30 Years Ended December 31
- --------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $303,634 251,948 547,046 481,904 444,018
Operating expenses 248,224 204,503 438,851 387,751 357,613
Selling, general and
administrative 38,964 34,200 74,398 66,044 64,454
- --------------------------------------------------------------------------------------------------------
Total costs and expenses 287,188 238,703 513,249 453,795 422,067
- --------------------------------------------------------------------------------------------------------
Other operating income 1,173 3,104 5,913 6,899 8,403
- --------------------------------------------------------------------------------------------------------
Operating profit $ 17,619 16,349 39,710 35,008 30,354
========================================================================================================
Depreciation and amortization $ 10,496 10,120 20,553 20,150 20,531
========================================================================================================
Cash capital expenditures $ 11,476 6,733 22,312 21,150 20,683
========================================================================================================
Revenues:
North America (United
States and Canada) $180,981 161,819 337,641 300,728 271,243
International
subsidiaries 122,653 90,129 209,405 181,176 172,775
- --------------------------------------------------------------------------------------------------------
Total revenues $303,634 251,948 547,046 481,904 444,018
========================================================================================================
Operating profit:
North America (United
States and Canada) $ 12,526 9,445 23,235 20,049 15,800
International
operations 5,093 6,904 16,475 14,959 14,554
- --------------------------------------------------------------------------------------------------------
Total operating profit $ 17,619 16,349 39,710 35,008 30,354
========================================================================================================
</TABLE>
Brink's operating profit increased $1.3 million to $17.6 million in the first
six months of 1995 from $16.3 million in the first six months of 1994, with an
increase in revenues of $51.7 million, partially offset by an increase in
operating expenses and selling, general and administrative expenses totaling
$48.5 million, and a decrease in other operating income of $1.9 million.
Revenue from North American (United States and Canada) operations increased 12%
to $181.0 million in the first half of 1995 from $161.8 million in the prior
year period. North American operating profit increased $3.1 million to $12.5
million from $9.4 million. The increase in operating profit was largely
attributable to increases in the armored car business which includes ATM
servicing and to a lesser extent to increases in the diamond and jewelry and
coin and currency processing businesses, partially offset by lower air courier
results.
<PAGE>
Revenue from international subsidiaries increased $32.5 million or 36% to $122.7
million, while operating profit from international subsidiaries and affiliates
decreased $1.8 million or 26% to $5.1 million in the first half of 1995. The
increase in revenue is primarily due to higher revenues in Brazil as well as the
favorable impact of foreign currency translation. The decline in operating
profit was primarily attributable to operations in Mexico, partially offset by
an increase reported in Brazil. Brink's share of its Mexican affiliate's results
was a $1.0 million loss in the first six months of 1995 compared to a $1.7
million profit reported in the same period of 1994. In the first six months of
1995, results from these operations were negatively impacted by the devaluation
of the peso, which occurred in December 1994, and the decline in general
economic conditions. Brink's Brazil reported an operating profit of $.9 million
in the first half of 1995 compared to $.1 million in the prior year period.
Operating profit of Brink's increased $4.7 million to $39.7 million in 1994 from
$35.0 million in 1993. An increase in revenues of $65.1 million was offset to a
large extent by increases in operating expenses and selling, general and
administrative expenses of $59.4 million and a decrease in other operating
income of $1.0 million.
The increase in operating profit in 1994 was largely due to North American
operations. Revenue from North American operations increased $36.9 million or
12% to $337.6 million and operating profit increased $3.2 million or 16% to
$23.2 million. Air courier, diamond and jewelry, armored car, automated teller
machine ("ATM") servicing and coin wrapping operations each contributed to the
increase in North American operating profit in 1994, while results for currency
processing operations remained comparable to the prior year.
In 1994, revenue from international subsidiaries increased $28.2 million or 16%
to $209.4 million, while operating earnings from international subsidiaries and
affiliates increased $1.5 million or 10% to $16.5 million compared to 1993. The
most significant improvements were recorded by operations in Brazil (100% owned)
and Israel (70% owned). Improvements were also recorded in the United Kingdom
(100% owned), Colombia (46% owned), Hong Kong (67% owned) and the Company's
international diamond and jewelry operations. Results for Holland (65% owned),
France (38% owned) and Chile (60% owned) declined from the prior year. Brazil's
operating profit for 1994 totaled $3.2 million compared with $1.4 million in
1993. Brazil's earnings in 1994 were augmented by the large volume of one-time
special shipments of the new Brazilian currency and to a lesser extent from
increased volume due to the growth of money in circulation. Results for Brazil
in 1994 also included price increases obtained during the year to defray the
substantially higher security costs made necessary by the dramatic increase in
attacks on the armored car industry in Brazil. Brink's share of the equity in
earnings from their Mexican affiliate (20% owned) of $2.8 million in 1994 was
comparable to the 1993 level. These results were impacted by the local economic
recession, and costs incurred to streamline the operation, including work force
reductions. Results in Mexico for 1994 were not significantly impacted by the
devaluation of the peso in late December 1994.
In 1993, Brink's operating profit increased $4.6 million to $35.0 million from
$30.4 million in 1992. Worldwide operating revenues increased 9% or $37.9
million to $481.9 million with increased operating expenses and
<PAGE>
selling, general and administrative expenses of $31.7 million and decreased
other operating income of $1.5 million.
A significant portion of the increase in revenues and operating profit in 1993
compared with 1992 was attributable to North American operations. Revenue from
North American operations increased $29.5 million or 11% to $300.7 million and
operating profit increased $4.2 million or 27% to $20.0 million. Increases in
ATM, armored car, air courier and coin wrapping results were partially offset by
a decrease in currency processing results.
Revenue from international subsidiaries increased $8.4 million or 5% to $181.2
million, while operating results for international subsidiaries and affiliates
for 1993 remained comparable to 1992 results. Increased earnings from operations
in Brazil were offset by decreased results from the U.K. operation and Brink's
equity affiliate in Mexico. Operations in Brazil reported a $1.4 million
operating profit in 1993 compared with a $.3 million operating loss in 1992.
Results in the U.K. were affected by competitive price pressures, recessionary
pressures and the cost of a labor settlement. Operations of Brink's equity
affiliate in Mexico were affected by a recessionary economy, competitive
pressures, losses from new business ventures and severance costs incurred in
streamlining the work force.
BHS
The following is a table of selected financial data for BHS on a comparative
basis:
<TABLE>
<CAPTION>
Six Months Ended
(Dollars in thousands) June 30 Years Ended December 31
- -------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 61,372 52,706 109,947 89,049 70,805
Operating expenses 32,664 28,734 59,334 46,203 40,262
Selling, general and
administrative 10,392 8,509 18,181 16,446 14,092
- -------------------------------------------------------------------------------------------------------
Total costs and
expenses 43,056 37,243 77,515 62,649 54,354
- -------------------------------------------------------------------------------------------------------
Operating profit $ 18,316 15,463 32,432 26,400 16,451
=======================================================================================================
Depreciation and
amortization $ 10,420 8,262 17,817 14,357 12,248
=======================================================================================================
Cash capital
expenditures $ 19,141 16,664 34,071 26,409 22,855
=======================================================================================================
Annualized service
revenues (a) $ 95,810 78,856 87,167 70,887 56,512
=======================================================================================================
Number of subscribers:
Beginning of period 318,029 259,551 259,551 216,639 180,069
Installations 38,362 37,977 75,203 59,733 51,309
Disconnects, net (9,851) (7,910) (16,725) (16,821) (14,739)
- -------------------------------------------------------------------------------------------------------
End of period 346,540 289,618 318,029 259,551 216,639
=======================================================================================================
</TABLE>
(a) Annualized service revenue is 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.
<PAGE>
Operating profit of BHS increased $2.8 million to $18.3 million in the first
half of 1995 from $15.5 million in the first half of 1994. The increase in
operating profit for the first six months of 1995 compared to the same period in
1994 reflected higher monitoring revenues due to an average subscriber base that
was approximately 20% higher than the same period in 1994, slightly offset by
higher account servicing and administrative costs. Net new subscribers totaled
approximately 28,500 in the first six months of 1995, compared with
approximately 30,000 in the first six months of 1994. Subscribers at June 30,
1995 totaled 346,540.
Operating profit of BHS aggregated $32.4 million in 1994 compared with $26.4
million in 1993 and $16.5 million in 1992. The $6.0 million increase in
operating profit in 1994 compared with 1993 reflects increased monitoring
revenues, partially offset by increased installation expenses and increased
overhead costs. The $9.9 million increase in operating profit in 1993 compared
with 1992 reflects increased monitoring revenues, partially offset by increases
in installation expenses and servicing and overhead costs.
The increased monitoring revenue in 1994 as in 1993 was largely attributable to
an expanding subscriber base. Although total costs, including installation
expenses, increased as a result of the expanding subscriber base, such growth
contributed to improved economies of scale and other cost efficiencies achieved
in servicing BHS's subscribers. At year-end 1994, BHS had approximately 318,000
subscribers, 47% more than the year-end 1992 subscriber base. New subscribers
totaled 75,200 in 1994 and 59,700 in 1993. As a result, BHS's average subscriber
base increased by 21% in 1994 and 20% in 1993 as compared with each prior year.
As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security installations to more accurately
reflect subscriber installation costs included as capitalized installation
costs, which added $4.1 million to operating profit in 1994 and 1993 and $4.3
million to operating profit in 1992. The additional costs not previously
capitalized consisted of costs for installation labor and related benefits for
supervisory, installation scheduling, equipment testing and other support
personnel (in the amount of $2.6 million in 1994 and 1993 and $2.3 million in
1992) and costs incurred in maintaining facilities and vehicles dedicated to the
installation process (in the amount of $1.5 million in 1994 and 1993 and $2.0
million in 1992). The increase in the amount capitalized, while adding to
current period profitability comparisons, defers recognition of expenses over
the estimated useful life of the installation. The additional subscriber
installation costs which are currently capitalized were expensed in prior years
for subscribers in those years. Because capitalized subscriber installation
costs for periods prior to January 1, 1992, were not adjusted for the change in
accounting principle, installation costs for subscribers in those years will
continue to be depreciated based on the lesser amounts capitalized in those
periods. Consequently, depreciation of capitalized subscriber installation costs
in the current year and until such capitalized costs prior to January 1, 1992,
are fully depreciated will be less than if such prior periods' capitalized costs
had been adjusted for the change in accounting. However, the Company believes
the effect on net income in 1994, 1993 and in 1992 was immaterial. While the
amounts of the costs incurred which are capitalized vary based on current market
and operating conditions, the types of such costs which are
<PAGE>
currently capitalized will not change. The change in the amount capitalized has
no additional effect on current or future cash flows or liquidity.
Foreign Operations
- ------------------
A portion of the Brink's Group's financial results is derived from activities in
several foreign countries, each with a local currency other than the U.S.
dollar. Because the financial results of the Brink's Group are reported in U.S.
dollars, they are affected by the changes in the value of the various foreign
currencies in relation to the U.S. dollar. The Brink's Group's international
activity is not concentrated in any single currency, which limits the risks of
foreign currency rate fluctuation. In addition, these rate fluctuations may
adversely affect transactions which are denominated in currencies other than the
functional currency. The Brink's Group routinely enters into such transactions
in the normal course of its business. Although the diversity of its foreign
operations limits the risks associated with such transactions, the Company, on
behalf of the Brink's Group, uses foreign currency forward contracts to hedge
the risk associated with certain transactions denominated in currencies other
than the functional currency. Realized and unrealized gains and losses on these
contracts are deferred and recognized as part of the specific transaction
hedged. In addition, cumulative translation adjustments relating to operations
in countries with highly inflationary economies are included in net income,
along with all transaction gains or losses for the period. A subsidiary in
Brazil operates in such a highly inflationary economy.
Additionally, the Brink's Group is subject to other risks customarily associated
with doing business in foreign countries, including economic conditions,
controls on repatriation of earnings and capital, nationalization, expropriation
and other forms of restrictive action by local governments. The future effects,
if any, of such risks on the Brink's Group cannot be predicted.
Corporate Expenses
- ------------------
A portion of the Company's corporate general and administrative expenses and
other shared services has been allocated to the Brink's Group based upon
utilization and other methods and criteria which management believes to be
equitable and a reasonable estimate of the cost attributable to the Brink's
Group. These allocations were $2.4 million in the first six months of 1995 and
1994, and $4.7 million, $4.8 million and $4.3 million in 1994, 1993 and 1992,
respectively.
Other Operating Income
- ----------------------
Other operating income decreased $1.9 million to $1.2 million in the first half
of 1995 from $3.1 million in the first half of 1994. Other operating income
decreased $1.0 million to $5.9 million in 1994 from $6.9 million in 1993 and
decreased $1.5 million in 1993 from $8.4 million in 1992. Other operating income
principally includes the equity earnings of foreign affiliates. These earnings,
which are attributable to equity affiliates of Brink's, amounted to $.8 million
and $3.4 million in the first six months of 1995 and 1994, respectively, and
$6.0 million, $6.9 million and $8.1 million 1994, 1993 and 1992, respectively.
The decrease in the first six months of 1995 compared with the same period a
year ago is due in large part to the $2.7 million decrease in Brink's share of
earnings from its affiliate in Mexico.
<PAGE>
Interest Expense
- ----------------
Interest expense for 1994 decreased $.3 million to $2.4 million from $2.7
million and in 1993 interest expense decreased $1.4 million from $4.1 million a
year earlier.
Other Income (Expense), Net
- ---------------------------
Other net expense improved by $1.0 million to a net expense of $1.2 million in
the first six months of 1995 from a net expense of $2.2 million in the first six
months of 1994. In 1994, other net expense decreased by $.9 million to a net
expense of $3.1 million in 1994 from $4.0 million in 1993. In 1993, other net
expense improved by $1.6 million from $5.6 million in 1992. Changes for the
comparable periods are largely due to fluctuations in foreign translation
losses.
Income Taxes
- ------------
In 1994 the provision for income taxes approximated the statutory federal income
tax rate of 35% primarily due to provisions for state income taxes and other
items, offset by lower taxes on foreign income. In 1993 and 1992, the provision
for income taxes exceeded the statutory federal income tax rate of 35% in 1993
and 34% in 1992 primarily because of provisions for state income taxes and other
items.
FINANCIAL CONDITION
A portion of the Company's corporate assets and liabilities has been attributed
to the Brink's Group based upon utilization of the shared services from which
assets and liabilities are generated, which management believes to be equitable
and a reasonable estimate of the cost attributable to the Brink's Group.
Corporate assets which were allocated to the Brink's Group consisted primarily
of pension assets and deferred income taxes and amounted to $41.6 million and
$38.1 million at December 31, 1994 and 1993, respectively.
Cash Flow Provided By Operating Activities
- ------------------------------------------
Cash provided by operating activities during the first six months of 1995
totaled $30.0 million compared with $26.1 million in the first six months of
1994. Increased net income and noncash charges were only partially offset by
increased requirements for working capital.
Cash provided by operating activities totaled $83.5 million in 1994, increasing
from $65.2 million in 1993. The net increase in 1994 compared with 1993 was
largely due to the increase in net income for the current year. Cash generated
from operations exceeded cash requirements for investing and financing
activities including $5.7 million loaned to the Minerals Group and, as a result,
cash and cash equivalents increased $3.2 million during 1994 to a year-end total
of $20.2 million.
Capital Expenditures
- --------------------
Cash capital expenditures for the first six months of 1995 totaled $30.7
million, of which $19.1 million was spent by BHS and $11.5 million was spent by
Brink's. Cash capital expenditures totaled $56.4 million in 1994. An additional
$16.4 million of expenditures were made for the year 1994 through capital and
operating leases. As in the first six months of 1995,
<PAGE>
a substantial portion of the Brink's Group's total cash capital expenditures in
1994 was attributable to BHS customer installations representing expansion of
the subscriber base. Of the total cash capital expenditures in 1994, $34.0
million or 60% related to these costs. Capital expenditures made by Brink's
during the first six months of 1995 as well as for the year 1994 were primarily
for replacement and maintenance of current ongoing business operations.
Cash capital expenditures for the first six months of 1995 and for the year 1994
were funded by cash flow from operating activities, with any shortfalls financed
through the Company by borrowings under its revolving credit agreements or
short-term borrowing arrangements, which were thereby attributed to the Brink's
Group.
Financing
- ---------
Gross capital expenditures in 1995 are currently expected to increase over 1994
levels. The increase is expected to result largely from expenditures at BHS
resulting from continued expansion of the subscriber base. The Brink's Group
intends to fund such expenditures through cash flow from operating activities or
through operating leases if the latter are financially attractive. Any
shortfalls will be financed through the Company's revolving credit agreements or
short-term borrowing arrangements or borrowings from the Burlington Group or the
Minerals Group.
In March 1994, the Company entered into a $350 million credit agreement with a
syndicate of banks (the "New Facility"), replacing the Company's previously
existing $250 million of revolving credit agreements. The New Facility includes
a $100 million term loan, which matures in May 2000. The New Facility also
permits additional borrowings, repayments and reborrowings of up to an aggregate
of $250 million until May 2000. At June 30, 1995 and December 31, 1994,
borrowings of $100 million were outstanding under the term loan portion of the
New Facility. Additional borrowings outstanding under the remainder of the
facility totaled $28.6 million and $9.4 million at June 30, 1995 and December
31, 1994, respectively. No portion of the total amount outstanding under the New
Facility at June 30, 1995 or at December 31, 1994 was attributed to the Brink's
Group.
Debt
- ----
Total debt outstanding for the Brink's Group amounted to $18.9 million at June
30, 1995 and $17.8 million at year-end 1994. At June 30, 1995 and December 31,
1994, no portion of such debt was payable to either the Burlington Group or the
Minerals Group. During 1994, cash generated from operations exceeded
requirements for investing activities and as a result, net debt repayments
totaled $10.1 million.
Related Party Transactions
- --------------------------
At June 30, 1995, the Minerals Group owed the Brink's Group $7.8 million, an
increase of $2.1 million from the $5.7 million owed at December 31, 1994.
At June 30, 1995, the Brink's Group owed the Minerals Group $18.7 million for
tax benefits, of which $7.0 million is expected to be paid within one year.
<PAGE>
Contingent Liabilities
- ----------------------
Under the Coal Industry Retiree Health Benefit Act of 1992 (the "Health Benefit
Act"), the Company and its majority-owned subsidiaries at July 20, 1992,
including the Brink's Group are jointly and severally liable with the Minerals
Group and the Burlington Group for the costs of health care coverage provided
for by that Act. For a description of the Health Benefit Act and a calculation
of certain of such costs, see Note 13 to the Company's consolidated financial
statements. At this time, the Company expects the Minerals Group to generate
sufficient cash flow to discharge its obligations under the Act.
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the cleanup costs on an undiscounted basis using
existing technologies to be between $6.7 million and $14.1 million over a period
of up to five years. Management is unable to determine that any amount within
that range is a better estimate due to a variety of uncertainties, which include
the extent of the contamination at the site, the permitted technologies for
remediation and the regulatory standards by which the cleanup will be conducted.
The cleanup estimates have been modified in light of certain regulatory changes
promulgated in December 1994.
The Company commenced insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws have been found to control the
interpretation of the policies), and numerous other factual considerations which
support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
Dividends
- ---------
The Board intends to declare and pay dividends on Brink's Stock based on the
earnings, financial condition, cash flow and business requirements of the
Brink's Group. Since the Company remains subject to Virginia law limitations on
dividends and to dividend restrictions in its public debt and bank credit
agreements, losses by the Minerals Group or the Burlington Group could affect
the Company's ability to pay dividends in respect of stock relating to the
Brink's Group.
In January 1994, the Company issued 161,000 shares or $80.5 million of a new
series of convertible preferred stock, which is convertible into Minerals Stock,
to finance a portion of a coal acquisition. While the issuance of the preferred
stock had no effect on the capitalization of the Brink's Group, annual
cumulative dividends of $31.25 per share of convertible preferred stock are
payable quarterly, in cash, out of all funds of the Company legally available
therefore, when, as and if declared by the Board, which commenced March 1, 1994.
Such stock also bears a liquidation preference of $500 per share plus an amount
equal to accrued and unpaid dividends thereon.
ANNEX VI
PITTSTON BURLINGTON GROUP
Description of Business
Pittston Burlington Group (the "Burlington Group") consists of the air freight
and logistics management services of Burlington Air Express Inc. ("Burlington"),
a wholly owned subsidiary of The Pittston Company ("Pittston" or the "Company").
Activities relating to the air freight and logistics management services
business are carried on by Burlington. The information set forth herein is as of
June 30, 1995 except where an earlier or later date is expressly stated.
BURLINGTON
General
- -------
Burlington is primarily engaged in North American overnight and international
time definite air and sea transportation, freight forwarding and logistics
management services and international customs brokerage. In conducting its
forwarding business, Burlington generally picks up or receives freight shipments
from its customers, consolidates the freight of various customers into shipments
for common destinations, arranges for the transportation of the consolidated
freight to such destinations (using either commercial carriers or, in the case
of most of its domestic and Canadian shipments, its own aircraft fleet and hub
sorting facility) and, at the destinations, distributes the consolidated
shipments and effects delivery to consignees. In international shipments,
Burlington also frequently acts as customs broker facilitating the clearance of
goods through customs at international points of entry. Burlington provides
transportation customers with logistics services and operates warehouse and
distribution facilities in several countries.
Burlington specializes in highly customized global freight forwarding and
logistics services. It has concentrated on providing service to customers with
significant logistics needs, such as manufacturers of computer and electronics
equipment. Burlington offers its customers a variety of service and pricing
alternatives for their shipments, such as overnight delivery, second-day
delivery or deferred service in North America. Internationally, Burlington
offers a similar variety of services with ocean, door-to-door delivery and
standard and expedited air freight services. Worldwide, a variety of ancillary
services, such as, shipment tracking, inventory control and management reports
are also provided.
Burlington provides air freight service to all major United States cities as
well as most foreign countries through its network of company-operated stations
and agent locations in 117 countries. Burlington markets its services primarily
through its direct sales force and also employs other marketing methods,
including print media advertising and direct mail campaigns. The pickup and
delivery of freight are accomplished principally by independent contractors.
Burlington's computer system, ARGUS+(Copyright), is a satellite-based, worldwide
communications system which, among other things, provides continuous worldwide
tracking and tracing of shipments and various data for management information
reports, enabling customers to improve efficiency and control costs. Burlington
also utilizes an image processing system to centralize airbill and related
document storage in Burlington's computer for automated retrieval by any
Burlington office. Burlington is in the process of developing a positive
tracking system that will utilize bar code technology and hand-held scanners.
Burlington's air freight business has tended to be seasonal, with a
significantly higher volume of shipments generally experienced during March,
June and the period August through November than during the other periods of the
year. The lowest volume of shipments has generally occurred in January and
February.
<PAGE>
Aircraft Operations
- -------------------
Burlington utilizes a fleet of 34 leased aircraft providing regularly scheduled
service throughout the United States and certain destinations in Canada from its
freight sorting hub in Toledo, Ohio. Burlington's fleet is also used for
charters and to serve other international markets from time to time. The fleet
and hub are primarily dedicated to providing reliable next-day service for
domestic and Canadian air cargo customers. At December 31, 1994, Burlington
utilized 15 DC8's (including ten DC8-71 aircraft) and two B727's under leases
for terms expiring between 1995 and 1999. Seventeen additional cargo aircraft
including two DC8-71 and six B727-200 aircraft were under lease at December 31,
1994, for terms of less than two years. Based on the current state of the
aircraft leasing market, Burlington believes that it should be able to renew
these leases or enter into new leases on terms reasonably comparable to those
currently in effect. Pittston has guaranteed Burlington's obligations under
certain of these leases covering six aircraft. The actual operation and routine
maintenance of the aircraft leased by Burlington is contracted out, normally for
two- to three-year terms, to federally certificated operators which supply the
pilots and other flight services.
The nightly lift capacity in operation at December 31, 1994, was approximately
2.4 million pounds, calculated on an average freight density of 7.5 pounds per
cubic foot. Burlington's nightly lift capacity varies depending upon the number
and type of planes operated by Burlington at any particular time. Including
trucking capacity available to Burlington, the aggregate cargo capacity through
the hub at December 31, 1994, was approximately 3.3 million pounds.
Under its aircraft leases, Burlington is generally responsible for all the costs
of operating and maintaining the aircraft, including any special maintenance or
modifications which may be required by Federal Aviation Administration ("FAA")
regulations or orders. See "Government Regulation" below. In 1994, Burlington
spent approximately $15 million on routine heavy maintenance of its aircraft
fleet. Burlington has made provision in its financial statements for the
expected costs associated with aircraft operations and maintenance which it
believes to be adequate; however, unanticipated maintenance costs or required
aircraft modifications could adversely affect Burlington's profitability.
The average airframe age of the fleet leased by Burlington under leases with
terms longer than two years is 28 years, although factors other than age, such
as cycles (i.e., numbers of takeoffs and landings) can have a significant impact
on an aircraft's serviceability. Generally, cargo aircraft tend to have fewer
cycles than passenger aircraft over comparable time periods because they have
fewer flights per day and longer flight segments.
Fuel costs are a significant element of the total costs of operating
Burlington's aircraft fleet. For each one cent per gallon increase or decrease
in the price of jet fuel, Burlington's airline operating costs may increase or
decrease approximately $60,000 per month. In order to protect against price
increases in jet fuel, from time to time Burlington enters into hedging and
other agreements, including swap contracts and options.
Fuel prices are subject to the world, as well as local, market conditions. It is
not possible to predict the impact of future conditions on fuel prices and fuel
availability. Competition in the airfreight industry is such that no assurance
can be given that any future increases in fuel costs (including taxes relating
thereto) will be recoverable in whole or in part from customers.
Burlington has a lease expiring in October 2013 with the Toledo-Lucas County
Port Authority covering its freight sorting hub and related facilities (the
"Hub") at Toledo Express Airport in Ohio. The Hub consists of various
facilities, including a
<PAGE>
technologically advanced material handling system which is capable of sorting
approximately one million pounds of freight per hour.
Customers
- ---------
Burlington's domestic and foreign customer base includes thousands of industrial
and commercial shippers, both large and small. Burlington's customer base
includes major companies in the automotive, computer, electronics, fashion,
pharmaceutical and other industries where rapid delivery of high-value products
is required. In 1994, Burlington's largest single customer accounted for less
than 3% of its total worldwide revenues. Burlington does not have long-term,
noncancellable contracts with any of its customers.
Competition
- -----------
The air and sea freight forwarding and logistics industry has been and is
expected to remain highly competitive. The principal competitive factors in both
domestic and international markets are price, the ability to provide
consistently fast and reliable delivery of shipments and the ability to provide
ancillary services such as warehousing, distribution, shipment tracking and
sophisticated information systems and reports. There is aggressive price
competition in the domestic air freight market, particularly for the business of
high volume shippers. Burlington competes with other integrated air freight
companies that operate their own aircraft, as well as with air freight
forwarders, express delivery services, passenger airlines and other
transportation companies. Domestically, Burlington also competes with package
delivery services provided by ground transportation companies, including
trucking firms and surface freight forwarders, which offer specialized overnight
services within limited geographical areas. As a freight forwarder to, from and
within international markets, Burlington also competes with government-owned or
subsidized passenger airlines and ocean shipping companies. In logistics
services, Burlington competes with many third party logistics providers.
Government Regulation
- ---------------------
The air transportation industry is subject to Federal regulation under the
Federal Aviation Act of 1958, as amended, and pursuant to that statute, the
Department of Transportation ("DOT") may exercise regulatory authority over
Burlington. Although Burlington itself is exempt from most DOT economic
regulations because it is an air freight forwarder, the operation of its
aircraft is subject directly or indirectly to FAA airworthiness directives and
other safety regulations and its Toledo, Ohio, hub operations are directly
affected by the FAA.
Federal statutes authorize the FAA, with the assistance of the Environmental
Protection Agency ("EPA"), to establish aircraft noise standards. Under the
National Emissions Standards Act of 1967, as amended by the Clean Air Act
Amendments of 1970, and the Airport Noise and Capacity Act of 1990 (the "Noise
Act"), the administrator of the EPA is authorized to issue regulations setting
forth standards for aircraft emissions. Although the Federal government
generally regulates aircraft noise, local airport operators may, under certain
circumstances, regulate airport operations based on aircraft noise
considerations. If airport operators were to restrict arrivals or departures
during certain nighttime hours to reduce or eliminate air traffic noise for
surrounding home areas at airports where Burlington's activities are centered,
Burlington would be required to serve those airports with Stage III equipment.
The Noise Act requires that aircraft not complying with Stage III noise limits
be phased out by December 31, 1999. The Secretary of Transportation may grant a
waiver if it is in the public interest and if the carrier has at least 85% of
its aircraft in compliance with Stage III noise levels by July 1, 1999, and has
a plan with firm orders to make all of its aircraft comply with such noise
levels not later than December 31, 2003. No waiver may permit the operation of
Stage II aircraft in the United States after December 31, 2003.
<PAGE>
The Noise Act requires the FAA to promulgate regulations setting forth a
schedule for the gradual phase-out of Stage II aircraft. The FAA has adopted
rules requiring each "U.S. operator" to reduce the number of its Stage II
aircraft by 25% by the end of 1994, by 50% by the end of 1996, and by 75% by the
end of 1998.
The Noise Act imposes certain conditions and limitations on an airport's right
to impose new noise or access restrictions on Stage II and Stage III aircraft
but exempts present and certain proposed regulations from those requirements.
Twelve of the 17 aircraft in Burlington's fleet held under longer term leases
now comply with the Stage III limits. Through 1999, Burlington anticipates
either modifying or hush-kitting two DC8-63 aircraft which currently do not
comply with Stage III limits, leasing additional aircraft that do not meet
Stage III limits and hush-kitting such planes as required, or acquiring aircraft
that meet Stage III noise standards. Burlington projects that the cost of
modifying or hush-kitting the remaining aircraft with remaining lease terms of
more than two years in its fleet would range from $5 million to $10 million in
the aggregate. In the event that additional expenditures would be required or
costs were to be incurred at a rate faster than expected, Burlington could be
adversely affected. Ten of the DC8 cargo aircraft leased by Burlington have been
re-engined with CFM 56-2C1 engines which comply with Stage III noise standards.
Ground transportation and logistics services provided by Burlington are
generally exempt from regulation by the Interstate Commerce Commission.
Burlington, however, is subject to various other requirements and regulations in
connection with the operation of its motor vehicles, including certain safety
regulations promulgated by DOT and state agencies.
International Operations
- ------------------------
Burlington's international operations accounted for approximately 53% of its
revenues in 1994. Included in international operations are export shipments from
the United States.
Burlington is continuing to develop import/export and logistics business between
shippers and consignees in countries other than the United States. Burlington
currently serves most foreign countries, 117 of which are served by Burlington's
network of company-operated stations and agent locations. Burlington has agents
and sales representatives in many overseas locations, although such agents and
representatives are not subject to long-term, noncancellable contracts.
A significant portion of Burlington's financial results is derived from
activities in several foreign countries, each with a local currency other than
the U.S. dollar. Because the financial results of Burlington are reported in
U.S. dollars, they are affected by the changes in the value of the various
foreign currencies in relation to the U.S. dollar. Burlington's international
activity is not concentrated in any single currency, which limits the risks of
foreign rate fluctuation. In addition, foreign currency rate fluctuations may
adversely affect transactions which are denominated in currencies other than the
functional currency. Burlington routinely enters into such transactions in the
normal course of its business. Although the diversity of its foreign operations
limits the risks associated with such transactions, Burlington uses foreign
exchange forward contracts to hedge the risk associated with certain
transactions denominated in currencies other than the functional currency. In
addition, Burlington is subject to the risks customarily attendant upon
operations owned by United States companies in countries outside the United
States, including local economic conditions, controls on repatriation of
earnings and capital, nationalization, expropriation and other forms of
restrictive action by local governments. The future effects of such risks on
Burlington cannot be predicted.
<PAGE>
Employee Relations
- ------------------
Burlington and its subsidiaries have approximately 6,500 employees worldwide, of
whom about 1,400 are classified as part-time. Approximately 200 of these
employees (principally customer service, clerical and/or dock workers) in
Burlington's stations at John F. Kennedy Airport, New York; Newark, New Jersey;
Secaucus, New Jersey; Minneapolis, Minnesota; and Toronto, Canada are
represented by labor unions, which in most cases are affiliated with the
International Brotherhood of Teamsters. The collective bargaining agreements
covering such employees expire at various times in 1995 and 1996. Burlington has
not experienced any significant strike or work stoppage in 1995 to date and
considers its employee relations satisfactory.
Substantially all of Burlington's cartage operations are conducted by
independent contractors, and the flight crews for its aircraft are employees of
the independent airline companies which operate such aircraft.
Properties
- ----------
Burlington operates 258 (112 domestic and 146 international) stations with
Burlington personnel, and has agency agreements at an additional 230 (57
domestic and 173 international) stations. These stations are located near
primary shipping areas, generally at or near airports. Burlington-operated
stations, which generally include office space and warehousing facilities, are
located in 47 states and Puerto Rico. Burlington-operated facilities are located
in 26 countries. Most stations serve not only the city in which they are
located, but also nearby cities and towns. Nearly all Burlington-operated
stations are held under lease. The Hub in Toledo, Ohio, is held under a lease
expiring in 2013, with rights of renewal for three five-year periods. Other
facilities, including the corporate headquarters in Irvine, California, are held
under leases having terms of one to ten years.
Burlington owns or leases, in the United States and Canada, a fleet of
approximately 220 automobiles as well as 170 vans and trucks utilized in station
work or for hauling freight between airport facilities and Burlington's
stations.
THE PITTSTON COMPANY AND SUBSIDIARIES
MATTERS RELATED TO FORMER OPERATIONS
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement the
Company is obligated to pay for 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the clean up costs, on an undiscounted basis, using
existing technologies to be between $6.7 million and $14.1 million over a period
of up to five years. Management is unable to determine that any amount within
that range is a better estimate due to a variety of uncertainties, which include
the extent of the contamination at the site, the permitted technologies for
remediation and the regulatory standards by which the clean up will be
conducted. The clean up estimates have been modified in light of certain
regulatory changes promulgated in December 1994.
The Company commenced an insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies
<PAGE>
which were broadly designed to cover such contingent liabilities, the favorable
state of the law in the State of New Jersey (whose laws were held by the court
to control the interpretation of the policies), and numerous other factual
considerations which support the Company's analysis of the insurance contracts
and rebut the underwriters' defenses. Accordingly, there is no net liability in
regard to the Tankport obligation.
<PAGE>
ANNEX VII
PITTSTON BURLINGTON GROUP
INDEX TO FINANCIAL INFORMATION
If the Brink's Stock Proposal is approved, The Pittston Company (the "Company")
will provide to holders of Pittston Burlington Common Stock ("Burlington Stock")
separate financial statements, financial review, descriptions of business and
other relevant information for the Pittston Burlington Group (the "Burlington
Group"). Notwithstanding the attribution of assets and liabilities (including
contingent liabilities) among the Pittston Minerals Group (the "Minerals
Group"), the Pittston Brink's Group (the "Brink's Group") and the Burlington
Group for the purpose of preparing their respective historical and future
financial statements, this attribution and the change in the capital structure
of the Company contemplated by the Brink's Stock Proposal will not affect legal
title to such assets or responsibility for such liabilities for the Company or
any of its subsidiaries. Holders of Burlington Stock will be common shareholders
of the Company, which will continue to be responsible for all of its
liabilities. Financial impacts arising from one group that affect the Company's
financial condition could affect the results of operations and financial
condition of each of the groups. Accordingly, the Company's consolidated
financial statements must be read in connection with the Burlington Group's
financial statements.
Under the Brink's Stock Proposal, dividends to be paid to holders of Burlington
Stock will be limited to funds of the Company legally available for the payment
of dividends. Amounts available for dividends may be further limited by
covenants in the Company's public debt indentures and bank credit agreements.
See the Company's consolidated financial statements and related footnotes set
forth in Annex IX. Subject to these limitations, the Company's Board of
Directors (the "Board"), although there is no requirement to do so, intends to
declare and pay dividends on the Burlington Stock based primarily on the
earnings, financial condition, cash flow and business requirements of the
Burlington Group.
The accounting policies applicable to the preparation of the financial
statements of the Burlington Group may be modified or rescinded at the sole
discretion of the Board without approval of shareholders, although there is no
intention to do so.
Page
Financial Statements:
Independent Auditors' Report ....................................... 1
Balance Sheets ..................................................... 2
Statements of Operations ........................................... 3
Statements of Cash Flows ........................................... 4
Notes to Financial Statements ...................................... 5
Management's Discussion and Analysis of
Results of Operations and Financial Condition ...................... 27
<PAGE>
PITTSTON BURLINGTON GROUP
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Pittston Company
We have audited the accompanying balance sheets of Pittston Burlington Group (as
described in Note 1) as of December 31, 1994 and 1993, and the related
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1994. These financial statements are the
responsibility of The Pittston Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements of Pittston Burlington Group present
fairly, in all material respects, the financial position of Pittston Burlington
Group as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the years in the three- year period ended December
31, 1994, in conformity with generally accepted accounting principles.
As more fully discussed in Note 1, the financial statements of Pittston
Burlington Group should be read in connection with the audited consolidated
financial statements of The Pittston Company and subsidiaries.
KPMG Peat Marwick LLP
Stamford, Connecticut
September 29, 1995
<PAGE>
PITTSTON BURLINGTON GROUP
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
(Dollars in thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 16,811 18,384 13,255
Accounts receivable:
Trade 198,583 180,024 139,622
Other 12,232 8,791 6,637
- ---------------------------------------------------------------------------------------------------------------
210,815 188,815 146,259
Less estimated amount uncollectible 10,899 10,475 9,949
- ---------------------------------------------------------------------------------------------------------------
199,916 178,340 136,310
Receivable - Pittston Minerals Group (Note 2) 20,556 31,465 -
Inventories 1,961 2,035 1,793
Prepaid expenses 14,961 9,290 12,912
Deferred income taxes (Note 7) 11,295 11,655 11,473
- ---------------------------------------------------------------------------------------------------------------
Total current assets 265,500 251,169 175,743
Property, plant and equipment, at cost (Note 4) 116,036 95,053 79,457
Less accumulated depreciation and amortization 53,407 50,611 48,357
- ---------------------------------------------------------------------------------------------------------------
62,629 44,442 31,100
Intangibles, net of amortization (Notes 5 and 10) 183,236 180,686 186,332
Deferred pension assets (Note 12) 10,693 10,655 10,667
Deferred income taxes (Note 7) 11,209 9,050 3,488
Other assets 18,356 25,514 24,906
- ---------------------------------------------------------------------------------------------------------------
Total assets $ 551,623 521,516 432,236
===============================================================================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Short-term borrowings $ 18,257 8,779 3,611
Current maturities of long-term debt (Note 8) 1,744 938 568
Accounts payable 157,197 149,290 107,982
Payable - Pittston Minerals Group (Note 2) - - 17,098
Accrued liabilities:
Taxes 4,154 10,389 9,875
Workers' compensation and other claims 3,473 4,185 4,076
Miscellaneous 47,671 44,944 29,131
- ---------------------------------------------------------------------------------------------------------------
55,298 59,518 43,082
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 232,496 218,525 172,341
Long-term debt, less current maturities (Note 8) 49,689 41,906 45,460
Postretirement benefits other than pensions (Note 12) 2,563 2,481 1,573
Deferred income taxes (Note 7) 1,398 1,572 1,174
Payable - Pittston Minerals Group (Note 2) 6,535 10,436 4,488
Other liabilities 6,314 5,716 4,050
Commitments and contingent liabilities (Notes 8, 11, and 14)
Shareholder's equity (Note 3) 252,628 240,880 203,150
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 551,623 521,516 432,236
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PITTSTON BURLINGTON GROUP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands, except Six Months Ended June 30 Year Ended December 31
per share amounts) 1995 1994 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating revenue $665,894 563,750 1,215,284 998,079 900,347
- ----------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Operating expenses 589,237 482,942 1,043,895 865,587 789,354
Selling, general and administrative
expenses 57,953 54,856 110,036 102,089 102,091
Pension credit (Note 12) - - - - (790)
- ----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 647,190 537,798 1,153,931 967,676 890,655
- ----------------------------------------------------------------------------------------------------------------------------------
Other operating income 1,369 1,473 3,206 2,811 1,938
- ----------------------------------------------------------------------------------------------------------------------------------
Operating profit 20,073 27,425 64,559 33,214 11,630
Interest income 1,988 557 2,127 901 788
Interest expense (Note 2) (2,223) (2,093) (3,847) (6,103) (3,479)
Other income (expense), net (524) (1,416) (1,629) (97) (359)
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 19,314 24,473 61,210 27,915 8,580
Provision for income taxes (Note 7) 7,256 9,625 22,854 12,439 5,256
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 12,058 14,848 38,356 15,476 3,324
==================================================================================================================================
Proforma Financial Information (unaudited)(Note 1):
Net income per common share $ .64 .79 2.03 .84 .18
==================================================================================================================================
Average common shares outstanding 18,956 18,858 18,892 18,454 18,541
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PITTSTON BURLINGTON GROUP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
(In thousands) 1995 1994 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,058 14,848 38,356 15,476 3,324
Adjustments to reconcile net income to net
cash provided by operating activities:
Noncash charges and other write-offs - 306 306 - 16
Depreciation and amortization 9,754 8,289 17,319 15,378 14,484
Provision for aircraft heavy maintenance 12,412 13,069 26,598 20,962 25,819
Provision (credit) for deferred income taxes (1,917) 311 (5,256) (1,337) (2,198)
Provision (credit) for pensions, noncurrent 80 777 203 290 (440)
Provision for uncollectible accounts receivable 867 1,445 3,054 2,949 2,016
Equity in earnings of unconsolidated affiliates,
net of dividends received (57) (66) (118) (115) -
Loss (gain) on sale of property, plant and equipment 28 36 39 (234) 66
Other operating, net 341 215 343 278 237
Change in operating assets and liabilities, net
of effects of acquisitions and dispositions:
Increase in accounts receivable (22,443) (18,790) (45,084) (9,986) (20,021)
(Increase) decrease in inventories 74 (458) (242) (361) 299
(Increase) decrease in prepaid expenses (5,586) 1,003 1,575 (2,610) 692
Increase in accounts payable and accrued liabilities (1,651) 28,996 64,615 10,104 13,178
Decrease (increase) in other assets (648) (154) 272 (4,921) 558
Increase (decrease) in other liabilities 331 791 1,000 (75) 202
Other, net (110) 594 860 (515) (1,544)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,533 51,212 103,840 45,283 36,688
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (13,607) (11,060) (24,005) (28,362) (6,691)
Proceeds from disposal of property, plant and equipment (124) 1,018 1,467 972 592
Aircraft heavy maintenance expenditures (7,217) (7,170) (15,333) (19,148) (17,870)
Acquisitions, net of cash acquired, and related
contingency payments (1,688) (63) (5,938) (736) (333)
Other, net 2,075 3,624 3,775 (23) 896
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (20,561) (13,651) (40,034) (47,297) (23,406)
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 11,598 24,463 31,790 - 27,560
Reductions of debt (1,376) (30,180) (30,482) (23,894) (734)
Payments from (to) - Minerals Group 7,909 (26,155) (55,731) 13,266 -
Attributed equity transactions:
Repurchase of common stock (919) (843) (2,042) (304) (3,582)
Proceeds from exercise of stock options 425 1,239 1,837 4,001 405
Proceeds from sale of stock to Savings
Investment Plan - - - 73 -
Proceeds from sale of stock to Minerals Group - 106 106 42 -
Dividends paid (2,182) (2,072) (4,154) (3,880) (3,088)
Cost of Services Stock Proposal - (1) (1) (782) -
Net cash from (to) the Company - - - 6,937 (35,524)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provide (used) by financing activities 15,455 (33,443) (58,677) (4,541) (14,963)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,573) 4,118 5,129 (6,555) (1,681)
Cash and cash equivalents at beginning of period 18,384 13,255 13,255 19,810 21,491
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 16,811 17,373 18,384 13,255 19,810
================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PITTSTON BURLINGTON GROUP
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
Upon approval of the Brink's Stock Proposal (see "The Brink's Stock Proposal" in
the Proxy Statement), the capital structure of The Pittston Company (the
"Company") will be modified to include an additional class of common stock. The
outstanding shares of Pittston Services Group Common Stock ("Services Stock")
will be redesignated as Pittston Brink's Group Common Stock, par value $1.00 per
share ("Brink's Stock"), and one-half of one share of a new class of common
stock identified as Pittston Burlington Group Common Stock, par value $1.00 per
share, ("Burlington Stock") will be distributed for each outstanding share of
Services Stock. Holders of Pittston Minerals Group Common Stock ("Minerals
Stock") will continue to be holders of such stock, which will continue to
reflect the performance of the Pittston Minerals Group (the "Minerals Group").
Brink's Stock is intended to reflect the performance of the Pittston Brink's
Group (the "Brink's Group") and Burlington Stock is intended to reflect the
performance of the Pittston Burlington Group (the "Burlington Group").
The financial statements of the Burlington Group include the balance sheets, the
results of operations and cash flows of the Burlington Air Express Inc.
("Burlington") operations of the Company, and a portion of the Company's
corporate assets and liabilities and related transactions which are not
separately identified with operations of a specific segment. The Burlington
Group's financial statements are prepared using the amounts included in the
Company's consolidated financial statements. Corporate allocations reflected in
these financial statements are determined based upon methods which management
believes to be a reasonable and equitable allocation of such items (see Note 2).
These financial statements also present the following proforma information
assuming completion of the Brink's Stock Proposal transaction:
* For the purpose of computing net income per common share of Burlington
Stock, the number of shares of Burlington Stock are assumed to be one-half
of the total number of shares of Services Stock. Net income per common
share is computed by dividing net income by the weighted average number of
common shares outstanding during the period. The potential dilution from
the exercise of stock options is not material. The potential dilution from
the assumed conversion of the 9.20% convertible subordinated debentures in
1993 and 1992 was not included since its effect was antidilutive. The
shares of Burlington Stock assumed to be held in The Pittston Company
Employee Benefits Trust are evaluated for inclusion in the calculation of
net income per share under the treasury stock method and had no dilutive
effect.
* All financial impacts of purchases and issuances of Services Stock have
been attributed to each Group in relation of their respective common equity
to the Services Group common stock. Dividends paid by the Company were
attributed to the Brink's and Burlington Groups in relation to the initial
dividends to be paid on the Brink's Stock and the Burlington Stock.
<PAGE>
If the Brink's Stock Proposal is approved, the Company will provide to holders
of Burlington Stock separate financial statements, financial review,
descriptions of business and other relevant information for the Burlington
Group. Notwithstanding the attribution of assets and liabilities (including
contingent liabilities) among the Minerals Group, the Brink's Group and the
Burlington Group for the purpose of preparing their respective historical and
future financial statements, this attribution and the change in the capital
structure of the Company contemplated by the Brink's Stock Proposal will not
affect legal title to such assets or responsibility for such liabilities for the
Company or any of its subsidiaries. Holders of Burlington Stock will be common
shareholders of the Company, which will continue to be responsible for all of
its liabilities. Financial impacts arising from one group that affect the
Company's financial condition could affect the results of operations and
financial condition of each of the groups. Since financial developments within
one group could affect other groups, all shareholders of the Company could be
adversely affected by an event directly impacting only one group. Accordingly,
the Company's consolidated financial statements must be read in connection with
the Burlington Group's financial statements.
Under the Brink's Stock Proposal, dividends to be paid to holders of Burlington
Stock will be limited to funds of the Company legally available for the payment
of dividends. Amounts available for dividends may be further limited by
covenants in the Company's public debt indentures and bank credit agreements.
See the Company's consolidated financial statements and related footnotes set
forth in Annex IX. Subject to these limitations, the Company's Board of
Directors (the "Board"), although there is no requirement to do so, intends to
declare and pay dividends on the Burlington Stock based primarily on the
earnings, financial condition, cash flow and business requirements of the
Burlington Group.
The accounting policies applicable to the preparation of the financial
statements of the Burlington Group may be modified or rescinded at the sole
discretion of the Board without approval of shareholders, although there is no
intention to do so.
The Brink's Stock Proposal will permit the Company, at any time, to exchange
each outstanding share of Burlington Stock for shares of Brink's Stock (or, if
no Brink's Stock is then outstanding, Minerals Stock) having a fair market value
equal to 115% of the fair market value of one share of Burlington Stock. In
addition, upon the disposition of all or substantially all of the properties and
assets of the Burlington Group to any person (with certain exceptions), the
Company will be required to exchange each outstanding share of Burlington Stock
for shares of Brink's Stock (or, if no Brink's Stock is then outstanding,
Minerals Stock) having a fair market value equal to 115% of the fair market
value of one share of Burlington Stock.
The Brink's Stock Proposal will also permit the Company, at any time, to
exchange each outstanding share of Minerals Stock, which was previously subject
to exchange for shares of Services Stock, for shares of Brink's
<PAGE>
Stock (or, if no Brink's Stock is then outstanding, Burlington Stock) having a
fair market value equal to 115% of the fair market value of one share of
Minerals Stock. In addition, upon the disposition of all or substantially all of
the properties and assets of the Minerals Group to any person (with certain
exceptions), the Company will be required to exchange each outstanding share of
Minerals Stock for shares of Brink's Stock (or, if no Brink's Stock is then
outstanding, Burlington Stock) having a fair market value equal to 115% of the
fair market value of one share of Burlington Stock. If any shares of the
Company's Preferred Stock are converted after an exchange of Minerals Stock for
Brink's Stock (or Burlington Stock), the holder of such Preferred Stock would,
upon conversion, receive shares of Brink's Stock (or Burlington Stock) in lieu
of shares of Minerals Stock otherwise issuable upon such conversion.
Shares of Brink's Stock are not subject to either optional or mandatory
exchange. The net proceeds of any disposition of properties and assets of the
Brink's Group will be attributed to the Brink's Group. In the case of a
disposition of all or substantially all the properties and assets of any other
group, the net proceeds will be attributed to the group the shares of which have
been issued in exchange for shares of the selling group.
The Brink's Stock Proposal provides that holders of Brink's Stock will at all
times have one vote per share, and initially holders of Burlington Stock and
Minerals Stock will have one and 1.4 votes per share, respectively. The votes of
holders of Burlington Stock and Minerals Stock will be subject to adjustment on
January 1, 1996, and on each January 1 every two years thereafter in such a
manner so that each class' share of the aggregate voting power at such time will
be equal to that class' share of the Company's aggregate market capitalization
at such time. Accordingly, on each adjustment date, each share of Burlington
Stock and Minerals Stock may have more than, less than or continue to have the
number of votes per share as they initially will have following the consummation
of the transaction. However, the aggregate voting power of the Minerals Stock is
expected to decrease on January 1, 1996 (the first adjustment date) based on the
current market value of Minerals Stock relative to the current market value of
Services Stock. Holders of Brink's Stock, Burlington Stock and Minerals Stock
will vote together as a single voting group on all matters as to which all
common shareholders are entitled to vote. In addition, as prescribed by Virginia
law, certain amendments to the Articles of Incorporation affecting, among other
things, the designation, rights, preferences or limitations of one class of
common stock, or certain mergers or statutory share exchanges, must be approved
by the holders of such class of common stock, voting as a group, and, in certain
circumstances, may also have to be approved by the holders of the other classes
of common stock, voting as separate voting groups. The voting rights of the
Preferred Stock are not affected by the Brink's Stock Proposal.
Under the Brink's Stock Proposal, in the event of a dissolution, liquidation or
winding up of the Company, the holders of Brink's Stock, Burlington Stock and
Minerals Stock will share on a per share basis an aggregate amount equal to 55%,
28% and 17%, respectively, of the funds, if any, remaining for distribution to
the common shareholders. In the case of Minerals Stock, such percentage has been
set, using a nominal number of shares of Minerals Stock of [ ] (the "Nominal
Shares") in excess of the actual number of shares of Minerals Stock outstanding,
to ensure that the holders of Minerals Stock are
<PAGE>
entitled to the same share of any such funds immediately following the
consummation of the transactions as they were prior thereto. These liquidation
percentages are subject to adjustment in proportion to the relative change in
the total number of shares of Brink's Stock, Burlington Stock and Minerals
Stock, as the case may be, then outstanding to the total number of shares of all
other classes of common stock then outstanding (which total, in the case of
Minerals Stock, shall include the Nominal Shares).
Principles of Combination
- -------------------------
The accompanying financial statements reflect the combined accounts of the
businesses comprising the Burlington Group and their majority-owned
subsidiaries. The Burlington Group interests in 20% to 50% owned companies are
carried on the equity method. All material intercompany items and transactions
have been eliminated in combination. Certain prior year amounts have been
reclassified to conform to the current year's financial statement presentation.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand, demand deposits and investments
with original maturities of three months or less.
Inventories
- -----------
Inventories are stated at cost (determined under the first-in, first-out or
average cost method) or market, whichever is lower.
Property, Plant and Equipment
- -----------------------------
Expenditures for maintenance and repairs are charged to expense, and the costs
of renewals and betterments are capitalized. Depreciation is provided
principally on the straight-line method at varying rates depending upon
estimated useful lives.
Intangibles
- -----------
The excess of cost over fair value of net assets of companies acquired is
amortized on a straight-line basis over the estimated periods benefited.
The Burlington Group evaluates the carrying value of intangibles and the periods
of amortization to determine whether events and circumstances warrant revised
estimates of asset value or useful lives. The Burlington Group annually assesses
the recoverability of the excess of cost over net assets acquired by determining
whether the amortization of the asset balance over its remaining life can be
recovered through projected undiscounted future operating cash flows. Evaluation
of asset value as well as periods of amortization are performed on a
disaggregated basis at each of the Burlington Group's operating units.
Income Taxes
- ------------
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
<PAGE>
See Note 2 for allocation of the Company's U.S. federal income taxes to the
Burlington Group.
Postretirement Benefits Other Than Pensions
- -------------------------------------------
Postretirement benefits other than pensions are accounted for in accordance with
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires employers to accrue
the cost of such retirement benefits during the employees' service with the
Company.
Foreign Currency Translation
- ----------------------------
Assets and liabilities of foreign operations have been translated at current
exchange rates, and related revenues and expenses have been translated at
average rates of exchange in effect during the year. Resulting cumulative
translation adjustments have been included in shareholder's equity. Translation
adjustments relating to operations in countries with highly inflationary
economies are included in net income, along with all transaction gains and
losses for the period.
A portion of the Burlington Group's financial results is derived from activities
in several foreign countries, each with a local currency other than the U.S.
dollar. Because the financial results of the Burlington Group are reported in
U.S. dollars, they are affected by the changes in the value of the various
foreign currencies in relation to the U.S. dollar. However, the Burlington
Group's international activity is not concentrated in any single currency, which
reduces the risks of foreign currency rate fluctuations.
Financial Instruments
- ---------------------
The Burlington Group uses foreign currency forward contracts to hedge risk of
changes in foreign currency rates associated with certain transactions
denominated in various currencies. Realized and unrealized gains and losses on
these contracts, designated and effective as hedges, are deferred and recognized
as part of the specific transaction hedged.
The Burlington Group also utilizes financial instruments to protect against
price increases in jet fuel as well as interest rate changes on certain variable
rate lease obligations. Gains and losses on such financial instruments,
designated and effective as hedges, are recognized as part of the specific
transaction hedged.
Revenue Recognition
- -------------------
Revenues related to transportation services are recognized, together with
related transportation costs, on the date shipments physically depart from
facilities en route to destination locations.
2. RELATED PARTY TRANSACTIONS
The following policies may be modified or rescinded by action of the Board, or
the Board may adopt additional policies, without approval of the shareholders of
the Company, although the Board has no present intention to do so. The Company
allocated certain corporate general and administrative expenses, net interest
expense and related assets and liabilities in accordance with the policies
described below. Corporate assets and
<PAGE>
liabilities are primarily cash, deferred pension assets, income taxes and
accrued liabilities.
Financial
- ---------
As a matter of policy, the Company manages most financial activities of the
Burlington Group, Brink's Group and Minerals Group on a centralized,
consolidated basis. Such financial activities include the investment of surplus
cash; the issuance, repayment and repurchase of short-term and long- term debt;
the issuance and repurchase of common stock and the payment of dividends. In
preparing these financial statements, transactions primarily related to invested
cash, short-term and long-term debt (including convertible debt), related net
interest and other financial costs have been attributed to the Burlington Group
based upon its cash flows for the periods presented after giving consideration
to the debt and equity structure of the Company. At December 31, 1994, the
Company attributed long-term debt to the Burlington Group based upon the purpose
for the debt in addition to the cash requirements of the Burlington Group. See
Note 8 for details and amounts of long-term debt. The portion of the Company's
interest expense allocated to the Burlington Group for 1994, 1993 and 1992 was
$2,629, $5,063 and $3,003, respectively. The portion of the Company's interest
expense allocated to the Burlington Group for the six months ended June 30, 1995
and 1994 (unaudited), was $1,170 and $1,598, respectively. Management believes
such method of allocation to be equitable and a reasonable estimate of the cost
attributable to the Burlington Group.
To the extent borrowings are deemed to occur between the Burlington Group, the
Brink's Group and the Minerals Group, intergroup accounts are established
bearing interest at the rate in effect from time to time under the Company's
unsecured credit lines or, if no such credit lines exist, at the prime rate
charged by Chemical Bank from time to time. At December 31, 1994, the Minerals
Group owed the Burlington Group $42,465 and at December 31, 1993, the Burlington
Group owed the Minerals Group $13,266, as the result of borrowings. At June 30
1995 (unaudited), the Minerals Group owed the Burlington Group $34,556, as the
result of borrowings.
Income Taxes
- ------------
The Burlington Group is included in the consolidated U.S. federal income tax
return filed by the Company.
The Company's consolidated provision and actual cash payments for U.S. federal
income taxes are allocated between the Burlington Group, Brink's Group and
Minerals Group in accordance with the Company's tax allocation policy and
reflected in the financial statements for each Group. In general, the
consolidated tax provision and related tax payments or refunds are allocated
among the Groups, for financial statement purposes, based principally upon the
financial income, taxable income, credits and other amounts directly related to
the respective Group. Tax benefits that cannot be used by the Group generating
such attributes, but can be utilized on a consolidated basis, are allocated to
the Group that generated such benefits and an intergroup account is established
for the benefit of the Group generating the attributes. As a result, the
allocated Group amounts of taxes payable or refundable are not necessarily
comparable to those that would have resulted if the Groups had filed separate
tax returns. At December 31, 1994 and 1993, the Burlington Group owed the
Minerals Group $21,436 and $8,320, respectively, for such tax benefits, of which
$10,436 and $4,488,
<PAGE>
respectively, were not expected to be paid within one year from such dates in
accordance with the policy.
Shared Services
- ---------------
A portion of the Company's corporate general and administrative expenses and
other shared services has been allocated to the Burlington Group based upon
utilization and other methods and criteria which management believes to be
equitable and a reasonable estimate of the cost attributable to the Burlington
Group. These allocations were $4,665, $4,757 and $4,278 in 1994, 1993 and 1992,
respectively.
Pension
- -------
The Burlington Group's pension cost related to its participation in the
Company's noncontributory defined benefit pension plan is actuarially determined
based on its respective employees and an allocable share of the pension plan
assets and calculated in accordance with Statement of Financial Accounting
Standards No. 87 ("SFAS 87"). Pension plan assets have been allocated to the
Burlington Group based on the percentage of its projected benefit obligation to
the plan's total projected benefit obligation. Management believes such method
of allocation to be equitable and a reasonable estimate of the cost attributable
to the Burlington Group.
<PAGE>
3. SHAREHOLDER'S EQUITY
The following presents shareholder's equity of the Burlington Group assuming
completion of the Brink's Stock Proposal transaction:
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of period $240,880 203,150 181,576 223,251
Net income 12,058 38,356 15,476 3,324
Foreign currency translation adjustment 1,622 2,418 (768) (3,535)
Attributed equity transactions:
Stock options exercised 425 1,837 4,001 405
Stock released from employee
benefits trust to employee
benefits plan 757 443 278 141
Stock sold from employee
benefits trust to employee
benefits plan - - 73 -
Stock issued to employee benefits plan - - - 184
Stock sold to Minerals Group - 107 42 -
Stock repurchases (919) (2 042) (304) (3,582)
Dividends declared (2,195) (4,161) (3,880) (3,088)
Cost of Services Stock Proposal - (1) (782) -
Tax benefit of options exercised - 765 501 -
Conversion of debt - 8 - -
Net cash (to) from the Company - - 6,937 (35,524)
- ------------------------------------------------------------------------------------------
Balance at end of period $252,628 240,880 203,150 181,576
==========================================================================================
</TABLE>
Included in shareholder's equity is the cumulative foreign currency translation
adjustment of $44 at June 30, 1995 (unaudited) and $1,666, $4,084 and $3,316 at
December 31, 1994, 1993 and 1992, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at cost, consist of the following:
December 31
1994 1993
----------------------------------------------------------------
Land $ 197 180
Buildings 9,147 4,073
Machinery and equipment 85,709 75,204
-----------------------------------------------------------------
$95,053 79,457
=================================================================
<PAGE>
The estimated useful lives for property, plant and equipment are as follows:
Years
- -----------------------------------------------------------------------
Buildings 5 to 20
Machinery and equipment 3 to 10
Depreciation of property, plant and equipment aggregated $10,797 in 1994, $8,735
in 1993 and $7,866 in 1992. For the six months ended June 30 1995 and 1994
(unaudited), depreciation of property, plant and equipment aggregated $6,435 and
$5,097, respectively.
5. INTANGIBLES
Intangibles consist entirely of the excess of cost over fair value of net assets
of companies acquired and are net of accumulated amortization of $66,140 at
December 31, 1994, and $59,978 at December 31, 1993. The estimated useful life
of intangibles is generally forty years. Amortization of intangibles aggregated
$6,162 in 1994, $6,218 in 1993 and $6,177 in 1992.
6. FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Burlington Group to
concentrations of credit risk consist principally of cash and cash equivalents,
and trade receivables. The Burlington Group's cash and cash equivalents are
placed with high credit qualified financial institutions. Also, by policy, the
amount of credit exposure to any one financial institution is limited.
Concentration of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Burlington Group's customer
base, and their dispersion across many different industries and geographic
areas.
The following details the fair values of financial instruments for which it is
practicable to estimate the value:
Cash and cash equivalents
- -------------------------
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Debt
- ----
The aggregate fair value of the Burlington Group's long-term debt obligations,
which is based upon quoted market prices and rates currently available to the
Burlington Group for debt with similar terms and maturities, approximates the
carrying amount.
Off-balance sheet instruments
- -----------------------------
The Burlington Group utilizes various off-balance sheet financial instruments,
as discussed below, to hedge its foreign currency and other market exposures.
The risk that counterparties to such instruments may be unable to perform is
minimized by limiting the counterparties to major financial institutions. The
Burlington Group does not expect any losses due to such counterparty default.
<PAGE>
Foreign currency forward contracts - The Company enters into foreign currency
forward contracts with a duration of 30 to 60 days as a hedge against accounts
payable denominated in various currencies. These contracts do not subject the
Company to risk due to exchange rate movements because gains and losses on these
contracts offset losses and gains on the payables being hedged. At December 31,
1994, the total contract value of foreign currency forward contracts outstanding
was $7,390. As of such date, the fair value of the foreign currency forward
contracts was not significant.
Fuel contracts - The Burlington Group has hedged a portion of its jet fuel
requirements through a swap contract. At December 31, 1994, the notional value
of the jet fuel swap, aggregating 12.5 million gallons, through March 31, 1995,
was $6,488. In addition, the Company has entered into several commodity option
transactions that are intended to protect against significant increases in jet
fuel prices. These transactions, aggregate 23.3 million gallons with a notional
value of $15,840 and are applicable throughout 1995 in amounts ranging from 3.5
million gallons per month in the first quarter of 1995 to 2.1 million gallons
per month in the fourth quarter of 1995. The Company has also entered into a
collar transaction applicable to 7.2 million gallons that provides a minimum and
maximum per gallon price. This transaction is settled monthly based upon the
average of the high and low prices during each period.
The fair value of these fuel hedge transactions may fluctuate over the course of
the contract period due to changes in the supply and demand for oil and refined
products. Thus, the economic gain or loss, if any, upon settlement of the
contracts may differ from the fair value of the contracts at an interim date. At
December 31, 1994, the fair value of these contracts was not significant.
Interest rate contracts - In connection with the aircraft leasing by Burlington
in 1993, the Company entered into interest rate cap agreements. These agreements
have a notional amount of $60,000 and cap the Company's interest rate on certain
aircraft leases at 8.5% through April 1, 1996. At December 31, 1994, the fair
value of these contracts was not significant.
<PAGE>
7. INCOME TAXES
The provision (credit) for income taxes consists of the following:
U.S.
Federal Foreign State Total
- --------------------------------------------------------------------------------
1994:
Current $ 22,077 3,033 3,000 28,110
Deferred (4,472) 80 (864) (5,256)
- --------------------------------------------------------------------------------
Total $ 17,605 3,113 2,136 22,854
================================================================================
1993:
Current $ 10,806 1,870 1,100 13,776
Deferred (520) (302) (515) (1,337)
- --------------------------------------------------------------------------------
Total $ 10,286 1,568 585 12,439
================================================================================
1992:
Current $ 5,437 1,091 926 7,454
Deferred (1,984) 239 (453) (2,198)
- --------------------------------------------------------------------------------
Total $ 3,453 1,330 473 5,256
================================================================================
The significant components of the deferred tax benefit were as follows:
1994 1993 1992
- --------------------------------------------------------------------------------
Deferred tax benefit, exclusive
of the components listed below $(6,028) (2,118) (2,220)
Investment tax credit carryforwards - - 1,490
Net operating loss carryforwards (247) 205 (368)
Alternative minimum tax credits 1,084 647 (1,316)
Change in the valuation allowance
for deferred tax assets (65) (71) 216
- --------------------------------------------------------------------------------
$(5,256) (1,337) (2,198)
================================================================================
The tax benefit for compensation expense related to the exercise of certain
employee stock options for tax purposes in excess of compensation expense for
financial reporting purposes is recognized as an adjustment to shareholder's
equity.
<PAGE>
The components of the net deferred tax asset as of December 31, 1994 and
December 31, 1993 were as follows:
1994 1993
- --------------------------------------------------------------------------------
Deferred tax assets:
Accounts receivable $ 3,368 3,358
Postretirement benefits other than pensions 985 828
Workers' compensation and other claims 1,819 1,691
Other liabilities and reserves 11,194 6,735
Miscellaneous 612 398
Net operating loss carryforwards 3,850 3,603
Alternative minimum tax credits 3,741 4,347
Valuation allowance (78) (143)
- --------------------------------------------------------------------------------
Total deferred tax asset 25,491 20,817
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 725 (389)
Pension assets 1,608 1,872
Other assets 383 2,280
Investments in foreign affiliates - -
Miscellaneous 3,642 3,267
- --------------------------------------------------------------------------------
Total deferred tax liability 6,358 7,030
- --------------------------------------------------------------------------------
Net deferred tax asset $19,133 13,787
================================================================================
The recording of deferred federal tax assets is based upon their expected
utilization in the Company's consolidated federal income tax return and the
benefit that would accrue to the Burlington Group under the Company's tax
allocation policy.
The valuation allowance relates to deferred tax assets in certain foreign and
state jurisdictions.
<PAGE>
The following table accounts for the difference between the actual tax provision
and the amounts obtained by applying the statutory U.S. federal income tax rate
of 35% in 1994 and 1993 and 34% in 1992 to the income before income taxes.
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Income before income taxes:
United States $35,464 11,633 (6,869)
Foreign 25,746 16,282 15,449
- --------------------------------------------------------------------------------
$61,210 27,915 8,580
- --------------------------------------------------------------------------------
Tax provision computed at statutory rate $21,424 9,770 2,918
Increases (reductions) in taxes due to:
State income taxes (net of federal tax
benefit) 1,388 380 202
Goodwill amortization 1,891 2,065 2,007
Difference between total taxes on foreign
income and the U.S. federal statutory
rate (2,790) 107 735
Miscellaneous 941 117 (606)
- --------------------------------------------------------------------------------
Actual tax provision $22,854 12,439 5,256
================================================================================
It is the policy of the Burlington Group to accrue deferred income taxes on
temporary differences related to the financial statement carrying amounts and
tax bases of investments in foreign subsidiaries and affiliates which are
expected to reverse in the foreseeable future. As of December 31, 1994 and
December 31, 1993, the unrecognized deferred tax liability for temporary
differences of approximately $20,237 and $4,223, respectively, related to
investments in foreign subsidiaries and affiliates that are essentially
permanent in nature and not expected to reverse in the foreseeable future was
approximately $7,083 and $1,478, respectively.
The Burlington Group is included in the Company's consolidated U.S. federal
income tax return. Such returns have been audited and settled with the Internal
Revenue Services through the year 1981.
As of December 31, 1994, the Burlington Group had $3,741 of alternative minimum
tax credits allocated to it under the Company's tax allocation policy. Such
credits are available to offset future U.S. federal income taxes and, under
current tax law, the carryforward period for such credits is unlimited.
The tax benefits of net operating loss carryforwards of the Burlington Group as
at December 31, 1994 were $3,850 and related to various state and foreign taxing
jurisdictions. The expiration periods primarily range from 5 to 15 years.
<PAGE>
8. LONG-TERM DEBT
A portion of the outstanding debt under the Company's credit agreement and the
Company's subordinated obligations have been attributed to the Burlington Group.
Total long-term debt of the Burlington Group consists of the following:
As of December 31
1994 1993
- -------------------------------------------------------------------------------
Senior obligations:
Canadian dollar term loan due 1999 (6.19% in 1994) $ 2,852 -
All other 353 349
- -------------------------------------------------------------------------------
3,205 349
Obligations under capital leases (average rates
12.04% in 1994 and 14.35% in 1993) 619 552
- -------------------------------------------------------------------------------
3,824 901
- -------------------------------------------------------------------------------
Attributed portion of the Company's debt:
U.S. dollar term loan due 1999 (year-end rate
6.48% in 1994) 23,434 -
Revolving credit note (year-end rate 3.53% in 1993) - 2,100
4% subordinated debentures due 1997 14,648 14,648
9.20% convertible subordinated debentures due 2004 - 27,811
- -------------------------------------------------------------------------------
38,082 44,559
- -------------------------------------------------------------------------------
Total long-term debt, less current maturities $41,906 45,460
===============================================================================
For the four years through December 31, 1999, minimum repayments of long-term
debt outstanding are as follows:
1996 $ 690
1997 14,865
1998 15
1999 26,300
The Canadian dollar term loan to a wholly owned indirect subsidiary of the
Burlington Group, bears interest based on Canadian prime or Bankers' Acceptance
rates, or if converted to a U.S. dollar loan based on Eurodollar or Federal
Funds rates. The Canadian dollar term loan is guaranteed by the Company. Under
the terms of the loan, Burlington has agreed to various restrictions relating to
net worth, disposition of assets and incurrence of additional debt.
In March 1994, the Company entered into a $350,000 credit agreement with a
syndicate of banks (the "New Facility"), replacing the Company's previously
existing $250,000 of revolving credit agreements. The New Facility included a
$100,000 five-year term loan, which originally matured in March 1999. The
Burlington Group has been attributed $23,434 of the $100,000 term loan. The New
Facility also permitted additional borrowings, repayments and reborrowings of up
to an aggregate of $250,000 initially until March 1999. In March 1995, the New
Facility was amended to extend the maturity of the term loan to May 2000 and to
permit the additional borrowings, repayments and reborrowings until May 2000.
Interest on borrowings under the New
<PAGE>
Facility is payable at rates based on prime, certificate of deposit, Eurodollar
or money market rates.
The 4% subordinated debentures due July 1, 1997, are exchangeable for cash, at
the rate of $157.80 per $1,000 debenture. The debentures are redeemable at the
Company's option, in whole or in part, at any time prior to maturity, at
redemption prices equal to 100% of principal amount.
On April 15, 1994, the Company redeemed all of the 9.2% convertible subordinated
debentures due July 1, 2004, at a premium of $767. The premium has been included
in the Statement of Operations in "Other income (expense), net".
Various international operations maintain lines of credit and overdraft
facilities aggregating approximately $61,000 with a number of banks on either a
secured or unsecured basis.
Under the terms of some of its debt instruments, the Company has agreed to
various restrictions relating to the payment of dividends, the repurchase of
capital stock, the maintenance of consolidated net worth, and the amount of
additional funded debt which may be incurred. See the Company's consolidated
financial statements and related footnotes set forth in Annex IX.
At December 31, 1994, the Company's portion of outstanding unsecured letters of
credit allocated to the Burlington Group was $27,300, primarily supporting the
Burlington Group's obligations under aircraft leases and its various
self-insurance programs.
9. STOCK OPTIONS
Upon approval of the Brink's Stock Proposal, the Company will convert its stock
options outstanding into options for shares of Brink's Stock or Burlington
Stock, or both, pursuant to provisions in the option agreements covering such
options. See the Company's consolidated financial statements and related
footnotes set forth in Annex IX for information regarding the Company's stock
options.
10. ACQUISITIONS
During 1994, the Burlington Group acquired several small businesses and made a
contingent payment related to an acquisition made in a prior year. Total
consideration paid was $5,938.
During 1993, the Burlington Group acquired one small business and made a
contingency payment related to an acquisition consummated in a prior year. The
total consideration paid was $736.
During 1992, cash payments of $226 were made for contingency payments for
acquisitions made in prior years.
The acquisition in 1993 has been accounted for as a purchase and the purchase
price for the acquisition was essentially equal to the fair value
<PAGE>
of assets acquired. The results of operations of the acquired company has been
included in the Burlington Group's results of operations from their date of
acquisition.
11. LEASES
The Burlington Group leases aircraft, facilities, vehicles, computers and other
equipment under long-term operating leases with varying terms, and most of the
leases contain renewal and/or purchase options. As of December 31, 1994,
aggregate future minimum lease payments under noncancellable operating leases
were as follows:
Equipment
Aircraft Facilities & Other Total
- --------------------------------------------------------------------------------
1995 $30,237 20,664 3,792 54,693
1996 22,641 15,348 2,745 40,734
1997 20,983 13,276 1,785 36,044
1998 4,815 11,025 1,282 17,122
1999 - 8,832 1,071 9,903
2000 - 7,607 897 8,504
2001 - 5,606 617 6,223
2002 - 5,051 417 5,468
2003 - 4,588 417 5,005
2004 - 4,283 417 4,700
Later Years - 52,925 3,716 56,641
- --------------------------------------------------------------------------------
$78,676 149,205 17,156 245,037
================================================================================
These amounts are net of aggregate future minimum noncancellable sublease
rentals of $6,000.
Rent expense amounted to $57,412 in 1994, $51,677 in 1993 and $45,467 in 1992
and is net of sublease rentals of $695, $781 and $1,403, respectively.
Burlington entered into two transactions covering various leases which provided
for the replacement of eight B707 aircraft with seven DC8-71 aircraft and
completed an evaluation of other fleet related costs. One transaction,
representing four aircraft, was reflected in the 1993 financial statements,
while the other transaction, covering three aircraft, was reflected in the 1992
financial statements. The net effect of these transactions did not have a
material impact on operating profit for either year.
The Burlington Group incurred capital lease obligations of $755 in 1994, $542 in
1993 and $538 in 1992. As of December 31, 1994, the Burlington Group's
obligations under capital leases were not significant.
<PAGE>
12. EMPLOYEE BENEFIT PLANS
The Burlington Group's businesses participate in the Company's noncontributory
defined benefit pension plan covering substantially all nonunion employees who
meet certain minimum requirements in addition to sponsoring certain other
defined benefit plans. Benefits of most of the plans are based on salary and
years of service. The Burlington Group's pension cost relating to its
participation in the Company's defined benefit pension plan is actuarially
determined based on its respective employees and an allocable share of the
pension plan assets. The Company's policy is to fund the actuarially determined
amounts necessary to provide assets sufficient to meet the benefits to be paid
to plan participants in accordance with applicable regulations. The net pension
expense for 1994, 1993 and 1992 for all plans is as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Service cost - benefits earned during year $ 3,009 2,350 2,229
Interest cost on projected benefit obligation 2,919 2,460 2,217
Loss (return) on assets - actual 662 (7,016) (4,551)
(Loss) return on assets - deferred (5,713) 2,915 798
Other amortization, net (357) (255) (586)
- --------------------------------------------------------------------------------
Net pension expense $ 520 454 107
================================================================================
The assumptions used in determining the net pension expense for the Company's
major pension plan were as follows:
1994 1993 1992
- ------------------------------------------------------------------------------
Interest cost on projected benefit obligation 7.5% 9.0% 9.0%
Expected long-term rate of return on assets 10.0% 10.0% 10.0%
Rate of increase in compensation levels 4.0% 5.0% 5.0%
<PAGE>
The funded status and prepaid pension expense at December 31, 1994 and 1993 are
as follows:
1994 1993
- --------------------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligation:
Vested $25,929 28,052
Nonvested 2,081 2,177
- --------------------------------------------------------------------------------
28,010 30,229
Benefits attributable to projected salaries 7,313 8,415
- --------------------------------------------------------------------------------
Projected benefit obligation 35,323 38,644
Plan assets at fair value 49,390 51,359
- --------------------------------------------------------------------------------
Excess of plan assets over projected
benefit obligation 14,067 12,715
Unamortized initial net asset (1,082) (1,364)
Unrecognized experience gain (2,873) (979)
Unrecognized prior service cost 84 35
- --------------------------------------------------------------------------------
Net pension assets 10,196 10,407
Current pension liability 459 260
- --------------------------------------------------------------------------------
Deferred pension asset per balance sheet $10,655 10,667
================================================================================
For the valuation of pension obligations and the calculation of the funded
status, the discount rate was 8.75% in 1994 and 7.5% in 1993. The expected
long-term rate of return on assets was 10% in both years. The rate of increase
in compensation levels used was 4% in 1994 and 1993.
The unrecognized initial net asset at January 1, 1986 (January 1, 1989, for
certain foreign pension plans), the date of adoption of SFAS 87, has been
amortized over the estimated remaining average service life of the employees. As
of December 31, 1994, approximately 77% of plan assets were invested in equity
securities and 23% in fixed income securities.
The Burlington Group also provides certain postretirement health care and life
insurance benefits for eligible active and retired employees in the United
States and Canada.
For the years 1994, 1993 and 1992, the components of periodic expense for these
postretirement benefits were as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Service cost - benefits earned during year $ 219 112 96
Interest cost on accumulated postretirement
benefit obligation 247 160 134
- --------------------------------------------------------------------------------
Total expense $ 466 272 230
================================================================================
Interest costs on the accumulated postretirement benefit obligation were based
upon rates of 7.5% in 1994 and 9% in 1993 and 1992.
<PAGE>
At December 31, 1994 and 1993, the actuarial and recorded liabilities for these
postretirement benefits, none of which have been funded, were as follows:
1994 1993
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 589 535
Fully eligible active plan participants 379 306
Other active plan participants 1,349 1,432
- --------------------------------------------------------------------------------
2,317 2,273
Unrecognized experience gain (loss) 214 (171)
- --------------------------------------------------------------------------------
Liability included on the balance sheet 2,531 2,102
Less current portion 50 529
- --------------------------------------------------------------------------------
Noncurrent liability for postretirement
health care and life insurance benefits $ 2,481 1,573
================================================================================
The accumulated postretirement benefit obligation was determined using the unit
credit method and an assumed discount rate of 8.75% in 1994 and 7.5% in 1993.
The postretirement benefit obligation for U.S. salaried employees does not
provide for changes in health care costs since the employer's contribution to
the plan is a fixed amount.
A percentage point increase each year in the health care cost trend rate used
would not have resulted in any increase in the aggregate service and interest
components of expense for the year 1994 or in the accumulated post retirement
benefit obligation at December 31, 1994.
The Burlington Group also participates in the Company's Savings-Investment Plan
to assist eligible employees in providing for retirement or other future
financial needs. Employee contributions are matched at rates of 50% to 125% up
to 5% of compensation (subject to certain limitations imposed by the Internal
Revenue Code of 1986, as amended). Contribution expense under the plan
aggregated $1,656 in 1994, $1,207 in 1993 and $1,218 in 1992.
In May 1994, the Company's shareholders approved the Employee Stock Purchase
Plan effective July 1, 1994. See the Company's consolidated financial statements
and related footnotes set forth in Annex IX for information regarding the
Company's Employee Stock Purchase Plan.
The Burlington Group sponsors several other defined contribution benefit plans
based on hours worked or other measurable factors. Contributions under all of
these plans aggregated $556 in 1994, $443 in 1993 and $498 in 1992.
<PAGE>
13. SEGMENT INFORMATION
Operating revenues by geographic area are as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
United States $ 565,813 459,431 421,365
International operations 649,471 538,648 478,982
- --------------------------------------------------------------------------------
$1,215,284 998,079 900,347
================================================================================
The following is derived from the business segment information in the Company's
consolidated financial statements as it relates to the Burlington Group. See
Note 2, Related Party Transactions, for a description of the Company's policy
for corporate allocations.
The Burlington Group's portion of the Company's operating profit is as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
United States $ 45,732 19,290 1,835
International operations 23,492 18,681 13,283
- --------------------------------------------------------------------------------
Burlington Group's portion of the
Company's segment operating profit 69,224 37,971 15,118
Corporate expenses allocated
to the Burlington Group (4,665) (4,757) (4,278)
Pension credit - - 790
- --------------------------------------------------------------------------------
Operating profit $ 64,559 33,214 11,630
================================================================================
The Burlington Group's portion of the Company's assets at year end is as
follows:
As of December 31
1994 1993 1992
- --------------------------------------------------------------------------------
United States $284,294 268,705 252,648
International operations 188,146 149,989 153,811
- --------------------------------------------------------------------------------
Burlington Group's portion of the
Company's assets 472,440 418,694 406,459
Burlington Group's portion of
corporate assets 49,076 13,542 17,564
- --------------------------------------------------------------------------------
Total assets $521,516 432,236 424,023
================================================================================
14. CONTINGENT LIABILITIES
Under the Coal Industry Retiree Health Benefit Act of 1992 (the "Act"), the
Company and its majority-owned subsidiaries at July 20, 1992, including the
Burlington Group included in these financial statements, are jointly and
severally liable with the Brink's Group and the Minerals Group for the costs of
health care coverage provided for by that Act. For a description of the
<PAGE>
Act and an estimate of certain of such costs, see Note 13 to the Company's
consolidated financial statements. At this time, the Company expects the
Minerals Group to generate sufficient cash flow to discharge its obligations
under the Act.
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the cleanup costs on an undiscounted basis using
existing technologies to be between $6,700 and $14,100 over a period of up to
five years. Management is unable to determine that any amount within that range
is a better estimate due to a variety of uncertainties, which include the extent
of the contamination at the site, the permitted technologies for remediation and
the regulatory standards by which the clean-up will be conducted. The clean-up
estimates have been modified in light of certain regulatory changes promulgated
in December 1994.
The Company commenced insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws have been found to control the
interpretation of the policies), and numerous other factual considerations which
support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
15. SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31, 1994, 1993 and 1992, cash payments for income
taxes, net of refunds received, were $16,980, $12,181 and $5,031, respectively.
For the six months ended June 30, 1995 and 1994 (unaudited), cash payments for
income taxes, net of refunds received were $18,219 and $8,117, respectively.
For the years ended December 31, 1994, 1993 and 1992, cash payments for interest
were $4,926, $5,359 and $4,319, respectively. For the six months ended June 30,
1995 and 1994 (unaudited), cash payments for interest were $2,467 and $3,339,
respectively.
<PAGE>
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Tabulated below are certain data for each quarter of 1994 and 1993.
1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
1994 Quarters:
Operating revenues $261,484 302,266 311,925 339,609
Gross profit 31,959 48,849 45,010 45,571
Net income 3,339 11,509 13,438 10,070
Proforma Financial
Information:
Per Pittston Burlington
Group Common Share:
Net income $ .18 .61 .71 .53
1993 Quarters:
Operating revenues $230,885 240,316 254,769 272,109
Gross profit 23,602 31,341 38,161 39,388
Net income (loss) $ (335) 2,793 6,800 6,218
Proforma Financial
Information:
Per Pittston Burlington
Group Common Share:
Net income (loss) $ (.02) .15 .37 .33
<PAGE>
PITTSTON BURLINGTON GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The financial statements of the Pittston Burlington Group (the "Burlington
Group") include the balance sheets, results of operations and cash flows of
Burlington Air Express Inc. ("Burlington") and a portion of The Pittston
Company's (the "Company") corporate assets and liabilities and related
transactions which are not separately identified with operations of a specific
segment.
Upon approval of the Brink's Stock Proposal (see "The Brink's Stock Proposal" in
the Proxy Statement), the capital structure of The Pittston Company (the
"Company") will be modified to include an additional class of common stock. The
outstanding shares of Pittston Services Group Common Stock ("Services Stock")
will be redesignated as Pittston Brink's Group Common Stock, par value $1.00 per
share ("Brink's Stock") and [ ] of one share of a new class of common stock
identified as Pittston Burlington Group Common Stock, par value $1.00 per share,
("Burlington Stock") will be distributed for each outstanding share of Services
Stock. Holders of Pittston Minerals Group Common Stock ("Minerals Stock") will
continue to be holders of such stock, which will continue to reflect the
performance of the Pittston Minerals Group (the "Minerals Group"). Brink's Stock
is intended to reflect the performance of the Pittston Brink's Group (the
"Brink's Group") and Burlington Stock is intended to reflect the performance of
the Pittston Burlington Group (the "Burlington Group"). This capital structure
has been reflected in these financial statements.
The Burlington Group's financial statements are prepared using the amounts
included in the Company's consolidated financial statements. Corporate
allocations reflected in these financial statements are determined based upon
methods which management believes to be an equitable allocation of such items.
The accounting policies applicable to the preparation of the Burlington Group's
financial statements may be modified or rescinded at the sole discretion of the
Company's Board of Directors (the "Board") without the approval of the
shareholders, although there is no intention to do so.
If the Brink's Stock Proposal is approved, the Company will provide to holders
of Burlington Stock separate financial statements, financial reviews,
descriptions of business and other relevant information for the Burlington Group
in addition to consolidated financial information of the Company.
Notwithstanding the attribution of assets and liabilities (including contingent
liabilities) between the Minerals Group, the Brink's Group and the Burlington
Group for the purpose of preparing their financial statements, this attribution
and the change in the capital structure of the Company as a result of the
approval of the Brink's Stock Proposal will not result in any transfer of assets
and liabilities of the Company or any of its subsidiaries. Holders of Burlington
Stock will be common shareholders of the Company, which will continue to be
responsible for all its liabilities. Therefore, financial developments affecting
the Minerals Group, the Brink's Group or the Burlington Group that affect the
Company's financial condition could affect the results of operations and
financial condition of each of the Groups. Since financial developments within
one group could affect other groups, all shareholders of the Company could be
adversely affected by an event directly impacting only one group.
<PAGE>
Accordingly, the Company's consolidated financial statements must be read in
connection with the Burlington Group's financial statements.
The following discussion is a summary of the key factors management considers
necessary in reviewing the Burlington Group's results of operations, liquidity
and capital resources. This discussion should be read in conjunction with the
financial statements and related notes of the Company.
RESULTS OF OPERATIONS
Net income for the Burlington Group for the first six months of 1995 was $12.1
million compared with $14.8 million in the first six months of 1994. Operating
profit totaled $20.1 million in the first six months of 1995 compared with $27.4
million in the first six months of 1994. Net income and operating profits in the
first six months of 1994 benefited from unusually strong operating profits due
to substantial additional volumes of freight directed to Burlington during a
nationwide trucking strike in the second quarter of 1994, which added an
estimated $8 million to operating profit and $5 million to net income for the
first six months of 1994. Revenues for the first six months of 1995 increased
$102.1 million or 18% compared with the same period of last year. Operating
expenses and selling, general and administrative expenses for the first six
months of 1995 increased $109.3 million or 20% over the same period last year.
Net income for the Burlington Group for 1994 was $38.4 million compared with
$15.5 million for 1993. Operating profit for 1994 was $64.6 million compared
with $33.2 million in 1993. Revenues for 1994 increased $217.2 million compared
with 1993. Operating expenses and selling, general and administrative expenses
for 1994 increased $186.3 million, which is net of a $.1 million decrease in the
allocation of corporate expenses.
In 1993, net income increased $12.2 million to $15.5 million from $3.3 million
in 1992. Operating profit for 1993 was $33.2 million compared with $11.6 million
in the prior year. Net income and operating profit in 1992 were positively
impacted by a pension credit of $.5 million and $.8 million, respectively,
relating to the amortization of the unrecognized initial net pension asset at
the date of adoption of Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions". This credit was recognized over the
estimated remaining average service life of employees since the date of
adoption, which expired at the end of 1992. Revenues for 1993 increased $97.7
million compared with 1992. Operating expenses and selling, general and
administrative expenses for 1993 increased $76.2 million.
<PAGE>
Burlington Operations
- ---------------------
The following is a table of selected financial data for Burlington on a
comparative basis:
<TABLE>
<CAPTION>
(Dollars in thousands -
except per pound/ Six Months Ended
shipment amounts) June 30 Years Ended December 31
- -------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Airfreight
Domestic U.S. $257,855 272,539 565,440 460,061 418,372
International 312,489 232,951 518,652 440,239 395,800
- -------------------------------------------------------------------------------------------------------
Total airfreight 570,344 505,490 1,084,092 900,300 814,172
Other 95,550 58,260 131,192 97,779 86,175
- -------------------------------------------------------------------------------------------------------
Total revenues 665,894 563,750 1,215,284 998,079 900,347
Operating expenses 589,237 482,942 1,043,895 865,587 789,354
Selling, general and
administrative 55,562 52,501 105,371 97,332 97,813
- -------------------------------------------------------------------------------------------------------
Total costs and
expenses 644,799 535,443 1,149,266 962,919 887,167
- -------------------------------------------------------------------------------------------------------
Other operating
income 1,369 1,473 3,206 2,811 1,938
- -------------------------------------------------------------------------------------------------------
Operating profit:
Domestic U.S. 11,480 20,391 45,732 19,290 1,835
International 10,984 9,389 23,492 18,681 13,283
- -------------------------------------------------------------------------------------------------------
Operating profit $ 22,464 29,780 69,224 37,971 15,118
=======================================================================================================
Depreciation and
amortization $ 9,702 8,233 17,209 15,250 14,379
=======================================================================================================
Cash capital
expenditures $ 13,500 11,009 23,946 28,253 6,623
=======================================================================================================
Airfreight shipment
growth rate (a) 6.2% 10.4% 7.6% 4.3% 11.4%
Airfreight weight
growth rate (a):
Domestic U.S. (4.1%) 21.5% 19.3% 12.5% 6.3%
International 25.1% 24.5% 25.3% 15.8% 43.8%
Worldwide 9.0% 22.9% 22.1% 14.3% 20.7%
Worldwide airfreight
weight (pounds) 644,366 591,257 1,248,541 1,020,428 892,974
- -------------------------------------------------------------------------------------------------------
Worldwide air-
freight shipments 2,538 2,389 4,805 4,530 4,342
- -------------------------------------------------------------------------------------------------------
Worldwide average
airfreight:
Yield (revenue
per pound) $ 0.885 0.855 0.868 0.882 0.912
Revenue per
shipment $ 225 212 226 199 188
Weight per ship-
ment (pounds) 254 247 260 225 206
=======================================================================================================
</TABLE>
(a) Compared to the same period in the prior year.
<PAGE>
Operating profit in the first half of 1995 for Burlington was $22.5 million, a
$7.3 million decrease from the $29.8 million operating profit reported in the
first half of 1994, which benefited from significant additional domestic freight
as a result of the nationwide trucking strike which added an estimated $8
million to the second quarter's operating profit. Worldwide revenues rose 18% to
$665.9 million in the current year period from $563.8 million in the first six
months of 1994. The $102.1 million increase in revenues resulted principally
from a 9% increase in worldwide airfreight pounds shipped.
Domestic airfreight revenues decreased by 5% or $14.7 million to $257.8 while
operating profit decreased $8.9 million to $11.5 million in the first half of
1995 compared to the first half of 1994. These decreases were due to a 4%
decrease in domestic volume and a 1% decrease in domestic yields. The decrease
in volume was due primarily to the impact of the U.S. trucking strike in the
second quarter of 1994 which added substantial additional volume and an
estimated $8 million to operating profit.
International airfreight revenues of $312.5 million in the first six months of
1995 were $79.5 million or 34% higher than the $233.0 million reported in the
prior year's first half. International operating profit of $11.0 million
increased $1.6 million in the first six months of 1995 compared to the first six
months of 1994. These increases were primarily due to a 25% increase in
airfreight weight shipped compared to the prior year period. The increase in
volume can be largely attributed to improved economic conditions in the
international markets and expansion of company-owned operations.
Other revenue, which includes import transactions such as customs clearance and
import related services, as well as ocean freight services, increased 64% or
$37.3 million to $95.6 million, due to an increase in international shipment
volume and a continued expansion of ocean freight services.
Operating profit of Burlington increased $31.2 million to $69.2 million in 1994
from $38.0 million in 1993. Worldwide revenues rose 22% to $1.2 billion in 1994
from $998.1 million in the prior year. The $217.2 million increase in revenues
resulted principally from higher volume in both domestic and international
markets.
In 1994, increased revenues from higher volumes were partially offset by lower
average yields (revenues per pound). Total airfreight weight shipped worldwide
increased 22% to 1,248.5 million pounds in 1994 from 1,020.4 million pounds a
year earlier. Worldwide average airfreight yield decreased less than 2% or $.01
to $.87 in 1994 compared with a year earlier. Total operating expenses and
selling, general and administrative expenses increased in 1994 compared with
1993 largely resulting from the increased volume of business.
Domestic U.S. operating profit of $45.7 million for 1994 benefited from volume
increases compared to the prior year, a significant portion of which was from
increased shipping levels. Such increases were aided by a strong economy and
limited lift capacity available to forwarders. Higher volume, in part, also
reflected the impact of the 24 day Teamsters strike in 1994. Domestic U.S.
operating profit also benefited from growth in the market for heavy airfreight,
increased market share, a shift in mix toward Burlington's premium next-day
service, and, on a per pound basis, lower private fleet, common carriage and
cartage costs. Increased capacity as a result of the fourth quarter 1993
expansion of Burlington's airfreight hub in Toledo, Ohio, as well as the 1994
fleet expansion assisted in increasing efficiency and provided additional
capacity in existing and new next morning markets. Gains from increased business
<PAGE>
volume including a 19% increase in domestic airfreight weight shipped and
efficiencies were partially offset by decreased average yields in 1994. Average
yields continue to reflect a highly competitive pricing environment.
International operating results of $23.5 million in 1994 increased from the 1993
level. These operations benefited from a 25% increase in international
airfreight weight shipped, partially offset by lower yields, additional costs
incurred in connection with offering complete global logistics services, and
startup costs incurred in providing services in additional foreign markets.
Although export volumes increased during 1994, pricing for U.S. exports was
adversely impacted by competitive pricing.
Operating profit of Burlington increased $22.9 million to $38.0 million in 1993
from $15.1 million in 1992. Worldwide revenues increased $97.8 million or 11% to
$998.1 million in 1993 from $900.3 million in 1992. The increase in revenues
primarily reflects volume increases only partially offset by lower average
yields. Total airfreight weight shipped worldwide for 1993 increased 14% to
1,020.4 million pounds from 893.0 million pounds in 1992. Worldwide average
airfreight yield decreased 3% or $.03 to $.88 in 1993 compared to 1992. Total
operating expenses increased, while selling, general and administrative expenses
decreased in 1993 compared with the prior year. Higher operating expenses
resulting from the increased volume of business in 1993 were, however, favorably
impacted by increased efficiency in private fleet operations achieved as a
result of a fleet upgrade to DC8-71 aircraft replacing B707 aircraft,
accomplished by lease transactions at year-end 1992 and in early 1993. During
the 1993 fourth quarter, Burlington also completed a 30% expansion of its
airfreight hub in Toledo, Ohio. This expansion assisted in increasing
efficiency, including higher average weight shipped per container. Selling,
general and administrative expenses in 1992 were adversely affected by charges
for costs related to organizational downsizing in both domestic and foreign
operations.
Domestic U.S. operating profit of $19.3 million in 1993 increased compared with
1992 largely due to increased volume and lower transportation costs per pound,
partially offset by decreased average yields. While average yields decreased in
1993 compared with 1992 reflecting a highly competitive pricing environment,
market improvement was evident during the last quarter of 1993 as load factors
increased.
International operating results of $18.7 million in 1993 increased compared with
results in 1992. These operations benefited from a 16% increase in international
weight shipped, however, such gains were partially offset by lower yields.
Foreign Operations
- ------------------
A portion of the Burlington Group's financial results is derived from activities
in several foreign countries, each with a local currency other than the U.S.
dollar. Because the financial results of the Burlington Group are reported in
U.S. dollars, they are affected by the changes in the value of the various
foreign currencies in relation to the U.S. dollar. The Burlington Group's
international activity is not concentrated in any single currency, which limits
the risks of foreign currency rate fluctuation. In addition, these rate
fluctuations may adversely affect transactions which are denominated in
currencies other than the functional currency. The Burlington Group routinely
enters into such transactions in the normal course of its business. Although the
diversity of its foreign operations
<PAGE>
limits the risks associated with such transactions, the Company, on behalf of
the Burlington Group, uses foreign currency forward contracts to hedge the risk
associated with certain transactions denominated in currencies other than the
functional currency. Realized and unrealized gains and losses on these contracts
are deferred and recognized as part of the specific transaction hedged. In
addition, cumulative translation adjustments relating to operations in countries
with highly inflationary economies are included in net income, along with all
transaction gains or losses for the period.
Additionally, the Burlington Group is subject to other risks customarily
associated with doing business in foreign countries, including economic
conditions, controls on repatriation of earnings and capital, nationalization,
expropriation and other forms of restrictive action by local governments. The
future effects, if any, of such risks on the Burlington Group cannot be
predicted.
Corporate Expenses
- ------------------
A portion of the Company's corporate general and administrative expenses and
other shared services has been allocated to the Burlington Group based upon
utilization and other methods and criteria which management believes to be
equitable and a reasonable estimate of the cost attributable to the Burlington
Group. These allocations were $2.4 million in the first six months of 1995 and
1994 and $4.7 million, $4.8 million and $4.3 million in 1994, 1993 and 1992,
respectively.
Other Operating Income
- ----------------------
Other operating income decreased $.1 million to $1.4 million in the first half
of 1995 from $1.5 million in the first half of 1994. Other operating income
increased $.4 million to $3.2 million in 1994 from $2.8 million in 1993 and
increased $.9 million in 1993 from $1.9 million in 1992. Other operating income
principally includes foreign exchange translation gains and losses, and the
changes for the comparable periods are due to fluctuations in such gains and
losses.
Interest Income
- ---------------
Interest income increased $1.4 million to $2.0 million in the first six months
of 1995 from $.6 million in the first six months of 1994. The increase is
primarily attributed to $1.5 million of interest income earned from amounts owed
by the Minerals Group in the first six months of 1995.
Interest Expense
- ----------------
Interest expense for 1994 decreased $2.3 million to $3.8 million from $6.1
million and in 1993 interest expense increased $2.6 million from $3.5 million a
year earlier. The decrease in 1994 compared with 1993 was primarily due to
significantly lower average borrowings, a portion of which resulted from the
redemption in April 1994 of the Company's 9.2% Convertible Subordinated
Debentures.
Other Income (Expense), Net
- ---------------------------
Other net expense improved by $.9 million to a net expense of $.5 million in the
first six months of 1995 from a net expense of $1.4 million in the first six
months of 1994. In 1994, other net expense increased by $1.5 million to a net
expense of $1.6 million in 1994 from $.1 million in 1993. In 1993 other net
expense improved by $.3 million from $.4 million in 1992. In first six months of
1994, $1.2 million of expenses was recognized on the Company's redemption of its
9.2% Convertible Subordinated Debentures, which
<PAGE>
was allocated to the Burlington Group. Other changes for the comparable periods
are largely due to fluctuations in foreign translation losses.
Income Taxes
- ------------
In 1994 the provision for income taxes exceeded the statutory federal income tax
rate of 35% primarily due to provisions for state income taxes and goodwill
amortization, partially offset by lower taxes on foreign income. In 1993 and
1992, the provision for income taxes exceeded the statutory federal income tax
rate of 35% in 1993 and 34% in 1992 primarily because of provisions for state
income taxes and goodwill amortization.
FINANCIAL CONDITION
A portion of the Company's corporate assets and liabilities has been attributed
to the Burlington Group based upon utilization of the shared services from which
assets and liabilities are generated, which management believes to be equitable
and a reasonable estimate of the cost attributable to the Burlington Group.
Corporate assets which were allocated to the Burlington Group consisted
primarily of pension assets and deferred income taxes and amounted to $49.1
million and $13.5 million at December 31, 1994 and 1993, respectively.
Cash Flow Provided By Operating Activities
- ------------------------------------------
In the first six months of 1995 operating activities used cash of $3.7 million,
while operating activities provided cash of $44.0 million in the first six
months of 1994. The decrease occurred principally as a result of additional
investment in working capital at Burlington. Such requirements primarily
reflected initial working capital needs of recently acquired foreign
subsidiaries, a relatively larger seasonal volume increase and increased
international revenues, which tend to have longer payment terms.
Cash provided by operating activities totaled $88.5 million in 1994, increasing
from $26.1 million in 1993. The net increase in 1994 compared with 1993 was due
to the increase in net income in 1994 and a significant increase in net cash
provided by operating assets and liabilities. Cash generated from operations
exceeded cash requirements for investing and financing activities including
$55.7 million loaned to the Minerals Group and, as a result, cash and cash
equivalents increased $5.1 million during 1994 to a year-end total of $18.4
million.
Capital Expenditures
- --------------------
Cash capital expenditures for the first six months of 1995 totaled $13.6
million. Cash capital expenditures totaled $24.0 million in 1994. An additional
$1.0 million of expenditures were made for the year 1994 through capital and
operating leases. A portion of the capital expenditures made during the first
six months of 1995 included expenditures to support new airfreight stations and
implementation of positive tracking systems. Capital expenditures were primarily
for replacement and maintenance of current ongoing business operations.
Cash capital expenditures during the first half of 1995 and during the year 1994
were funded by cash flow from operating activities, with any shortfalls financed
through the Company by borrowings under its revolving credit agree ments or
short-term borrowing arrangements, which were thereby attributed to the
Burlington Group.
<PAGE>
Financing
- ---------
Gross capital expenditures in 1995 are currently expected to increase over 1994
levels. The increase is expected to result largely from expenditures at
Burlington supporting new airfreight stations and implementation of positive
tracking systems. The Burlington Group intends to fund such expenditures through
cash flow from operating activities or through operating leases if the latter
are financially attractive. Any shortfalls will be financed through the
Company's revolving credit agreements or short-term borrowing arrangements or
borrowings from the Brink's Group or the Minerals Group.
In March 1994, the Company entered into a $350 million credit agreement with a
syndicate of banks (the "New Facility"), replacing the Company's previously
existing $250 million of revolving credit agreements. The New Facility includes
a $100 million term loan, which matures in May 2000. The New Facility also
permits additional borrowings, repayments and reborrowings of up to an aggregate
of $250 million until May 2000. At June 30, 1995 and December 31, 1994,
borrowings of $100 million were outstanding under the term loan portion of the
New Facility. Additional borrowings under the remainder of the facility totaled
$28.6 million and $9.4 million at June 30, 1995 and December 31, 1994,
respectively. Of the total amount outstanding under the New Facility at June 30,
1995 and December 31, 1994, $23.4 million was attributed to the Burlington
Group.
Debt
- ----
Total debt outstanding for the Burlington Group amounted to $69.7 million at
June 30, 1995 and $51.6 million at year-end 1994. At June 30, 1995 and December
31, 1994, no portion of such debt was payable to either the Brink's Group or the
Minerals Group. During the first six months of 1995 cash required for operating
activities and investing activities was less than amounts received from the
Minerals Group, and as a result, net cash required from external borrowings
totaled $10.2 million. During 1994, cash generated from operations was less than
cash requirements for investing activities and funding the Minerals Group, and
as a result, net cash required from external borrowings totaled $1.3 million.
Related Party Transactions
- --------------------------
At June 30, 1995, the Minerals Group owed the Burlington Group $34.6 million, a
$7.9 million decrease from the $42.5 million owed at December 31, 1994.
At June 30, 1995, the Burlington Group owed the Minerals Group $20.5 million for
tax benefits, of which $14.0 million is expected to be paid within one year.
Off-balance sheet instruments
- -----------------------------
The Burlington Group utilizes various off-balance sheet financial instruments,
as discussed below, to hedge its foreign currency and other market exposures.
The risk that counterparties to such instruments may be unable to perform is
minimized by limiting the counterparties to major financial institutions. The
Burlington Group does not expect any losses due to such counterparty default.
Foreign currency forward contracts - The Company enters into foreign currency
forward contracts with a duration of 30 to 60 days as a hedge
<PAGE>
against accounts payable denominated in various currencies. These contracts do
not subject the Company to risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the payables being hedged.
At December 31, 1994, the total contract value of foreign currency forward
contracts outstanding was $7.4 million. As of such date, the fair value of the
foreign currency forward contracts was not significant.
Fuel contracts - The Services Group has hedged a portion of its jet fuel
requirements through a swap contract. At December 31, 1994, the notional value
of the jet fuel swap, aggregating 12.5 million gallons, through March 31, 1995,
was $6.5 million. In addition, the Company has entered into several commodity
option transactions that are intended to protect against significant increases
in jet fuel prices. These transactions, aggregate 23.3 million gallons with a
notional value of $15.8 million and are applicable throughout 1995 in amounts
ranging from 3.5 million gallons per month in the first quarter of 1995 to 2.1
million gallons per month in the fourth quarter of 1995. The Company has also
entered into a collar transaction applicable to 7.2 million gallons that
provides a minimum and maximum per gallon price. This transaction is settled
monthly based upon the average of the high and low prices during each period.
The fair value of these fuel hedge transactions may fluctuate over the course of
the contract period due to changes in the supply and demand for oil and refined
products. Thus, the economic gain or loss, if any, upon settlement of the
contracts may differ from the fair value of the contracts at an interim date. At
December 31, 1994, the fair value of these contracts was not significant.
Interest rate contracts - In connection with the aircraft leasing by Burlington
in 1993, the Company entered into interest rate cap agreements. These agreements
have a notional amount of $60 million and cap the Company's interest rate on
certain aircraft leases at 8.5% through April 1, 1996. At December 31, 1994, the
fair value of these contracts was not significant.
Contingent Liabilities
- ----------------------
Under the Coal Industry Retiree Health Benefit Act of 1992 (the "Health Benefit
Act"), the Company and its majority-owned subsidiaries at July 20, 1992,
including the Burlington Group are jointly and severally liable with the
Minerals Group and the Brink's Group for the costs of health care coverage
provided for by that Act. For a description of the Health Benefit Act and a
calculation of certain of such costs, see Note 13 to the Company's consolidated
financial statements. At this time, the Company expects the Minerals Group to
generate sufficient cash flow to discharge its obligations under the Act.
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the cleanup costs on an undiscounted basis using
existing technologies to be between $6.7 million and $14.1 million over a period
of up to five years. Management is unable to determine that any amount within
that range is a better estimate due to a variety of uncertainties, which include
the extent of the contamination at the site,
<PAGE>
the permitted technologies for remediation and the regulatory standards by which
the cleanup will be conducted. The cleanup estimates have been modified in light
of certain regulatory changes promulgated in December 1994.
The Company commenced insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws have been found to control the
interpretation of the policies), and numerous other factual considerations which
support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
Dividends
- ---------
The Board intends to declare and pay dividends on Burlington Stock based on the
earnings, financial condition, cash flow and business requirements of the
Burlington Group. Since the Company remains subject to Virginia law limitations
on dividends and to dividend restrictions in its public debt and bank credit
agreements, losses by the Minerals Group or the Brink's Group could affect the
Company's ability to pay dividends in respect of stock relating to the
Burlington Group.
In January 1994, the Company issued 161,000 shares or $80.5 million of a new
series of convertible preferred stock, which is convertible into Minerals Stock,
to finance a portion of a coal acquisition. While the issuance of the preferred
stock had no effect on the capitalization of the Burlington Group, annual
cumulative dividends of $31.25 per share of convertible preferred stock are
payable quarterly, in cash, out of all funds of the Company legally available
therefore, when, as and if declared by the Board, which commenced March 1, 1994.
Such stock also bears a liquidation preference of $500 per share plus an amount
equal to accrued and unpaid dividends thereon.
<PAGE>
ANNEX VIII
THE PITTSTON COMPANY
Description of Businesses
As used herein, the "Company" includes The Pittston Company ("Pittston") and its
direct and indirect subsidiaries, except as otherwise indicated by the context.
The Company's reportable industry segments for 1994 are Burlington Air Express,
Brink's, BHS, Coal and Mineral Ventures. See Note 16 to the Company's
Consolidated Financial Statements set forth in Annex IX hereto. The information
set forth with respect to "Business" and "Properties" is as of June 30, 1995
except where an earlier or later date is expressly stated. Nothing herein should
be considered as implying that such information is correct as of any date other
than June 30, 1995, except as so stated or indicated by the context.
Activities relating to the Burlington segment are carried on by Burlington Air
Express Inc. and its subsidiaries and certain affiliates and associated
companies in foreign countries (together, "Burlington"). Activities relating to
the Brink's segment (which includes armored car, air courier and related
services) are carried on by Brink's, Incorporated and its subsidiaries and
certain affiliates and associated companies in foreign countries (together,
"Brink's"). Activities relating to the BHS segment are carried on by Brink's
Home Security, Inc. ("BHS"). Activities relating to the Coal segment are carried
on by certain subsidiaries (together, "Coal operations") of the Company engaged
in the mining, preparation and marketing of bituminous coal, the purchase of
coal for resale and the sale and leasing of coal lands to others. Activities
relating to Mineral Ventures are carried on by Pittston Mineral Ventures Company
and its subsidiaries.
The Company has a total of approximately 24,300 employees.
PITTSTON SERVICES GROUP
Pittston Services Group (the "Services Group") consists of the air freight and
logistics management services of Burlington, the armored car business of Brink's
and the home security business of BHS.
BURLINGTON
General
- -------
Burlington is primarily engaged in North American overnight and international
time definite air and sea transportation, freight forwarding and logistics
management services and international customs brokerage. In conducting its
forwarding business, Burlington generally picks up or receives freight shipments
from its customers, consolidates the freight of various customers into shipments
for common destinations, arranges for the transportation of the consolidated
freight to such destinations (using either commercial carriers or, in the case
of most of its domestic and Canadian shipments, its own aircraft fleet and hub
sorting facility) and, at the destinations, distributes the consolidated
shipments and effects delivery to consignees. In international shipments,
Burlington also frequently acts as customs broker facilitating the clearance of
goods through customs at international points of entry. Burlington provides
transportation customers with logistics services and operates warehouse and
distribution facilities in several countries.
Burlington specializes in highly customized global freight forwarding and
logistics services. It has concentrated on providing service to customers with
significant logistics needs, such as manufacturers of computer and electronics
equipment. Burlington offers its customers a variety of service and pricing
alternatives for their shipments, such as overnight delivery, second-day
delivery or deferred service in North America.
<PAGE>
Internationally, Burlington offers a similar variety of services with ocean,
door-to-door delivery and standard and expedited air freight services.
Worldwide, a variety of ancillary services, such as shipment tracking, inventory
control and management reports are also provided.
Burlington provides air freight service to all major United States cities as
well as most foreign countries through its network of company-operated stations
and agent locations in 117 countries. Burlington markets its services primarily
through its direct sales force and also employs other marketing methods,
including print media advertising and direct mail campaigns. The pickup and
delivery of freight are accomplished principally by independent contractors.
Burlington's computer system, ARGUS+(Copyright), is a satellite-based, worldwide
communications system which, among other things, provides continuous worldwide
tracking and tracing of shipments and various data for management information
reports, enabling customers to improve efficiency and control costs. Burlington
also utilizes an image processing system to centralize airbill and related
document storage in Burlington's computer for automated retrieval by any
Burlington office. Burlington is in the process of developing a positive
tracking system that will utilize bar code technology and hand-held scanners.
Burlington's air freight business has tended to be seasonal, with a
significantly higher volume of shipments generally experienced during March,
June and the period August through November than during the other periods of the
year. The lowest volume of shipments has generally occurred in January and
February.
Aircraft Operations
- -------------------
Burlington utilizes a fleet of 34 leased aircraft providing regularly scheduled
service throughout the United States and certain destinations in Canada from its
freight sorting hub in Toledo, Ohio. Burlington's fleet is also used for
charters and to serve other international markets from time to time. The fleet
and hub are primarily dedicated to providing reliable next-day service for
domestic and Canadian air cargo customers. At December 31, 1994, Burlington
utilized 15 DC8's (including ten DC8-71 aircraft) and two B727's under leases
for terms expiring between 1995 and 1999. Seventeen additional cargo aircraft
including two DC8-71 and six B727-200 aircraft were under lease at December 31,
1994, for terms of less than two years. Based on the current state of the
aircraft leasing market, Burlington believes that it should be able to renew
these leases or enter into new leases on terms reasonably comparable to those
currently in effect. Pittston has guaranteed Burlington's obligations under
certain of these leases covering six aircraft. The actual operation and routine
maintenance of the aircraft leased by Burlington is contracted out, normally for
two- to three-year terms, to federally certificated operators which supply the
pilots and other flight services.
The nightly lift capacity in operation at December 31, 1994, was approximately
2.4 million pounds, calculated on an average freight density of 7.5 pounds per
cubic foot. Burlington's nightly lift capacity varies depending upon the number
and type of planes operated by Burlington at any particular time. Including
trucking capacity available to Burlington, the aggregate cargo capacity through
the hub at December 31, 1994, was approximately 3.3 million pounds.
Under its aircraft leases, Burlington is generally responsible for all the costs
of operating and maintaining the aircraft, including any special maintenance or
modifications which may be required by Federal Aviation Administration ("FAA")
regulations or orders. See "Government Regulation" below. In 1994, Burlington
spent approximately $15 million on routine heavy maintenance of its aircraft
fleet. Burlington has made provision in its
<PAGE>
financial statements for the expected costs associated with aircraft operations
and maintenance which it believes to be adequate; however, unanticipated
maintenance costs or required aircraft modifications could adversely affect
Burlington's profitability.
The average airframe age of the fleet leased by Burlington under leases with
terms longer than two years is 28 years, although factors other than age, such
as cycles (i.e., numbers of takeoffs and landings) can have a significant impact
on an aircraft's serviceability. Generally, cargo aircraft tend to have fewer
cycles than passenger aircraft over comparable time periods because they have
fewer flights per day and longer flight segments.
Fuel costs are a significant element of the total costs of operating
Burlington's aircraft fleet. For each one cent per gallon increase or decrease
in the price of jet fuel, Burlington's airline operating costs may increase or
decrease approximately $60,000 per month. In order to protect against price
increases in jet fuel, from time to time Burlington enters into hedging and
other agreements, including swap contracts and options.
Fuel prices are subject to the world, as well as local, market conditions. It is
not possible to predict the impact of future conditions on fuel prices and fuel
availability. Competition in the airfreight industry is such that no assurance
can be given that any future increases in fuel costs (including taxes relating
thereto) will be recoverable in whole or in part from customers.
Burlington has a lease expiring in October 2013 with the Toledo-Lucas County
Port Authority covering its freight sorting hub and related facilities (the
"Hub") at Toledo Express Airport in Ohio. The Hub consists of various
facilities, including a technologically advanced material handling system which
is capable of sorting approximately one million pounds of freight per hour.
Customers
- ---------
Burlington's domestic and foreign customer base includes thousands of industrial
and commercial shippers, both large and small. Burlington's customer base
includes major companies in the automotive, computer, electronics, fashion,
pharmaceutical and other industries where rapid delivery of high-value products
is required. In 1994, Burlington's largest single customer accounted for less
than 3% of its total worldwide revenues. Burlington does not have long-term,
noncancellable contracts with any of its customers.
Competition
- -----------
The air and sea freight forwarding and logistics industry has been and is
expected to remain highly competitive. The principal competitive factors in both
domestic and international markets are price, the ability to provide
consistently fast and reliable delivery of shipments and the ability to provide
ancillary services such as warehousing, distribution, shipment tracking and
sophisticated information systems and reports. There is aggressive price
competition in the domestic air freight market, particularly for the business of
high volume shippers. Burlington competes with other integrated air freight
companies that operate their own aircraft, as well as with air freight
forwarders, express delivery services, passenger airlines and other
transportation companies. Domestically, Burlington also competes with package
delivery services provided by ground transportation companies, including
trucking firms and surface freight forwarders, which offer specialized overnight
services within limited geographical areas. As a freight forwarder to, from and
within international markets, Burlington also competes with government-owned or
subsidized passenger airlines and ocean shipping companies. In logistics
services, Burlington competes with many third party logistics providers.
<PAGE>
Government Regulation
- ---------------------
The air transportation industry is subject to Federal regulation under the
Federal Aviation Act of 1958, as amended, and pursuant to that statute, the
Department of Transportation ("DOT") may exercise regulatory authority over
Burlington. Although Burlington itself is exempt from most DOT economic
regulations because it is an air freight forwarder, the operation of its
aircraft is subject directly or indirectly to FAA airworthiness directives and
other safety regulations and its Toledo, Ohio, hub operations are directly
affected by the FAA.
Federal statutes authorize the FAA, with the assistance of the Environmental
Protection Agency ("EPA"), to establish aircraft noise standards. Under the
National Emissions Standards Act of 1967, as amended by the Clean Air Act
Amendments of 1970, and the Airport Noise and Capacity Act of 1990 (the "Noise
Act"), the administrator of the EPA is authorized to issue regulations setting
forth standards for aircraft emissions. Although the Federal government
generally regulates aircraft noise, local airport operators may, under certain
circumstances, regulate airport operations based on aircraft noise
considerations. If airport operators were to restrict arrivals or departures
during certain nighttime hours to reduce or eliminate air traffic noise for
surrounding home areas at airports where Burlington's activities are centered,
Burlington would be required to serve those airports with Stage III equipment.
The Noise Act requires that aircraft not complying with Stage III noise limits
be phased out by December 31, 1999. The Secretary of Transportation may grant a
waiver if it is in the public interest and if the carrier has at least 85% of
its aircraft in compliance with Stage III noise levels by July 1, 1999, and has
a plan with firm orders for making all of its aircraft comply with such noise
levels not later than December 31, 2003. No waiver may permit the operation of
Stage II aircraft in the United States after December 31, 2003.
The Noise Act requires the FAA to promulgate regulations setting forth a
schedule for the gradual phase-out of Stage II aircraft. The FAA has adopted
rules requiring each "U.S. operator" to reduce the number of its Stage II
aircraft by 25% by the end of 1994, by 50% by the end of 1996, and by 75% by the
end of 1998.
The Noise Act imposes certain conditions and limitations on an airport's right
to impose new noise or access restrictions on Stage II and Stage III aircraft
but exempts present and certain proposed regulations from those requirements.
Twelve of the 17 aircraft in Burlington's fleet held under longer term leases
now comply with the Stage III limits. Through 1999, Burlington anticipates
either modifying or hush-kitting two DC8-63 aircraft which currently do not
comply with Stage III limits, leasing additional aircraft that do not meet
Stage III limits and hush-kitting such planes as required, or acquiring aircraft
that meet Stage III noise standards. Burlington projects that the cost of
modifying or hush-kitting the remaining aircraft with remaining lease terms of
more than two years in its fleet would range from $5 million to $10 million in
the aggregate. In the event that additional expenditures would be required or
costs were to be incurred at a rate faster than expected, Burlington could be
adversely affected. Ten of the DC8 cargo aircraft leased by Burlington have been
re-engined with CFM 56-2C1 engines which comply with Stage III noise standards.
Ground transportation and logistics services provided by Burlington are
generally exempt from regulation by the Interstate Commerce Commission.
Burlington, however, is subject to various other requirements and regulations in
connection with the operation of its motor vehicles, including certain safety
regulations promulgated by DOT and state agencies.
<PAGE>
International Operations
- ------------------------
Burlington's international operations accounted for approximately 53% of its
revenues in 1994. Included in international operations are export shipments from
the United States.
Burlington is continuing to develop import/export and logistics business between
shippers and consignees in countries other than the United States. Burlington
currently serves most foreign countries, 117 of which are served by Burlington's
network of company-operated stations and agent locations. Burlington has agents
and sales representatives in many overseas locations, although such agents and
representatives are not subject to long-term, noncancellable contracts.
A significant portion of Burlington's financial results is derived from
activities in several foreign countries, each with a local currency other than
the U.S. dollar. Because the financial results of Burlington are reported in
U.S. dollars, they are affected by the changes in the value of the various
foreign currencies in relation to the U.S. dollar. Burlington's international
activity is not concentrated in any single currency, which limits the risks of
foreign rate fluctuation. In addition, foreign currency rate fluctuations may
adversely affect transactions which are denominated in currencies other than the
functional currency. Burlington routinely enters into such transactions in the
normal course of its business. Although the diversity of its foreign operations
limits the risks associated with such transactions, Burlington uses foreign
exchange forward contracts to hedge the risk associated with certain
transactions denominated in currencies other than the functional currency. In
addition, Burlington is subject to the risks customarily attendant upon
operations owned by United States companies in countries outside the United
States, including local economic conditions, controls on repatriation of
earnings and capital, nationalization, expropriation and other forms of
restrictive action by local governments. The future effects of such risks on
Burlington cannot be predicted.
Employee Relations
- ------------------
Burlington and its subsidiaries have approximately 6,500 employees worldwide, of
whom about 1,400 are classified as part-time. Approximately 200 of these
employees (principally customer service, clerical and/or dock workers) in
Burlington's stations at John F. Kennedy Airport, New York; Newark, New Jersey;
Secaucus, New Jersey; Minneapolis, Minnesota; and Toronto, Canada are
represented by labor unions, which in most cases are affiliated with the
International Brotherhood of Teamsters. The collective bargaining agreements
covering such employees expire at various times in 1995 and 1996. Burlington has
not experienced any significant strike or work stoppage to date in 1995 and
considers its employee relations satisfactory.
Substantially all of Burlington's cartage operations are conducted by
independent contractors, and the flight crews for its aircraft are employees of
the independent airline companies which operate such aircraft.
Properties
- ----------
Burlington operates 258 (112 domestic and 146 international) stations with
Burlington personnel, and has agency agreements at an additional 230 (57
domestic and 173 international) stations. These stations are located near
primary shipping areas, generally at or near airports. Burlington-operated
stations, which generally include office space and warehousing facilities, are
located in 47 states and Puerto Rico. Burlington-operated facilities are located
in 26 countries. Most stations serve not only the city in which they are
located, but also nearby cities and towns. Nearly all Burlington-operated
stations are held under lease. The Hub in Toledo, Ohio, is held under a lease
expiring in 2013, with rights of renewal for three five-year periods. Other
facilities, including the corporate headquarters in Irvine, California, are held
under leases having terms of one to ten years.
<PAGE>
Burlington owns or leases, in the United States and Canada, a fleet of
approximately 220 automobiles as well as 170 vans and trucks utilized in station
work or for hauling freight between airport facilities and Burlington's
stations.
BRINK'S
General
- -------
The major activities of Brink's are contract-carrier armored car, automated
teller machine ("ATM"), air courier, coin wrapping, and currency and deposit
processing services. Brink's serves customers through 145 branches in the United
States and 39 branches in Canada. Service is also provided through subsidiaries,
affiliates and associated companies in 45 countries outside the United States
and Canada. These international operations contributed approximately 40% of
Brink's total reported 1994 operating profit. Brink's ownership interest in
these companies varies from approximately 5% to 100%; in some instances local
laws limit the extent of Brink's interest.
Representative customers include banks, commercial establishments, industrial
facilities, investment banking and brokerage firms and government agencies.
Brink's provides its individualized services under separate contracts designed
to meet the distinct transportation and security requirements of its customers.
These contracts are usually for an initial term of one year or less, but
generally continue in effect thereafter until canceled by either party.
Brink's armored car services include transportation of money from industrial and
commercial establishments to banks for deposit, and transportation of money,
securities and other negotiable items and valuables between commercial banks,
Federal Reserve Banks and their branches and correspondents, and brokerage
firms. Brink's also transports new currency, coins and precious metals for the
United States Mint, the Federal Reserve System and the Bank of Canada. For
transporting money and other valuables over long distances, Brink's offers a
combined armored car and air courier service linking many cities in the United
States and abroad. Brink's does not own or operate any aircraft, but uses
regularly scheduled or chartered aircraft in connection with its air courier
services.
In addition to its armored car pickup and delivery services, Brink's provides
payroll services, change services, coin wrapping services, currency and deposit
processing services, automated teller machine services, safes and safe control
services, check cashing and pickup and delivery of valuable air cargo shipments.
In certain geographic areas Brink's transports canceled checks between banks or
between a clearing house and its member banks. Brink's is developing a product
called CompuSafe (Trademark) designed to streamline the handling and management
of cash receipts for the convenience store and gas station market. Pilot tests
are under way in several test markets in the United States.
Brink's operates a worldwide specialized diamond and jewelry transportation
business and has offices in the major diamond and jewelry centers of the world,
including Antwerp, Tel Aviv, Hong Kong, New York, Bombay and Tokyo.
A wholly owned subsidiary, Brink's SFB Solutions, Inc., operates a business,
acquired in 1992, that develops highly flexible deposit processing and vault
management software systems for the financial service industry and its own
locations. Brink's offers a total processing package and the ability to tie
together a full range of cash vault, ATM, transportation, storage, processing,
inventory management and reporting services. Brink's believes that its
processing and information capabilities differentiate its currency and deposit
processing services from its competitors and enable Brink's to take advantage of
the trend by banks, retail business establishments and others to outsource
vaulting and cash room operations.
<PAGE>
Brink's activities outside of North America are organized into three regions:
Europe, Latin America and Asia/Pacific. In Europe wholly owned subsidiaries of
Brink's operate in Switzerland and the United Kingdom and in the diamond and
jewelry business in Belgium, Italy and the United Kingdom. Brink's has a 70%
interest in a subsidiary in Israel, a 65% general partnership interest in
Brink's-Nedlloyd VOF in the Netherlands and a majority interest in a subsidiary
in Greece. Brink's also has ownership interests ranging from 24.5% to 50% in
affiliates operating in Belgium, France, Germany, Ireland, Italy, Jordan and
Luxembourg. In Latin America a wholly owned subsidiary operates in Brazil.
Brink's owns a 60% interest in subsidiaries in Chile and Bolivia and a 20%
interest in a Mexican company, Servicio Pan Americano de Proteccion, S.A., which
operates one of the world's largest security transportation services with over
1,700 armored vehicles. Brink's also has ownership interests ranging from 5% to
49% in affiliates operating in Colombia, Panama, Peru and Venezuela. In the
Asia/Pacific region a wholly owned subsidiary of Brink's operates in Australia,
and majority owned subsidiaries operate in Hong Kong, Japan and Singapore.
Brink's also has minority interests in affiliates in India, Pakistan and
Thailand and a 50% ownership interest in an affiliate in Taiwan.
Competition
- -----------
Brink's is the oldest and largest armored car service company in the United
States and most of the countries it operates in. The foreign subsidiaries,
affiliates and associates of Brink's compete with numerous armored car and
courier service companies in many areas of operation. In the United States,
Brink's presently competes with two companies which operate numerous branches
nationally and with many regional and smaller local companies. Brink's believes
that its service, high quality insurance coverage and company reputation
(including the name "Brink's") are important competitive factors. However, the
cost of service is in many instances the controlling factor in obtaining and
retaining customers. While Brink's cost structure is generally competitive,
certain competitors of Brink's have lower costs primarily as a result of lower
wage and benefit levels.
See also "Government Regulation" below.
Service Mark, Patents and Copyrights
- ------------------------------------
Brink's is a registered service mark of Brink's, Incorporated in the United
States and in certain foreign countries. The Brink's mark and name are of
material significance to Brink's business. Brink's owns patents with respect to
certain coin sorting and counting machines and armored truck design. Brink's
holds copyrights on certain software systems developed by Brink's.
Insurance
- ---------
Brink's carries insurance coverage for losses. Insurance policies cover
liability for loss of various types of property entrusted to Brink's from any
cause except war and nuclear risk. The various layers of insurance are covered
by different groups of participating underwriters. Such insurance is obtained by
Brink's at rates and upon terms negotiated periodically with the underwriters.
The loss experience of Brink's and, to some extent, other armored carriers
affects premium rates charged to Brink's. A significant hardening of the
insurance market coupled with industry loss experience in recent years has
resulted in premium increases. The availability of quality and reliable
insurance coverage is an important factor in the ability of Brink's to obtain
and retain customers. Quality insurance is available to Brink's in major markets
although the premiums charged are subject to fluctuations depending on market
conditions. Less expensive armored car and air courier all-risk insurance is
available, but these policies typically contain unacceptable operating
warranties and limited customer protection.
Government Regulation
- ---------------------
As an interstate carrier, Brink's is subject to regulation in the United States
by the Interstate Commerce Commission ("ICC"). ICC jurisdiction includes, among
other things,
<PAGE>
authority over the issuance of operating rights to transport various
commodities. The operations of Brink's are also subject to regulation by the
United States Department of Transportation with respect to safety of operation
and equipment. Intrastate and intraprovince operations in the United States and
Canada are subject to regulation by state and by Canadian Dominion and
provincial regulatory authorities. Recent federal legislation may further ease
entry requirements for armored car and other companies in domestic markets by
essentially limiting ICC and State oversight to issues of safety and financial
responsibility.
Employee Relations
- ------------------
Brink's has approximately 7,900 employees in North America (including
approximately 3,000 classified as part-time employees), of whom approximately
60% are members of armored car crews. Brink's has approximately 6,000 employees
outside North America. In the United States, two locations are covered by
collective bargaining agreements. At June 30, 1995, Brink's was a party to two
United States and thirteen Canadian collective bargaining agreements with
various local unions covering approximately 1,195 employees, of whom 1,183 (for
the most part members of unions affiliated with the International Brotherhood of
Teamsters) are employees in Canada. Negotiations are continuing for one
agreement that expired in 1994. One agreement expired in 1995 and the remainder
will expire thereafter.
Brink's experienced a nine-week strike in British Columbia in 1994 which was
settled on favorable terms. Brink's experienced a five day strike in Ontario in
1995 which was settled on favorable terms. Brink's believes that its employee
relations are generally satisfactory.
Properties
- ----------
Brink's owns 24 branch offices and holds under lease an additional 185 branch
offices, located in 38 states, the District of Columbia, the Commonwealth of
Puerto Rico and nine Canadian provinces. Such branches generally include office
space and garage or vehicle terminals, and serve not only the city in which they
are located but also nearby cities. Brink's corporate headquarters in Darien,
Connecticut, is held under a lease expiring in 2000, with an option to renew for
an additional five-year period. The leased branches include 100 facilities held
under long-term leases, while the remaining 85 branches are held under
short-term leases or month-to-month tenancies.
Brink's owns or leases, in the United States and Canada, approximately 1,800
armored vehicles, 230 panel trucks and 225 other vehicles which are primarily
service cars. In addition, approximately 3,100 Brink's-owned safes are located
on customers' premises. The armored vehicles are of bullet-resistant
construction and are specially designed and equipped to afford security for crew
and cargo. Brink's subsidiaries and affiliated and associated companies located
outside the United States and Canada operate approximately 4,300 armored
vehicles.
BHS
General
- -------
BHS is engaged in the business of installing, servicing and monitoring
electronic security systems primarily in owner-occupied, single-family
residences. At June 30, 1995, BHS was monitoring approximately 347,000 systems,
including 38,200 new subscribers since December 31, 1994, and was servicing 48
metropolitan areas in 29 states, the District of Columbia and Canada. One of
these areas was added during 1995.
BHS markets its alarm systems primarily through media advertising, inbound
telemarketing and a direct sales force. BHS also markets its systems directly to
home builders and has entered into several contracts which extend through 1995.
<PAGE>
BHS employees install and service the systems from local BHS branches.
Subcontractors are utilized in some service areas. BHS does not manufacture any
of the equipment used in its security systems; instead, it purchases such
equipment from a small number of suppliers. Equipment inventories are maintained
at each branch office.
BHS's security system consists of sensors and other devices which are installed
at a customer's premises. The equipment is designed to signal intrusion, fire
and medical alerts. When an alarm is triggered, a signal is sent by telephone
line to BHS's central monitoring station near Dallas, Texas. The monitoring
station has been designed and constructed to meet the specifications of
Underwriters' Laboratories, Inc. ("UL") and is UL listed for residential
monitoring. A backup monitoring center in Arlington, Texas, protects against a
catastrophic event at the primary monitoring center. In the event of an
emergency, such as fire, flood, major interruption in telephone service, or any
other calamity affecting the primary facility, monitoring operations can be
transferred to the backup facility.
BHS's alarm service contracts contain provisions limiting BHS's liability to its
customers. Courts have, from time to time, upheld such provisions, but there can
be no assurance that the limitations contained in BHS's agreements will be
enforced according to their terms in any or all cases. The nature of the service
provided by BHS potentially exposes it to greater risks of liability than may be
borne by other service businesses. However, BHS has not experienced any major
liability losses. BHS carries insurance of various types, including general
liability and errors and omissions insurance, to protect it from product
deficiencies and negligent acts of its employees. Certain of BHS's insurance
policies and the laws of some states limit or prohibit insurance coverage for
punitive or certain other kinds of damages arising from employees' misconduct.
Regulation
- ----------
BHS and its personnel are subject to various Federal, state and local consumer
protection, licensing and other laws and regulations. BHS's business relies upon
the use of telephone lines to communicate signals, and telephone companies are
currently regulated by both the Federal and state governments. BHS's wholly
owned Canadian subsidiary, Brink's Home Security Canada Limited, is subject to
the laws of Canada, British Columbia and Vancouver. The alarm service industry
has experienced a high incidence of false alarms in some communities, including
communities in which BHS operates. This has caused some local governments to
impose assessments, fines and penalties on subscribers of alarm companies
(including BHS) based upon the number of false alarms reported. There is a
possibility that at some point some police departments may refuse to respond to
calls from alarm companies which would necessitate that private response forces
be used to respond to alarm signals. Regulation of installation and monitoring
of fire detection devices has also increased in several markets.
Competition
- -----------
BHS competes in many of its markets with numerous small local companies,
regional companies and several large national firms. BHS believes that it is one
of the leading firms engaged in the business of installing, servicing and
monitoring electronic security systems in the single-family home marketplace.
BHS offers a lower initial price than many of its competitors, although, in
recent years competition has greatly intensified in all of BHS markets. Several
significant competitors offer installation prices which match or are less than
BHS prices; however, many of the small local competitors in BHS markets continue
to charge significantly more for installation. The regional telecommunication
companies could become significant competitors in the home security business,
depending on regulatory developments affecting those companies. BHS believes
that the quality of its service compares favorably with that provided by
competitors and that the Brink's name and reputation also provide an important
competitive advantage.
<PAGE>
Employees
- ---------
BHS has approximately 1,400 employees, none of whom is covered by a collective
bargaining agreement. BHS believes that its employee relations are satisfactory.
Properties
- ----------
BHS operates from 41 leased offices and warehouse facilities across the United
States. All premises protected by BHS alarm systems are monitored from its
central monitoring station in suburban Dallas which is held by BHS under a lease
expiring in 1996. The adjacent National Support Center, where administrative,
technical, and marketing services are performed to support branch operations, is
also held under a lease expiring in 1996. The lease for the backup monitoring
center in Arlington, Texas, expires in 1998. BHS retains ownership of nearly all
the approximately 347,000 systems currently being monitored. BHS leases all the
vehicles used for installation and servicing of its security systems.
PITTSTON MINERALS GROUP
Pittston Minerals Group (the "Minerals Group") is primarily engaged in the
mining, preparation and marketing of coal, the purchase of coal for resale and
the sale or leasing of coal lands to others through its Coal operations. The
Minerals Group also explores for and acquires mineral assets other than coal
through its Pittston Mineral Ventures Company ("PMV") operations, although
revenues from such activities currently represent less than 2% of Minerals Group
revenues.
COAL OPERATIONS
General
- -------
Coal operations produces coal from approximately 24 company-operated surface and
deep mines located in Virginia, West Virginia, eastern Kentucky and Ohio for
consumption in the steam and metallurgical markets. Steam coal is sold primarily
to utilities and industrial customers located in the eastern United States.
Metallurgical coal is sold to steel and coke producers primarily located in
Japan, Korea, the United States, Europe, the Mediterranean basin and Brazil.
Coal operations' strategy is to develop its business as a low-cost producer of
steam coal and to maintain its presence in the metallurgical coal markets. Coal
operations has substantial reserves of low sulphur coal which can be produced
primarily from surface mines. Steam coal is sold primarily to domestic utility
customers through long-term contracts which have the effect of moderating the
impact of short-term market conditions. Most of the steam coal consumed in the
United States is used to generate electricity. Coal fuels approximately 500 of
the nation's 3,000 electric power plants, with larger facilities consuming more
than 10,000 tons of coal daily. In 1993 coal accounted for approximately 56% of
the electricity generated by the electric utility industry having increased from
approximately 54% in 1983. Given the absence of any new nuclear power plants
under construction and the impact of certain environmental legislation mandating
lower sulphur emissions by power plants, Coal operations believes that its
production of low sulphur steam coals should be well matched to market dynamics.
In addition, reduction in governmental subsidies for coal production in Europe
may provide opportunities for Coal operations to utilize its export
infrastructure to penetrate this market as well. This year, Coal operations will
make its first export steam shipments into Europe since the early 1980's.
By contrast, the market for metallurgical coal, for most of the past fifteen
years, has been characterized by weak demand from primary steel producers and
intense competition from foreign coal producers, especially those in Australia
and Canada who had benefited
<PAGE>
over this period from a declining currency value versus the U.S. dollar, since
coal sales contracts are denominated in U.S. dollars. Metallurgical coal sales
contracts typically are subject to annual price renegotiation, which increases
the exposure to market forces. Nonetheless, it appears that beginning in late
1994 reductions in the supply of metallurgical coal and improved operating rates
for primary steel producers in Japan and Europe have improved the current
supply-demand balance for metallurgical coal, and have created some current
shortages of certain high-quality mid-volatile metallurgical coals. Coal
operations achieved a more than $4 per ton increase on pricing with its
principal metallurgical export coal customers for the contract year beginning
April 1, 1995. These price increases have the effect of realigning pricing to
levels in effect prior to last year's unusually large decline. Coal operations,
given its significant reserves of metallurgical coal, long term customer
relations and export infrastructure, expects to maintain its presence in the
metallurgical coal business.
Since 1986, Coal operations has pursued its strategy through a combination of:
(i) selected acquisitions of steam coal assets and related sales contracts; (ii)
development of lower-cost surface mines; and (iii) divestiture and closures of
uneconomical coal mining operations. For example, since 1993, Coal operations
has opened three large surface mines in the vicinity of its Rum Creek
preparation and loading complex in West Virginia and has upgraded that facility
to load 10,000 ton unit-trains in four hours. The three mines and loading
facility have the capability of producing, blending and loading over five
million tons of steam coal annually. In March of 1992, Coal operations acquired
from Addington Resources, Inc.("Addington") for $42.7 million in cash, two
long-term contracts to supply steam coal to a utility as well as certain
highwall mining systems. Subsequently, in January of 1994, Coal operations
acquired substantially all of the remaining coal mining operations and coal
sales contracts of Addington, adding approximately 8.5 million tons of annual
low sulphur steam coal production and sales and providing additional reserves of
surface mineable low sulphur coal. The sales contracts acquired, some of which
continue in excess of five years, provide a broader base of domestic utility
customers.
In 1992, Coal operations sold Sewell Coal Company, which had conducted deep mine
metallurgical coal operations, and sold certain other coal reserves and coal
lands; in February 1993 Coal operations sold a coal preparation plant and
related interests in land, equipment and facilities in Stone, Kentucky, as well
as certain coal lands and mining rights for $24 million in cash and other
property. In early 1995, Coal operations closed its McClure River longwall mine
and preparation facility which had produced metallurgical coal for the export
market. The significant investment required to maintain this mine could not be
justified given the uncertain nature of the metallurgical coal market. In March
1995, Coal operations sold to Zither Mining certain Upper Freeport and Redstone
reserves for $4.8 million in cash and a note. Also, in June 1995, substantially
all of the Kentland-Elkhorn Coal Corporation coal reserves were surrendered back
to the lessor, Kentucky Berwind, in return for $5.4 million in cash and a note.
As a result of such strategic activities, Coal operations' steam coal sales as a
percentage of total coal sales have risen from approximately 35% in 1985 to 65%
for the period ending June 30, 1995. Coal operations' total coal production from
surface mines as a percentage of Coal operations' total coal production has
grown from approximately 2% in 1985 to 70% as of June 30, 1995.
Production
- ----------
The following table indicates the approximate tonnage of coal purchased and
produced by the Coal operations in the first six months of 1995, and the years
ended December 31, 1994, 1993 and 1992:
<PAGE>
6 Months Ended Year Ended December 31
(In thousands) June 30, 1995 1994 1993 1992
- -------------------------------------------------------------------------------
Produced:
Deep 2,041 4,857 7,061 8,642
Surface 7,130 15,107 7,492 5,804
Contract 1,040 2,364 2,521 2,792
- -------------------------------------------------------------------------------
10,211 22,328 17,074 17,238
Purchased 3,503 5,826 4,533 3,607
- -------------------------------------------------------------------------------
Total 13,714 28,154 21,607 20,845
===============================================================================
Of the coal production through June 30, 1995, approximately 35% was produced for
sale as metallurgical coal and 65% was produced for sale as steam coal.
In April 1993, Coal operations commenced production at its $15 million Tower
Mountain surface mine in Logan County, West Virginia, employing many former
underground miners who were retrained to operate large scale surface equipment.
Operating under a mining plan known as mountaintop removal, the Tower Mountain
mine utilizes 150 ton trucks to remove rock and overburden and uncover coal at a
low cost. In the six months ended June 30, 1995, this operation produced
1.0 million tons of coal.
Building on the success of Tower Mountain, Coal operations in 1994 opened two
additional surface mines, Boardtree and Bandmill, in the same general area of
West Virginia, also employing retrained underground miners. Taken together these
three mines are expected to produce over five million tons annually of low
sulphur steam coal. The coal produced from these mines will be shipped from the
Rum Creek loading facility which is being upgraded at the cost of $6.8 million
to load 10,000 ton unit trains in four hours, thereby reducing the delivered
cost to the customer.
In connection with the 1994 acquisition of substantially all the coal mining
operations and coal sales contracts of Addington, Coal operations acquired
surface and deep mines, river docks, preparation plants and rail loading
facilities. As part of the acquisition, Coal operations entered into a coal
purchase agreement for 4.9 million tons over a four year period. In addition,
Coal operations also purchased four highwall mining systems from an affiliate of
Addington, bringing to eight the total number of such systems owned by Coal
operations. These systems, which follow contour surface mining, achieve
productivity levels which can exceed conventional surface mining methods. During
1994, productivity and costs of the four operating surface mines acquired from
Addington did not meet expectations and adverse geological conditions were
encountered at one of the mines.
In June 1994, Coal operations prematurely terminated operations at its Heartland
surface mine in Lincoln County, West Virginia, due to rising costs caused by
adverse geological conditions that could not be overcome.
Productivity continues to benefit from the operating flexibilities contained in
the labor agreements with the United Mine Workers of America (the "UMWA"). Since
the signing of the 1990 Agreement, no significant labor disruptions have
occurred. On June 21, 1994, a successor collective bargaining agreement between
Coal operations' union companies and the UMWA was ratified by such companies'
union employees, replacing the principal labor agreement which expired on June
30, 1994.
Sales
- -----
The following table indicates the approximate tonnage of coal sold by Coal
operations in the six months ended June 30, 1995, and the year ended December
31, 1994, 1993 and 1992
<PAGE>
in the domestic (North American) and export markets and by categories of
customers:
(In thousands, except Six Months Ended Year Ended December 31
per ton amounts) June 30, 1995 1994 1993 1992
- --------------------------------------------------------------------------------
Domestic:
Steel and coke producers 373 769 1,854 1,931
Utility, industrial and other 8,483 18,198 10,277 8,432
- --------------------------------------------------------------------------------
8,856 18,967 12,131 10,363
Export:
Utility, industrial and other 47
Steel and coke producers 4,258 9,115 9,821 10,367
- --------------------------------------------------------------------------------
Total sold 13,161 28,082 21,952 20,730
- --------------------------------------------------------------------------------
Average selling price per ton $ 28.13 $ 27.70 $ 29.67 $ 30.96
================================================================================
For the six months ended June 30, 1995, Coal operations sold approximately 13.2
million tons of coal, of which approximately 9.5 million tons were sold under
contracts having a term of more than one year ("long-term contract"). In 1994,
Coal operations sold approximately 28.1 million tons of coal, of which
approximately 18.8 million tons were sold under contracts having a term of more
than one year. At June 30, 1995, approximately 89.4 million tons were committed
for sale under long-term contracts expiring at various times through July 2007.
Contracts relating to the greater part of this tonnage are subject to periodic
price renegotiation, which can result in termination by the purchaser or the
seller prior to contract expiration in case the parties should fail to agree
upon price.
For the six months ended June 30, 1995, the ten largest domestic customers
purchased 6.2 million tons of coal (47% of total coal sales and 70% of domestic
coal sales, by tonnage). The three largest domestic customers purchased 3.5
million tons of coal for the six months ended June 30, 1995 (27% of total coal
sales and 40% of domestic coal sales, by tonnage). For the six months ended June
30, 1995, American Electric Power Company purchased 2.2 million tons of coal,
accounting for 17% of total coal sales and 25% of domestic coal sales, by
tonnage. In 1994, the ten largest domestic customers purchased 13.0 million tons
of coal (46% of total coal sales and 69% of domestic coal sales, by tonnage).
The three largest domestic customers purchased 7.0 million tons of coal in 1994
(25% of total coal sales and 37% of domestic coal sales, by tonnage). In 1994,
American Electric Power Company purchased 3.6 million tons of coal, accounting
for 13% of total coal sales and 19% of domestic coal sales, by tonnage.
Of the 4.3 million tons of coal sold in the export market for the six months
ended June 30, 1995, the ten largest customers accounted for 2.7 million tons
(20% of total coal sales and 62% of export coal sales, by tonnage) and the three
largest customers purchased 1.2 million tons (9% of total coal sales and 29% of
export coal sales, by tonnage). Of the 9.1 million tons of coal sold in the
export market in 1994, the ten largest customers accounted for 5.3 million tons
(19% of total coal sales and 59% of export coal sales, by tonnage) and the three
largest customers purchased 2.5 million tons (9% of total coal sales and 27% of
export coal sales, by tonnage). Export coal sales are made principally under
annual contracts or long-term contracts that are subject to annual price
renegotiation. Under these export contracts, the price for coal is expressed and
paid in United States dollars.
<PAGE>
Virtually all coal sales in the domestic utility market pursuant to long-term
contracts are subject to periodic price adjustment on the basis of provisions
which permit an increase or decrease periodically in the price of coal sold
thereunder to reflect increases and decreases in certain price indices and, in
certain cases, such items as changes in taxes other than income taxes and, when
the coal is sold other than FOB the mine, changes in railroad and barge freight
rates. The provisions, however, are not identical in all of such contracts, and
the selling price of the coal does not necessarily reflect every change in
production cost incurred by the seller. These contracts are also generally
subject to periodic price renegotiation.
Contracts for the sale of metallurgical coal in the domestic and export markets
are generally subject to price renegotiation on an annual basis. Approximately
1.5 million tons, or 35%, of Coal operations' export coal sales of metallurgical
coal in the six months ended June 30, 1995 were made to Far East customers under
similar long-term contracts which continue in effect through various dates, the
latest of which is March 31, 1996, in each case subject to annual negotiation of
price and other terms. Negotiations with Far East customers were concluded in
March 1995 and substantial price increases over fiscal 1994 were secured. Coal
operations' steam coal business for 1995 has been impacted by the very mild
winter which severely depressed the U.S. utility business causing decreased
prices and demand. Due to this softening, Coal operations had to close or cut
back certain operations because of lack of sales opportunities in spot markets.
Competition
- -----------
The bituminous coal industry is highly competitive. Coal operations competes
with many other large coal producers and with hundreds of small producers in the
United States and abroad.
In the export market many foreign competitors, particularly Australian, South
African and Canadian coal producers, benefit from certain competitive advantages
existing in the countries in which they operate, such as less difficult mining
conditions, less severe government regulation and lower labor and health benefit
costs, as well as currencies which had generally depreciated against the United
States dollar, although the Australian dollar strengthened in 1994. While the
metallurgical coal produced by Coal operations is generally of higher quality,
and is often used by foreign steel producers to blend with coals from other
sources to improve the quality of coke and coke oven efficiency, in recent years
steel producers have developed facilities and techniques which, to some extent,
enable them to accept lower quality metallurgical coal in their coke ovens.
Moreover, new technologies for steel production which utilize pulverized coal
injection, direct reduction iron and the electric arc furnace may reduce the
demand for metallurgical coal of all types. U.S. metallurgical coal has been
disadvantaged in 1995 due to significant increases in ocean freight costs which
impact U.S. coals more severely due to the distance from East coast ports to the
Far East.
Coal operations competes domestically on the basis of the high quality of its
coal, which is not only valuable in the making of steel but, because of low
sulphur and high heat content, is also an attractive source of fuel to the
electric utility and other coal burning industries.
Other factors which affect competition include the price, availability and
public acceptance of alternative energy sources (in particular, oil, natural
gas, hydroelectric power and nuclear power), as well as the impact of federal
energy policies. Coal operations is not able to predict the effect, if any, on
its business (especially with respect to sales to domestic utilities) of
particular price levels for such alternative energy sources, especially oil and
natural gas. However, any sustained and marked decline in such prices could have
a material adverse effect on such business.
<PAGE>
Environmental Matters
- ---------------------
The Surface Mining Control and Reclamation Act of 1977 and the regulations
promulgated thereunder ("SMCRA") by the Federal Office of Surface Mining
Reclamation and Enforcement ("OSM"), and the enforcement thereof by the
U.S. Department of the Interior, establish mining and reclamation standards for
all aspects of surface mining as well as many aspects of deep mining. SMCRA also
imposes a tax of $0.35 on each ton of surface-mined coal and $0.15 on each ton
of deep-mined coal. OSM and its state counterparts monitor compliance with SMCRA
and its regulations by the routine issuance of "notices of violation" which
direct the mine operator to correct the cited conditions within a stated period
of time. Coal operations' policy is to correct the conditions that are the
subject of these notices or to contest those believed to be without merit in
appropriate proceedings.
Coal operations is involved in previously reported litigation with the state and
federal agencies that regulate the environmental aspects of underground and
surface mining. The litigation arises from the agencies' attempt to hold Coal
operations liable for the unabated violations, civil penalties, and AML fees of
other companies ("contractors") that have contracted in the past to mine Coal
operations' coal. In so doing, the agencies are retroactively applying
"ownership or control" regulations first promulgated in 1988, to past
transactions and ended relationships. The regulations are designed to "block" or
deny mining permits to any company that is "linked" by "ownership or control" to
another company that has outstanding violations, penalties or fees. The company
that is so linked cannot obtain new permits until the outstanding liabilities of
the violator are satisfied.
In 1991, Coal operations filed an action against the Secretary of Interior and
the State of Virginia to enjoin the agencies from blocking Coal operations'
permits without first providing due process. The district court ruled that the
United States Constitution requires the government to give Coal operations
notice and an opportunity to contest the charges before blocking permits or
taking other action to hold Coal operations liable for the alleged contractor
violations. However, the court later ruled against Coal operations on a
jurisdictional issue, holding that the case was a challenge to the ownership and
control regulations themselves which had to be filed in the District of
Columbia.
Coal operations has appealed the district court's decision on jurisdiction to
the Fourth Circuit Court of Appeals. At the request of Coal operations, the
district court left its injunction in force during the appeal to the Fourth
Circuit, and the Fourth Circuit denied the government's motion to dissolve the
injunction pending appeal. Following briefing and oral argument in October of
1992, the Fourth Circuit stayed its ultimate decision in the case pending a
final disposition in a District of Columbia case in which industry groups have
challenged the validity of the ownership or control rules. The District of
Columbia case is awaiting decision on motions for summary judgment, which have
been fully briefed and argued.
It has been over two years since the Fourth Circuit stayed its decision. How
long the court will continue to do so is unknown. If the case is decided
adversely to Coal operations, Coal operations may seek transfer to Washington or
further review in the Supreme Court. If the injunction is dissolved and a permit
block results, Coal operations will have to pay or settle the claims involving
these contractors.
While the total liabilities of these contractors has not been determined at this
time, it is estimated that they have outstanding civil penalties of
approximately $2.0 million and unpaid AML fees of approximately $1.5 million (as
of March 1994). In addition, the contractors may have outstanding reclamation
obligations of several million dollars. Firm figures of the reclamation costs
have not been determined at this time.
Coal operations is subject to various federal environmental laws, including the
Clean Water Act, the Clean Air Act and the Safe Drinking Water Act, as well as
state laws of
<PAGE>
similar scope in Virginia, West Virginia, Kentucky and Ohio. These laws require
approval of many aspects of coal mining operations, and both federal and state
inspectors regularly visit Coal operations' mines and other facilities to assure
compliance.
While it is not possible to quantify the costs of compliance with all applicable
federal and state laws, those costs have been and are expected to continue to be
significant. In that connection, it is estimated that Coal operations will make
capital expenditures for environmental control facilities in the amount of
approximately $1.7 million in 1995 and $1.7 million in 1996. Compliance with
these laws has substantially increased the cost of coal mining, but is, in
general, a cost common to all domestic coal producers. Pittston believes that
the competitive position of Coal operations has not been and should not be
adversely affected except in the export market where Coal operations competes
with various foreign producers subject to less stringent environmental
regulation.
Federal, state and local authorities strictly monitor the sulphur dioxide and
particulate emissions from electric power plants served by Coal operations. In
1990, Congress enacted the Clean Air Act Amendments of 1990, which, among other
things, permit utilities to use low sulphur coals in lieu of constructing
expensive sulphur dioxide removal systems. Pittston believes that such Act
should have a favorable impact on the marketability of Coal operations'
extensive reserves of low sulphur coals. However, Pittston cannot predict at
this time the timing or extent of such favorable impact.
Mine Health and Safety Laws
- ---------------------------
The coal operating companies included within Coal operations are generally
liable under federal laws requiring payment of benefits to coal miners with
pneumoconiosis ("black lung"). The Black Lung Benefits Revenue Act of 1977 and
the Black Lung Benefits Reform Act of 1977 (the "1977 Act"), as amended by the
Black Lung Benefits and Revenue Amendments Act of 1981 (the "1981 Act"),
expanded the benefits for black lung disease and levied a tax on coal production
of $1.10 per ton for deep-mined coal and $0.55 per ton for surface-mined coal,
but not to exceed 4.4% of the sales price. In addition, the 1981 Act provides
that certain claims for which coal operators had previously been responsible
will be obligations of the government trust funded by the tax. The 1981 Act also
tightens standards set by the 1977 Act for establishing and maintaining
eligibility for benefits. The Revenue Act of 1987 extended the termination date
of the tax from January 1, 1996 to the earlier of January 1, 2014 or the date on
which the government trust becomes solvent. Pittston cannot predict whether any
future legislation effecting changes in the tax will be enacted.
Stringent safety and health standards have been imposed by federal legislation
since 1969 when the Federal Coal Mine Health and Safety Act was adopted, which
resulted in increased operating costs and reduced productivity. The Federal Mine
Safety and Health Act of 1977 significantly expanded the enforcement of health
and safety standards.
Compliance with health and safety laws is, in general, a cost common to all
domestic coal producers. Pittston believes that the competitive position of Coal
operations has not been and should not be adversely affected except in the
export market where Coal operations competes with various foreign producers
subject to less stringent health and safety regulations.
Labor Agreements; Employee Relations
- ------------------------------------
In January 1990, after a 46-week strike, various coal subsidiaries of Pittston
(collectively, the "Coal Subsidiaries") entered into the 1990 Agreement with the
UMWA. The 1990 Agreement provided for increases in wages and benefits, expanded
job security for the Coal Subsidiaries' employees, new health care cost
containment measures and operational flexibility for the Coal Subsidiaries,
including the right to operate 24 hours per day, seven days per week. The 1990
Agreement expired on June 30, 1994.
<PAGE>
On June 21, 1994, a successor collective bargaining agreement between the Coal
Subsidiaries' union companies and the UMWA was ratified by such companies' union
employees, replacing the 1990 Agreement. The new agreement will remain in effect
until December 31, 1998. This agreement continues the basic principles and
provisions established in the 1990 Agreement with respect to the areas of job
security, work rules and scheduling. The new agreement provides for, among other
things, wage increases of $.40 per hour on December 15 of each of the years 1994
to 1997 and includes improvements in certain employee benefit programs.
In January 1993, the Coal Subsidiaries entered into a Memorandum of
Understanding which modified the 1990 Agreement to cover the terms and
conditions of employment at Coal operations' Tower Mountain and other surface
mines located in Logan and Boone Counties, West Virginia. Such Memorandum
expires on January 31, 1997.
At June 30, 1995, approximately 744 of the 2,300 employees of Coal operations
were members of the UMWA. The remainder of such employees are either supervisory
personnel or unrepresented hourly employees. Since the signing of the 1990
Agreement, no significant labor disruptions have occurred. Pittston believes
that its employee relations are satisfactory.
Health Benefit Act
- ------------------
In October 1992, the Coal Industry Retiree Health Benefit Act of 1992 (the
"Health Benefit Act") was enacted as part of the Energy Policy Act of 1992. The
Health Benefit Act established rules for the payment of future health care
benefits for thousands of retired union mine workers and their dependents. Part
of the burden for these payments was shifted by the Health Benefit Act from
certain coal producers, which had a contractual obligation to fund such
payments, to producers such as Pittston which have collective bargaining
agreements with the UMWA that do not require such payments and to numerous other
companies which are no longer in the coal business. The Health Benefit Act
established a trust fund to which "signatory operators" and "related persons,"
including Pittston and certain of its coal subsidiaries (collectively, the
"Pittston Companies"), are obligated to pay annual premiums for assigned
beneficiaries, together with a pro rata share for certain beneficiaries who
never worked for such employers, including, in Pittston's case, the Pittston
Companies ("unassigned beneficiaries"), in amounts determined by the Secretary
of Health and Human Services on the basis set forth in the Health Benefit Act.
In October 1993 the Pittston Companies received notices from the Social Security
Administration (the "SSA") with regard to their assigned beneficiaries for which
they are responsible under the Health Benefit Act. For 1993 and 1994, these
amounts were approximately $9.1 million and $11.0 million, respectively.
Pittston believes that the annual cash funding under the Health Benefit Act for
the Pittston Companies' assigned beneficiaries will continue in the $10 to $11
million range for the next eight years and should begin to decline thereafter as
the number of such assigned beneficiaries decreases.
Based on the number of beneficiaries actually assigned by the SSA, Pittston
estimates the aggregate pretax liability relating to the Pittston Companies'
assigned beneficiaries at December 31, 1994 at approximately $250 million, which
when discounted at 8.75% provides a present value estimate of approximately
$100 million.
The ultimate obligation that will be incurred by Pittston could be significantly
affected by, among other things, increased medical costs, decreased number of
beneficiaries, governmental funding arrangements, and such federal health
benefit legislation of general application as may be enacted. In addition, the
Health Benefit Act requires the Pittston Companies to fund, pro rata according
to the total number of assigned beneficiaries, a portion of the health benefits
for unassigned beneficiaries. At this time, the funding for such health benefits
is being provided from another source and for this and other reasons the
Pittston Companies' ultimate obligation for the unassigned beneficiaries cannot
be
<PAGE>
determined. Pittston accounts for the obligation under the Health Benefit Act as
a participant in a multi-employer plan and recognizes the annual cost on a
pay-as-you-go basis.
Evergreen Case
- --------------
In 1988, the trustees of certain pension and benefit trust funds (the "Funds")
established under collective bargaining agreements with the UMWA brought an
action (the "Evergreen Case") against Pittston and a number of its coal
subsidiaries in the United States District Court for the District of Columbia,
claiming that the defendants are obligated to contribute to the Funds in
accordance with the provisions of the 1988 and subsequent National Bituminous
Coal Wage Agreements, to which neither Pittston nor any of its subsidiaries is a
signatory. In January 1992, the District Court issued an order granting summary
judgment on the issue of liability which was thereafter affirmed by the Court of
Appeals. In June 1993, the United States Supreme Court denied a petition for a
writ of certiorari. The case has been remanded to the District Court, and damage
and other issues remain to be decided. In September 1993, the Company filed a
motion seeking relief from the District Court's grant of summary judgment to
plaintiffs based on, among other things, the Company's allegation that
plaintiffs improperly withheld evidence that directly refutes plaintiffs'
representations to the District Court and the Court of Appeals in this case. In
December 1993, that motion was denied. On May 23, 1994, the trustees filed a
Motion for Entry of Final Judgment seeking approximately $71.1 million in
delinquent contributions, interest and liquidated damages through May 31, 1994,
plus approximately $17.4 thousand additional interest and liquidated damages for
each day between May 31, 1994 and the date final judgment is entered, plus
ongoing contributions to the 1974 Pension Plan. The Company has opposed this
motion. There has been no decision on this motion or final judgment entered to
date.
In furtherance of its ongoing effort to identify other available legal options
for seeking relief from what it believes to be an erroneous finding of liability
in the Evergreen Case, the Company has filed suit against the Bituminous Coal
Operators Association and others (the "BCOA Case") to hold them responsible for
any damages sustained by the Company as a result of the Evergreen Case. Although
the Company is continuing that effort, the Company, following the District
Court's ruling in December 1993, recognized the potential liability that may
result from an adverse judgment in the Evergreen Case. In any event, any final
judgment in the Evergreen Case will be subject to appeal.
In December 1994, the District Court ordered that the Evergreen Case, as well as
related cases filed against other coal companies, and the BCOA Case be submitted
to mediation before a Federal judge in an effort to obtain a settlement. The
mediation process is ongoing.
As a result of the Health Benefit Act described above, there is no continuing
liability in this case in respect of health benefit funding after February 1,
1993.
Properties
- ----------
The principal properties of Coal operations are coal reserves, coal mines and
coal preparation plants, all of which are located in Virginia, West Virginia,
eastern Kentucky and Ohio. Such reserves are either owned or leased. Leases of
land or coal mining rights generally are either for a long-term period or until
exhaustion of the reserves, and require the payment of a royalty based generally
on the sales price and/or tonnage of coal mined from a particular property. Many
leases or rights provide for payment of minimum royalties.
Pittston estimates that Coal operations' proved and probable surface mining,
deep mining and total coal reserves as of June 30, 1995 were 151 million, 225
million and 376 million
<PAGE>
tons, respectively. Such estimates represent economically recoverable and
minable tonnage and include allowances for extraction and processing.
Of the 376 million tons of proved and probable coal reserves as of June 30,
1995, approximately 75% has a sulphur content of less than 1% (which is
generally regarded in the industry as low sulphur coal) and approximately 25%
has a sulphur content greater than 1%. Approximately 24% of such reserves
consists of primarily metallurgical grade coal.
As of June 30, 1995, Coal operations controlled approximately 925 million tons
of additional coal deposits in the eastern United States, which cannot be
expected to be economically recovered without market improvement and/or the
application of new technologies. Coal operations also owns substantial
quantities of low sulphur coal deposits in Sheridan County, Wyoming.
Most of the oil and gas rights associated with Coal operations' properties are
managed by an indirect wholly owned subsidiary of Pittston which, in general,
receives royalty and other income from oil and gas development and operation by
third parties. Coal operations also receives incidental income from the sale of
timber cutting rights on certain properties.
Coal operations owns a 32.5% interest in Dominion Terminal Associates ("DTA"),
which leases and operates a ground storage-to-vessel coal transloading facility
in Newport News, Virginia. DTA has a throughput capacity of 22.0 million tons of
coal per year and ground storage capacity of 2.0 million tons. A portion of Coal
operations' share of the throughput and ground storage capacity of the DTA
facility is subject to user rights of third parties which pay Coal operations a
fee. The DTA facility serves export customers, as well as domestic coal users
located on the eastern seaboard of the United States. For information relating
to the financing arrangements for DTA, see Note 12 to Minerals Group Financial
Statements included in Part II hereof.
MINERAL VENTURES
PMV's business is directed at locating and acquiring mineral assets, advanced
stage projects and operating mines. PMV is currently evaluating gold projects in
the United States and Australia. An exploration office has been opened in Reno,
Nevada, to coordinate PMV's expanded exploration program in the Western United
States. In 1994 PMV expended approximately $2.8 million on all of such programs.
The Stawell gold mine, located in the Australian state of Victoria, in which PMV
has a net equity interest of 67%, produced 77,966 ounces of gold in 1994. PMV
estimates that on June 30, 1995, the Stawell gold mine had approximately
4,200,000 tons of proved and probable gold ore reserves at an average
recoverable grade of about .115 of an ounce per ton. In- mine exploration at
Stawell continues to generate positive results.
MATTERS RELATING TO FORMER OPERATIONS
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement the
Company is obligated to pay for 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the clean-up costs, on an undiscounted basis, using
existing technologies to be between $6.7 million and $14.1 million over a period
of up to five years. Management is unable to determine that any amount within
that range is a better estimate due to a variety of uncertainties, which include
the extent of
<PAGE>
the contamination at the site, the permitted technologies for remediation and
the regulatory standards by which the clean-up will be conducted. The clean-up
estimates have been modified in light of certain regulatory changes promulgated
in December 1994.
The Company commenced an insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws were held by the court to control
the interpretation of the policies), and numerous other factual considerations
which support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
<PAGE>
ANNEX IX
THE PITTSTON COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL INFORMATION
Page
Statement of Management Responsibility ............................. 1
Audited Consolidated Financial Statements as of December 31, 1994
and 1993, and for each of the years in the three-year period
ended December 31, 1994 and unaudited Consolidated Financial
Statements as of June 30, 1995 and for the six months ended
June 30, 1995 and 1994:
Independent Auditors' Report ....................................... 2
Consolidated Balance Sheets ........................................ 3
Consolidated Statements of Operations .............................. 4
Consolidated Statements of Shareholders' Equity .................... 5
Consolidated Statements of Cash Flows .............................. 7
Notes to Consolidated Financial Statements ......................... 8
Industry Segment Information ....................................... 36
Management's Discussion and Analysis of
Results of Operations and Financial Condition ...................... 42
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
STATEMENT OF MANAGEMENT RESPONSIBILITY
The management of The Pittston Company (the "Company") is responsible for
preparing the accompanying consolidated financial statements and for their
integrity and objectivity. The statements were prepared in accordance with
generally accepted accounting principles. Management has also prepared the other
information in the annual report and is responsible for its accuracy.
In meeting our responsibility for the integrity of the consolidated financial
statements, we maintain a system of internal controls designed to provide
reasonable assurance that assets are safeguarded, that transactions are executed
in accordance with management's authorization and that the accounting records
provide a reliable basis for the preparation of the financial statements.
Qualified personnel throughout the organization maintain and monitor these
internal controls on an ongoing basis. In addition, the Company maintains an
internal audit department that systematically reviews and reports on the
adequacy and effectiveness of the controls, with management follow-up as
appropriate.
Management has also established a formal Business Code of Ethics which is
distributed throughout the Company. We acknowledge our responsibility to
establish and preserve an environment in which all employees properly understand
the fundamental importance of high ethical standards in the conduct of our
business.
The Company's consolidated financial statements have been audited by KPMG Peat
Marwick LLP, independent auditors. During the audit they review and make
appropriate tests of accounting records and internal controls to the extent they
consider necessary to express an opinion on the Company's consolidated financial
statements.
The Company's Board of Directors pursues its oversight role with respect to the
Company's consolidated financial statements through the Audit and Ethics
Committee, which is composed solely of outside directors. The Committee meets
periodically with the independent auditors, internal auditors and management to
review the Company's control system and to ensure compliance with applicable
laws and the Company's Business Code of Ethics.
We believe that the policies and procedures described above are appropriate and
effective and do enable us to meet our responsibility for the integrity of the
Company's consolidated financial statements.
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
The Pittston Company
We have audited the accompanying consolidated balance sheets of The Pittston
Company and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Pittston Company
and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Stamford, Connecticut
January 25, 1995
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands, June 30 December 31
except per share amounts) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 38,921 42,318 32,412
Short-term investments 26,921 25,162 22,946
Accounts receivable:
Trade (Note 3) 355,528 361,361 283,942
Other 44,081 31,165 28,641
- -------------------------------------------------------------------------------------------------------------
399,609 392,526 312,583
Less estimated amount uncollectible 16,138 15,734 16,040
- -------------------------------------------------------------------------------------------------------------
383,471 376,792 296,543
Coal inventory 39,022 25,518 18,649
Other inventory 8,564 8,635 5,506
- -------------------------------------------------------------------------------------------------------------
47,586 34,153 24,155
Prepaid expenses 37,156 27,700 27,493
Deferred income taxes (Note 6) 52,796 55,850 53,642
- -------------------------------------------------------------------------------------------------------------
Total current assets 586,851 561,975 457,191
Property, plant and equipment, at cost (Note 4) 878,755 840,494 782,354
Less accumulated depreciation, depletion and
amortization 416,125 394,660 412,533
- -------------------------------------------------------------------------------------------------------------
462,630 445,834 369,821
Intangibles, net of amortization (Notes 5 and 10) 331,416 329,441 215,042
Deferred pension assets (Note 13) 121,405 118,953 117,066
Deferred income taxes (Note 6) 81,299 84,214 59,846
Other assets 176,065 197,361 142,535
- -------------------------------------------------------------------------------------------------------------
Total assets $1,759,666 1,737,778 1,361,501
=============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 25,430 13,323 9,546
Current maturities of long-term debt (Note 7) 11,217 13,748 7,908
Accounts payable 250,749 252,615 182,276
Accrued liabilities:
Taxes 34,253 44,654 43,769
Workers' compensation and other claims 33,383 41,771 42,397
Miscellaneous 212,004 208,359 151,548
- -------------------------------------------------------------------------------------------------------------
279,640 294,784 237,714
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 567,036 574,470 437,444
Long-term debt, less current maturities (Note 7) 162,532 138,071 58,388
Postretirement benefits other than pensions (Note 13) 219,599 218,738 212,218
Workers' compensation and other claims 130,888 138,793 127,545
Deferred income taxes (Note 6) 20,118 19,036 15,847
Other liabilities 188,244 200,855 156,547
Commitments and contingent liabilities
(Notes 7, 11, 12, 13, 17 and 18)
Shareholders' equity (Notes 1, 7, 8 and 9):
Preferred stock, par value $10 per share,
Authorized: 2,000,000 shares
$31.25 Series C Cumulative Preferred Stock,
Issued: 1995 - 139,980 shares;
1994 - 152,650 shares 1,399 1,526 -
Pittston Services Group common stock, par value
$1 per share: Authorized: 100,000,000 shares
Issued: 1995 41,571,345 shares;
1994 - 41,594,845 shares;
1993 - 41,429,455 shares 41,571 41,595 41,429
Pittston Minerals Group common stock,
par value $1 per share:
Authorized: 20,000,000 shares
Issued: 1995 - 8,484,708 shares;
1994 - 8,389,622 shares;
1993 - 8,280,619 shares 8,484 8,390 8,281
Capital in excess of par value 395,686 420,470 354,911
Retained earnings 137,650 107,739 98,290
Equity adjustment from foreign currency translation (18,616) (14,276) (18,381)
Employee benefits trust, at market value (Note 9) (94,925) (117,629) (131,018)
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 471,249 447,815 353,512
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,759,666 1,737,778 1,361,501
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands, except Six Months Ended June 30 Year Ended December 31
per share amounts) 1995 1994 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 379,951 378,891 794,998 687,089 657,871
Operating revenues 1,030,900 868,404 1,872,277 1,569,032 1,415,170
- ------------------------------------------------------------------------------------------------------------------------------
Net sales and operating revenues 1,410,851 1,247,295 2,667,275 2,256,121 2,073,041
- ------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 374,800 378,825 771,586 645,679 604,319
Operating expenses 870,125 716,179 1,542,080 1,299,541 1,187,229
Selling, general and
administrative expenses 126,621 118,156 244,330 226,125 222,234
Restructuring and other charges,
including litigation
accrual (Note 14) - 90,806 90,806 78,633 -
Pension credit (Note 13) - - - - (11,130)
- ------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,371,546 1,303,966 2,648,802 2,249,978 2,002,652
- ------------------------------------------------------------------------------------------------------------------------------
Other operating income (Note 15) 19,282 10,835 24,400 19,956 19,103
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) 58,587 (45,836) 42,873 26,099 89,492
Interest income 1,652 1,208 2,513 2,839 3,235
Interest expense (6,744) (5,209) (11,489) (10,173) (11,087)
Other income (expense),
net (Note 15) (2,196) (4,067) (5,572) (4,611) (4,034)
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 51,299 (53,904) 28,325 14,154 77,606
Provision (credit) for income
taxes (Note 6) 12,626 (18,374) 1,428 8 28,519
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) 38,673 (35,530) 26,897 14,146 49,087
Preferred stock dividends (1,176) (2,263) (3,998) - -
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributed to
common shares $ 37,497 (37,793) 22,899 14,146 49,087
==============================================================================================================================
Pittston Services Group (Note 1):
Net income attributed to
common shares $ 33,569 31,799 79,845 47,126 27,277
==============================================================================================================================
Net income per common share $ .89 .84 2.11 1.28 .74
==============================================================================================================================
Average common shares outstanding 37,912 37,715 37,784 36,907 37,081
Pittston Minerals Group (Note 1):
Net income (loss) attributed
to common shares $ 3,928 (69,592) (56,946) (32,980) 21,810
==============================================================================================================================
Net income (loss) per common share $ .51 (9.20) (7.50) (4.47) 2.94
==============================================================================================================================
Average common shares outstanding 7,764 7,565 7,594 7,381 7,416
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Pittston Pittston
$31.25 Services Minerals Equity
Series C Group Group Capital in Adjustment
Cumulative Common Common Excess of from Foreign Employee
Preferred Stock Stock Par Value Retained Currency Benefits
Stock (Note 1) (Note 1) (Note 1) Earnings Translation Trust
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $ - 37,317 7,463 221,369 59,523 (9,157) -
Net income - - - - 49,087 - -
Stock options exercised (Note 8) - 113 23 1,336 - - -
Employee benefit plan (Note 13) - 71 14 817 - - -
Employee benefits trust (Note 9) - 4,000 800 49,700 - - (54,500)
Foreign currency translation adjustment - - - - - (4,905) -
Remeasurement of employee
benefits trust - - - 4,963 - - (4,963)
Shares released from employee
benefits trust to employee
benefit plan (Note 9) - - - (7) - - 691
Retirement of stock under share
repurchase programs (Note 9) - (968) (193) (8,764) (3,108) - -
Cash dividends declared -
Pittston Services Group
$.1515 per share and Pittston
Minerals Group $.4924 per
share (Note 1) - - - - (9,262) - -
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 - 40,533 8,107 269,414 96,240 (14,062) (58,772)
Net income - - - - 14,146 - -
Stock options exercised (Note 8) - 971 208 13,578 - - -
Tax benefit of stock options
exercised (Note 6) - - - 2,121 - - -
Foreign currency translation adjustment - - - - - (4,319) -
Remeasurement of employee
benefits trust - - - 73,907 - - (73,907)
Shares released from employee
benefits trust to employee
benefit plan (Note 9) - - - (2) - - 1,661
Retirement of stock under
share repurchase programs (Note 9) - (75) (34) (944) (458) - -
Costs of Services Stock
Proposal (Note 9) - - - (3,163) - - -
Cash dividends declared -
Pittston Services Group
$.1909 per share and Pittston
Minerals Group $.6204 per
share (Note 1) - - - - (11,638) - -
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 - 41,429 8,281 354,911 98,290 (18,381) (131,018)
</TABLE>
Continued on Page 9.
<PAGE>
Continuation of Page 8.
<TABLE>
<CAPTION>
Pittston Pittston
$31.25 Services Minerals Equity
Series C Group Group Capital in Adjustment
Cumulative Common Common Excess of from Foreign Employee
Preferred Stock Stock Par Value Retained Currency Benefits
Stock (Note 1) (Note 1) (Note 1) Earnings Translation Trust
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 - 41,429 8,281 354,911 98,290 (18,381) (131,018)
Net income - - - - 26,897 - -
Issuance of $31.25 Series C
Cumulative Preferred Stock,
net of cash expenses (Note 9) 1,610 - - 75,472 - - -
Stock options exercised (Note 8) - 422 129 6,781 - - -
Tax benefit of stock options
exercised (Note 6) - - - 2,936 - - -
Foreign currency translation adjustment - - - - - 4,105 -
Remeasurement of employee
benefits trust - - - (10,449) - - 10,449
Shares released from
employee benefits trust
to employee benefit plan (Note 9) - - - (309) - - 2,940
Retirement of stock under
share repurchase
programs (Note 9) (84) (256) (20) (8,877) (718) - -
Costs of Services Stock
Proposal (Note 9) - - - (4) - - -
Conversion of 9.2% debentures - - - 9 - - -
Cash dividends declared -
Pittston Services Group
$.20 per share, Pittston
Minerals Group $.65 per
share and Series C Preferred
Stock $27.09 per share - - - - (16,730) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $1,526 41,595 8,390 420,470 107,739 (14,276) (117,629)
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30 Year Ended December 31
(In thousands) 1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 38,673 (35,530) 26,897 14,146 49,087
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Noncash charges and other write-offs - 46,793 46,793 10,857 3,147
Depreciation, depletion and amortization 51,893 47,191 101,856 77,565 70,424
Provision for aircraft heavy maintenance 12,412 13,069 26,598 20,962 25,819
Provision (credit) for deferred income taxes 6,543 (17,389) (17,777) (29,435) 9,063
Credit for pensions, noncurrent (1,730) 642 (1,128) (2,596) (15,161)
Provision for uncollectible accounts receivable 1,999 1,766 4,532 6,880 4,058
Equity in earnings of unconsolidated affiliates,
net of dividends received (8) (2,248) (1,432) (4,205) (4,989)
Gain on sale of leveraged leases - - - - (2,341)
Gain on sale of property, plant and equipment (3,357) (585) (3,569) (5,472) (915)
Other operating, net 1,930 1,756 3,491 3,904 3,485
Change in operating assets and liabilities,
net of effects of acquisitions and dispositions:
Increase in accounts receivable (8,678) (38,610) (85,734) (20,715) (20,139)
Decrease (increase) in inventories (13,432) (9,095) (4,184) 6,507 4,034
Decrease (increase) in prepaid expenses (9,371) (2,619) (2,849) (2,795) 443
Increase (decrease)in accounts payable
and accrued liabilities (16,532) 22,447 69,033 20,458 40,446
Decrease (increase) in other assets 704 249 991 (5,783) (202)
Increase (decrease) in workers' compensation
and other claims, noncurrent (7,903) 11,608 6,605 (17,213) (16,705)
Increase (decrease) in other liabilities (14,532) 10,661 (15,283) 66,339 (6,593)
Other, net (1,120) (314) (178) (342) (275)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 37,491 49,792 154,662 139,062 142,686
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (55,353) (42,276) (106,312) (97,779) (100,575)
Proceeds from disposal of property, plant
and equipment 10,481 1,562 7,622 4,620 5,848
Aircraft heavy maintenance expenditures (7,217) (7,170) (15,333) (19,148) (17,870)
Acquisitions, net of cash acquired, and related
contingency payments (2,410) (157,294) (163,262) (1,435) (52,560)
Proceeds from leveraged leases - - - - 13,707
Other, net 1,775 7,622 5,431 8,569 (2,435)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (52,724) (197,556) (271,854) (105,173) (153,885)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Additions to debt 33,940 112,737 117,332 4,136 30,916
Reductions of debt (7,911) (33,916) (48,257) (34,385) (9,608)
Repurchase of stock of the Company (7,808) (2,953) (9,955) (1,511) (13,033)
Proceeds from exercise of stock options 2,490 4,703 7,332 14,757 1,472
Dividends paid (8,875) (8,065) (16,709) (11,638) (9,262)
Proceeds from sale of stock to SIP - - - 264 -
Costs of Services Stock Proposal - (4) (4) (3,163) -
Preferred stock issuance, net of cash expenses - 77,359 77,359 (277) -
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 11,836 149,861 127,098 (31,817) 485
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (3,397) 2,097 9,906 2,072 (10,714)
Cash and cash equivalents at beginning of year 42,318 32,412 32,412 30,340 41,054
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 38,921 34,509 42,318 32,412 30,340
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ----------------------
On July 26, 1993, the shareholders of The Pittston Company (the "Company")
approved the Services Stock Proposal, as described in Note 9, resulting in the
reclassification of the Company's common stock into shares of Pittston Services
Group Common Stock ("Services Stock") on a share-for-share basis. In addition, a
second class of common stock, designated as Pittston Minerals Group Common Stock
("Minerals Stock") was distributed on a basis of one- fifth of one share of
Minerals Stock for each share of the Company's previous common stock. The
Pittston Services Group (the "Services Group") consists of the Burlington Air
Express Inc. ("Burlington"), Brink's, Incorporated ("Brink's") and Brink's Home
Security, Inc. ("BHS") operations of the Company. The Pittston Minerals Group
(the "Minerals Group") consists of the Coal and Mineral Ventures operations of
the Company. The approval of the Services Stock Proposal did not result in any
transfer of assets and liabilities of the Company or any of its subsidiaries.
The Company prepares separate financial statements for the Minerals and Services
Groups in addition to consolidated financial information of the Company.
Due to the reclassification of the Company's common stock, all stock and per
share data in the accompanying financial statements for the periods prior to the
reclassification have been restated to reflect the reclassification. The primary
impacts of this restatement are as follows:
* Net income per common share has been restated in the Consolidated
Statements of Operations to reflect the two classes of stock, Services
Stock and Minerals Stock, as if they were outstanding for all periods
presented. For the purposes of computing net income per common share of
Services Stock and Minerals Stock, the number of shares of Services Stock
are assumed to be the same as the total corresponding number of shares of
the Company's common stock. The number of shares of Minerals Stock are
assumed to be one-fifth of the shares of the Company's common stock.
* All financial impacts of purchases and issuances of the Company's common
stock prior to the effective date of the Services Stock Proposal have been
attributed to each Group in relation of their respective common equity to
the Company's common stock. Dividends paid by the Company were attributed
to the Services and Minerals Groups in relation to the initial dividends
paid on the Services Stock and the Minerals Stock. Accordingly, the
Consolidated Statements of Shareholders' Equity have been restated to
reflect these changes.
Principles of Consolidation
- ---------------------------
The accompanying consolidated financial statements reflect the accounts of the
Company and its majority-owned subsidiaries. The Company's interests in 20% to
50% owned companies are carried on the equity method. All material
<PAGE>
intercompany items and transactions have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform to the current
year's financial statement presentation.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include cash on hand, demand deposits and investments
with original maturities of three months or less.
Short-term Investments
- ----------------------
Short-term investments primarily include funds set aside by management for
certain obligations and are carried at cost which approximates market.
Inventories
- -----------
Inventories are stated at cost (determined under the first-in, first-out or
average cost method) or market, whichever is lower.
Property, Plant and Equipment
- -----------------------------
Expenditures for maintenance and repairs are charged to expense and the costs of
renewals and betterments are capitalized. Depreciation is provided principally
on the straight-line method at varying rates depending upon estimated useful
lives. Depletion of bituminous coal lands is provided on the basis of tonnage
mined in relation to the estimated total of recoverable tonnage in the ground.
Mine development costs, primarily included in bituminous coal lands, are
capitalized and amortized over the estimated useful life of the mine. These
costs include expenses incurred for site preparation and development as well as
operating deficits incurred at the mines during the development stage. A mine is
considered under development until all planned production units have been placed
in operation.
Subscriber installation costs for home security systems provided by BHS are
capitalized and depreciated over the estimated life of the assets and are
included in machinery and equipment. The standard security system that is
installed, remains the property of BHS and is capitalized at the cost to bring
the revenue producing asset to its intended use. When an installation is
identified for disconnect, the remaining net book value of the installation is
fully written-off and charged to depreciation expense.
Intangibles
- -----------
The excess of cost over fair value of net assets of companies acquired is
amortized on a straight-line basis over the estimated periods benefited.
The Company evaluates the carrying value of intangibles and the periods of
amortization to determine whether events and circumstances warrant revised
estimates of asset value or useful lives. The Company annually assesses the
recoverability of the excess of cost over net assets acquired by determining
whether the amortization of the asset balance over its remaining life can be
recovered through projected undiscounted future operating cash flows. Evaluation
of asset value as well as periods of amortization are performed on a
disaggregated basis at each of the Company's operating units.
Coal Supply Contracts
- ---------------------
Coal supply contracts consist of contracts to supply coal to customers at
certain negotiated prices over a period of time, which have been acquired
<PAGE>
from other coal companies, and are stated at cost at the time of acquisition,
which approximates fair market value. The capitalized cost of such contracts is
amortized over the term of the contract on the basis of tons of coal sold under
the contract.
Income Taxes
- ------------
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
Pneumoconiosis (Black Lung) Expense
- -----------------------------------
The Company acts as self-insurer with respect to almost all black lung benefits.
Provision is made for estimated benefits in accordance with annual actuarial
reports prepared by outside actuaries. The excess of the present value of
expected future benefits over the accumulated book reserves is recognized over
the amortization period as a level percentage of payroll. Cumulative actuarial
gains or losses are calculated periodically and amortized on a straight-line
basis. Assumptions used in the calculation of the actuarial present value of
black lung benefits are based on actual retirement experience of the Company's
coal employees, black lung claims incidence for active miners, actual dependent
information, industry turnover rates, actual medical and legal cost experience
and projected inflation rates. As of December 31, 1994 and 1993, the accrued
value of estimated future black lung benefits discounted at 6% was approximately
$62,824 and $61,067, respectively, and are included in workers' compensation and
other claims. The December 31, 1994 balance included $4,643 related to the
purchase of Addington Resources, Inc. (Note 10). Based on actuarial data, the
Company charged to operations $201 in 1994, $438 in 1993 and $1,029 in 1992. In
addition, the Company accrued additional expenses for black lung benefits
related to federal and state assessments, legal and administration expenses and
other self insurance costs. These amounted to $2,472 in 1994, $2,887 in 1993 and
$2,073 in 1992.
Postretirement Benefits Other Than Pensions
- -------------------------------------------
Postretirement benefits other than pensions are accounted for in accordance with
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which requires employers to accrue
the cost of such retirement benefits during the employees' service with the
Company.
Foreign Currency Translation
- ----------------------------
Assets and liabilities of foreign subsidiaries have been translated at current
exchange rates, and related revenues and expenses have been translated at
average rates of exchange in effect during the year. Resulting cumulative
translation adjustments have been recorded as a separate component of
shareholders' equity. Translation adjustments relating to subsidiaries in
countries with highly inflationary economies are included in net income, along
with all transaction gains and losses for the period.
<PAGE>
A portion of the Company's financial results is derived from activities in
several foreign countries, each with a local currency other than the U.S.
dollar. Because the financial results of the Company are reported in U.S.
dollars, they are affected by the changes in the value of the various foreign
currencies in relation to the U.S. dollar. However, the Company's international
activity is not concentrated in any single currency, which reduces the risks of
foreign currency rate fluctuations.
Financial Instruments
- ---------------------
The Company uses foreign currency forward contracts to hedge risk of changes in
foreign currency rates associated with certain transactions denominated in
various currencies. Realized and unrealized gains and losses on these contracts,
designated and effective as hedges, are deferred and recognized as part of the
specific transaction hedged.
The Company also utilizes other financial instruments to protect against adverse
price movements in gold, which the Company produces, and jet fuel products,
which the Company consumes as well as interest rate changes on certain variable
rate obligations. Gains and losses on these contracts, designated and effective
as hedges, are deferred and recognized as part of the transaction hedged.
Revenue Recognition
- -------------------
Coal - Coal sales are generally recognized when coal is loaded onto
transportation vehicles for shipment to customers. For domestic sales, this
generally occurs when coal is loaded onto railcars at mine locations. For export
sales, this generally occurs when coal is loaded onto marine vessels at terminal
facilities.
Mineral Ventures - Gold sales are recognized when products are shipped to a
refinery. Settlement adjustments arising from final determination of weights and
assays are reflected in sales when received.
Burlington - Revenues related to transportation services are recognized,
together with related transportation costs, on the date shipments physically
depart from facilities en route to destination locations.
Brink's - Revenues are recognized when services are performed.
BHS - Monitoring revenues are recognized when earned and amounts paid in advance
are deferred and recognized as income over the applicable monitoring period,
which is generally one year or less. Revenues from the sale of equipment are
recognized, together with related costs, upon completion of the installation.
Connection fee revenues are recognized to the extent of direct selling costs
incurred and expensed. Connection fee revenues in excess of direct selling costs
are deferred and recognized as income on a straight-line basis over ten years.
Net Income Per Common Share
- ---------------------------
Net income per common share for Services Stock is computed by dividing the net
income for the Services Group by the weighted average number of shares
outstanding during the period. The potential dilution from the exercise of stock
options is not material. The assumed conversion of the 9.2% convertible
subordinated debentures in 1993 and 1992 was not included since its effect was
antidilutive.
<PAGE>
The computation of primary earnings per share for Minerals Stock is based on the
weighted average number of outstanding common shares divided into net income for
the Minerals Group less preferred stock dividends. The computation of fully
diluted earnings per common share for Minerals Stock assumes the conversion of
the $31.25 Series C Cumulative Preferred Stock (issued in 1994) and additional
shares assuming the exercise of stock options (antidilutive in the primary
calculation) divided into net income for the Minerals Group. For 1994 and 1993,
the loss per share, assuming full dilution, is considered to be the same as
primary since the effect of common stock equivalents and the preferred stock
conversion would be antidilutive.
The shares of Services Stock and Minerals Stock held in The Pittston Company
Employee Benefits Trust (Note 9) are evaluated for inclusion in the calculations
of net income per common share under the treasury stock method and had no
dilutive effect.
2. FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents, short-term
investments and trade receivables. The Company places its cash and cash
equivalents and short-term investments with high credit qualified financial
institutions and, by policy, limits the amount of credit exposure to any one
financial institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across many different industries
and geographic areas.
The following details the fair values of financial instruments for which it is
practicable to estimate the value:
Cash and cash equivalents and short-term investments
- ----------------------------------------------------
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Debt
- ----
The aggregate fair value of the Company's long-term debt obligations, which is
based upon quoted market prices and rates currently available to the Company for
debt with similar terms and maturities, approximates the carrying amount.
Off-balance sheet instruments
- -----------------------------
The Company enters into various off-balance sheet financial instruments, as
discussed below, to hedge its foreign currency and other market exposures. The
risk that counterparties to such instruments may be unable to perform is
minimized by limiting the counterparties to major financial institutions. The
Company does not expect any losses due to such counterparty default.
Foreign currency forward contracts - The Company enters into foreign currency
forward contracts with a duration of 30 to 60 days as a hedge against
liabilities denominated in various currencies. These contracts do not subject
the Company to risk due to exchange rate movements because gains and losses on
these contracts offset losses and gains on the liabilities being hedged. At
December 31, 1994, the total notional value of foreign
<PAGE>
currency forward contracts outstanding was $7,390. As of such date, the fair
value of foreign currency forward contracts was not significant.
Gold contracts - In order to protect itself against downward movements in gold
prices, the Company hedges a portion of its recoverable proved and probable
reserves primarily through forward sales contracts. At December 31, 1994, 60,056
ounces of gold, representing approximately 30% of the Company's recoverable
proved and probable reserves, were sold forward under forward sales contracts
with a total notional value of $24,679. Because only a portion of its future
production is currently sold forward, the Company can take advantage of
increases, if any, in the spot price of gold. At December 31, 1994, the fair
value of the Company's forward sales contracts was not significant.
Fuel contracts - The Company has hedged a portion of its jet fuel requirements
through a swap contract. At December 31, 1994, the notional value of the jet
fuel swap, aggregating 12.5 million gallons, through March 31, 1995 was $6,488.
In addition, the Company has entered into several commodity options transactions
that are intended to protect against significant increases in jet fuel prices.
These transactions, aggregate 23.3 million gallons with a notional value of
$15,840 and are applicable throughout 1995 in amounts ranging from 3.5 million
gallons per month in the first quarter of 1995 to 2.1 million gallons per month
in the fourth quarter of 1995. The Company has also entered into a collar
transaction, applicable to 7.2 million gallons that provides for a minimum and
maximum per gallon price. This transaction is settled monthly based upon the
average of the high and low prices during each period.
The fair value of these fuel hedge transactions may fluctuate over the course of
the contract period due to changes in the supply and demand for oil and refined
products. Thus, the economic gain or loss, if any, upon settlement of the
contracts may differ from the fair value of the contracts at an interim date. At
December 31, 1994, the fair value of these contracts was not significant.
Interest rate contracts - In connection with the aircraft leasing by Burlington
in 1993, the Company entered into interest rate cap agreements. These agreements
have a notional amount of $60,000 and cap the Company's interest rate on certain
aircraft leases at 8.5% through April 1, 1996. As discussed further in Note 7,
in 1994, the Company entered into a variable to fixed interest rate swap
agreement. The fair value of these contracts was $1,759 at December 31, 1994.
3. ACCOUNTS RECEIVABLE - TRADE
For each of the years in the three-year period ended December 31, 1994, the
Company maintained agreements with financial institutions whereby it had the
right to sell certain coal receivables to those institutions. Certain agreements
contained provisions for sales with recourse and other agreements had limited
recourse. All agreements have since expired. No receivables were sold in 1994.
In 1993 and 1992 total coal receivables of approximately $16,143 and $65,231,
respectively, were sold under such agreements. As of December 31, 1994 and 1993,
there were no receivables sold which remained to be collected.
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost consists of the following:
December 31
1994 1993
- --------------------------------------------------------------------------
Bituminous coal lands $102,392 118,944
Land - other than coal lands 29,914 11,212
Buildings 45,344 40,838
Machinery and equipment 662,844 611,360
- --------------------------------------------------------------------------
$840,494 782,354
==========================================================================
The estimated useful lives for property, plant and equipment are as follows:
Years
-------------------------------------------------------
Buildings 3 to 25
Machinery and equipment 2 to 20
Depreciation and depletion of property, plant and equipment aggregated $74,270
in 1994, $63,953 in 1993 and $57,291 in 1992. For the six months ended June 30,
1995 and 1994 (unaudited), depreciation of property, plant and equipment
aggregated $39,334 and $34,618, respectively.
Capitalized mine development costs totaled $11,908 in 1994, $2,181 in 1993 and
$18,487 in 1992.
Changes in capitalized subscriber installation costs for home security systems
were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Capitalized subscriber install-
ation costs - beginning of year $81,445 65,785 54,668 44,842
Capitalized cost of security
system installations 17,320 32,309 23,972 20,694
Capitalized cost of security
systems acquired - - - (143)
Depreciation, including amounts
recognized to fully depreciate
capitalized costs for install-
ations disconnected during
the year (9,840) (16,649) (12,855) (10,725)
- --------------------------------------------------------------------------------------------------------
Capitalized subscriber install-
ation costs - end of year $88,925 81,445 65,785 54,668
========================================================================================================
</TABLE>
New subscribers were 75,200 in 1994, 59,700 in 1993 and 51,300 in 1992. For the
six months ended June 30, 1995 (unaudited), new subscribers were 38,300.
<PAGE>
As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security system installations. This change in
accounting principle is preferable because it more accurately reflects
subscriber installation costs. The additional costs not previously capitalized
consisted of costs for installation labor and related benefits for supervisory,
installation scheduling, equipment testing and other support personnel (in the
amount of $2,645 in 1994, $2,567 in 1993 and $2,327 in 1992) and costs incurred
in maintaining facilities and vehicles dedicated to the installation process (in
the amount of $1,492 in 1994, $1,484 in 1993 and $1,994 in 1992). The effect of
this change in accounting principle was to increase operating profit of the
consolidated group and the BHS segment in 1994, 1993 and 1992 by $4,137, $4,051
and $4,321, respectively, and net income of the Company and the Services Group
in 1994, 1993 and 1992 by $2,486, $2,435 and $2,596, respectively, or by $.07
per share in each year. The effect of this change in accounting principle was to
increase operating profit of the consolidated group and the BHS segment for the
first six months of 1995 and 1994 by $1,949 and $2,149, respectively. The effect
of this change increased net income per common share of the Services Group for
the first six months of 1995 and 1994 by $.03. Prior to January 1, 1992, the
records needed to identify such costs were not available. Thus, it was
impossible to accurately calculate the effect on retained earnings as of January
1, 1992. However, the Company believes the effect on retained earnings as of
January 1, 1992, was immaterial.
Because capitalized subscriber installation costs for prior periods were not
adjusted for the change in accounting principle, installation costs for
subscribers in those years will continue to be depreciated based on the lesser
amounts capitalized in prior periods. Consequently, depreciation of capitalized
subscriber installation costs in the current year and until such capitalized
costs prior to January 1, 1992, are fully depreciated will be less than if such
prior periods' capitalized costs had been adjusted for the change in accounting.
However, the Company believes the effect on net income in 1994, 1993 and 1992
was immaterial.
5. INTANGIBLES
Intangibles consist entirely of the excess of cost over fair value of net assets
of companies acquired and are net of accumulated amortization of $75,649 at
December 31, 1994, and $65,738 at December 31, 1993. The estimated useful life
of intangibles is generally forty years. Amortization of intangibles aggregated
$9,686 in 1994, $7,126 in 1993 and $7,184 in 1992.
<PAGE>
6. INCOME TAXES
The provision (credit) for income taxes consists of the following:
U.S.
Federal Foreign State Total
- -------------------------------------------------------------------------------
1994:
Current $ 7,563 5,956 5,686 19,205
Deferred (20,238) 2,696 (235) (17,777)
- -------------------------------------------------------------------------------
Total $(12,675) 8,652 5,451 1,428
===============================================================================
1993:
Current $ 16,385 9,705 3,353 29,443
Deferred (20,719) (7,939) (777) (29,435)
- -------------------------------------------------------------------------------
Total $ (4,334) 1,766 2,576 8
===============================================================================
1992:
Current $ 12,643 2,640 4,173 19,456
Deferred 8,675 583 (195) 9,063
- -------------------------------------------------------------------------------
Total $ 21,318 3,223 3,978 28,519
===============================================================================
The significant components of the deferred tax expense (benefit) were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax expense (benefit), exclusive
of the components listed below $(16,869) (33,157) 8,209
Investment tax credit carryforwards - - 8,978
Net operating loss carryforwards (393) 1,793 (654)
Alternative minimum tax credits 1,147 4,826 (9,814)
Change in the valuation allowance
for deferred tax assets (1,662) (1,397) 2,344
Adjustment to deferred tax assets
and liabilities for the change
in the U.S. Federal tax rate - (1,500) -
- -----------------------------------------------------------------------------------------
$(17,777) (29,435) 9,063
=========================================================================================
</TABLE>
The tax benefit for compensation expense related to the exercise of certain
employee stock options for tax purposes in excess of compensation expense for
financial reporting purposes is recognized as an adjustment to shareholders'
equity.
<PAGE>
The components of the net deferred tax asset as of December 31, 1994 and
December 31, 1993 were as follows:
1994 1993
- ---------------------------------------------------------------------------
Deferred tax assets:
Accounts receivable $ 5,522 5,630
Postretirement benefits other than pensions 94,430 93,341
Workers' compensation and other claims 58,285 60,007
Other liabilities and reserves 104,382 85,002
Miscellaneous 9,975 10,595
Net operating loss carryforwards 8,692 8,299
Alternative minimum tax credits 30,884 30,774
Valuation allowance (8,193) (9,855)
- ---------------------------------------------------------------------------
Total deferred tax asset 303,977 283,793
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 55,095 62,391
Pension assets 47,159 45,566
Other assets 4,217 4,955
Investments in foreign affiliates 11,965 13,044
Miscellaneous 64,513 60,286
- ---------------------------------------------------------------------------
Total deferred tax liability 182,949 186,242
- ---------------------------------------------------------------------------
Net deferred tax asset $121,028 97,551
===========================================================================
The valuation allowance relates to deferred tax assets in certain foreign and
state jurisdictions.
Based on the Company's historical and expected taxable earnings, management
believes it is more likely than not that the Company will realize the benefit of
the existing deferred tax asset at December 31, 1994.
<PAGE>
The following table accounts for the difference between the actual tax provision
and the amounts obtained by applying the statutory U.S. federal income tax rate
of 35% in 1994 and 1993 and 34% in 1992 to the income (loss) before income
taxes.
<TABLE>
<CAPTION>
Year Ended December 31
1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income taxes:
United States $(16,517) (7,329) 58,053
Foreign 44,842 21,483 19,553
- -----------------------------------------------------------------------------------------
$ 28,325 14,154 77,606
=========================================================================================
Tax provision computed at statutory rate $ 9,914 4,954 26,386
Increases (reductions) in taxes due to:
Percentage depletion (9,313) (7,598) (5,033)
State income taxes (net of federal
tax benefit) 5,043 1,924 2,064
Goodwill amortization 2,437 3,055 2,229
Difference between total taxes on
foreign income and the U.S.
federal statutory rate (6,111) (118) (1,254)
Change in the valuation allowance
for deferred tax assets (1,662) (1,397) 2,344
Adjustment to deferred tax assets
and liabilities for the change in
the U.S. Federal tax rate - (1,500) -
Miscellaneous 1,120 688 1,783
- -----------------------------------------------------------------------------------------
Actual tax provision $ 1,428 8 28,519
=========================================================================================
</TABLE>
It is the policy of the Company to accrue deferred income taxes on temporary
differences related to the financial statement carrying amounts and tax bases of
investments in foreign subsidiaries and affiliates which are expected to reverse
in the foreseeable future. As of December 31, 1994 and December 31, 1993 the
unrecognized deferred tax liability for temporary differences of approximately
$56,697 and $43,640, respectively, related to investments in foreign
subsidiaries and affiliates that are essentially permanent in nature and not
expected to reverse in the foreseeable future was approximately $19,844 and
$15,274, respectively.
The Company and its domestic subsidiaries file a consolidated U.S. federal
income tax return. Such returns have been audited and settled with the Internal
Revenue Service through the year 1981.
As of December 31, 1994, the Company had $30,884 of alternative minimum tax
credits available to offset future U.S. federal income taxes and, under current
tax law, the carryforward period for such credits is unlimited.
The tax benefit of net operating loss carryforwards as at December 31, 1994 was
$8,692 and related to various state and foreign taxing jurisdictions. The
expiration periods primarily range from 5 to 15 years.
<PAGE>
7. LONG-TERM DEBT
Consists of the following:
As of December 31
1994 1993
- --------------------------------------------------------------------------------
Senior obligations:
U.S. dollar term loan due 1999 (year-end rate
6.48% in 1994) $100,000 -
Revolving credit notes due 1999 (5.75% in 1994) 9,400 -
U.S. dollar term loan due 1996 to 1997
(6.50% in 1994 and 3.81% in 1993) 3,451 5,321
Canadian dollar term loan due 1999 (6.19% in 1994) 2,852 -
Dutch guilder term loan due 1995 (6.69% in 1993) - 1,250
U.S. dollar term loan due 1995 (4.06% in 1993) - 1,714
Revolving credit notes (year-end rate 3.53% in 1993) - 2,100
All other 2,562 2,629
- --------------------------------------------------------------------------------
118,265 13,014
- --------------------------------------------------------------------------------
Subordinated obligations:
4% subordinated debentures due 1997 14,648 14,648
9.20% convertible subordinated debentures due 2004 - 27,811
- --------------------------------------------------------------------------------
14,648 42,459
- --------------------------------------------------------------------------------
Obligations under capital leases (average rates
9.08% in 1994 and 9.62% in 1993) 5,158 2,915
- --------------------------------------------------------------------------------
Total long-term debt, less current maturities $138,071 58,388
================================================================================
For the four years through December 31, 1999, minimum repayments of long-term
debt outstanding are as follows:
1996 $ 5,769
1997 17,744
1998 1,175
1999 112,641
In 1994, the Company entered into a standard three year variable to fixed
interest rate swap agreement. This agreement fixed the Company's interest rate
at 5% on current borrowings of $40,000 in principal. The principal amount to
which the 5% interest rate applies declines periodically throughout the term of
the agreement.
In March 1994, the Company entered into a $350,000 credit agreement with a
syndicate of banks (the "New Facility"), replacing the Company's previously
existing $250,000 of revolving credit agreements. The New Facility included a
$100,000 five-year term loan, which originally matured in March 1999. The New
Facility also permitted additional borrowings, repayments and reborrowings of up
to an aggregate of $250,000 initially until March 1999. In March 1995, the New
Facility was amended to extend the maturity of the term loan to May 2000 and to
permit the additional borrowings, repayments and reborrowings until May 2000.
Interest on borrowings under the New
<PAGE>
Facility is payable at rates based on prime, certificate of deposit, Eurodollar
or money market rates.
The Dutch guilder loan to Brink's bears interest based on a Euroguilder rate, or
if converted to a U.S. dollar loan based on prime, Eurodollar or money market
rates. In January 1992, a portion of the guilder loan was converted into a U.S.
dollar loan. The U.S. dollar term loan due 1996 to 1997 to Brink's bears
interest based on the Eurodollar rate.
The Canadian dollar term loan to a wholly owned indirect subsidiary of
Burlington bears interest based on Canadian prime or Bankers' Acceptance rates,
or if converted to a U.S. dollar loan based on Eurodollar or Federal Funds
rates. The loan is guaranteed by the Company.
Under the terms of the loans, Brink's and Burlington have agreed to various
restrictions relating to net worth, disposition of assets and incurrence of
additional debt.
The 4% subordinated debentures due July 1, 1997, are exchangeable only for cash,
at the rate of $157.80 per $1,000 debenture. The debentures are redeemable at
the Company's option, in whole or in part, at any time prior to maturity, at
redemption prices equal to 100% of principal amount.
On April 15, 1994, the Company redeemed all of the 9.2% convertible subordinated
debentures due July 1, 2004, at a premium of $767. The premium has been included
in the Consolidated Statement of Operations in "Other income (expense), net".
Various international subsidiaries maintain lines of credit and overdraft
facilities aggregating approximately $75,000 with a number of banks on either a
secured or unsecured basis.
Under the terms of some of its debt instruments, the Company has agreed to
various restrictions relating to the payment of dividends, the repurchase of
capital stock, the maintenance of consolidated net worth, and the amount of
additional funded debt which may be incurred. Allowable restricted payments for
dividends and stock repurchases aggregated $175,486 at December 31, 1994.
At December 31, 1994, the Company had outstanding unsecured letters of credit
totaling $81,450 primarily supporting the Company's obligations under its
various self-insurance programs.
8. STOCK OPTIONS
The Company grants options under its 1988 Stock Option Plan (the "1988 Plan") to
executives and key employees and under its Non-Employee Directors' Stock Option
Plan (the "Non-Employee Plan") to outside directors to purchase common stock at
a price not less than 100% of quoted market value at date of grant. As part of
the Services Stock Proposal (Note 9), the 1988 and Non- Employee Plans were
amended to permit option grants to be made to optionees with respect to either
Services Stock or Minerals Stock, or both.
<PAGE>
The Company's 1979 Stock Option Plan (the "1979 Plan") and 1985 Stock Option
Plan (the "1985 Plan") terminated in 1985 and 1988, respectively, except as to
options still outstanding.
At the Effective Date of the Services Stock Proposal a total of 2,228,225 shares
of common stock were subject to options outstanding under the 1988 Plan, the
Non-Employee Plan, the 1979 Plan and the 1985 Plan. Pursuant to antidilution
provisions in the option agreements covering such options, the Company converted
these options into options for shares of Services Stock or Minerals Stock, or
both, depending primarily on the employment status and responsibilities of the
particular optionee. In the case of optionees having Company-wide
responsibilities, each outstanding option was converted into an option for
Services Stock and an option for Minerals Stock, in the same ratio as the
distribution on the Effective Date of Minerals Stock to shareholders of the
Company, viz., one share to one-fifth of a share, with any resultant fractional
share of Minerals Stock rounded downward to the nearest whole number of shares.
In the case of other optionees, each outstanding option was converted into a new
option for only Services Stock or Minerals Stock, as the case may be, following
the Effective Date. As a result, 2,167,247 shares of Services Stock and 507,698
shares of Minerals Stock were subject to options outstanding as of the Effective
Date.
The table below summarizes the activity in all plans.
Aggregate
No. of Option
Shares Price
- --------------------------------------------------------------------------------
The Pittston Company Common Stock Options:
Granted:
1993 17,500 $ 294
1992 758,300 11,706
Became exercisable:
1993 468,250 7,749
1992 320,009 5,367
Exercised:
1993 377,191 5,379
1992 113,347 1,472
Pittston Services Group Common Stock Options:
Outstanding:
12/31/94 1,990,197 38,401
12/31/93 2,378,804 42,680
Granted:
1994 73,000 2,018
1993 829,000 22,080
Became exercisable:
1994 421,030 7,593
1993 21,008 273
Exercised:
1994 421,302 5,567
1993 594,129 7,638
<PAGE>
Pittston Minerals Group Common Stock Options:
Outstanding:
12/31/94 507,323 9,571
12/31/93 623,498 11,023
Granted:
1994 23,000 431
1993 252,000 6,094
Became exercisable:
1994 108,259 1,978
1993 3,575 50
Exercised:
1994 128,667 1,765
1993 134,528 1,738
At December 31, 1994, a total of 1,121,047 shares of Services Stock and 271,815
shares of Minerals Stock were exercisable. In addition, there were 3,634,470
shares of Services Stock and 725,323 shares of Minerals Stock reserved for
issuance under the plans, including 1,644,273 shares of Services Stock and
218,000 shares of Minerals Stock reserved for future grant.
9. CAPITAL STOCK
On July 26, 1993 (the "Effective Date"), the shareholders of the Company
approved the Services Stock Proposal, as described in the Company's proxy
statement dated June 24, 1993, resulting in the reclassification of the
Company's common stock. The outstanding shares of Company common stock were
redesignated as Services Stock on a share-for-share basis and a second class of
common stock, designated as Minerals Stock, was distributed on the basis of
one-fifth of one share of Minerals Stock for each share of the Company's
previous common stock held by shareholders of record on July 26, 1993. Minerals
Stock and Services Stock are designed to provide shareholders with separate
securities reflecting the performance of the Minerals Group and the Services
Group, respectively, without diminishing the benefits of remaining a single
corporation or precluding future transactions affecting either Group.
The Company, at any time, has the right to exchange each outstanding share of
Minerals Stock for shares of Services Stock having a fair market value equal to
115% of the fair market value of one share of Minerals Stock. In addition, upon
the sale, transfer, assignment or other disposition, whether by merger,
consolidation, sale or contribution of assets or stock or otherwise of all or
substantially all of the properties and assets of the Minerals Group to any
person, entity or group (with certain exceptions), the Company is required to
exchange each outstanding share of Minerals Stock for shares of Services Stock
having a fair market value equal to 115% of the fair market value of one share
of Minerals Stock. Shares of Services Stock are not subject to either optional
or mandatory exchange.
Holders of Services Stock have one vote per share. Holders of Minerals Stock
have one vote per share, subject to adjustment on January 1, 1996, and on each
January 1 every two years thereafter based upon the relative fair market value
of one share of Minerals Stock and one share of Services Stock
<PAGE>
on each such date. Accordingly, beginning on January 1, 1996, each share of
Minerals Stock may have more than, less than or continue to have exactly one
vote. Holders of Services Stock and Minerals Stock vote together as a single
voting group on all matters as to which all common shareholders are entitled to
vote. In addition, as prescribed by Virginia law, certain amendments to the
Company's Restated Articles of Incorporation affecting, among other things, the
designation, rights, preferences or limitations of one class of common stock, or
any merger or statutory share exchange, must be approved by the holders of such
class of common stock, voting as a separate voting group, and, in certain
circumstances, may also have to be approved by the holders of the other class of
common stock, voting as a separate voting group.
In the event of a dissolution, liquidation or winding up of the Company, the
holders of Services Stock and Minerals Stock will receive the funds remaining
for distribution, if any, to the common shareholders on a per share basis in
proportion to the total number of shares of Services Stock and Minerals Stock,
respectively, then outstanding to the total number of shares of both classes of
common stock then outstanding.
In July 1993, the Board of Directors authorized a new share repurchase program
under which up to 1,250,000 shares of Services Stock and 250,000 shares of
Minerals Stock may be repurchased from time to time in the open market or in
private transactions, as conditions warrant, not to exceed an aggregate purchase
price of $43,000. Through December 31, 1994, a total of 256,100 shares of
Services Stock were repurchased at a total cost of $6,188, all of which were
repurchased in 1994. Through December 31, 1994, a total of 38,500 shares of
Minerals Stock were repurchased at a total cost of $808, of which 19,700 shares
were acquired in 1994 at a total cost of $401. The program to acquire shares in
the open market remains in effect in 1995.
The Company has authority to issue up to 2,000,000 shares of preferred stock,
par value $10 per share. In January 1994, the Company issued 161,000 shares of
its $31.25 Series C Cumulative Convertible Preferred Stock, par value $10 per
share (the "Convertible Preferred Stock"). The Convertible Preferred Stock pays
an annual cumulative dividend of $31.25 per share payable quarterly, in cash, in
arrears, out of all funds of the Company legally available therefore, when, as
and if declared by the Board of Directors of the Company, and bears a
liquidation preference of $500 per share, plus an amount equal to accrued and
unpaid dividends thereon. Each share of the Convertible Preferred Stock is
convertible at the option of the holder at any time, unless previously redeemed
or, under certain circumstances, called for redemption, into shares of Minerals
Stock at a conversion price of $32.175 per share of Minerals Stock, subject to
adjustment in certain circumstances. Except under certain circumstances, the
Convertible Preferred Stock is not redeemable prior to February 1, 1997. On and
after such date, the Company may at its option, redeem the Convertible Preferred
Stock, in whole or in part, for cash initially at a price of $521.875 per share,
and thereafter at prices declining ratably annually on each February 1 to an
amount equal to $500.00 per share on and after February 1, 2004, plus in each
case an amount equal to accrued and unpaid dividends on the date of redemption.
Except under certain circumstances or as prescribed by Virginia law, shares of
the Convertible Preferred Stock are nonvoting. Other than the Convertible
Preferred Stock no shares of preferred stock are presently issued or
outstanding.
<PAGE>
In July 1994, the Board of Directors of the Company authorized the repurchase
from time to time of up to $15,000 of Convertible Preferred Stock. As of
December 31, 1994, 8,350 shares at a total cost of $3,366 have been repurchased.
The program to acquire shares remains in effect in 1995.
Under a Shareholder Rights Plan adopted by the Company's Board of Directors in
1987 and amended in December 1988, rights to purchase a new Series A
Participating Cumulative Preferred Stock (the "Series A Preferred Stock") of the
Company were distributed as a dividend at the rate of one right for each share
of the Company's common stock. Pursuant to the Services Stock Proposal, the
Shareholders Rights Plan was amended and restated to reflect the change in the
capital structure of the Company. Each existing right was amended to become a
Pittston Services Group right (a "Services Right"). Holders of Minerals Stock
received one Pittston Minerals Group right (a "Minerals Right") for each
outstanding share of Minerals Stock. Each Services Right, if and when it becomes
exercisable, will entitle the holder to purchase one-thousandth of a share of
Series A Preferred Stock at a purchase price of $40, subject to adjustment. Each
Minerals Right, if and when it becomes exercisable, will entitle the holder to
purchase one- thousandth of a share of Series B Participating Cumulative
Preferred Stock (the "Series B Preferred Stock") at a purchase price of $40,
subject to adjustment. Each fractional share of Series A Preferred Stock and
Series B Preferred Stock will be entitled to participate in dividends and to
vote on an equivalent basis with one whole share of Services Stock and Minerals
Stock, respectively. Each right will not be exercisable until ten days after a
third party acquires 20% or more of the total voting rights of all outstanding
Services Stock and Minerals Stock or ten days after commencement of a tender
offer or exchange offer by a third party for 30% or more of the total voting
rights of all outstanding Services Stock and Minerals Stock. If after the rights
become exercisable, the Company is acquired in a merger or other business
combination, each right will entitle the holder to purchase, for the purchase
price, common stock of the surviving or acquiring company having a market value
of twice the purchase price. In the event a third party acquires 30% or more of
all outstanding Services Stock and Minerals Stock or engages in one or more
"self dealing" transactions with the Company, the rights will entitle each
holder to purchase, at the purchase price, that number of fractional shares of
Series A Preferred Stock and Series B Preferred Stock equivalent to the number
of shares of common stock which at the time of the triggering event would have a
market value of twice the purchase price. The rights may be redeemed by the
Company at a price of $.01 per right and expire on September 25, 1997.
The Company's Articles of Incorporation limits dividends on Minerals Stock to
the lesser of (i) all funds of the Company legally available therefore (as
prescribed by Virginia law) and (ii) the Available Minerals Dividend Amount (as
defined in the Articles of Incorporation). At December 31, 1994, the Available
Minerals Dividend Amount was at least $24,788. Dividends on Minerals Stock are
also restricted by covenants in the Company's public indentures and bank credit
agreements (Note 7).
In December 1992, the Company formed The Pittston Company Employee Benefits
Trust (the "Trust") to hold shares of its common stock to fund obligations under
certain employee benefit programs. Upon formation of the Trust, the Company sold
for a promissory note of the Trust, 4,000,000 new shares of its common stock to
the Trust at a price equal to the fair value of the stock
<PAGE>
on the date of sale. Upon approval of the Services Stock Proposal, 3,871,826
shares in the Trust were redesignated as Services Stock and 774,365 shares of
Minerals Stock were distributed to the Trust. At December 31, 1994, 3,778,565
shares of Services Stock (3,853,778 in 1993) and 723,218 (770,301 in 1993)
shares of Minerals Stock remained in the Trust, valued at market. These shares
will be voted by the trustee in the same proportion as those voted by the
Company's employees participating in the Company's Savings Investment Plan. The
fair market value of the shares is included in each issue of common stock and
capital in excess of par and, in total, as a reduction to common shareholders'
equity in the Company's consolidated balance sheet.
10. ACQUISITIONS
During 1994, a wholly owned indirect subsidiary of the Company completed the
acquisition of substantially all of the coal mining operations and coal sales
contracts of Addington Resources, Inc. for $157,324. The acquisition has been
accounted for as a purchase; accordingly, the purchase price has been allocated
to the underlying assets and liabilities based on their respective estimated
fair value at the date of acquisition. The fair value of assets acquired was
$173,959 and liabilities assumed was $138,518. The excess of the purchase price
over the fair value of assets acquired and liabilities assumed was $121,883 and
is being amortized over a period of forty years.
The acquisition was financed by the issuance of $80,500 of Convertible Preferred
Stock (Note 9) and additional borrowing under existing credit facilities. In
March 1994, the additional debt incurred for this acquisition was refinanced
with a portion of the proceeds from the five-year term loan (Note 7).
The following pro forma results, however, assume that the acquisition and
related financing had occurred at the beginning of 1993. The unaudited pro forma
data below are not necessarily indicative of the results that would have
occurred if the transaction was in effect for the year ended December 31, 1993,
nor are they indicative of the future results of operations of the Company.
<PAGE>
Pro Forma (Unaudited)
Year Ended December 31
1993
- -------------------------------------------------------------------------
Net sales and operating revenues $2,527,720
=========================================================================
Net income $ 29,769
=========================================================================
Pittston Services Group:
Net income attributed to common shares $ 47,126
- -------------------------------------------------------------------------
Net income per common share $ 1.28
- -------------------------------------------------------------------------
Average common shares outstanding 36,907
=========================================================================
Pittston Minerals Group:
Net loss attributed to common shares $ (22,388)
=========================================================================
Net loss per common share $ (3.03)
- -------------------------------------------------------------------------
Average common shares outstanding 7,381
=========================================================================
In addition, during 1994, the Company acquired several small businesses and made
a contingent payment related to an acquisition made in a prior year. Total
consideration paid was $5,938.
During 1993, the Company acquired one small business and made installment and
contingency payments related to other acquisitions made in prior years. The
total consideration paid was $1,435.
During 1992, the Company acquired several businesses for an aggregate purchase
price of $47,800 including debt and installment payments to be made of $2,864.
The fair value of assets acquired was $50,858 and liabilities assumed was
$3,058. In addition, the Company made cash payments of $7,624 in the aggregate
for an equity investment and contingency payments for acquisitions made in prior
years.
The acquisitions in 1993 and 1992 have been accounted for as purchases and the
purchase price for each acquisition was essentially equal to the fair value of
assets acquired.
In 1994, 1993 and 1992 the results of operations of the acquired companies have
been included in the Company's results of operations from their date of
acquisition.
11. COAL JOINT VENTURE
The Company, through a wholly owned indirect subsidiary, entered into a
partnership agreement in 1982 with four other coal companies to construct and
operate coal port facilities in Newport News, Virginia, in the Port of Hampton
Roads (the "Facilities"). The Facilities commenced operations in 1984, and now
have an annual throughput capacity of 22 million tons, with a ground storage
capacity of approximately 2 million tons. The Company initially had an indirect
25% interest in the partnership, DTA. Initial financing of the Facilities was
accomplished through the issuance of
<PAGE>
$135,000 principal amount of revenue bonds by the Peninsula Ports Authority of
Virginia (the "Authority"), which is a political subdivision of the Commonwealth
of Virginia. In 1987, the original revenue bonds were refinanced by the issuance
of $132,800 of coal terminal revenue refunding bonds of which two series of
these bonds in the aggregate principal amount of $33,200 were attributable to
the Company. In 1990, the Company acquired an additional indirect 7 1/2%
interest in the DTA partnership, increasing its ownership to 32 1/2%. With the
increase in ownership, $9,960 of the remaining four additional series of the
revenue refunding bonds of $99,600 became attributable to the Company. In
November 1992, all bonds attributable to the Company were refinanced with the
issuance of a new series of coal terminal revenue refunding bonds in the
aggregate principal amount of $43,160. The new series of bonds bear a fixed
interest rate of 7 3/8%. The Authority owns the Facilities and leases them to
DTA for the life of the bonds, which mature on June 1, 2020. DTA may purchase
the Facilities for $1 at the end of the lease term. The obligations of the
partners are several, and not joint.
Under loan agreements with the Authority, DTA is obligated to make payments
sufficient to provide for the timely payment of the principal of and interest on
the bonds of the new series. Under a throughput and handling agreement, the
Company has agreed to make payments to DTA that in the aggregate will provide
DTA with sufficient funds to make the payments due under the loan agreements and
to pay the Company's share of the operating costs of the Facilities. The Company
has also unconditionally guaranteed the payment of the principal of and premium,
if any, and the interest on the new series of bonds. Payments for operating
costs aggregated $7,173 in 1994, $7,949 in 1993 and $6,819 in 1992. The Company
has the right to use 32 1/2% of the throughput and storage capacity of the
Facilities subject to user rights of third parties which pay the Company a fee.
The Company pays throughput and storage charges based on actual usage at per ton
rates determined by DTA.
<PAGE>
12. LEASES
The Company and its subsidiaries lease aircraft, facilities, vehicles, computers
and coal mining and other equipment under long-term operating leases with
varying terms, and most of the leases contain renewal and/or purchase options.
As of December 31, 1994, aggregate future minimum lease payments under
noncancellable operating leases were as follows:
Equipment
Aircraft Facilities & Other Total
- -------------------------------------------------------------------------------
1995 $30,237 31,652 35,977 97,866
1996 22,641 25,286 24,962 72,889
1997 20,983 21,727 17,678 60,388
1998 4,815 18,619 11,164 34,598
1999 - 14,886 4,420 19,306
2000 - 13,052 1,657 14,709
2001 - 10,334 694 11,028
2002 - 8,545 419 8,964
2003 - 7,797 418 8,215
2004 - 7,384 417 7,801
Later Years - 58,987 3,716 62,703
- -------------------------------------------------------------------------------
$78,676 218,269 101,522 398,467
===============================================================================
These amounts are net of aggregate future minimum noncancellable sublease
rentals of $6,161.
A wholly-owned subsidiary of the Company entered into two transactions covering
various leases which provided for the replacement of eight B707 aircraft with
seven DC8-71 aircraft and completed an evaluation of other fleet related costs.
One transaction, representing four aircraft, was reflected in the 1993 financial
statements, while the other transaction, covering the remaining three aircraft,
was reflected in the 1992 financial statements. The net effect of these
transactions did not have a material impact on operating profit for either year.
Rent expense amounted to $110,414 in 1994, $91,439 in 1993 and $84,365 in 1992
and is net of sublease rentals of $800, $862 and $1,488, respectively.
The Company incurred capital lease obligations of $3,152 in 1994, $1,601 in 1993
and $2,316 in 1992. In addition, in 1994 the Company assumed capital lease
obligations of $16,210 as part of the Addington Resources, Inc. acquisition
(Note 10). As of December 31, 1994, the Company's obligations under capital
leases were not significant.
13. EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries maintain several noncontributory defined
benefit pension plans covering substantially all nonunion employees who meet
certain minimum requirements. Benefits of most of the plans are based on salary
and years of service. The Company's policy is to fund the actuarially determined
amounts necessary to provide assets sufficient to meet the benefits to be paid
to plan participants in accordance with applicable
<PAGE>
regulations. The net pension expense (credit) for 1994, 1993 and 1992 for all
plans is as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Service cost - benefits earned
during year $ 12,169 9,680 9,185
Interest cost on projected benefit
obligation 19,781 19,098 17,593
Loss (return) on assets - actual 576 (46,089) (31,144)
(Loss) return on assets - deferred (33,601) 16,154 1,935
Other amortization, net 1,441 (440) (11,669)
- --------------------------------------------------------------------------------
Net pension expense (credit) $ 366 (1,597) (14,100)
================================================================================
The assumptions used in determining the net pension expense (credit) for the
Company's major pension plan were as follows:
1994 1993 1992
- -------------------------------------------------------------------------------
Interest cost on projected benefit obligation 7.5% 9.0% 9.0%
Expected long-term rate of return on assets 10.0% 10.0% 10.0%
Rate of increase in compensation levels 4.0% 5.0% 5.0%
The funded status and prepaid pension expense at December 31, 1994 and 1993 for
all plans are as follows:
1994 1993
- --------------------------------------------------------------------------------
Actuarial present value of accumulated
benefit obligation:
Vested $198,510 214,017
Nonvested 12,652 11,867
- --------------------------------------------------------------------------------
211,162 225,884
Benefits attributable to projected salaries 33,777 46,979
- --------------------------------------------------------------------------------
Projected benefit obligation 244,939 272,863
Plan assets at fair value 339,973 351,021
- --------------------------------------------------------------------------------
Excess of plan assets over projected
benefit obligation 95,034 78,158
Unamortized initial net asset (4,499) (5,505)
Unrecognized experience loss 24,247 40,715
Unrecognized prior service cost 1,963 2,149
- --------------------------------------------------------------------------------
Net pension assets 116,745 115,517
Current pension liability 2,208 1,549
- --------------------------------------------------------------------------------
Deferred pension asset per balance sheet $118,953 117,066
================================================================================
For the valuation of pension obligations and the calculation of the funded
status, the discount rate was 8.75% in 1994 and 7.5% in 1993. The expected
long-term rate of return on assets was 10% in both years. The rate of increase
in compensation levels used was 4% in 1994 and 1993.
<PAGE>
The unrecognized initial net asset at January 1, 1986 (January 1, 1989 for
certain foreign pension plans), the date of adoption of Statement of Financial
Accounting Standards No. 87, has been amortized over the estimated remaining
average service life of the employees. As of December 31, 1994, approximately
70% of plan assets were invested in equity securities and 30% in fixed income
securities.
Under the 1990 collective bargaining agreement with the United Mine Workers of
America ("UMWA"), the Company has made payments, based on hours worked, into an
escrow account established for the benefit of union employees (Note 17). The
total amount accrued and escrowed by the Company's coal operations under this
agreement as at December 31, 1994 and 1993, was $23,120 and $21,064,
respectively. The amount escrowed and accrued is included in "Short-term
investments" and "Miscellaneous accrued liabilities".
The Company and its subsidiaries also provide certain postretirement health care
and life insurance benefits for eligible active and retired employees in the
United States and Canada.
For the years 1994, 1993 and 1992, the components of periodic expense for these
postretirement benefits were as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Service cost - benefits earned during year $ 2,446 2,695 2,379
Interest cost on accumulated postretirement
benefit obligation 21,429 21,485 19,576
Amortization of (gains) losses 2,804 393 (6)
- --------------------------------------------------------------------------------
Total expense $26,679 24,573 21,949
================================================================================
Interest costs on the accumulated postretirement benefit obligation were based
upon rates of 7.5% in 1994 and 9% in 1993 and 1992.
At December 31, 1994 and 1993, the actuarial and recorded liabilities for these
postretirement benefits, none of which have been funded, were as follows:
1994 1993
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $217,307 202,473
Fully eligible active plan participants 22,203 45,913
Other active plan participants 19,449 42,957
- --------------------------------------------------------------------------------
258,959 291,343
Unrecognized experience loss (22,928) (63,495)
- --------------------------------------------------------------------------------
Liability included on the balance sheet 236,031 227,848
Less current portion 17,293 15,630
- --------------------------------------------------------------------------------
Noncurrent liability for postretirement
health care and life insurance benefits $218,738 212,218
================================================================================
The accumulated postretirement benefit obligation was determined using the unit
credit method and an assumed discount rate of 8.75% in 1994 and 7.5%
<PAGE>
in 1993. The assumed health care cost trend rate used in 1994 was 10% for pre-65
retirees, grading down to 5% in the year 2001. For post-65 retirees, the assumed
trend rate in 1994 was 8%, grading down to 5% in the year 2001. The assumed
Medicare cost trend rate used in 1994 was 7%, grading down to 5% in the year
2001.
A percentage point increase each year in the health care cost trend rate used
would have resulted in a $2,820 increase in the aggregate service and interest
components of expense for the year 1994, and a $40,986 increase in the
accumulated postretirement benefit obligation at December 31, 1994.
The Company also sponsors a Savings-Investment Plan to assist eligible employees
in providing for retirement or other future financial needs. Employee
contributions are matched at rates of 50% to 125% up to 5% of compensation
(subject to certain limitations imposed by the Internal Revenue Code of 1986, as
amended). Contribution expense under the plan aggregated $5,848 in 1994, $5,381
in 1993 and $5,391 in 1992.
In May 1994, the Company's shareholders approved the Employee Stock Purchase
Plan effective July 1, 1994. Eligible employees may elect to purchase shares of
Minerals Stock and Services Stock at the lower of 85% of the fair market value
as of specified dates. Under this plan employees purchased 11,843 shares of
Minerals Stock for $187 and 26,444 shares of Services Stock for $590.
The Company sponsors several other defined contribution benefit plans based on
hours worked, tons produced or other measurable factors. Contributions under all
of these plans aggregated $1,026 in 1994 and $918 in 1993 and 1992.
In October 1992, the Coal Industry Retiree Health Benefit Act of 1992 (the
"Health Benefit Act") was enacted as part of the Energy Policy Act of 1992. The
Health Benefit Act established rules for the payment of future health care
benefits for thousands of retired union mine workers and their dependents. Part
of the burden for these payments was shifted by the Health Benefit Act from
certain coal producers, which had a contractual obligation to fund such
payments, to producers such as the Company which have collective bargaining
agreements with the UMWA that do not require such payments and to numerous other
companies which are no longer in the coal business. The Health Benefit Act
established a trust fund to which "signatory operators" and "related persons,"
including the Company and certain of its coal subsidiaries (the "Pittston
Companies") are obligated to pay annual premiums for assigned beneficiaries,
together with a pro rata share for certain beneficiaries who never worked for
such employers ("unassigned beneficiaries"), in amounts determined by the
Secretary of Health and Human Services on the basis set forth in the Health
Benefit Act. For 1993 and 1994, this liability (on a pre-tax basis) was
approximately $9,100 and $11,000, respectively. The Company believes that the
annual liability under the Health Benefit Act for the Pittston Companies'
assigned beneficiaries will continue in the $10,000 to $11,000 range for the
next eight years and should begin to decline thereafter as the number of such
assigned beneficiaries decreases.
Based on the number of beneficiaries actually assigned by the Social Security
Administration, the Company estimates the aggregate pre-tax
<PAGE>
liability relating to the Pittston Companies' assigned beneficiaries at
approximately $250,000, which when discounted at 8.75% provides a present value
estimate of approximately $100,000.
The ultimate obligation that will be incurred by the Company could be
significantly affected by, among other things, increased medical costs,
decreased number of beneficiaries, governmental funding arrangements and such
federal health benefit legislation of general application as may be enacted. In
addition, the Health Benefit Act requires the Pittston Companies to fund, pro
rata according to the total number of assigned beneficiaries, a portion of the
health benefits for unassigned beneficiaries. At this time, the funding for such
health benefits is being provided from another source and for this and other
reasons the Pittston Companies' ultimate obligation for the unassigned
beneficiaries cannot be determined. The Company accounts for its obligations
under the Health Benefit Act as a participant in a multi-employer plan and
recognizes the annual cost on a pay-as-you-go basis.
14. RESTRUCTURING AND OTHER CHARGES, INCLUDING LITIGATION ACCRUAL
The market for metallurgical coal, for most of the past fifteen years, has been
characterized by weak demand from primary steel producers and intense
competition from foreign coal producers, especially those in Australia and
Canada. Metallurgical coal sales contracts typically are subject to annual price
negotiations, which increase the risk of market forces. As a result of the
continuing long-term decline in the metallurgical coal markets, which was
further evidenced by significant price reductions in early 1994, the Coal
operations accelerated its strategy of decreasing its exposure to these markets.
After a review of the economic viability of the remaining metallurgical coal
assets in early 1994, management determined that four underground mines were no
longer economically viable and should be closed resulting in significant
economic impairment to three related preparation plants. In addition, it was
determined that one surface steam coal mine, the Heartland mine, which provided
coal to Alabama Power Company under a long-term sales agreement, would be closed
due to rising costs caused by unfavorable geological conditions.
As a result of these decisions, the Company incurred a pre-tax charge of $90,806
in 1994 ($58,116 after tax) which included a reduction in the carrying value of
these assets and related accruals for mine closure costs. These charges included
asset write-downs of $46,487 which reduced the book carrying value of such
assets to what management believes to be their net realizable value based on
either estimated sales or leasing of such property to unrelated third parties.
In addition, the charges included $3,836 for required lease payments owed to
lessors for machinery and equipment that would be idled as a result of the mine
and facility closures. The charges also included $19,290 for mine and plant
closure costs which represented estimates for reclamation and other
environmental costs to be incurred to bring the properties in compliance with
federal and state mining and environmental laws. This accrual was required due
to the premature closing of the mines. The accrual also included $21,193 in
contractually or statutorily required employee severance and other benefit costs
associated with termination of employees at these facilities and costs
associated with inactive employees at these facilities. Such employee benefits
included severance payments, medical insurance, workers' compensation and other
<PAGE>
benefits and have been calculated in accordance with contractually (collective
bargaining agreements signed by certain coal subsidiaries included in the
Company) and legally required employee severance and other benefits.
Of the four underground mines, two have ceased coal production (one in the first
half of 1995), while the remaining two mines are expected to cease coal
production in 1995. In 1994 the Company reached agreement with Alabama Power
Company to transfer the coal sales contract serviced by the Heartland mine to
another location in West Virginia. The Heartland mine ceased coal production
during 1994 and final reclamation and environmental work is in process. At the
beginning of 1994, there were approximately 750 employees involved in operations
at these facilities and other administrative support. Employment at these
facilities was reduced by 52% to approximately 360 employees at December 31,
1994 and by 78% to approximately 165 employees at June 30, 1995.
Although coal production has or will cease at the mines contemplated in the
accrual, the Company will incur reclamation and environmental costs for several
years to bring these properties into compliance with federal and state
environmental laws. In addition, employee termination and medical costs will
continue to be incurred for several years after the facilities have been closed.
The significant portion of these employee liabilities is for statutorily
provided workers' compensation costs for inactive employees. Such benefits
include indemnity and medical payments as required under state workers'
compensation laws. The long payment periods are based on continued, and in some
cases, lifetime indemnity and medical payments to injured former employees and
their surviving spouses. Management believes that the charges incurred in 1994
should be sufficient to provide for these future costs and does not anticipate
material additional future charges to operating earnings for these facilities,
although continual cash funding will be required over the next several years.
In 1993 the Company incurred a pre-tax charge of $78,633 ($48,897 after tax)
relating to mine closing costs including employee benefit costs and certain
other noncash charges, together with previously reported litigation (the
"Evergreen Case") brought against the Company and a number of its coal
subsidiaries by the trustees of certain pension and benefit trust funds
established under collective bargaining agreements with the UMWA (Note 17).
These charges impacted Coal and Mineral Ventures operating profit in the amount
of $70,713 and $7,920, respectively.
The charge in the Mineral Ventures segment in 1993, related to the write-down of
the Company's investment in the Uley graphite mine in Australia. Although
reserve drilling of the Uley property indicates substantial graphite deposits,
processing difficulties, depressed graphite prices which remained significantly
below the level prevailing at the start of the project and an analysis of
various technical and marketing conditions affecting the project resulted in the
determination that the assets had been impaired and that loss recognition was
appropriate. The charge included asset write-downs of $7,496, which reduced the
carrying value of such assets to zero.
<PAGE>
The following table analyzes the changes in liabilities during the last three
years for facility closure costs recorded as restructuring and other charges:
Employee
Mine Termination,
Leased and Medical
Machinery Plant and
and Closure Severance
Equipment Costs Costs Total
- --------------------------------------------------------------------------------
Balance as of January
1, 1993 (a) $1,146 35,499 35,413 72,058
Additions 2,782 1,598 6,267 10,647
Payments (b) 836 8,663 7,463 16,962
- --------------------------------------------------------------------------------
Balance as of December
31, 1993 3,092 28,434 34,217 65,743
Additions 3,836 19,290 21,193 44,319
Payments (c) 3,141 9,468 12,038 24,647
- --------------------------------------------------------------------------------
Balance as of December
31, 1994 3,787 38,256 43,372 85,415
Payments (unaudited) (d) 1,018 6,294 4,198 11,510
- --------------------------------------------------------------------------------
Balance as of June
30, 1995 (unaudited) $2,769 31,962 39,174 73,905
================================================================================
(a) These amounts represent the remaining liabilities for facility closure
costs recorded as restructuring and other charges in prior years. The
original charges included $2,312 for leased machinery and equipment,
$50,645 principally for incremental facility closing costs, including
reclamation and $47,841 for employee benefit costs, primarily workers'
compensation, which will continue to be paid for several years.
(b) These amounts represent total cash payments made during the year for
liabilities recorded in prior years.
(c) These amounts represent total cash payments made during the year for these
charges. Of the total payments made, $8,672 was for liabilities recorded in
years prior to 1993, $5,822 was for liabilities recorded in 1993 and
$10,153 was for liabilities recorded in 1994.
(d) Payments made in the first six months of 1995 (unaudited), included $6,401
related to pre-1994 liabilities and $5,109 for liabilities recorded in the
first quarter of 1994.
During the next twelve months, expected cash funding of these charges is
approximately $15,000 to $20,000. Management estimates that the remaining
liability for leased machinery and equipment will be fully paid over the next
two years. The liability for mine and plant closure costs is expected to be
satisfied over the next ten years of which approximately 70% is expected to be
paid over the first three years. The liability for employee related costs, which
is primarily workers' compensation, is estimated to be 70% settled over the next
five years with the balance paid during the following five to ten years.
<PAGE>
15. OTHER INCOME AND EXPENSE
Other operating income includes the Company's share of net income of
unconsolidated affiliated companies which are carried on the equity method,
royalty income and gains on sales of assets.
Amounts presented include the accounts of the following equity affiliates:
Ownership
At December 31, 1994
- --------------------------------------------------------------------------------
Servicio Pan Americano De Protecion, S.A. (Mexico) 20.0%
Brink's Panama, S.A. 49.0%
Brink's De Colombia S.A. 46.5%
Brink's S.A. (France) 38.0%
Brink's Schenker, GmbH (Germany) 50.0%
Brink's Securmark S.p.A. (Italy) 24.5%
Security Services (Brink's Jordan), W.L.L. 45.0%
Brink's-Allied Limited (Ireland) 50.0%
Brink's Ayra India Private Limited 40.0%
Brink's Pakistan (Pvt.) Limited 49.0%
Brink's (Thailand) Ltd. 40.0%
Brink's Taiwan Limited 50.0%
Burlington International Forwarding Ltd. (Taiwan) 33.3%
Mining Project Investors Limited (Australia) 34.2%
MPI Gold (USA) 34.2%
The following table presents summarized financial information of these
companies.
1994 1993 1992
- ------------------------------------------------------------------------------
Revenues $833,056 727,697 696,840
Gross profit 154,608 147,778 127,987
Net income 23,503 26,530 31,396
The Company's share of net income $ 6,336 7,503 7,996
==============================================================================
Current assets $180,868 196,480
Noncurrent assets 299,338 230,939
Current liabilities 145,549 155,572
Noncurrent liabilities 160,876 108,286
Net equity $173,781 163,561
Undistributed earnings of such companies included in consolidated retained
earnings approximated $40,536 at December 31, 1994.
Other income (expense), net included a gain aggregating $2,341 in 1992 from the
sale of investments in leveraged leases, which increased the Minerals Group's
net income by $.37 per share in 1992.
<PAGE>
16. SEGMENT INFORMATION
Net sales and operating revenues by geographic area are as follows:
Year Ended December 31
1994 1993 1992
- ------------------------------------------------------------------------------
United States:
Domestic customers $1,477,450 1,172,880 1,035,646
Export customers 274,695 315,664 347,614
- ------------------------------------------------------------------------------
1,752,145 1,488,544 1,383,260
International operations 915,130 767,577 689,781
- ------------------------------------------------------------------------------
$2,667,275 2,256,121 2,073,041
==============================================================================
Segment operating profit by geographic area is as follows:
Year Ended December 31
1994 1993 1992
- ----------------------------------------------------------------------------
United States $11,770 5,139 68,896
International operations 47,279 37,692 26,576
- ----------------------------------------------------------------------------
$59,049 42,831 95,472
============================================================================
Identifiable assets by geographic area are as follows:
As of December 31
1994 1993 1992
- ------------------------------------------------------------------------------
United States $1,252,057 945,122 919,845
International operations 389,074 329,574 331,970
- ------------------------------------------------------------------------------
$1,641,131 1,274,696 1,251,815
==============================================================================
Segment operating profit includes restructuring and other charges, including
litigation accrual aggregating $90,806 in 1994, all of which is included in the
United States and $78,633 in 1993, of which $70,713 is included in United States
and $7,920 is included in other foreign (Note 14).
<PAGE>
Industry segment information is as follows:
Year Ended December 31
1994 1993 1992
- --------------------------------------------------------------------------------
Revenues:
Burlington $1,215,284 998,079 900,347
Brink's 547,046 481,904 444,018
BHS 109,947 89,049 70,805
Coal 779,504 672,244 657,871
Mineral Ventures 15,494 14,845 -
- --------------------------------------------------------------------------------
Consolidated revenues $2,667,275 2,256,121 2,073,041
================================================================================
Operating Profit (Loss):
Burlington $ 69,224 37,971 15,118
Brink's (a) 39,710 35,008 30,354
BHS (b) 32,432 26,400 16,451
Coal (c) (83,451) (48,246) 36,905
Mineral Ventures (c) 1,134 (8,302) (3,356)
- --------------------------------------------------------------------------------
Segment operating profit (loss) 59,049 42,831 95,472
General Corporate expense (16,176) (16,732) (17,110)
Pension credit - - 11,130
- --------------------------------------------------------------------------------
Consolidated operating profit (loss) $ 42,873 26,099 89,492
================================================================================
(a) Includes equity in net income of unconsolidated foreign affiliates of
$6,048 in 1994, $6,895 in 1993 and $8,133 in 1992 (Note 15).
(b) As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security installations to more accurately
reflect subscriber installation costs. The effect of this change in
accounting principle was to increase operating profit by $4,137 in 1994,
$4,051 in 1993 and $4,321 in 1992 (Note 4).
(c) Operating profit (loss) of the Coal segment includes restructuring and
other charges, including litigation accrual of $90,806 in 1994 and $70,713
in 1993 (Note 14). Operating loss of the Mineral Ventures segment includes
restructuring and other charges of $7,920 in 1993 (Note 14).
Capital Expenditures:
Burlington $ 24,701 21,544 14,412
Brink's 23,963 22,209 22,461
BHS 34,071 26,409 22,855
Coal 25,016 15,499 48,945
Mineral Ventures 2,514 2,690 6,526
General Corporate 209 110 206
- --------------------------------------------------------------------------------
Consolidated capital expenditures $ 110,474 88,461 115,405
================================================================================
Depreciation, Depletion and Amortization:
Burlington $ 17,209 15,250 14,379
Brink's 20,553 20,150 20,531
BHS 17,817 14,357 12,215
Coal 44,731 25,679 22,961
Mineral Ventures 1,202 1,779 3
General Corporate 344 350 335
- --------------------------------------------------------------------------------
Consolidated depreciation, depletion
and amortization $ 101,856 77,565 70,424
================================================================================
<PAGE>
As of December 31
1994 1993 1992
- ------------------------------------------------------------------------------
Assets:
Burlington $ 472,440 418,694 406,459
Brink's 297,816 267,229 246,648
BHS 87,372 72,609 65,781
Coal 761,827 499,494 513,340
Mineral Ventures 21,676 16,670 19,587
- ------------------------------------------------------------------------------
Identifiable assets 1,641,131 1,274,696 1,251,815
General Corporate (primarily
cash, investments, advances
and deferred pension assets) 96,647 86,805 70,473
- ------------------------------------------------------------------------------
Consolidated assets $1,737,778 1,361,501 1,322,288
==============================================================================
17. LITIGATION
In 1988, the trustees of certain pension and benefit trust funds established
under collective bargaining agreements with the UMWA brought an action (the
"Evergreen Case") against the Company and a number of its coal subsidiaries in
the United States District Court for the District of Columbia, claiming that the
defendants are 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 is a
signatory. In January 1992, the Court issued an order granting summary judgment
in favor of the trustees on the issue of liability, which was thereafter
affirmed by the Court of Appeals. In June 1993 the United States Supreme Court
denied a petition for a writ of certiorari. The case has been remanded to
District Court, and damage and other issues remain to be decided. In September
1993, the Company filed a motion seeking relief from the District Court's grant
of summary judgment based on, among other things, the Company's allegation that
plaintiffs improperly withheld evidence that directly refutes plaintiffs'
representations to the District Court and the Court of Appeals in this case. In
December 1993, that motion was denied. On May 23, 1994, the trustees filed a
Motion for Entry of Final Judgment seeking approximately $71,100 in delinquent
contributions, interest and liquidated damages through May 31, 1994, plus
approximately $17 additional interest and liquidated damages for each day
between May 31, 1994 and the date final judgment is entered, plus on-going
contributions to the 1974 Pension Plan. The Company has opposed this motion.
There has been no decision on this motion or final judgment entered to date.
In furtherance of its ongoing effort to identify other available legal options
for seeking relief from what it believes to be an erroneous finding of liability
in the Evergreen Case, the Company has filed suit against the Bituminous Coal
Operators Association ("BCOA") and others to hold them responsible for any
damages sustained by the Company as a result of the Evergreen Case. Although the
Company is continuing that effort, the Company, following the District Court's
ruling in December 1993, recognized the potential liability that may result from
an adverse judgment in the Evergreen Case (Notes 13 and 14). In any event, any
final judgment in the Evergreen Case will be subject to appeal. In December
1994, the District
<PAGE>
Court ordered that the Evergreen Case, as well as related cases filed against
other coal companies, and the BCOA case, be submitted to mediation before a
federal judge in an effort to obtain a settlement. The mediation process is
on-going.
As a result of the Health Benefit Act (Note 13), there is no continuing
liability in this case in respect of health benefit funding after February 1,
1993.
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the cleanup costs on an undiscounted basis using
existing technologies to be between $6,700 and $14,100 over a period of three to
five years. Management is unable to determine that any amount within that range
is a better estimate due to a variety of uncertainties, which include the extent
of the contamination at the site, the permitted technologies for remediation and
the regulatory standards by which the clean-up will be conducted. The clean-up
estimates have been modified in light of certain regulatory changes promulgated
in December 1994.
The Company commenced insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws have been found to control the
interpretation of the policies), and numerous other factual considerations which
support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
18. COMMITMENTS
At December 31, 1994, the Company had contractual commitments to purchase coal
which is primarily used to blend with Company mined coal. Based on the contract
provisions these commitments are currently estimated to aggregate approximately
$276,111 and expire from 1995 through 1998 as follows:
1995 $105,112
1996 89,219
1997 56,970
1998 24,810
- --------------------------------------------------------------------------------
$276,111
================================================================================
<PAGE>
Purchases under the contracts were $53,097 in 1994, $81,069 in 1993 and $74,331
in 1992.
19. SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31, 1994, 1993 and 1992, cash payments for income
taxes, net of refunds received, were $23,406, $30,237 and $6,129, respectively.
For the six months ended June 30, 1995 and 1994 (unaudited), cash payments for
income taxes, net of refunds received were $16,474 and $11,514, respectively.
For the years ended December 31, 1994, 1993 and 1992, cash payments for interest
were $12,104, $10,207 and $11,553, respectively. For the six months ended June
30, 1995 and 1994 (unaudited), cash payments for interest were $7,082 and
$5,816, respectively.
In June 1995, the Company sold its rights under certain coal reserve leases and
the related equipment for $2,800 in cash and notes totaling $2,882. The cash
proceeds have been included in the Consolidated Statement of Cash Flows as "Cash
flow from investing activities: Proceeds from disposals of property, plant and
equipment".
In March 1995, the Company sold surplus coal reserves for cash of $2,878 and a
note receivable of $2,317. The cash proceeds have been included in the
Consolidated Statement of Cash Flows as "Cash flow from investing activities:
Proceeds from disposals of property, plant and equipment".
In December 1993, the Company sold the majority of the assets of its captive
mine supply company. Cash proceeds of $8,400 from the sale were received on
January 2, 1994, and have been included in "Cash flow from investing activities:
Other, net" in 1994.
During 1993, the Company sold a coal preparation plant and related interest in
land, equipment and facilities for mineral reserves with a fair market value of
$13,300 and cash of $10,700. The cash proceeds of $10,700 less $1,001 in
expenses related to the transaction were included in "Cash flow from investing
activities: Other, net".
<PAGE>
20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Tabulated below are certain data for each quarter of 1994 and 1993.
1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
1994 Quarters:
Net sales and operating
revenues $587,795 659,500 693,854 726,126
Gross profit 51,770 100,521 98,823 102,495
Net income (loss) $(63,568) 28,038 31,210 31,217
Per Pittston Services Group
Common Share:
Net income $ .28 .56 .66 .61
Per Pittston Minerals Group
Common Share:
Net income (loss)
Primary $ (9.96) .72 .74 .91
Fully diluted $ (9.96) .67 .61 .81
1993 Quarters:
Net sales and operating
revenues $531,748 554,659 569,438 600,276
Gross profit 64,476 74,537 82,925 88,963
Net income (loss) $ 8,156 14,140 21,245 (29,395)
Per Pittston Services Group
Common Share:
Net income $ .15 .30 .41 .41
Per Pittston Minerals Group
Common Share:
Net income (loss)
Primary $ .38 .43 .80 (5.98)
Fully diluted $ .37 .43 .79 (5.98)
Net loss in the first quarter of 1994 included restructuring and other charges
of $58,116 (Note 14).
Net loss in the fourth quarter of 1993 included restructuring and other charges,
including litigation accrual of $48,897 (Note 14).
<PAGE>
THE PITTSTON COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
In the first six months of 1995, the Pittston Company (the "Company") reported a
net income of $38.7 million compared with a net loss of $35.5 million in the
first six months of 1994. Operating profit totaled $58.6 million in the first
six months of 1995 compared to an operating loss of $45.8 million in the prior
year period. The net loss and operating loss in the first six months of 1994
included charges totaling $58.1 million and $90.8 million, respectively,
attributable to the Company's Coal operations for asset writedowns and accruals
for costs related to facility shutdowns. Net income in the first half of 1995
was positively impacted by improved results from the Brink's, Incorporated
("Brink's"), Brink's Home Security, Inc. ("BHS") and Pittston Mineral Ventures
businesses, partially offset by lower results at Burlington. The 1995 first half
was also impacted by lower nonoperating expenses and higher net interest expense
compared with the same period of last year.
Net income for the Company for 1994 was $26.9 million compared with $14.1
million for 1993. Operating profit totaled $42.9 million for 1994 compared with
$26.1 million for 1993. Net income and operating profit for 1994 included
charges totaling $58.1 million and $90.8 million, respectively, attributable to
the Company's Coal operations for asset writedowns and accruals for costs
related to facility shutdowns. Net income and operating profit for 1993
reflected similar charges, in addition to a litigation accrual, totaling $48.9
million and $78.6 million, respectively. Such charges in 1993 impacted the
Company's Coal and Mineral Ventures operations. Net income and operating profit
for 1994 compared with 1993 were positively impacted by improved results from
each of the Company's services businesses, which include the operations of
Burlington Air Express Inc. ("Burlington"), Brink's, Incorporated ("Brink's")
and Brink's Home Security, Inc. ("BHS"), and from the Company's Mineral Ventures
business. In addition to the impact of asset writedowns and other restructuring
charges year to year, operating results for Coal operations declined for 1994
compared with 1993.
Net income and operating profit for 1992 was $49.1 million and $89.5 million,
respectively. The comparison of net income and operating profit for 1993 is also
affected by charges incurred beginning in 1993 for legislated health care
benefits for retired union mine workers and their dependents. In 1993, the
Company recognized a pre-tax charge of $10 million ($6.5 million after tax) for
these benefits. Net income and operating profit for 1992 were positively
impacted by a pension credit of $7.0 million and $11.1 million, respectively,
relating to the final year of amortization of the unrecognized initial net
pension asset at the date of adoption of Statement of Financial Accounting
Standards ("SFAS") No. 87, "Employers' Accounting for Pensions". This credit was
recognized over the estimated remaining average service life of the Company's
employees at the date of adoption.
<PAGE>
Burlington Operations
- ---------------------
The following is a table of selected financial data for Burlington on a
comparative basis:
<TABLE>
<CAPTION>
(Dollars in thousands -
except per pound/ Six Months Ended
shipment amounts) June 30 Years Ended December 31
- -------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Airfreight
Domestic U.S. $257,855 272,539 565,440 460,061 418,372
International 312,489 232,951 518,652 440,239 395,800
- -------------------------------------------------------------------------------------------------------
Total airfreight 570,344 505,490 1,084,092 900,300 814,172
Other 95,550 58,260 131,192 97,779 86,175
- -------------------------------------------------------------------------------------------------------
Total revenues 665,894 563,750 1,215,284 998,079 900,347
Operating expenses 589,237 482,942 1,043,895 865,587 789,354
Selling, general and
administrative 55,562 52,501 105,371 97,332 97,813
- -------------------------------------------------------------------------------------------------------
Total costs and
expenses 644,799 535,443 1,149,266 962,919 887,167
- -------------------------------------------------------------------------------------------------------
Other operating
income 1,369 1,473 3,206 2,811 1,938
- -------------------------------------------------------------------------------------------------------
Operating profit:
Domestic U.S. 11,480 20,391 45,732 19,290 1,835
International 10,984 9,389 23,492 18,681 13,283
- -------------------------------------------------------------------------------------------------------
Operating profit $ 22,464 29,780 69,224 37,971 15,118
=======================================================================================================
Depreciation and
amortization $ 9,702 8,233 17,209 15,250 14,379
=======================================================================================================
Cash capital
expenditures $ 13,500 11,009 23,946 28,253 6,623
=======================================================================================================
Airfreight shipment
growth rate (a) 6.2% 10.4% 7.6% 4.3% 11.4%
Airfreight weight
growth rate (a):
Domestic U.S. (4.1%) 21.5% 19.3% 12.5% 6.3%
International 25.1% 24.5% 25.3% 15.8% 43.8%
Worldwide 9.0% 22.9% 22.1% 14.3% 20.7%
Worldwide airfreight
weight (pounds) 644,366 591,257 1,248,541 1,020,428 892,974
- -------------------------------------------------------------------------------------------------------
Worldwide air-
freight shipments 2,538 2,389 4,805 4,530 4,342
- -------------------------------------------------------------------------------------------------------
Worldwide average
airfreight:
Yield (revenue
per pound) $ 0.885 0.855 0.868 0.882 0.912
Revenue per
shipment $ 225 212 226 199 188
Weight per ship-
ment (pounds) 254 247 260 225 206
=======================================================================================================
</TABLE>
(a) Compared to the same period in the prior year.
<PAGE>
Operating profit in the first half of 1995 for Burlington was $22.5 million, a
$7.3 million decrease from the $29.8 million operating profit reported in the
first half of 1994, which benefited from significant additional domestic freight
as a result of the nationwide trucking strike which added an estimated $8
million to the second quarter' operating profit. Worldwide revenues rose 18% to
$665.9 million in the current year period from $563.8 million in the first six
months of 1994. The $102.1 million increase in revenues resulted principally
from a 9% increase in worldwide airfreight pounds shipped.
Domestic airfreight revenues decreased by 5% or $14.7 million to $257.8 while
operating profit decreased $8.9 million to $11.5 million in the first half of
1995 compared to the first half of 1994. These decreases were due to a 4%
decrease in domestic volume and a 1% decrease in domestic yields. The decrease
in volume was due primarily to the impact of the U.S. trucking strike in the
second quarter of 1994 which added substantial additional volume and an
estimated $8 million to operating profit.
International airfreight revenues of $312.5 million in the first six months of
1995 were $79.5 million or 34% higher than the $233.0 million reported in the
prior year's first half. International operating profit of $11.0 million
increased $1.6 million in the first six months of 1995 compared to the first six
months of 1994. These increases were primarily due to a 25% increase in
airfreight weight shipped compared to the prior year period. The increase in
volume can be largely attributed to improved economic conditions in the
international markets and expansion of company-owned operations.
Other revenue, which includes import transactions such as customs clearance and
import related services, as well as ocean freight services, increased 64% or
$37.3 million to $95.6 million, due to an increase in international shipment
volume and a continued expansion of ocean freight services.
Operating profit of Burlington increased $31.2 million to $69.2 million in 1994
from $38.0 million in 1993. Worldwide revenues rose 22% to $1.2 billion in 1994
from $998.1 million in the prior year. The $217.2 million increase in revenues
resulted principally from higher volume in both domestic and international
markets.
In 1994, increased revenues from higher volumes were partially offset by lower
average yields (revenues per pound). Total airfreight weight shipped worldwide
increased 22% to 1,248.5 million pounds in 1994 from 1,020.4 million pounds a
year earlier. Worldwide average airfreight yield decreased less than 2% or $.01
to $.87 in 1994 compared with a year earlier. Total operating expenses and
selling, general and administrative expenses increased in 1994 compared with
1993 largely resulting from the increased volume of business.
Domestic U.S. operating profit of $45.7 million for 1994 benefited from volume
increases compared to the prior year, a significant portion of which was from
increased shipping levels. Such increases were aided by a strong economy and
limited lift capacity available to forwarders. Higher volume, in part, also
reflected the impact of the 24 day Teamsters strike in 1994. Domestic U.S.
operating profit also benefited from growth in the market for heavy airfreight,
increased market share, a shift in mix toward Burlington's premium next-day
service, and, on a per pound basis, lower private fleet, common carriage and
cartage costs. Increased capacity as a result of the fourth quarter 1993
expansion of Burlington's airfreight hub in Toledo, Ohio, as well as the 1994
fleet expansion assisted in increasing efficiency and provided additional
<PAGE>
capacity in existing and new next morning markets. Gains from increased business
volume including a 19% increase in domestic airfreight weight shipped and
efficiencies were partially offset by decreased average yields in 1994. Average
yields continue to reflect a highly competitive pricing environment.
International operating results of $23.5 million in 1994 increased from the 1993
level. These operations benefited from a 25% increase in international
airfreight weight shipped, partially offset by lower yields, additional costs
incurred in connection with offering complete global logistics services, and
startup costs incurred in providing services in additional foreign markets.
Although export volumes increased during 1994, pricing for U.S. exports was
adversely impacted by competitive pricing.
Operating profit of Burlington increased $22.9 million to $38.0 million in 1993
from $15.1 million in 1992. Worldwide revenues increased $97.8 million or 11% to
$998.1 million in 1993 from $900.3 million in 1992. The increase in revenues
primarily reflects volume increases only partially offset by lower average
yields. Total airfreight weight shipped worldwide for 1993 increased 14% to
1,020.4 million pounds from 893.0 million pounds in 1992. Worldwide average
airfreight yield decreased 3% or $.03 to $.88 in 1993 compared to 1992. Total
operating expenses increased, while selling, general and administrative expenses
decreased in 1993 compared with the prior year. Higher operating expenses
resulting from the increased volume of business in 1993 were, however, favorably
impacted by increased efficiency in private fleet operations achieved as a
result of a fleet upgrade to DC8-71 aircraft replacing B707 aircraft,
accomplished by lease transactions at year-end 1992 and in early 1993. During
the 1993 fourth quarter, Burlington also completed a 30% expansion of its
airfreight hub in Toledo, Ohio. This expansion assisted in increasing
efficiency, including higher average weight shipped per container. Selling,
general and administrative expenses in 1992 were adversely affected by charges
for costs related to organizational downsizing in both domestic and foreign
operations.
Domestic U.S. operating profit of $19.3 million in 1993 increased compared with
1992 largely due to increased volume and lower transportation costs per pound,
partially offset by decreased average yields. While average yields decreased in
1993 compared with 1992 reflecting a highly competitive pricing environment,
market improvement was evident during the last quarter of 1993 as load factors
increased.
International operating results of $18.7 million in 1993 increased compared with
results in 1992. These operations benefited from a 16% increase in international
weight shipped, however, such gains were partially offset by lower yields.
<PAGE>
BRINK'S
The following is a table of selected financial data for Brink's on a comparative
basis:
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) June 30 Years Ended December 31
- --------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $303,634 251,948 547,046 481,904 444,018
Operating expenses 248,224 204,503 438,851 387,751 357,613
Selling, general and administrative 38,964 34,200 74,398 66,044 64,454
- --------------------------------------------------------------------------------------------------------
Total costs and expenses 287,188 238,703 513,249 453,795 422,067
- --------------------------------------------------------------------------------------------------------
Other operating income 1,173 3,104 5,913 6,899 8,403
- --------------------------------------------------------------------------------------------------------
Operating profit $ 17,619 16,349 39,710 35,008 30,354
========================================================================================================
Depreciation and amortization $ 10,496 10,120 20,553 20,150 20,531
========================================================================================================
Cash capital expenditures $ 11,476 6.733 22,312 21,150 20,683
========================================================================================================
Revenues:
North America (United
States and Canada) $180,981 161,819 337,641 300,728 271,243
International
subsidiaries 122,653 90,129 209,405 181,176 172,775
- --------------------------------------------------------------------------------------------------------
Total revenues $303,634 251,948 547,046 481,904 444,018
========================================================================================================
Operating profit:
North America (United
States and Canada) $ 12,526 9,445 23,235 20,049 15,800
International
operations 5,093 6,904 16,475 14,959 14,554
- --------------------------------------------------------------------------------------------------------
Total operating profit $ 17,619 16,349 39,710 35,008 30,354
========================================================================================================
</TABLE>
Brink's operating profit increased $1.3 million to $17.6 million in the first
six months of 1995 from $16.3 million in the first six months of 1994, with an
increase in revenues of $51.7 million, partially offset by an increase in
operating expenses and selling, general and administrative expenses totaling
$48.5 million, and a decrease in other operating income of $1.9 million.
Revenue from North American (United States and Canada) operations increased 12%
to $181.0 million in the first half of 1995 from $161.8 million in the prior
year period. North American operating profit increased $3.1 million to $12.5
million from $9.4 million. The increase in operating profit was largely
attributable to increases in the armored car business which includes ATM
servicing and to a lesser extent to increases in the diamond and jewelry and
coin and currency processing businesses, partially offset by lower air courier
results.
Revenue from international subsidiaries increased $32.5 million or 36% to $122.7
million, while operating profit from international subsidiaries and
<PAGE>
affiliates decreased $1.8 million or 26% to $5.1 million in the first half of
1995. The increase in revenue is primarily due to higher revenues in Brazil as
well as the favorable impact of foreign currency translation. The decline in
operating profit was primarily attributable to operations in Mexico, partially
offset by an increase reported in Brazil. Brink's share of its Mexican
affiliate's results was a $1.0 million loss in the first six months of 1995
compared to a $1.7 million profit reported in the same period of 1994. In the
first six months of 1995, results from these operations were negatively impacted
by the devaluation of the peso, which occurred in December 1994, and the decline
in general economic conditions. Brink's Brazil reported an operating profit of
$.9 million in the first half of 1995 compared to $.1 million in the prior year
period.
Operating profit of Brink's increased $4.7 million to $39.7 million in 1994 from
$35.0 million in 1993. An increase in revenues of $65.1 million was offset to a
large extent by increases in operating expenses and selling, general and
administrative expenses of $59.4 million and a decrease in other operating
income of $1.0 million.
The increase in operating profit in 1994 was largely due to North American
operations. Revenue from North American operations increased $36.9 million or
12% to $337.6 million and operating profit increased $3.2 million or 16% to
$23.2 million. Air courier, diamond and jewelry, armored car, automated teller
machine ("ATM") servicing and coin wrapping operations each contributed to the
increase in North American operating profit in 1994, while results for currency
processing operations remained comparable to the prior year.
In 1994, revenue from international subsidiaries increased $28.2 million or 16%
to $209.4 million, while operating earnings from international subsidiaries and
affiliates increased $1.5 million or 10% to $16.5 million compared to 1993. The
most significant improvements were recorded by operations in Brazil (100% owned)
and Israel (70% owned). Improvements were also recorded in the United Kingdom
(100% owned), Colombia (46% owned), Hong Kong (67% owned) and the Company's
international diamond and jewelry operations. Results for Holland (65% owned),
France (38% owned) and Chile (60% owned) declined from the prior year. Brazil's
operating profit for 1994 totaled $3.2 million compared with $1.4 million in
1993. Brazil's earnings in 1994 were augmented by the large volume of one-time
special shipments of the new Brazilian currency and to a lesser extent from
increased volume due to the growth of money in circulation. Results for Brazil
in 1994 also included price increases obtained during the year to defray the
substantially higher security costs made necessary by the dramatic increase in
attacks on the armored car industry in Brazil. Brink's share of the equity in
earnings from their Mexican affiliate (20% owned) of $2.8 million in 1994 was
comparable to the 1993 level. These results were impacted by the local economic
recession, and costs incurred to streamline the operation, including work force
reductions. Results in Mexico for 1994 were not significantly impacted by the
devaluation of the peso in late December 1994.
In 1993, Brink's operating profit increased $4.6 million to $35.0 million from
$30.4 million in 1992. Worldwide operating revenues increased 9% or $37.9
million to $481.9 million with increased operating expenses and selling, general
and administrative expenses of $31.7 million and decreased other operating
income of $1.5 million.
<PAGE>
A significant portion of the increase in revenues and operating profit in 1993
compared with 1992 was attributable to North American operations. Revenue from
North American operations increased $29.5 million or 11% to $300.7 million and
operating profit increased $4.2 million or 27% to $20.0 million. Increases in
ATM, armored car, air courier and coin wrapping results were partially offset by
a decrease in currency processing results.
Revenue from international subsidiaries increased $8.4 million or 5% to $181.2
million, while operating results for international subsidiaries and affiliates
for 1993 remained comparable to 1992 results. Increased earnings from operations
in Brazil were offset by decreased results from the U.K. operation and Brink's
equity affiliate in Mexico. Operations in Brazil reported a $1.4 million
operating profit in 1993 compared with a $.3 million operating loss in 1992.
Results in the U.K. were affected by competitive price pressures, recessionary
pressures and the cost of a labor settlement. Operations of Brink's equity
affiliate in Mexico were affected by a recessionary economy, competitive
pressures, losses from new business ventures and severance costs incurred in
streamlining the work force.
BHS
The following is a table of selected financial data for BHS on a comparative
basis:
<TABLE>
<CAPTION>
Six Months Ended
(Dollars in thousands) June 30 Years Ended December 31
- -------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 61,372 52,706 109,947 89,049 70,805
Operating expenses 32,664 28,734 59,334 46,203 40,262
Selling, general and
administrative 10,392 8,509 18,181 16,446 14,092
- -------------------------------------------------------------------------------------------------------
Total costs and expenses 43,056 37,243 77,515 62,649 54,354
- -------------------------------------------------------------------------------------------------------
Operating profit $ 18,316 15,463 32,432 26,400 16,451
=======================================================================================================
Depreciation and amortization $ 10,420 8,262 17,817 14,357 12,248
=======================================================================================================
Cash capital expenditures $ 19,141 16,664 34,071 26,409 22,855
=======================================================================================================
Annualized service revenues (a) $ 95,810 78,856 87,164 70,887 56,512
=======================================================================================================
Number of subscribers:
Beginning of period 318,029 259,551 259,551 216,639 180,069
Installations 38,362 37,977 75,203 59,733 51,309
Disconnects, net (9,851) (7,910) (16,725) (16,821) (14,739)
- -------------------------------------------------------------------------------------------------------
End of period 346,540 289,618 318,029 259,551 216,639
=======================================================================================================
</TABLE>
(a) Annualized service revenue is 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.
<PAGE>
Operating profit of BHS increased $2.8 million to $18.3 million in the first
half of 1995 from $15.5 million in the first half of 1994. The increase in
operating profit for the first six months of 1995 compared to the same period in
1994 reflected higher monitoring revenues due to an average subscriber base that
was approximately 20% higher than the same period in 1994, slightly offset by
higher account servicing and administrative costs. Net new subscribers totaled
approximately 28,500 in the first six months of 1995, compared with
approximately 30,000 in the first six months of 1994. Subscribers at June 30,
1995 totaled 346,540.
Operating profit of BHS aggregated $32.4 million in 1994 compared with $26.4
million in 1993 and $16.5 million in 1992. The $6.0 million increase in
operating profit in 1994 compared with 1993 reflects increased monitoring
revenues, partially offset by increased installation expenses and increased
overhead costs. The $9.9 million increase in operating profit in 1993 compared
with 1992 reflects increased monitoring revenues, partially offset by increases
in installation expenses and servicing and overhead costs.
The increased monitoring revenue in 1994 as in 1993 was largely attributable to
an expanding subscriber base. Although total costs, including installation
expenses, increased as a result of the expanding subscriber base, such growth
contributed to improved economies of scale and other cost efficiencies achieved
in servicing BHS's subscribers. At year-end 1994, BHS had approximately 318,000
subscribers, 47% more than the year-end 1992 subscriber base. New subscribers
totaled 75,200 in 1994 and 59,700 in 1993. As a result, BHS's average subscriber
base increased by 21% in 1994 and 20% in 1993 as compared with each prior year.
As of January 1, 1992, BHS elected to capitalize categories of costs not
previously capitalized for home security installations to more accurately
reflect subscriber installation costs included as capitalized installation
costs, which added $4.1 million to operating profit in 1994 and 1993 and $4.3
million to operating profit in 1992. The additional costs not previously
capitalized consisted of costs for installation labor and related benefits for
supervisory, installation scheduling, equipment testing and other support
personnel (in the amount of $2.6 million in 1994 and 1993 and $2.3 million in
1992) and costs incurred in maintaining facilities and vehicles dedicated to the
installation process (in the amount of $1.5 million in 1994 and 1993 and $2.0
million in 1992). The increase in the amount capitalized, while adding to
current period profitability comparisons, defers recognition of expenses over
the estimated useful life of the installation. The additional subscriber
installation costs which are currently capitalized were expensed in prior years
for subscribers in those years. Because capitalized subscriber installation
costs for periods prior to January 1, 1992, were not adjusted for the change in
accounting principle, installation costs for subscribers in those years will
continue to be depreciated based on the lesser amounts capitalized in those
periods. Consequently, depreciation of capitalized subscriber installation costs
in the current year and until such capitalized costs prior to January 1, 1992,
are fully depreciated will be less than if such prior periods' capitalized costs
had been adjusted for the change in accounting. However, the Company believes
the effect on net income in 1994, 1993 and in 1992 was immaterial. While the
amounts of the costs incurred which are capitalized vary based on current market
and operating conditions, the types of such costs which are
<PAGE>
currently capitalized will not change. The change in the amount capitalized has
no additional effect on current or future cash flows or liquidity.
COAL
The following is a table of selected financial data for the Coal operations on a
comparative basis:
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) June 30 Years Ended December 31
- -------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $371,270 371,796 779,504 672,244 657,871
Cost of sales 368,945 373,659 760,966 632,777 604,319
Selling, general and
administrative expenses 11,702 12,963 26,294 26,752 25,656
Restructuring and other
charges, including
litigation accrual - 90,806 90,806 70,713 -
- -------------------------------------------------------------------------------------------------------
Total costs and expenses 380,647 477,428 878,066 730,242 629,975
- -------------------------------------------------------------------------------------------------------
Other operating income 16,498 6,188 15,111 9,752 9,009
- -------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 7,121 (99,444) (83,451) (48,246) 36,905
=======================================================================================================
Coal sales (tons):
Metallurgical 4,633 4,876 9,884 11,675 12,298
Utility and industrial 8,528 8,387 18,198 10,277 8,432
- -------------------------------------------------------------------------------------------------------
Total coal sales 13,161 13,263 28,082 21,952 20,730
=======================================================================================================
Production/purchased (tons)
Deep 2,041 2,622 4,857 7,061 8,642
Surface 7,129 7,004 15,107 7,492 5,804
Contract 1,041 1,126 2,364 2,521 2,792
- -------------------------------------------------------------------------------------------------------
10,211 10,752 22,328 17,074 17,238
Purchased 3,502 2,786 5,826 4,533 3,607
- -------------------------------------------------------------------------------------------------------
Total 13,713 13,538 28,154 21,607 20,845
=======================================================================================================
</TABLE>
Coal operations had an operating profit of $7.1 million in the first six months
of 1995 compared to an operating loss of $99.4 million in the prior year period.
Included in the results for the first six months of 1995 are a pretax gain of
$5.3 million from the disposition of surplus coal reserves and a $2.5 million
benefit from a favorable litigation decision which reduced previously expensed
employee benefit costs. The 1994 first six months operating loss included $90.8
million of charges for asset writedowns and accruals for costs related to
facilities which are being closed (discussed further below) and $6.7 million of
operating losses incurred during the first half related to those facilities.
Excluding the positive impact from both the sale of surplus coal reserves and
the favorable employee benefits litigation decision, Coal operations incurred an
operating loss of $.7 million in the first six months of 1995. As part of its
strategy to achieve positive operating profit on a sustainable basis for the
long-term, the following steps are being implemented: (i) reduction of overhead;
(ii) evaluation of non-strategic assets for sale; (iii) improvement of margin at
continuing operations; (iv)
<PAGE>
review of unprofitable mines for possible closure; and (v) review of new mine
openings to take advantage of specific market opportunities.
Sales volume of 13.2 million tons in the first half of 1995, was .1 million tons
less than the 13.3 million tons sold in the first half of 1994. Steam coal sales
increased by .1 million tons to 8.5 million tons and metallurgical coal sales
declined by .2 million tons to 4.6 million tons compared to the prior year.
Steam coal sales represented 65% of total volume in the first half of 1995,
compared to 63% in the prior year.
Production in the first half of 1995 totaled 10.2 million tons, a 5% decrease
compared to the first half of 1994, principally reflecting the scheduled
reduction in underground mine production during 1994 and early 1995 and the
idling of surface steam coal mines. Surface production accounted for 71% and 66%
of total production in the first half of 1995 and 1994, respectively.
Productivity of 36 tons per man day represented a 9% increase over the
comparable period in 1994. Domestic steam coal markets continue to be depressed,
with spot pricing at exceptionally low levels.
Coal operations reached contract agreements with most of its metallurgical
customers for the coal year that began April 1, 1995 calling for price increases
of approximately $4.00 to $5.50 per metric ton, depending upon coal quality.
These price increases had the effect of realigning pricing to levels in effect
prior to last year's unusually large decline. Sales volume is expected to
decline modestly from the level in the prior contract year. The price increases
were in effect during a portion of the 1995 second quarter as a result of the
timing of metallurgical coal shipments and were partially offset by the higher
costs of purchased coal as well as increased transportation costs.
Coal operations had an $83.4 million operating loss in 1994 compared with an
operating loss of $48.2 million in 1993. Results for 1994 included the operating
results from substantially all the coal mining operations and coal sales
contracts of Addington Resources, Inc. ("Addington"), which were acquired by the
Coal operations on January 14, 1994. The Coal operating loss in 1994 included
$90.8 million of charges for asset writedowns and accruals for costs related to
facilities which are being closed (further discussed below). In addition,
operating results for 1994 reflected the adverse impact of the severe winter
weather in early 1994 which particularly hampered surface mine production and
river transportation. Operating profit in 1994 included other operating income
primarily from third party royalties and sales of properties and equipment of
$15.1 million compared with $9.8 million in 1993. The operating loss in 1993
included a $70.7 million charge related to mines which were closed at the end of
1993 or early 1994, including employee benefit costs and certain other noncash
charges, together with the estimated liability in connection with previously
reported litigation (the "Evergreen Case"), discussed later, brought against the
Company and a number of its coal subsidiaries by the trustees of certain pension
and benefit trust funds established under collective bargaining agreements with
the United Mine Workers of America ("UMWA"). Operating profit in 1993 was also
negatively impacted by a $1.8 million charge to settle litigation related to the
moisture content of tonnage used to compute royalty payments to the UMWA pension
and benefit funds during the period ending February 1, 1988.
<PAGE>
Sales volume of 28.1 million tons for 1994 was 28% or 6.1 million tons higher
than sales volume in 1993. The increased sales were attributable to steam coal
with sales of 18.2 million tons (65% of total sales), up from 10.3 million tons
(47% of total sales) in 1993, while metallurgical coal sales decreased 15% from
11.7 million tons to 9.9 million tons. Coal produced (22.3 million tons) and
purchased (5.8 million tons) totaled 28.2 million tons for 1994, a 30% or 6.5
million ton increase over 1993. The increase in coal sales and coal produced/
purchased in 1994 as compared with 1993 was largely attributable to the addition
of the Addington operations.
In 1994, 31% of total production was derived from deep mines and 69% was derived
from surface mines compared with 54% and 46% of deep and surface mine
production, respectively, in 1993.
Average coal margin (realization less current production cost of coal sold),
which was $1.72 per ton in 1994 decreased $1.03 or 38% from the 1993 level with
a 7% or $1.91 per ton decrease in average realization, only partially offset by
a 3% or $.88 per ton decrease in average current production cost of coal sold.
The higher percentage of steam coal sales and declines in export metallurgical
coal prices contributed to the decline in average realization. The decrease in
average cost is largely due to the shift to lower cost surface production.
However, margins were negatively impacted by costs that have continued at higher
than expected levels, particularly at the Addington operations. In addition,
adverse geological conditions were also encountered at one of the mines acquired
from Addington. Management is reviewing its options of sources used to fulfill
its coal sales agreements and to reduce costs in an effort to improve margins.
Production and related costs in early 1994 were adversely impacted by the
extreme cold weather and above-normal precipitation which resulted in a large
number of lost production days and interruptions which limited output
efficiencies during periods of performance. Sales also suffered during this
period due to lost loading days and were impeded by restricted road
accessibility. Sales were further impacted by the lack of rail car availability
and the disruption of river barge service initially due to frozen waterways and
subsequently due to the heavy snow melt and rain, which raised the rivers above
operational levels. The severe weather early in the year also reduced output
from purchased coal suppliers, which hindered the ability to meet customer
shipments during the period. In addition to weather related difficulties,
operations in early 1994 were affected by lost business due to a utility
customer's plant closure and production shortfalls due to the withdrawal of
contract producers from the market.
Early in 1994 the metallurgical coal markets continued their long-term decline
with significant price reductions negotiated between Canadian and Australian
producers and Japanese steel mills. During the 1994 second quarter Coal
operations reached agreement with its major Japanese steel customers for new
three-year agreements (subject to annual price renegotiations) for metallurgical
coal shipments. Such agreements replaced sales contracts which expired on March
31, 1994. Pricing under the new agreements for the coal year beginning April 1,
1994, was impacted by the price reductions accepted by foreign producers, but
was largely offset by modifications in coal quality specifications which allows
the Coal operation flexibility in sourcing and blending of coals. Although Coal
operations has not yet reached price agreements with its significant
metallurgical export
<PAGE>
coal customers for the contract year beginning April 1, 1995, certain European
metallurgical coal customers have agreed to price increases.
The market for metallurgical coal, for most of the past fifteen years, has been
characterized by weak demand from primary steel producers and intense
competition from foreign coal producers, especially those in Australia and
Canada. Metallurgical coal sales contracts typically are subject to annual price
negotiations, which increase the risk of market forces. As a result of the
continuing long-term decline in the metallurgical coal markets, which was
further evidenced by the previously discussed significant price reductions in
early 1994, the Coal operations accelerated its strategy of decreasing its
exposure to these markets. After a review of the economic viability of the
remaining metallurgical coal assets in early 1994, management determined that
four underground mines were no longer economically viable and should be closed
resulting in significant economic impairment to three related preparation
plants. In addition, it was determined that one surface steam coal mine, the
Heartland mine, which provided coal to Alabama Power under a long-term sales
agreement, would be closed due to rising costs caused by unfavorable geological
conditions.
As a result of these decisions, the Coal operations incurred pre-tax charges of
$90.8 million ($58.1 million after tax) in the first quarter of 1994 which
included a reduction in the carrying value of these assets and related accruals
for mine closure costs. These charges included asset writedowns of $46.5 million
which reduced the book carrying value of such assets to what management believes
to be their net realizable value based on either estimated sales or leasing of
such property to unrelated third parties. In addition, the charges included $3.8
million for required lease payments owed to lessors for machinery and equipment
that would be idled as a result of the mine and facility closures. The charges
also included $19.3 million for mine and plant closure costs which represented
estimates of reclamation and other environmental costs to be incurred to bring
the properties in compliance with federal and state mining and environmental
laws. This accrual was required due to the premature closing of the mines. The
accrual also included $21.2 million in contractually or statutorily required
employee severance and other benefit costs associated with termination of
employees at these facilities and costs associated with inactive employees at
these facilities. Such employee benefits include severance payments, medical
insurance, workers' compensation and other benefits and have been calculated in
accordance with contractually (collective bargaining agreements signed by
certain coal subsidiaries included in the Coal operations) and legally required
employee severance and other benefits. During the remainder of 1994, the Company
paid $10.2 million of these liabilities, of which $1.5 million was for idled
leased equipment; $5.3 million was for facility closure costs and $3.4 million
was for employee- related costs.
Of the four underground mines, two have ceased coal production (one in the first
half of 1995), while the remaining two mines are expected to cease coal
production in 1995. In 1994 the Coal operations reached agreement with Alabama
Power Company to transfer the coal sales contract serviced by the Heartland mine
to another location in West Virginia. The Heartland mine ceased coal production
during 1994 and final reclamation and environmental work is in process. At the
beginning of 1994 there were approximately 750 employees involved in operations
at these facilities and other
<PAGE>
administrative support. Employment at these facilities was reduced by 52% to
approximately 360 employees at December 31, 1994 and by 78% to approximately 165
employees at June 30, 1995.
As discussed previously, the effects of this strategy have been to decrease Coal
operations' exposure to the metallurgical coal markets and to increase its
production and sales of lower cost surface minable steam coal. As previously
mentioned, for 1994, steam coal sales rose to approximately 65% of total coal
sales up from less than 50% in the prior year. In addition, production from
surface mines has increased to 69% for 1994 as compared to 45% for last year. In
addition, metallurgical coal produced/ purchased decreased to 9.9 million tons
versus 11.7 million tons when comparing 1994 to 1993.
Although coal production has or will cease at the mines contemplated in the
accrual, the Coal operations will incur reclamation and environmental costs for
several years to bring these properties into compliance with federal and state
environmental laws. In addition, employee termination and medical costs will
continue to be incurred for several years after the facilities have been closed.
The significant portion of these employee liabilities is for statutorily
provided workers' compensation costs for inactive employees. Such benefits
include indemnity and medical costs as required under state workers'
compensation laws. The long payment periods are based on continued, and in some
cases lifetime, indemnity and medical payments to injured former employees and
their surviving spouses. Management believes that the charges incurred in the
first quarter of 1994 should be sufficient to provide for these future costs and
does not anticipate material additional future charges to operating earnings for
these facilities, although continual cash funding will be required over the next
several years.
<PAGE>
The following table analyzes the changes in liabilities during the last three
years for facility closure costs recorded as restructuring and other charges:
Employee
Mine Termination,
Leased and Medical
Machinery Plant and
and Closure Severance
Equipment Costs Costs Total
- --------------------------------------------------------------------------------
Balance as of January
1, 1993 (a) $1,146 35,499 35,413 72,058
Additions 2,782 1,598 6,267 10,647
Payments (b) 836 8,663 7,463 16,962
- --------------------------------------------------------------------------------
Balance as of December
31, 1993 3,092 28,434 34,217 65,743
Additions 3,836 19,290 21,193 44,319
Payments (c) 3,141 9,468 12,038 24,647
- --------------------------------------------------------------------------------
Balance as of December
31, 1994 3,787 38,256 43,372 85,415
Payments (d) 1,018 6,294 4,198 11,510
- --------------------------------------------------------------------------------
Balance as of June 30,
1995 $2,769 31,962 39,174 73,905
================================================================================
(a) These amounts represent the remaining liabilities for facility closure
costs recorded as restructuring and other charges in prior years. The
original charges included $2,312 for leased machinery and equipment,
$50,645 principally for incremental facility closing costs, including
reclamation and $47,841 for employee benefit costs, primarily workers'
compensation, which will continue to be paid for several years.
(b) These amounts represent total cash payments made during the year for
liabilities recorded in prior years.
(c) These amounts represent total cash payments made during the year for these
charges. Of the total payments made, $8,672 was for liabilities recorded in
years prior to 1993, $5,822 was for liabilities recorded in 1993 and
$10,153 was for liabilities recorded in 1994.
(d) Payments made in the first six months of 1995 included $6,401 related to
pre-1994 liabilities and $5,109 for liabilities recorded in the first
quarter of 1994.
During the next twelve months, expected cash funding of these charges is
approximately $15 to $20 million. Management estimates that the remaining
liability for leased machinery and equipment will be fully paid over the next
two years. The liability for mine and plant closure costs is expected to be
satisfied over the next ten years of which approximately 70% is expected to be
paid over the first three years. The liability for employee related costs, which
is primarily workers' compensation, is estimated to be 70% settled over the next
five years with the balance paid during the following five to ten years.
<PAGE>
For 1994, Coal operations' closed facilities (including those facilities for
which the decision to close was made in early 1994) incurred operating losses of
$4.4 million.
On June 21, 1994, a successor collective bargaining agreement between the Coal
operations' union companies and the UMWA was ratified by such companies' union
employees, replacing the principal labor agreement which expired on June 30,
1994. The successor agreement will remain in effect until December 31, 1998.
This agreement continues the basic principles and provisions established in the
predecessor 1990 Agreement with respect to areas of job security, work rules and
scheduling. The new agreement provides for, among other things, wage increases
of $.40 per hour on December 15 of each of the years 1994 to 1997 and includes
improvements in certain employee benefit programs.
Operating profit for Coal operations totaled $36.9 million in 1992 compared to
an operating loss of $48.2 million in 1993. Operating results in 1993 were
negatively impacted by the $70.7 million in charges, as discussed earlier, $10.0
million in expenses relating to retiree health benefits required by federal
legislation enacted in October 1992 (discussed later) and the $1.8 million
charge to settle litigation related to the moisture content of tonnage used to
compute royalty payments to the UMWA pension and benefit funds for the period
ended February 1, 1988. Coal operating profit in 1993 also included other
operating income of $9.8 million compared with $9.0 million in the year-earlier
period primarily for third party royalties and sales of properties and
equipment.
Sales volume of 22.0 million tons in 1993 was 6% or 1.2 million tons higher than
sales volume in the year earlier. The increased sales were attributable to steam
coal sales of 10.3 million tons (47% of total sales), up from 8.4 million tons
(41% of total sales), while metallurgical coal sales decreased 5% from 12.3
million tons to 11.7 million tons. Coal produced (17.1 million tons) and
purchased (4.5 million tons) totaled 21.6 million tons in 1993, which was
slightly lower than production in 1992. In 1993, 54% of total production was
derived from deep mines and 46% was derived from surface mines compared with 65%
and 35% of deep and surface mine production, respectively, in 1992.
Average margin in 1993 of $2.75 per ton decreased 12% or $.37 per ton compared
to 1992, as a 4% or $1.30 per ton decrease in average realization was only
partially offset by a 4% or $.93 per ton decrease in average current production
costs of coal sold. The decrease in average realization in 1993 reflected lower
export pricing and a downward price revision on a domestic utility contract. The
decrease in average current production costs of coal sold in 1993 was mainly due
to a higher proportion of production sourced from company surface mine
operations.
The strike by the UMWA against certain coal producers in the eastern United
States, which lasted throughout a significant portion of 1993, was settled in
late 1993. None of the operations of the Company's coal subsidiaries were
involved in the strike. Although the supply of metallurgical coal was
appreciably reduced as a result of the strike, Australian producers increased
production to absorb the shortfall. The strike had little impact on Coal
operating profits during 1993 since a large proportion of production was under
contract. Coal operations benefited from improved spot prices for
<PAGE>
domestic steam coal on relatively small amounts of uncommitted tonnage available
for this market.
In October 1992, the Coal Industry Retiree Health Benefit Act of 1992 (the
"Health Benefit Act") was enacted as part of the Energy Policy Act of 1992. The
Health Benefit Act established rules for the payment of future health care
benefits for thousands of retired union mine workers and their dependents. Part
of the burden for these payments was shifted by the Health Benefit Act from
certain coal producers, which had a contractual obligation to fund such
payments, to producers such as the Company which have collective bargaining
agreements with the UMWA that do not require such payments and to numerous other
companies which are no longer in the coal business. The Health Benefit Act
established a trust fund to which "signatory operators" and "related persons",
including the Company and certain of its coal subsidiaries (the "Pittston
Companies") are obligated to pay annual premiums for assigned beneficiaries,
together with a pro rata share for certain beneficiaries who never worked for
such employers ("unassigned beneficiaries"), in amounts determined by the
Secretary of Health and Human Services on the basis set forth in the Health
Benefit Act. For 1993 and 1994, these amounts were approximately $9.1 million
and $11.0 million, respectively. In addition, in 1993, the Company incurred
costs of $.9 million to review the accuracy of beneficiaries assigned. The
Company believes that the annual cash funding under the Health Benefit Act for
the Pittston Companies' assigned beneficiaries will continue in the $10 to $11
million range for the next eight years and should begin to decline thereafter as
the number of such assigned beneficiaries decreases.
Based on the number of beneficiaries actually assigned by the Social Security
Administration, the Company estimates the aggregate pre-tax liability relating
to the Pittston Companies' assigned beneficiaries remaining at December 31, 1994
at approximately $250 million, which when discounted at 8.75% provides a present
value estimate of approximately $100 million.
The ultimate obligation that will be incurred by the Company could be
significantly affected by, among other things, increased medical costs,
decreased number of beneficiaries, governmental funding arrangements and such
federal health benefit legislation of general application as may be enacted. In
addition, the Health Benefit Act requires the Pittston Companies to fund, pro
rata according to the total number of assigned beneficiaries, a portion of the
health benefits for unassigned beneficiaries. At this time, the funding for such
health benefits is being provided from another source and for this and other
reasons the Pittston Companies' ultimate obligation for the unassigned
beneficiaries cannot be determined. The Company accounts for its obligations
under the Health Benefit Act as a participant in a multi-employer plan and
recognizes the annual cost on a pay-as-you-go basis.
In February 1990, the Pittston Coal Group companies and the UMWA entered into a
collective bargaining agreement that resolved a labor dispute and related strike
of Pittston Coal Group operations by UMWA-represented employees that began on
April 5, 1989. As part of the agreement, the Pittston Coal Group companies
agreed to make a $10 million lump sum payment to the 1950 Benefit Trust Fund and
to renew participation in the 1974 Pension and Benefit Trust Funds at specified
contribution rates. These aspects of the agreement were subject to formal
approval by the trustees of
<PAGE>
the funds. The trustees did not accept the terms of the agreement and,
therefore, payments were made to escrow accounts for the benefit of union
employees. Under the new 1994 Agreement, the Pittston Coal Group companies
agreed to continue participation in the 1974 Pension Plan at specified
contribution rates, again subject to trustee approval. At this time, payments
continue to be made to the escrow accounts for the benefit of union employees.
The escrow accounts balances as of December 31, 1994 totaled $23.1 million.
In 1988, the trustees of certain pension and benefit trust funds established
under collective bargaining agreements with the UMWA brought an action (the
"Evergreen Case") against the Company and a number of its coal subsidiaries in
the United States District Court for the District of Columbia, claiming that the
defendants are 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 is a
signatory. In January 1992, the Court issued an order granting summary judgment
in favor of the trustees on the issue of liability, which was thereafter
affirmed by the Court of Appeals. In June 1993 the United States Supreme Court
denied a petition for a writ of certiorari. The case has been remanded to
District Court, and damage and other issues remain to be decided. In September
1993, the Company filed a motion seeking relief from the District Court's grant
of summary judgment based on, among other things, the Company's allegation that
plaintiffs improperly withheld evidence that directly refutes plaintiffs'
representations to the District Court and the Court of Appeals in this case. In
December 1993, that motion was denied. On May 23, 1994, the trustees filed a
Motion for Entry of Final Judgment seeking approximately $71.1 million in
delinquent contributions, interest and liquidated damages through May 31, 1994,
plus approximately $17 thousand additional interest and liquidated damages for
each day between May 31, 1994 and the date final judgment is entered, plus
on-going contributions to the 1974 Pension Plan. The Company has opposed this
motion. There has been no decision on this motion or final judgment entered to
date.
In furtherance of its ongoing effort to identify other available legal options
for seeking relief from what it believes to be an erroneous finding of liability
in the Evergreen Case, the Company has filed suit against the Bituminous Coal
Operators Association ("BCOA") and others to hold them responsible for any
damages sustained by the Company as a result of the Evergreen Case. Although the
Company is continuing that effort, the Company, following the District Court's
ruling in December 1993, recognized the potential liability that may result from
an adverse judgment in the Evergreen Case. In any event, any final judgment in
the Evergreen Case will be subject to appeal. In December 1994, the District
Court ordered that the Evergreen Case, as well as related cases filed against
other coal companies, and the BCOA case, be submitted to mediation before a
federal judge in an effort to obtain a settlement. The mediation process is
on-going.
As a result of the Health Benefit Act, there is no continuing liability in this
case in respect of health benefit funding after February 1, 1993.
<PAGE>
MINERAL VENTURES
The following is a table of selected financial data for the Mineral Ventures on
a comparative basis:
<TABLE>
<CAPTION>
(Dollars in thousands, Six Months Ended
except per ounce data) June 30 Years Ended December 31
- ---------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 8,681 7,095 15,494 14,845 -
Cost of sales 5,855 5,166 10,620 12,902 -
Selling, general and
administrative costs 1,577 1,931 3,910 2,819 3,109
Restructuring and other
charges - - - 7,920 -
- ---------------------------------------------------------------------------------------------------------
Total costs and expenses 7,432 7,097 14,530 23,641 3,109
Other operating income
(expense) 242 70 170 494 (247)
- ---------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 1,491 68 1,134 (8,302) (3,356)
=========================================================================================================
Stawell Gold Mine:
PMV's 50% direct share
ounces sold 21,492 17,820 38,600 36,200 -
Average realized gold
price per ounce (US$) $ 397 396 399 364 -
</TABLE>
In the first six months of 1995, operating profit of Mineral Ventures increased
$1.4 million to $1.5 million from $.1 million in the first six months of 1994.
The increase in operating profit was primarily the result of increased
production at the Stawell Gold Mine. An operator accident that occurred in the
1994 first quarter hindered production in 1994 and also contributed to higher
operating costs for the period. The Stawell gold mine produced 42,576 ounces in
the first six months of 1995 compared with 35,734 ounces in the comparable
period of 1994. Mineral Ventures is continuing exploration projects in Nevada
and Australia with its joint venture partner.
Successful exploration efforts indicate an increase of approximately 68,000
ounces of additional proven and probable gold reserves at the Stawell mine. At
June 30, 1995, remaining proven and probable gold reserves are estimated at
480,000 ounces.
Mineral Ventures reported operating income of $1.1 million for 1994 compared
with an operating loss of $8.3 million for 1993. Operating results in 1993
included a $7.9 million charge related to the write-down of the company's
investment in the Uley graphite mine in Australia. Although reserve drilling of
the Uley property indicated substantial graphite deposits, graphite prices which
remained significantly below the level prevailing at the start of the project,
processing difficulties and an analysis of various technical and marketing
conditions affecting the project resulted in the determination that the assets
had been impaired and that loss recognition was appropriate. Excluding the $7.9
million charge, Mineral Ventures operations incurred a $.4 million operating
loss in 1993. Operating results for 1994 and 1993 also reflected production from
the Stawell gold mine. Mineral Ventures has a 67%
<PAGE>
net equity interest in the Stawell mine and its adjacent exploration acreage. In
December 1992, Mineral Ventures acquired its 50% direct ownership in the Stawell
property through its participation in a joint venture with Mining Project
Investors Pty Ltd., (in which Mineral Ventures holds a 34% interest). At
December 31, 1994, the Stawell gold mine, which is in western Victoria,
Australia, had remaining proven and probable gold reserves estimated at 444,000
ounces. The joint venture also has exploration rights in the highly prospective
district around the mine. In 1994 and 1993, the Stawell mine produced 77,966
ounces and 73,765 ounces of gold, respectively, with Mineral Ventures' share of
the operating profit amounting to $5.0 million and $4.9 million, in 1994 and
1993, respectively. The contribution to operating profit from the Stawell mine
in both 1994 and 1993 was offset by exploration expenditures related chiefly to
other potential gold mining projects in addition to administrative overhead.
Operating results for 1994 were also impacted by higher operating costs incurred
as a result of an operator accident at Stawell which occurred early in the year.
Mineral Ventures is continuing gold exploration projects in Nevada and Australia
with its joint venture partner.
In 1992, Mineral Ventures operations reported operating losses of $3.4 million,
which primarily related to expenses for project review and exploration.
Foreign Operations
- ------------------
A portion of the Company's financial results is derived from activities in
several foreign countries, each with a local currency other than the U.S.
dollar. Because the financial results of the Company are reported in U.S.
dollars, they are affected by the changes in the value of the various foreign
currencies in relation to the U.S. dollar. The Company's international activity
is not concentrated in any single currency, which limits the risks of foreign
currency rate fluctuations. In addition, these rate fluctuations may adversely
affect transactions which are denominated in currencies other than the
functional currency. The Company routinely enters into such transactions in the
normal course of its business. Although the diversity of its foreign operations
limits the risks associated with such transactions, the Company uses foreign
exchange forward contracts to hedge the risks associated with certain
transactions denominated in currencies other than the functional currency.
Realized and unrealized gains and losses on these contracts are deferred and
recognized as part of the specific transaction hedged. In addition, cumulative
translation adjustments relating to operations in countries with highly
inflationary economies are included in net income, along with all transaction
gains or losses for the period. Subsidiaries in Brazil operate in such highly
inflationary economies.
Additionally, the Company is subject to other risks customarily associated with
doing business in foreign countries, including economic conditions, controls on
repatriation of earnings and capital, nationalization, expropriation and other
forms of restrictive action by local governments. The future effects, if any, of
such risks on the Company cannot be predicted.
Other Operating Income
- ----------------------
Other operating income for the first half of 1995 increased $8.5 million to
$19.3 million from $10.8 million in the prior year. Other operating income
<PAGE>
increased $4.4 million to $24.4 million in 1994 and increased $.9 million to
$20.0 million in 1993 from $19.1 million in 1992. Other operating income
principally includes the Company's share of net income of unconsolidated foreign
affiliates, which are substantially attributable to equity affiliates of
Brink's, royalty income and gains and losses from sales of coal assets. A $2.5
million decrease in equity in earnings of unconsolidated subsidiaries was more
than offset by gains of $8.4 million on the disposition of surplus coal reserves
in the first six months of 1995 compared with the first six months of 1994. The
increase in 1994 compared to 1993 was largely due to increased sales of coal
assets and royalty income from coal and natural gas properties, partially offset
by decreased earnings of equity affiliates. Equity earnings of foreign
affiliates totaled $1.8 million and $3.4 million in the first six months of 1995
and 1994, respectively, and $6.3 million, $7.5 million and $8.0 million in 1994,
1993 and 1992, respectively.
Corporate and Other Expenses
- ----------------------------
In the first six months of 1995, general corporate expenses were $8.4 million
compared with $8.1 million in the prior year period. General corporate expenses
aggregated $16.2 million, $16.7 million and $17.1 million for 1994, 1993 and
1992, respectively.
Other net expense for the first six months of 1995 decreased $1.9 million to a
net expense of $2.2 million from a net expense of $4.1 million in the prior year
period. Other net expense was $5.6 million, $4.6 million and $4.0 million in
1994, 1993 and 1992, respectively. In the first half of 1994, $1.2 million of
expenses were recognized on the Company's redemption of its 9.2% Convertible
Subordinated Debentures. Other net expense in 1992 included a gain of $2.3
million from the sale of investments in leveraged leases.
Interest Expense
- ----------------
Interest expense totaled $6.7 million in the first six months of 1995 compared
with $5.2 million in the first half of 1994. Interest expense totaled $11.5
million, $10.2 million and $11.1 million in 1994, 1993 and 1992, respectively.
The increase in the first six months of 1995 compared with the prior year period
is due to higher interest rates on higher average debt balances. Interest
expense in 1994 increased due to higher average borrowings under revolving
credit and term loan facilities resulting from the Addington acquisition and
higher average interest rates, partially offset by a decrease resulting from the
Company's redemption of its 9.2% Convertible Subordinated Debentures in April
1994. Interest expense in 1993 also included interest assessed on settlement of
coal litigation related to the moisture content of tonnage used to compute
royalty payments to UMWA pension and benefit funds. The $1.1 million decrease
for 1993 compared with 1992 was largely a result of lower interest rates
worldwide.
Income Taxes
- ------------
In 1994, the provision for income taxes was less than the statutory federal
income tax rate of 35% due to the tax benefits of percentage depletion, lower
taxes on foreign income and a reduction in the valuation allowance for deferred
tax assets primarily in state jurisdictions. These benefits were partially
offset by state income taxes and goodwill amortization. In 1993, the provision
for income taxes was less than the statutory federal income tax rate of 35% due
to the tax benefits of percentage depletion, favorable adjustments to the
Company's deferred tax assets as a result of the increase
<PAGE>
in the statutory U.S. federal income tax rate and a reduction in the valuation
allowance for deferred tax assets primarily in foreign jurisdictions. These
benefits were partially offset by state income taxes and goodwill amortization.
In 1992, the provision for income taxes exceeded the statutory federal income
tax rate of 34% primarily due to provisions for state income taxes, goodwill
amortization and the increase in the valuation allowance for deferred tax
assets.
Based on the Company's historical and expected taxable earnings, management
believes it is more likely than not that the Company will realize the benefit of
the existing deferred tax asset at December 31, 1994.
FINANCIAL CONDITION
Cash Provided By Operating Activities
- -------------------------------------
Cash provided by operating activities during the first six months of 1995
totaled $30.3 million compared with $42.6 million in the first six months of
1994. The decrease in cash provided occurred, despite higher net income,
partially as a result of additional investment in working capital at Burlington.
Such requirements primarily reflected initial working capital needs of recently
acquired foreign subsidiaries, a relatively larger seasonal volume increase and
increased international revenues, which tend to have longer payment terms. Cash
provided by operating activities in the first six months of 1994 was negatively
impacted by the integration of operating activities of Addington which required
cash to finance working capital. Net income, noncash charges and changes in
operating assets and liabilities in the 1994 first half were significantly
affected by after-tax restructuring and other charges of $58.1 million which had
minimal effect in the first half on cash generated by operations.
Cash provided by operating activities for 1994 totaled $139.3 million compared
with $119.9 million in 1993. Cash flow from operations was negatively impacted
by the integration of the operations of Addington, which required cash to
finance initial working capital needs. Net income, noncash charges and changes
in operating assets and liabilities in 1994 were significantly affected by
after-tax restructuring and other charges of $58.1 million which used cash of
approximately $10.2 million in 1994. Of the total $90.8 million of 1994 pre-tax
charges, $46.5 million was for noncash write downs of assets and the remainder
represents liabilities which are expected to be paid over the next several
years. In addition, during 1994, $14.5 million was paid for similar charges
reported in prior periods. As discussed under Coal operations, funding
requirements for these charges are expected to be approximately $15 to $20
million during the next twelve months. The Company intends to fund any cash
requirements during 1995 with anticipated cash flows from operations, and
shortfalls, if any, financed through borrowings under revolving credit
agreements or short-term borrowing arrangements.
Capital Expenditures
- --------------------
Cash capital expenditures for the first six months of 1995 totaled $55.4
million. Of that amount, $13.5 million was spent by Burlington, $11.5 million
was spent by Brink's, $19.1 million was spent by BHS, $9.7 million was spent by
Coal and $1.1 million was spent by Mineral Ventures. Expenditures incurred by
BHS in the first half of 1995 were primarily for
<PAGE>
customer installations, representing the expansion in the subscriber base. For
the full year 1995, capital expenditures are estimated to approximate $150
million. The foregoing amounts exclude equipment expenditures that have been or
are expected to be financed through capital and operating leases, and any
acquisition expenditures. Increased expenditures in 1995 are expected at
Burlington to support new airfreight stations and implementation of positive
tracking systems and at BHS resulting from continued expansion of the subscriber
base.
Cash capital expenditures totaled $106.3 million in 1994. An additional $41.2
million of expenditures were made through capital and operating leases.
Approximately 32% of the 1994 gross capital expenditures were incurred in the
Coal segment. Of that amount, approximately 75% of the expenditures was for
business expansion, and the remainder was for replacement and maintenance of
ongoing business operations. Expenditures made by Mineral Ventures approximated
2% of the Company's total capital expenditures and were primarily costs incurred
for project development. Capital expenditures made by both Burlington and
Brink's during 1994 were primarily for replacement and maintenance of current
ongoing business operations and comprised approximately 17% and 24%,
respectively, of the Company's total. Expenditures incurred by BHS during 1994
were 25% of total expenditures and were primarily for customer installations,
resulting from expansion of the subscriber base.
Other Investing Activities
- --------------------------
All other investing activities in the first six months of 1995 provided net cash
of $2.6 million which primarily relates to proceeds from disposal of property,
plant and equipment, partially offset by expenditures for aircraft heavy
maintenance. All other investing activities in 1994 used net cash of $165.5
million. In January 1994, the Company paid approximately $157 million in cash
for the acquisition of substantially all the coal mining operations and coal
sales contracts of Addington. The purchase price of the acquisition was financed
through the issuance of $80.5 million of a new series of convertible preferred
stock, which is convertible into Pittston Minerals Group Common Stock, and
additional debt under credit agreements. Other investing activities also
included $8.4 million of cash received in 1994 from the December 1993 sale of
the majority of the assets of a captive mine supply company. Disposal of
property, plant and equipment provided $7.6 million in cash in 1994 and
expenditures for heavy aircraft maintenance used cash of $15.3 million in 1994.
Financing
- ---------
Gross capital expenditures in 1995 are currently expected to increase over 1994
levels. The increase is expected to result largely from expenditures at
Burlington, supporting new airfreight stations and implementation of positive
tracking systems, and expenditures at BHS resulting from continued expansion of
the subscriber base. The Company intends to fund such expenditures through cash
flow from operating activities or through operating leases if the latter are
financially attractive. Any shortfalls will be financed through the Company's
revolving credit agreements or short-term borrowing arrangements.
In March 1994, the Company entered into a $350 million credit agreement with a
syndicate of banks (the "New Facility"), replacing the Company's previously
existing $250 million of revolving credit agreements. The New
<PAGE>
Facility includes a $100 million term loan, which matures in May 2000. The New
Facility also permits additional borrowings, repayments and reborrowings of up
to an aggregate of $250 million until May 2000. At December 31, 1994, borrowings
of $100 million were outstanding under the term loan portion of the New Facility
and borrowings of $9.4 million were outstanding under the remainder of the
facility.
Debt
- ----
Outstanding debt, including borrowings under revolving credit agreements,
aggregated $199.2 million at June 30, 1995, up from $165.1 million at year- end
1994. Cash proceeds from operating activities, other investing activities and
the proceeds from the exercise of stock options were not sufficient to fund
capital expenditures, the repurchase of stock and dividends payments, resulting
in additional borrowings under the Company's revolving credit agreements.
Outstanding debt, including borrowings under revolving credit agreements,
aggregated $165.1 million at December 31, 1994, compared to $75.8 million at
year-end 1993. Cash generated from operating activities and proceeds from the
issuance of preferred stock were not sufficient to fund capital expenditures and
the Addington acquisition, resulting in additional borrowings under the
Company's credit agreements.
On April 15, 1994, the Company redeemed all outstanding 9.2% Convertible
Subordinated Debentures due July 1, 2004. The principal amount outstanding was
$27.8 million and the premium paid to call the debt totaled $.8 million. The
Company used cash provided under its revolving credit agreements to redeem the
debentures. The premium paid in addition to other charges related to the
redemption are included in the Company's 1994 Consolidated Statements of
Operations for the six months ended June 30, 1994 and for the year ended
December 31, 1994.
Off-balance Sheet Instruments
- -----------------------------
The Company enters into various off-balance sheet financial instruments, as
discussed below, to hedge its foreign currency and other market exposures. The
risk that counterparties to such instruments may be unable to perform is
minimized by limiting the counterparties to major financial institutions. The
Company does not expect any losses due to such counterparty default.
Foreign currency forward contracts - The Company enters into foreign currency
forward contracts with a duration of 30 to 60 days as a hedge against
liabilities denominated in various currencies. These contracts do not subject
the Company to risk due to exchange rate movements because gains and losses on
these contracts offset losses and gains on the liabilities being hedged. At
December 31, 1994, the total notional value of foreign currency forward
contracts outstanding was $7.4 million. As of such date, the fair value of
foreign currency forward contracts was not significant.
Gold contracts - In order to protect itself against downward movements in gold
prices, the Company hedges a portion of its recoverable proved and probable
reserves primarily through forward sales contracts. At December 31, 1994, 60,056
ounces of gold, representing approximately 30% of the Company's recoverable
proved and probable reserves, were sold forward under forward sales contracts
with a total notional value of $24.7 million. Because only a portion of its
future production is currently sold forward, the Company
<PAGE>
can take advantage of increases, if any, in the spot price of gold. At December
31, 1994, the fair value of the Company's forward sales contracts was not
significant.
Fuel contracts - The Company has hedged a portion of its jet fuel requirements
through a swap contract. At December 31, 1994, the notional value of the jet
fuel swap, aggregating 12.5 million gallons, through March 31, 1995 was $6.5
million. In addition, the Company has entered into several commodity options
transactions that are intended to protect against significant increases in jet
fuel prices. These transactions, aggregate 23.3 million gallons with a notional
value of $15.8 million and are applicable throughout 1995 in amounts ranging
from 3.5 million gallons per month in the first quarter of 1995 to 2.1 million
gallons per month in the fourth quarter of 1995. The Company has also entered
into a collar transaction, applicable to 7.2 million gallons that provides for a
minimum and maximum per gallon price. This transaction is settled monthly based
upon the average of the high and low prices during each period.
The fair value of these fuel hedge transactions may fluctuate over the course of
the contract period due to changes in the supply and demand for oil and refined
products. Thus, the economic gain or loss, if any, upon settlement of the
contracts may differ from the fair value of the contracts at an interim date. At
December 31, 1994, the fair value of these contracts was not significant.
Interest rate contracts - In connection with the aircraft leasing by Burlington
in 1993, the Company entered into interest rate cap agreements. These agreements
have a notional amount of $60 million and cap the Company's interest rate on
certain aircraft leases at 8.5% through April 1, 1996. In addition, in 1994, the
Company entered into a standard three year variable to fixed interest rate swap
agreement. This agreement fixed the Company's interest rate at 5% on current
borrowings of $40.0 million in principal. The amount to which the 5% interest
rate applies declines periodically throughout the term of the agreement. The
fair value of these contracts was $1.8 million at December 31, 1994.
Contingent Liabilities
- ----------------------
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the cleanup costs on an undiscounted basis using
existing technologies to be between $6.7 million and $14.1 million over a period
of up to five years. Management is unable to determine that any amount within
that range is a better estimate due to a variety of uncertainties, which include
the extent of the contamination at the site, the permitted technologies for
remediation and the regulatory standards by which cleanup will be conducted. The
cleanup estimates have been modified in light of certain regulatory changes
promulgated in December 1994.
The Company commenced insurance coverage litigation in 1990, in the United
States District Court for the District of New Jersey, seeking a declaratory
judgment that all amounts payable by the Company pursuant to the Tankport
<PAGE>
obligation were reimbursable under comprehensive general liability and pollution
liability policies maintained by the Company. Although the underwriters have
disputed this claim, management and its legal counsel believe that recovery is
probable of realization in the full amount of the claim. This conclusion is
based upon, among other things, the nature of the pollution policies which were
broadly designed to cover such contingent liabilities, the favorable state of
the law in the State of New Jersey (whose laws have been found to control the
interpretation of the policies), and numerous other factual considerations which
support the Company's analysis of the insurance contracts and rebut the
underwriters' defenses. Accordingly, there is no net liability in regard to the
Tankport obligation.
Capitalization
- --------------
On July 26, 1993, the Company's shareholders approved the Services Stock
Proposal, as described in the Company's proxy statement dated June 24, 1993,
which resulted in the reclassification of the Company's common stock. The
outstanding shares of common stock of the Company were redesignated as Pittston
Services Group Common Stock ("Services Stock") on a share-for-share basis and a
second class of common stock, designated as Pittston Minerals Group Common Stock
("Minerals Stock"), was distributed on the basis of one- fifth of one share of
Minerals Stock for each share of the Company's previous common stock held by
shareholders of record on July 26, 1993. Minerals Stock and Services Stock are
designed to provide shareholders with separate securities reflecting the
performance of the Pittston Minerals Group (the "Minerals Group") and the
Pittston Services Group (the "Services Group"), respectively, without
diminishing the benefits of remaining a single corporation or precluding future
transactions affecting either Group.
The redesignation of the Company's common stock as Services Stock and the
distribution of Minerals Stock as a result of the approval of the Services Stock
Proposal did not result in any transfer of assets and liabilities of the Company
or any of its subsidiaries. Holders of Services Stock and Minerals Stock are
shareholders of the Company, which continues to be responsible for all its
liabilities. Therefore, financial developments affecting the Minerals Group or
the Services Group that affect the Company's financial condition could affect
the results of operations and financial condition of both Groups. The change in
the capital structure of the Company had no effect on the Company's total
capital, except as to expenses incurred in the execution of the Services Stock
Proposal. Since the approval of the Services Stock Proposal, capitalization of
the Company has been affected by the share activity related to each of the
classes of common stock.
In 1993, the Board of Directors of the Company (the "Board") authorized the
repurchase of up to 1,250,000 shares of Services Stock and 250,000 shares of
Minerals Stock, not to exceed an aggregate purchase price of $43 million. As of
June 30, 1995, a total of 376,100 shares ($9.0 million) of Services Stock and
38,500 shares ($.8 million) of Minerals Stock had been acquired pursuant to the
authorization. Of those amounts, during the six months ended June 30, 1995,
120,000 shares of Services Stock were repurchased at a total cost of $2.8
million. No shares of Minerals Stock were repurchased in the first six months of
1994. During 1994, 256,100 shares of Services Stock and 19,700 shares of
Minerals Stock were repurchased in 1994 at an aggregate cost of $6.6 million.
<PAGE>
In January 1994, the Company issued $80.5 million (161,000 shares) of a new
series of cumulative preferred stock, convertible into Minerals Stock. The
cumulative convertible preferred stock, which is attributable to the Minerals
Group, pays an annual cumulative dividend of $31.25 per share payable quarterly,
in cash, in arrears, out of all funds of the Company legally available
therefore, when, as and if declared by the Board, which commenced March 1, 1994,
and bears a liquidation preference of $500 per share, plus an amount equal to
accrued and unpaid dividends thereon.
In July 1994, the Board authorized the repurchase from time to time of up to $15
million of the new series of cumulative convertible preferred stock. As of June
30, 1995, 21,020 shares at a total cost of $8.4 million were repurchased, of
which 12,670 shares at a cost of $5.0 million were repurchased in the first half
of 1995.
As of December 31, 1994, debt as a percent of capitalization (total debt and
shareholders' equity) was 27%, compared with 18% at December 31, 1993. The
increase since December 1993 is largely due to the additional debt incurred
under the New Facility to finance the Addington acquisition.
Dividends
- ---------
The Board intends to declare and pay dividends on Services Stock and Minerals
Stock based on the earnings, financial condition, cash flow and business
requirements of the Services Group and the Minerals Group, respectively. Since
the Company remains subject to Virginia law limitations on dividends and to
dividend restrictions in its public debt and bank credit agreements, losses by
one Group could affect the Company's ability to pay dividends in respect of
stock relating to the other Group. Dividends on Minerals Stock are also limited
by the Available Minerals Dividend Amount as defined in the Company's Articles
of Incorporation. At June 30, 1995, the Available Minerals Dividend Amount was
at least $20.8 million.
During the first six months of 1995 and 1994, the Board declared and the Company
paid dividends of 10 cents per share of Services Stock and 32.5 cents per share
of Minerals Stock. In 1994, the Board declared and the Company paid cash
dividends of 20 cents per share of Services Stock and 65 cents per share of
Minerals Stock. On an equivalent basis, in 1993 the Company paid dividends of
19.09 cents per share of Services Stock and 62.04 cents per share of Minerals
Stock.
Dividends paid on the cumulative convertible preferred stock in the first six
months of 1995 were $2.3 million. Preferred dividends included on the Company's
Statement of Operations for the six months ended June 30, 1995, are net of $1.0
million which was the excess of the carrying amount of the preferred stock over
the cash paid to holders of the preferred stock for preferred stock repurchased
during the period. Dividends paid on the cumulative convertible preferred stock,
which commenced March 1, 1994, totaled $4.2 million for the year 1994.
<PAGE>
APPENDIX 1
PROXY CARDS
PRELIMINARY COPY
PITTSTON
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR SPECIAL
MEETING OF SHAREHOLDERS, DECEMBER , 1995
PROXY
The undersigned hereby appoints J. C. Farrell, J. B. Hartough and A. F.
Reed and each of them as proxies, with full power of substitution, to
vote the shares of the undersigned in The Pittston Company at the
Special Meeting of Shareholders to be held on , December ,
1995, at , Eastern Daylight Time and at any adjournment thereof,
on all matters coming before the meeting. The proxies will vote: (1) as
you specify on the back of this card; (2) as the Board of Directors
recommends where you do not specify your vote on the matter listed on
the back of this card; and (3) as the proxies decide on any other
matter.
IF YOU WISH TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS, PLEASE SIGN,
DATE AND RETURN THIS CARD. IF YOU WISH TO VOTE INDIVIDUALLY, PLEASE MARK
THE APPROPRIATE BOX ON THE BACK OF THIS CARD.
[OVER]
<PAGE>
The Board of Directors Recommends a vote 'FOR' Item 1.
- ------------------ X PLEASE MARK YOUR VOTE LIKE THIS.
Item 1 -- Approval of the Brink's Stock Proposal.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- ------------------ ------------------ -----------------
</TABLE>
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
PLEASE MARK, DATE, SIGN AND
MAIL THIS CARD PROMPTLY IN
THE POSTAGE PAID RETURN
ENVELOPE PROVIDED.
Date ................ , 1995
............................
SIGNATURE
............................
SIGNATURE
PLEASE MARK YOUR CHOICE IN BLUE OR BLACK INK.
<PAGE>
PRELIMINARY COPY
PITTSTON
SAVINGS-INVESTMENT PLAN VOTING INSTRUCTIONS
TO: IDS TRUST, TRUSTEE
PROXY
I hereby instruct the Trustee to vote (or cause to be voted) all shares
of Common Stock of The Pittston Company credited to my account under the
Plan at the Special Meeting of Shareholders to be held on December ,
1995 (and at any adjournment thereof) for the purposes set forth in the
accompanying notice of such meeting.
Please date, sign exactly as your name appears below and return this
card in the enclosed envelope. Your shares will not be voted by the
Trustee in accordance with your instructions unless you sign and return
this card so that it will reach the Trustee no later than December ,
1995. These instructions are irrevocable.
IF YOU WISH TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS, PLEASE SIGN,
DATE AND RETURN THIS CARD. IF YOU WISH TO VOTE INDIVIDUALLY, PLEASE MARK
THE APPROPRIATE BOX ON THE BACK OF THIS CARD.
[OVER]
<PAGE>
The Board of Directors Recommends a vote 'FOR' Item 1.
- ------------------ X PLEASE MARK YOUR VOTE LIKE THIS.
Item 1 -- Approval of the Brink's Stock Proposal.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
- ------------------ ------------------ ------------------
</TABLE>
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
PLEASE MARK, DATE, SIGN AND
MAIL THIS CARD PROMPTLY IN
THE POSTAGE PAID RETURN
ENVELOPE PROVIDED.
Date ................ , 1995
............................
SIGNATURE
............................
SIGNATURE
PLEASE MARK YOUR CHOICE IN BLUE OR BLACK INK.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Virginia Stock Corporation Act, unless otherwise required by its
Restated Articles of Incorporation, The Pittston Company (the 'Company') is
mandatorily required to indemnify a director or officer who entirely prevails in
the defense of any proceeding to which he or she was a party because he or she
is or was a director or officer of the Company against reasonable expenses
incurred in connection with the proceeding. Such Act also authorizes Virginia
corporations to provide additional indemnification in certain specified
instances. Accordingly, Article VIII of the Restated Articles of Incorporation,
as amended, of the Company provides that each officer, director or employee of
the Company shall be entitled to indemnity, including indemnity with respect to
a proceeding by or in the right of the Company, to the fullest extent required
or permitted under the provisions of the Virginia Stock Corporation Act as in
effect from time to time, except for an indemnity against willful misconduct or
a knowing violation of the criminal law. Furthermore, the Company is required to
promptly pay for or reimburse the reasonable expenses, including attorneys'
fees, incurred by an officer, director or employee of the Company in connection
with any proceeding (whether or not made a party) arising from his or her status
as such officer, director or employee, in advance of final disposition of any
such proceeding upon receipt by the Company from such officer, director or
employee of (a) a written statement of good faith belief that he or she is
entitled to indemnity by the Company and (b) a written undertaking, executed
personally or on his or her behalf, to repay the amount so paid or reimbursed if
after final disposition of such proceeding it is determined that he or she did
not meet the applicable standard of conduct.
Certain executive officers of the Company have indemnification contracts
with the Company. The contracts provide indemnification to the same extent as
the Company's Restated Articles of Incorporation, as amended, and provide for
the advancement of attorneys' fees. The Company also has directors' and
officers' insurance which protects each director or officer from liability for
actions taken in their capacity as directors or officers.
The foregoing represents a summary of the general effect of Virginia law
and the Company's Restated Articles of Incorporation, as amended, with regard to
the indemnification of the Company's directors and officers and is for general
descriptive purposes only.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<S> <C> <C>
3.1 Restated Articles of Incorporation Incorporated by reference to Exhibit 3(a) to the
Company's Form 10-K for the fiscal year ended
December 31, 1994.
3.2 Articles of Amendment to Restated Articles of
Incorporation Filed as Annex II to Proxy Statement/ Prospectus
which is incorporated herein by reference.
3.3 Bylaws Incorporated by reference to Exhibit 3(b) of the
Company's Form 10-K for the fiscal year ended
December 31, 1994.
4 Form of Amended and Restated Rights Agreement
5 Opinion of Hunton & Williams *
8 Opinion of Cravath, Swaine & Moore *
10.1 Amendments to the Non-Employee Directors' Stock
Option Plan Filed as Annex III-A to Proxy Statement/ Prospectus
which is incorporated herein by reference.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C> <C>
10.2 Amendments to the 1988 Stock Option Plan............ Filed as Annex III-B to Proxy Statement/ Prospectus
which is incorporated herein by reference.
23.1 Consent of Hunton & Williams (included in Exhibit 5) *
23.2 Consent of KPMG Peat Marwick
23.3 Consent of Cravath, Swaine & Moore (included in
Exhibit 8) *
24 Power of Attorney (included in the signature pages
of this Registration Statement)
</TABLE>
(b) Financial Statement Schedules.
<TABLE>
<S> <C> <C>
(i) Schedule II -- Pittston Brink's Group Valuation and Qualifying Accounts
(ii) Schedule II -- Pittston Burlington Group Valuation and Qualifying Accounts
(iii) Schedule II -- The Pittston Company and Subsidiaries Valuation and Qualifying Accounts, incorporated by
reference to the Company's Form 10-K for the fiscal year ended December 31, 1994
</TABLE>
- ------------
* Exhibit to be filed by amendment.
------------------------
All other schedules are omitted because they are not applicable or the
required information is contained in the respective financial statements of
Pittston Brink's Group (Annex V to the Proxy Statement/Prospectus), Pittston
Burlington Group (Annex VII to the Proxy Statement/Prospectus) and The Pittston
Company and Subsidiaries (Annex IX to the Proxy Statement/Prospectus).
(c) None.
ITEM 22. UNDERTAKINGS.
<TABLE>
<S> <C>
(a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the registrant pursuant to the provisions described in Item
20 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit, or proceeding) is asserted against the registrant
by such director, officer or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form S-4, within one business day
of receipt of such request, and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
(d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(e) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the
securities registered hereunder through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(f) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (e) immediately
preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933
and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all the requirements for filing on Form S-4 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto authorized, in The City of New York, State of New York,
on October 10, 1995.
THE PITTSTON COMPANY
By: /S/ JOSEPH C. FARRELL
...................................
(JOSEPH C. FARRELL, CHAIRMAN OF THE
BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints JOSEPH C. FARRELL, AUSTIN F. REED, JAMES B.
HARTOUGH and GARY R. ROGLIANO and each of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ J. C. FARRELL Chairman of the Board, President, Chief September 15, 1995
......................................... Executive Officer, and Director (principal
(J. C. FARRELL) executive officer)
/s/ D. L. MARSHALL Vice Chairman of the Board and Director September 15, 1995
.........................................
(D. L. MARSHALL)
/s/ R. G. ACKERMAN Director September 15, 1995
.........................................
(R. G. ACKERMAN)
/s/ M. J. ANTON Director September 15, 1995
.........................................
(M. J. ANTON)
/s/ J. R. BARKER Director September 15, 1995
.........................................
(J. R. BARKER)
/s/ J. L. BROADHEAD Director September 15, 1995
.........................................
(J. L. BROADHEAD)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/s/ W. F. CRAIG Director September 15, 1995
.........................................
(W. F. CRAIG)
/s/ R. M. GROSS Director September 15, 1995
.........................................
(R. H. GROSS)
/s/ C. F. HAYWOOD Director September 20, 1995
.........................................
(C. F. HAYWOOD)
/s/ G. R. ROGLIANO Vice President -- Controllership and Taxes September 25, 1995
......................................... (principal accounting officer)
(G. R. ROGLIANO)
/s/ R. H. SPILMAN Director September 21, 1995
.........................................
(R. H. SPILMAN)
/s/ A. H. ZIMMERMAN Director September 15, 1995
.........................................
(A. H. ZIMMERMAN)
</TABLE>
The Registrant does not have any designated principal financial officer.
II-5
Pittston Brink's Group
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ----------------------------------------- -------- ------------------------ -------- --------
Additions
------------------------
Balance at Charged to Charged Balance
beginning costs and to other at end of
Description of period expenses accounts Deductions period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Estimated uncollectible amount of notes
and accounts receivable $ 3,796 1,346 3 (a) 1,766 (b) 3,379
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1993
Estimated uncollectible amount of notes
and accounts receivable $ 4,309 3,403 695 (a) 4,611 (b) 3,796
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1992
Estimated uncollectible amount of notes
and accounts receivable $ 3,313 1,881 852 (a) 1,737 (b) 4,309
====================================================================================================================================
</TABLE>
(a) Amounts reclassified from other accounts.
(b) Accounts written off.
Pittston Burlington Group
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------------------- -------- ------------------------ -------- --------
Additions
------------------------
Balance at Charged to Charged Balance
beginning costs and to other at end of
Description of period expenses accounts Deductions period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Estimated uncollectible amount of notes 926 (a)
and accounts receivable $ 9,949 3,054 284 (b) 3,738 (c) 10,475
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1993
Estimated uncollectible amount of notes
and accounts receivable $ 9,824 2,949 551 (a) 3,375 (c) 9,949
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1992
Estimated uncollectible amount of notes
and accounts receivable $ 10,910 2,016 814 (a) 3,916 (c) 9,824
====================================================================================================================================
</TABLE>
(a) Amounts recovered.
(b) Amounts reclassified from other accounts.
(c) Accounts written off.
<PAGE>
EXHIBIT 4
________________________________________________________________________________
AMENDED AND RESTATED
RIGHTS AGREEMENT
DATED AS OF DECEMBER [XX], 1995
BETWEEN
THE PITTSTON COMPANY
AND
CHEMICAL BANK,
AS RIGHTS AGENT
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Certain Definitions......................................................................... 1
SECTION 2. Appointment of Rights Agent................................................................. 6
SECTION 3. Issue of Right Certificates................................................................. 6
SECTION 4. Forms of Right Certificates................................................................. 7
SECTION 5. Execution, Countersignature and Registration................................................ 8
SECTION 6. Transfer, Split-up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates......................................................... 8
SECTION 7. Exercise of Rights; Expiration Date of Rights; Restriction on Transfer of Rights............ 8
SECTION 8. Cancelation and Destruction of Right Certificates........................................... 9
SECTION 9. Reservation and Availability of Preferred Shares............................................ 10
SECTION 10. Preferred Shares Record Date................................................................ 10
SECTION 11. Adjustment of Number and Kind of Shares and the Purchase Price.............................. 10
SECTION 12. Certificate of Adjustment................................................................... 15
SECTION 13. Consolidation, Merger, Share Exchange or Sale or Transfer of Major Part of Assets........... 15
SECTION 14. Additional Covenants........................................................................ 17
SECTION 15. Fractional Rights and Fractional Shares..................................................... 17
SECTION 16. Rights of Action............................................................................ 18
SECTION 17. Transfer and Ownership of Rights and Right Certificate...................................... 18
SECTION 18. Right Certificate Holder Not Deemed a Shareholder........................................... 18
SECTION 19. Concerning the Rights Agent................................................................. 18
SECTION 20. Merger or Consolidation or Change of Rights Agent........................................... 19
SECTION 21. Duties of Rights Agent...................................................................... 19
SECTION 22. Change of Rights Agent...................................................................... 20
SECTION 23. Issuance of New Right Certificates.......................................................... 21
SECTION 24. Redemption and Termination.................................................................. 21
SECTION 25. Notice of Certain Events.................................................................... 22
SECTION 26. Notices..................................................................................... 22
SECTION 27. Supplements and Amendments.................................................................. 22
SECTION 28. Successors.................................................................................. 23
SECTION 29. Benefits of This Rights Agreement; Determinations and Actions by the Board of Directors,
etc....................................................................................... 23
SECTION 30. Severability................................................................................ 23
SECTION 31. Governing Law............................................................................... 23
SECTION 32. Counterparts................................................................................ 23
SECTION 33. Descriptive Headings........................................................................ 24
Exhibits
Exhibit A Articles of Amendment
Exhibit B-1 Form of Right Certificate for Brink's Rights
Exhibit B-2 Form of Right Certificate for Minerals Rights
Exhibit B-3 Form of Right Certificate for Burlington Rights
</TABLE>
<PAGE>
AMENDED AND RESTATED RIGHTS AGREEMENT
DATED
AS OF DECEMBER [XX], 1995,
BETWEEN
THE PITTSTON COMPANY,
A VIRGINIA CORPORATION (THE 'COMPANY'),
AND
CHEMICAL BANK,
A NEW YORK BANKING CORPORATION, AS RIGHTS AGENT (THE 'RIGHTS AGENT').
On September 11, 1987 (the 'Rights Dividend Declaration Date'), the Board
of Directors of the Company adopted a shareholder rights plan governed by the
terms of a rights agreement (as amended as of December 12, 1988, the 'Original
Agreement') and distributed one right (a 'Common Right') for each share of
common stock, par value $1.00 per share, of the Company (the 'Common Stock')
outstanding at the close of business on September 25, 1987 (the 'Record Date'),
and authorized the issuance of one Common Right for each share of Common Stock
issued between the Record Date and the date hereof.
On May 7, 1993, the Board of Directors of the Company adopted amendments to
the Original Agreement (as amended, the 'Amended Agreement') and, contingent
upon and simultaneously with the distribution of Minerals Stock (as defined
herein) to holders of the Common Stock on the close of business on July 26,
1993, pursuant to such amendments (i) authorized and declared a dividend
distribution of one Pittston Minerals Group Right (a 'Minerals Right') for each
share of Minerals Stock and (ii) redesignated each Common Right as a Pittston
Services Group Right (a 'Services Right').
On December [yy], 1995, the Board of Directors of the Company adopted
amendments to the Amended Agreement (as amended, the 'Rights Agreement') and
contingent upon and simultaneously with (i) the redesignation of Pittston
Services Group Common Stock, par value $1.00 per share, of the Company
('Services Stock') as Brink's Stock (as defined herein) and (ii) the
distribution of Burlington Stock (as defined herein) to holders of Services
Stock on the close of business on December [xx], 1995 (the 'Effective Date'),
redesignated each Services Right as a Pittston Brink's Group Right (a 'Brink's
Right') and authorized and declared a distribution of one Pittston Burlington
Group Right (a 'Burlington Right') for each share of Burlington Stock.
Each Brink's Right, Minerals Right and Burlington Right initially
represents the right to purchase one one-thousandth (1/1000th) of a Series A
Preferred Share (as defined herein), one one-thousandth (1/1000th) of a Series B
Preferred Share (as defined herein), and one one-thousandth (1/1000th) of a
Series D Preferred Share (as defined herein), respectively, each such Preferred
Share having the powers, rights and preferences set forth in the form of
Articles of Amendment (as defined herein) attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Rights Agreement, the
following terms have the meanings indicated:
(a) 'Acquiring Person' shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of Common Shares representing 20% or more of the total Voting Rights
of all the Common Shares then outstanding, but shall not include any
Subsidiary of the Company, any employee benefit plan of the Company or of
any of its Subsidiaries or any Person holding Common Shares for or pursuant
to the terms of any such employee benefit plan.
(b) 'Affiliate' and 'Associate', when used with reference to any
Person, shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on the date of this Rights Agreement.
(c) 'Affiliate Merger' shall have the meaning set forth in clause (i)
of Section 11(e) of this Rights Agreement.
<PAGE>
(d) 'Articles of Amendment' shall mean the Articles of Amendment to
the Restated Articles of Incorporation of the Company setting forth the
powers, preferences, rights, qualifications, limitations and restrictions
of the Series A Preferred Shares, the Series B Preferred Shares and the
Series D Preferred Shares of the Company, a copy of which is attached to
this Rights Agreement as Exhibit A.
(e) A Person shall be deemed the 'Beneficial Owner' of, and shall be
deemed to 'beneficially own', any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (written or oral), or upon
the exercise of conversion rights, exchange rights, rights (other than
Rights issuable under this Rights Agreement), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered
pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange thereunder; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding (written or oral); provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding (written or
oral) to vote such security (1) arises solely from a revocable proxy
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding (written
or oral), for the purpose of acquiring, holding, voting (except pursuant
to a revocable proxy as described in clause (B) of subparagraph (ii) of
this paragraph (d)) or disposing of any securities of the Company;
provided, however, that, notwithstanding any provision of this Section
1(e), any Person engaged in business as an underwriter of securities who
acquires any securities of the Company through such Person's
participation in good faith in a firm commitment underwriting registered
under the Securities Act shall not be deemed the 'Beneficial Owner' of,
or to 'beneficially own', such securities until the expiration of 40
days after the date of acquisition.
(f) 'Book Value' when used with reference to Common Shares issued by
any Person shall mean the amount of equity of such Person applicable to
each Common Share, determined (i) in accordance with generally accepted
accounting principles in effect on the date as of which such Book Value is
to be determined, (ii) using all the consolidated assets and all the
consolidated liabilities of such Person on the date as of which such Book
Value is to be determined, except that no value shall be included in such
assets for goodwill arising from consummation of a Business Combination,
and (iii) after giving effect to (A) the exercise of all rights, options
and warrants to purchase such Common Shares (other than the Rights), and
the conversion of all securities convertible into such Common Shares, at an
exercise or conversion price, per Common Share, which is less than such
Book Value before giving effect to such exercise or conversion, (B) all
dividends and other distributions on the capital stock of such Person
declared prior to the date as of which such Book Value is to be determined
and to be paid or made after such date, and (C) any other agreement,
arrangement or understanding (written or oral), or transaction or other
action prior to the date as of which such Book Value is to be determined
which would have the effect of thereafter reducing such Book Value.
(g) 'Brink's Right' shall have the meaning set forth in the third
introductory paragraph of this Rights Agreement.
2
<PAGE>
(h) 'Brink's Stock' shall mean the Pittston Brink's Group Common
Stock, par value $1.00 per share, of the Company.
(i) 'Burlington Right' shall have the meaning set forth in the third
introductory paragraph of this Rights Agreement.
(j) 'Burlington Stock' shall mean the Pittston Burlington Group Common
Stock, par value $1.00 per share, of the Company.
(k) 'Business Combination' shall have the meaning set forth in Section
13(a) of this Rights Agreement.
(l) 'Business Day' shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the
Borough of Manhattan, The City of New York, are authorized or obligated by
law or executive order to close.
(m) 'Close of Business' on any given date shall mean 5 p.m., New York
City time, on such date; provided, however, that if such date is not a
Business Day, 'Close of Business' shall mean 5 p.m., New York City time, on
the next succeeding Business Day.
(n) 'Common Shares' when used with reference to the Company prior to a
Business Combination shall mean the shares of Brink's Stock, Minerals Stock
or Burlington Stock, as the context requires, of the Company or any other
shares of capital stock of the Company into which Brink's Stock, Minerals
Stock or Burlington Stock, as the case may be, shall be reclassified or
changed; provided, however, that 'Common Shares' shall mean shares of
Brink's Stock, Minerals Stock and Burlington Stock (or any other shares of
capital stock into which Brink's Stock, Minerals Stock or Burlington Stock,
as the case may be, shall be reclassified or changed) whenever a
determination of whether a Person shall have become the Beneficial Owner
of, or shall have made a tender or exchange offer for, Common Shares
representing a specified percentage of the total Voting Rights of all the
Common Shares then outstanding is required to be made herein. 'Common
Shares' when used with reference to any Person (other than the Company
prior to a Business Combination) shall mean shares of capital stock of such
Person (if such Person is a corporation) of any class or series, or units
of equity interests in such Person (if such Person is not a corporation) of
any class or series, the terms of which do not limit (as a fixed amount and
not merely in proportional terms) the amount of dividends or income payable
or distributable on such class or series or the amount of assets
distributable on such class or series upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide
that such class or series is subject to redemption at the option of such
Person, or any shares of capital stock or units of equity interests into
which the foregoing shall be reclassified or changed; provided, however,
that if at any time there shall be more than one such class or series of
capital stock or equity interests of such Person, 'Common Shares' of such
Person shall include all such classes and series substantially in the
proportion of the total number of shares or other units of each such class
or series outstanding at such time.
(o) 'Common Stock' shall have the meaning set forth in the first
introductory paragraph of this Rights Agreement.
(p) 'Company' shall have the meaning set forth in the heading of this
Rights Agreement; provided, however, that if there is a Business
Combination, 'Company' shall have the meaning set forth in Section 13(b) of
this Rights Agreement.
(q) The term 'control', with respect to any Person, shall mean the
power to direct the management and policies of such Person, directly or
indirectly, by or through stock ownership, agency or otherwise, or pursuant
to or in connection with an agreement, arrangement or understanding
(written or oral) with one or more other Persons by or through stock
ownership, agency or otherwise; and the terms 'controlling' and
'controlled' shall have meanings correlative to the foregoing.
(r) 'Disinterested Director' shall mean (i) any member of the Board of
Directors of the Company who was a member of the Board of Directors of the
Company prior to the Share Acquisition Date, and (ii) any member of the
Board of Directors of the Company who was
3
<PAGE>
recommended for election by, or was elected to fill a vacancy and received
the affirmative vote of, a majority of the Disinterested Directors at the
time on the Board of Directors of the Company.
(s) 'Distribution Date' shall have the meaning set forth in Section
3(a) of this Rights Agreement.
(t) 'Effective Date' shall have the meaning set forth in the third
introductory paragraph of this Rights Agreement.
(u) 'Equivalent Shares' shall mean any Preferred Shares and any other
class or series of capital stock of the Company which is entitled to
participate in dividends and other distributions, including distributions
upon the liquidation, dissolution or winding up of the Company, on a
proportional basis with Brink's Stock, Minerals Stock or Burlington Stock,
as the case may be. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11 of this Rights Agreement, the
number of shares, or fractions of a share, of such class or series of
capital stock that is entitled to the same dividend or distribution as a
whole share of Brink's Stock, Minerals Stock or Burlington Stock, as the
case may be, shall be deemed to be one share.
(v) 'Exchange Act' shall mean the Securities Exchange Act of 1934, as
in effect on the date in question, unless otherwise specifically provided
in this Rights Agreement.
(w) 'Expiration Date' shall have the meaning set forth in Section 7(a)
of this Rights Agreement.
(x) 'Major Part' when used with reference to the assets of the Company
and its Subsidiaries as of any date shall mean assets (i) having a fair
market value aggregating 50% or more of the total fair market value of all
the assets of the Company and its Subsidiaries (taken as a whole) as of the
date in question, (ii) accounting for 50% or more of the total value (net
of depreciation and amortization) of all the assets of the Company and its
Subsidiaries (taken as a whole), as would be shown on a consolidated or
combined balance sheet of the Company and its Subsidiaries as of the date
in question, prepared in accordance with generally accepted accounting
principles then in effect, or (iii) accounting for 50% or more of the total
amount of net income of the Company and its Subsidiaries (taken as a
whole), as would be shown on a consolidated or combined statement of income
of the Company and its Subsidiaries for the period of 12 months ending on
the last day of the Company's monthly accounting period next preceding the
date in question, prepared in accordance with generally accepted accounting
principles then in effect.
(y) 'Market Value' when used with reference to Common Shares or
Equivalent Shares on any date shall be deemed to be the average of the
daily closing prices, per share, of such Common Shares or Equivalent Shares
for the period which is the shorter of (1) 30 consecutive Trading Days
immediately prior to the date in question or (2) the consecutive Trading
Days beginning on the date of the first public announcement of the event
requiring a determination of the Market Value and ending on the Trading Day
immediately prior to the record date of such event; provided, however, that
in the event that the Market Value of such Common Shares or Equivalent
Shares is to be determined in whole or in part during a period following
the announcement by the issuer of such Common Shares or Equivalent Shares
of any dividend, distribution or other action of the type described in
paragraph (a), (b), (c) or (d) of Section 11 of this Rights Agreement that
would require an adjustment thereunder, then, and in each such case, the
Market Value of such Common Shares or Equivalent Shares shall be
appropriately adjusted to reflect the effect of such action on the market
price of such Common Shares or Equivalent Shares. The closing price for
each Trading Day shall be the last sale price, regular way, or, in case no
such sale takes place on such Trading Day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to a security listed
or admitted to trading on a national securities exchange or, if such
security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated
Quotations System ('NASDAQ') or such other system then in use, or, if on
any such Trading Day the applicable securities are not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market
4
<PAGE>
maker making a market in the shares of such securities selected by the
Board of Directors of the Company. If on any such Trading Day no market
maker is making a market in such securities, the fair value of such
securities on such Trading Day shall mean the fair value of such securities
as determined in good faith by the Board of Directors of the Company (whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent, the holders of Rights and all
other Persons).
(z) 'Minerals Right' shall have the meaning set forth in the second
introductory paragraph of this Rights Agreement.
(aa) 'Minerals Stock' shall mean Pittston Minerals Group Common Stock,
par value $1.00 per share, of the Company.
(bb) 'Person' shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity.
(cc) 'Preferred Shares' shall mean the Series A Preferred Shares, the
Series B Preferred Shares or the Series D Preferred Shares, as the context
requires. Any reference in this Rights Agreement to Preferred Shares shall
be deemed to include any authorized fraction of a Preferred Share, unless
the context otherwise requires.
(dd) 'Principal Party' shall mean the Surviving Person in a Business
Combination; provided, however, that if such Surviving Person is a direct
or indirect Subsidiary of any other Person, 'Principal Party' shall mean
the Person which is the ultimate parent of such Surviving Person and which
is not itself a Subsidiary of another Person. In the event ultimate control
of such Surviving Person is shared by two or more Persons, 'Principal
Party' shall mean that Person that is immediately controlled by such two or
more Persons.
(ee) 'Purchase Price' with respect to each Right shall mean $40, as
such amount may from time to time be adjusted as provided herein, and shall
be payable in lawful money of the United States of America. All references
herein to the Purchase Price shall mean the Purchase Price as in effect at
the time in question.
(ff) 'Record Date' shall have the meaning set forth in the first
introductory paragraph of this Rights Agreement.
(gg) 'Redemption Date' shall mean the time when the Rights are ordered
to be redeemed by the Board of Directors of the Company as provided in
Section 24(a) of this Rights Agreement.
(hh) 'Redemption Price' shall mean the price required to be paid upon
the redemption of the Rights as provided in Section 24 of this Rights
Agreement.
(ii) 'Registered Common Shares' shall mean Common Shares which are, as
of the date of consummation of a Business Combination, and have been
continuously registered under Section 12 of the Exchange Act during the
preceding 12 months.
(jj) 'Right Certificates' shall have the meaning set forth in Section
3(a) of this Rights Agreement.
(kk) 'Rights' shall mean Brink's Rights, Minerals Rights or Burlington
Rights, as the context requires.
(ll) 'Securities Act' shall mean the Securities Act of 1933, as in
effect on the date in question, unless otherwise specifically provided in
this Rights Agreement.
(mm) 'Series A Preferred Shares' shall mean the Series A Participating
Cumulative Preferred Stock, par value $10 per share, of the Company which
the Board of Directors of the Company has heretofore established, subject
to filing the Articles of Amendment immediately after the Effective Date.
(nn) 'Series B Preferred Shares' shall mean the Series B Participating
Cumulative Preferred Stock, par value $10 per share, of the Company which
the Board of Directors of the Company has heretofore established, subject
to filing the Articles of Amendment immediately after the Effective Date.
5
<PAGE>
(oo) 'Series D Preferred Shares' shall mean the Series D Participating
Cumulative Preferred Stock, par value $10 per share, of the Company which
the Board of Directors of the Company has heretofore established, subject
to filing the Articles of Amendment immediately after the Effective Date.
(pp) 'Share Acquisition Date' shall mean the first date of public
disclosure by the Company or an Acquiring Person that an Acquiring Person
has become an Acquiring Person.
(qq) 'Subsidiary' shall mean a Person, a majority of the total
outstanding Voting Rights of which is owned, directly or indirectly, by
another Person or by such other Person and one or more other Subsidiaries
of such other Person.
(rr) 'Surviving Person' shall mean (1) the Person which is the
continuing or surviving Person in a consolidation or merger specified in
clause (i) or (ii) of Section 13(a) of this Rights Agreement or (2) the
Person to which the Major Part of the assets of the Company and its
Subsidiaries are sold, leased, exchanged or otherwise transferred or
disposed of in a transaction specified in clause (iii) of Section 13(a) of
this Rights Agreement; provided, however, that if the Major Part of the
assets of the Company and its Subsidiaries are sold, leased, exchanged or
otherwise transferred or disposed of in one or more related transactions
specified in clause (iii) of Section 13(a) of this Rights Agreement to more
than one Person, the 'Surviving Person' in such case shall mean the Person
that acquired assets of the Company and/or its Subsidiaries with the
greatest fair market value in such transaction or transactions.
(ss) 'Trading Day' shall mean a day on which the principal national
securities exchange (or principal recognized foreign stock exchange, as the
case may be) on which any shares or Rights, as the case may be, are listed
or admitted to trading is open for the transaction of business or, if the
shares or Rights in question are not listed or admitted to trading on any
national securities exchange (or recognized foreign stock exchange, as the
case may be), a Business Day.
(tt) 'Triggering Event' shall have the meaning set forth in clause
(ii) of Section 11(e) of this Rights Agreement.
(uu) 'Voting Rights' when used with reference to the capital stock of,
or units of equity interests in, any Person shall mean the right under
ordinary circumstances (and not merely upon the happening of a contingency)
to vote in the election of directors of such Person (if such Person is a
corporation) or to participate in the management and control of such Person
(if such Person is not a corporation).
SECTION 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint one or more co-Rights Agents as it may
deem necessary or desirable (the term 'Rights Agent' being used herein to refer,
collectively, to the Rights Agent together with any such co-Rights Agents). In
the event the Company appoints one or more co-Rights Agents, the respective
duties of the Rights Agent and any co-Rights Agents shall be as the Company
shall determine.
SECTION 3. Issue of Right Certificates. (a) Until the earlier of (i) the
Close of Business on the tenth calendar day after the Share Acquisition Date or
(ii) the Close of Business on the tenth calendar day after the date of the
commencement of a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any of its Subsidiaries, or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan) for Common Shares
representing 30% or more of the total Voting Rights of all the outstanding
Common Shares (including any such date which is after the date of this Rights
Agreement and prior to the issuance of the Rights) (the Close of Business on the
earlier of such dates being herein referred to as the 'Distribution Date'), (x)
Brink's Rights, Minerals Rights and Burlington Rights will be evidenced by the
certificates for Brink's Stock, Minerals Stock and Burlington Stock,
respectively, registered in the names of the holders thereof (which certificates
for Brink's Stock, Minerals Stock and Burlington Stock shall also be deemed to
be certificates for Brink's Rights, Minerals Rights and Burlington Rights,
respectively) and not by separate certificates, and (y) the Rights, including
the right to receive certificates as herein provided, will be transferable only
in connection with the transfer of
6
<PAGE>
Common Shares. As soon as practicable after the Distribution Date, the Rights
Agent will send, by first-class, insured, postage prepaid mail, to each record
holder of (1) Brink's Stock as of the close of business on the Distribution
Date, at the address of such holder shown on the records of the Company, one or
more right certificates in substantially the form of Exhibit B-1 hereto (the
'Brink's Right Certificates'), evidencing one Brink's Right for each share of
Brink's Stock so held, (2) Minerals Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more right certificates in substantially the form of Exhibit B-2
hereto (the 'Minerals Right Certificates'), evidencing one Minerals Right for
each share of Minerals Stock so held and (3) Burlington Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more right certificates in substantially the form
of Exhibit B-3 hereto (the 'Burlington Right Certificates' and, together with
the Brink's Right Certificates and the Minerals Right Certificates, the 'Right
Certificates'), evidencing one Burlington Right for each share of Burlington
Stock so held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) Until the earliest of the Distribution Date, the Redemption Date or the
Expiration Date, the surrender for transfer of any of the certificates for the
Common Shares in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificate.
(c) Rights shall be issued in respect of all Common Shares which are issued
after the Effective Date but prior to the earliest of the Distribution Date, the
Redemption Date or the Expiration Date. Certificates representing Common Shares
shall also be deemed to be certificates for the Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in an Amended and Restated Rights Agreement
dated as of December [xx], 1995 (the 'Rights Agreement'), between The
Pittston Company and Chemical Bank, as Rights Agent, the terms of which are
hereby incorporated herein by reference and a copy of which is on file at
the principal executive offices of The Pittston Company. The term 'Rights
Agreement' as used herein includes each amendment thereto or supplement
thereof made from time to time, the terms of each of which are incorporated
herein by reference and a copy of each of which is on file as hereinabove
stated. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Pittston Company will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under no circumstances shall
Rights evidenced by this certificate be transferred to any Person who is or
becomes an Acquiring Person or an Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement) and any such purported transfer
shall be, and shall render such Rights, null and void.
Until the Distribution Date the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
SECTION 4. Forms of Right Certificates. The Brink's Right Certificates, the
Minerals Right Certificates and the Burlington Right Certificates (and the forms
of assignment and the forms of election to purchase to be printed on the reverse
thereof) shall be in substantially the forms set forth as Exhibit B-1, Exhibit
B-2 and Exhibit B-3 hereto, respectively, and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Rights Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights may from
time to time be listed, or to conform to usage. Subject to the provisions of
Sections 11 and 23 hereof, the Right Certificates, whenever issued, shall be
dated as of the Record Date, and on their face shall entitle the holders thereof
to purchase such number of Preferred Shares as shall be set forth therein for
the Purchase Price set forth therein.
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SECTION 5. Execution, Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by the Chairman of the
Board, the President or any Vice President of the Company, either manually or by
facsimile signature, and have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Right Certificate
shall be manually countersigned by the Rights Agent and shall not be valid or
obligatory for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates may nevertheless
be countersigned by the Rights Agent, and issued and delivered by the Company,
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer
of the Company.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office in New York, New York, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. Transfer, Split-up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Section 7(e) and Section 15 hereof, at any time
after the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Expiration Date, any Right Certificate or
Certificates may be transferred, split-up, combined or exchanged for another
Right Certificate or Certificates, entitling the registered holder to purchase a
like number of Preferred Shares as the Right Certificate or Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split-up, combine or exchange any Right Certificate shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Certificates to be transferred, split-up, combined or
exchanged at the principal office of the Rights Agent. Thereupon the Rights
Agent shall, subject to Section 7(e) and Section 15 hereof, countersign and
deliver to the Person entitled thereto a Right Certificate or Certificates, as
the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split-up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a valid
Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancelation of
the Right Certificate if mutilated, the Company will make a new Right
Certificate of like tenor and deliver such new Right Certificate to the Rights
Agents for delivery to the registered owner in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.
SECTION 7. Exercise of Rights; Expiration Date of Rights; Restriction on
Transfer of Rights. (a) Each Right shall entitle the registered holder thereof,
upon the exercise thereof as provided herein, to purchase, for the Purchase
Price, at any time after the earlier of the Distribution Date or the occurrence
of a Triggering Event and at or prior to the earlier of (i) the Close of
Business on September 25, 1997 (the Close of Business on such date being herein
referred to as the 'Expiration Date') or (ii) the Redemption Date, one
one-thousandth (1/1000th) of a Preferred Share, subject to adjustment from time
to time as provided in Sections 11 and 13 of this Rights Agreement.
(b) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal office of the Rights Agent in New York, New
York, together with payment of the Purchase Price for such one one-thousandth
(1/1000th) of a Preferred
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Share as to which the Rights are exercised, at or prior to the earlier of (i)
the Expiration Date or (ii) the Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the Preferred Shares to be purchased together with an
amount equal to any applicable transfer tax, in lawful money of the United
States of America, in cash or by certified check or money order payable to the
order of the Company, the Rights Agent shall thereupon promptly (i) requisition
from any transfer agent of the Preferred Shares (or make available, if the
Rights Agent is the transfer agent) certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 15 hereof, (iii) promptly after
receipt of such certificates, cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, and (iv) when appropriate,
after receipt promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to the provisions of Section 15 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, Rights,
including Rights evidenced by certificates for Common Shares, shall not at any
time be transferable to an Acquiring Person or any Affiliate or Associate of an
Acquiring Person or to any Person who subsequently becomes an Acquiring Person
or Affiliate or Associate of an Acquiring Person, although at the time of the
purported transfer such Person was not an Acquiring Person or an Affiliate or
Associate thereof. Any attempt to transfer Rights to any such Person shall be
null and void as of the date of the purported transfer. Any Right which has been
the subject of any such purported transfer shall be null and void, and
thereafter may not be exercised by any Person (including any subsequent
transferee) for Preferred Shares or capital stock of the Company pursuant to any
provision hereof. The Company may require (or cause the Rights Agent or any
transfer agent of the Company to require) any Person who submits a Right
Certificate (or a certificate representing Common Shares which evidences, or but
for the provisions of this Section 7(e) would evidence, Rights) for transfer on
the registry books or to exercise the Rights represented thereby to establish to
the reasonable satisfaction of the Company that such Rights have not been the
subject of any purported transfer in violation of the provision of this Section
7(e). The Company shall use all reasonable efforts to ensure that the provisions
of this Section 7(e) are complied with, but shall have no liability to any
holder of Right Certificates or any other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates or
Associates hereunder.
(f) Notwithstanding anything in this Rights Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Right Certificates upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. Cancelation and Destruction of Right Certificates. All Right
Certificates surrendered for the purposes of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancelation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancelation and retirement, and the Rights Agent shall so
cancel and retire, any Right Certificate purchased or acquired by the Company.
The Rights Agent shall deliver all canceled Right Certificates to the Company,
or shall, at the written request of the Company, destroy such canceled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
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SECTION 9. Reservation and Availability of Preferred Shares. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares, free from
preemptive rights or any right of first refusal, a number of Preferred Shares
sufficient to permit the exercise in full of all outstanding Rights.
(b) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and non-assessable shares.
(c) So long as the Preferred Shares issuable upon the exercise of Rights
are to be listed on any national securities exchange, the Company covenants and
agrees to use its best efforts to cause, from and after such time as the Rights
become exercisable, all Preferred Shares reserved for such issuance to be listed
on such exchange upon official notice of issuance upon such exercise.
(d) The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of Right Certificates or of any
Preferred Shares upon the exercise of the Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or in
respect of the issuance or delivery of certificates for the Preferred Shares in
a name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for Preferred Shares upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
SECTION 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open.
SECTION 11. Adjustment of Number and Kind of Shares and the Purchase Price.
The number and kind of shares subject to purchase upon the exercise of each
Right and the Purchase Price are subject to adjustment from time to time as
provided in this Section 11.
(a) In the event at any time after the date of this Rights Agreement the
Company shall (i) declare a dividend, or make a distribution, on any class of
its Common Shares payable in Common Shares, (ii) subdivide (by stock split or
otherwise) or split any class of its outstanding Common Shares into a larger
number of Common Shares or (iii) combine (by reverse stock split or otherwise)
or consolidate any class of its outstanding Common Shares into a smaller number
of Common Shares, then, in each such event, (1) the number of Preferred Shares
issuable upon exercise of each Right at the time of the record date for such
dividend or distribution or the effective date of such subdivision or
combination, shall be adjusted so that the number of Preferred Shares thereafter
issuable upon exercise of such Right shall equal the result obtained by
multiplying the number of Preferred Shares issuable upon exercise of each Right
at such time by a fraction, the numerator of which shall be the total number of
Rights outstanding immediately prior to such time and the denominator of which
shall be the total number of Rights outstanding immediately following such time,
and (2) the Purchase Price in effect at such time shall be adjusted so that the
Purchase Price thereafter shall equal the result obtained by multiplying the
Purchase Price in effect immediately prior to such time by the fraction referred
to in the preceding clause (1).
(b) In the event at any time after the date of this Rights Agreement the
Company shall (i) declare a dividend, or make a distribution, on any series of
its outstanding Preferred Shares payable in Preferred Shares, (ii) subdivide (by
stock split or otherwise) or split any series of its outstanding
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Preferred Shares into a larger number of Preferred Shares, (iii) combine (by a
reverse stock split or otherwise) or consolidate any series of its outstanding
Preferred Shares into a smaller number of Preferred Shares or (iv) issue any
shares of its capital stock in a reclassification or change of any series of its
outstanding Preferred Shares (including any such reclassification or change in
connection with a merger in which the Company is the continuing or surviving
corporation), then in each such event, the number and kind of shares of capital
stock issuable upon the exercise of each Right at the time of the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, for the Purchase
Price, the aggregate number and kind of shares of capital stock which such
holder would have owned and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification if such holder had exercised such
Right immediately prior to such time.
(c) If at any time after the date of this Rights Agreement the Company
shall fix a record date for the issuance of rights, options or warrants to all
holders of any class of Common Shares or of any class or series of Equivalent
Shares entitling such holders (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Common Shares or Equivalent
Shares (or securities convertible into Common Shares or Equivalent Shares) at a
price per share (or having a conversion price per share, if a security
convertible into Common Shares or Equivalent Shares) less than the Market Value
of such Common Shares or Equivalent Shares on such record date, then, in each
such case, each Right outstanding immediately prior to such record date shall
thereafter evidence the right to purchase, for the Purchase Price, that number
of one one-thousandths (1/1000ths) of a Preferred Share obtained by multiplying
the number of one one-thousandths (1/1000ths) of a Preferred Share issuable upon
exercise of a Right immediately prior to such record date by a fraction, the
numerator of which shall be the number of Common Shares and Equivalent Shares
(if any) outstanding on such record date plus the number of additional Common
Shares or Equivalent Shares, as the case may be, to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible) and the denominator of which shall be the total number of
Common Shares and Equivalent Shares (if any) outstanding on such record date
plus the number of Common Shares or Equivalent Shares, as the case may be, which
the aggregate offering price of the total number of Common Shares or Equivalent
Shares, as the case may be, so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Market Value. In case such subscription price may be paid in a
consideration, part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Common Shares and Equivalent Shares owned by or
held for the account of the Company or any Subsidiary of the Company shall not
be deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, each Right shall
be adjusted to evidence the right to receive that number of one one-thousandths
(1/1000ths) of a Preferred Share which such Right would have entitled the holder
to receive, for the Purchase Price, if such record date had not been fixed.
(d) If at any time after the date of this Rights Agreement the Company
shall fix a record date for the making of a distribution to all holders of any
class of Common Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a merger in which the Company is
the continuing or surviving corporation or in connection with a statutory share
exchange with the Company after which the Company is not a Subsidiary of any
Acquiring Person or any Associate or Affiliate of any Acquiring Person) of cash
(other than a regular periodic cash dividend at a rate not in excess of 125% of
the rate of the last regular cash dividend theretofore paid on the class of
Common Shares, evidences of indebtedness, assets, securities (other than Common
Shares or Preferred Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(c)), then, in each such case, each
Right outstanding immediately prior to such record date shall thereafter
evidence the right to purchase, for the Purchase Price, that number of one
one-thousandths (1/1000ths) of a Preferred Share obtained by multiplying the
number of one one-thousandths (1/1000ths) of a Preferred Share issuable upon
exercise of such Right immediately prior to such record date by a fraction, the
numerator of which shall be the Market Value of such Common Shares or Equivalent
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Shares on the record date and the denominator of which shall be the Market Value
of such Common Shares or Equivalent Shares on such record date less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, evidences of indebtedness, assets or
securities so to be distributed or of such subscription rights, options or
warrants applicable to one Common Share or Equivalent Share, as the case may be.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, each Right shall
be adjusted to evidence the right to receive that number of one one-thousandths
(1/1000ths) of a Preferred Share which such Right would have entitled the holder
to receive, for the Purchase Price, if such record date had not been fixed.
(e) (i) If any Acquiring Person or any Affiliate or Associate of any
Acquiring Person, at any time after the date of this Rights Agreement, directly
or indirectly, shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of such
merger or combination and all the Common Shares shall remain outstanding and
unchanged, or shall effect a statutory share exchange with the Company after
which the Company is not a Subsidiary of any Acquiring Person or any Affiliate
or Associate of any Acquiring Person (such merger, share exchange or combination
being herein referred to as an 'Affiliate Merger') then, in each such case,
proper provision shall be made so that each holder of a Right, except as
provided in Section 7(e) hereof and below, shall thereafter have a right to
receive, upon exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, such number of Common Shares as shall equal the
result obtained by multiplying the Purchase Price by a fraction, the numerator
of which is the number of one one-thousandths (1/1000ths) of a Preferred Share
for which such Right is then exercisable and the denominator of which is 50% of
the Market Value of the Common Shares on the date of the occurrence of such
merger or combination. The Company shall not consummate any Affiliate Merger
unless upon such consummation it shall have sufficient authorized Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 11(e)(i) and unless prior
thereto a registration statement under the Securities Act on an appropriate
form, with respect to the Common Shares purchasable upon exercise of the Rights,
shall be effective under the Securities Act. The Company covenants and agrees to
use its best efforts to:
(A) cause a registration statement under the Securities Act on an
appropriate form with respect to the Common Shares purchasable upon
exercise of the Rights, to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date;
(B) qualify or register the Common Shares purchasable upon exercise of
the Rights under the blue sky laws of such jurisdictions as may be
necessary or appropriate; and
(C) list the Common Shares purchasable upon the exercise of the Rights
on each national securities exchange on which the Common Shares were listed
prior to the consummation of such Affiliate Merger.
(ii) If any of the events described in the following clauses (A), (B), (C)
or (D) of this subparagraph (e)(ii) (each such event being herein referred to as
a 'Triggering Event') shall occur:
(A) any Acquiring Person or any Affiliate or Associate of any
Acquiring Person, at any time after the date of this Rights Agreement,
directly or indirectly (1) shall, in one or more transactions, transfer any
assets to the Company or any Subsidiary of the Company in exchange (in
whole or in part) for shares of capital stock of the Company or any
Subsidiary of the Company or for securities exercisable for or convertible
into shares of capital stock of the Company or any Subsidiary of the
Company or otherwise obtain from the Company or any of its Subsidiaries,
with or without consideration, any additional shares of capital stock of
the Company or any Subsidiary of the Company or securities exercisable for
or convertible into shares of capital stock of the Company or any
Subsidiary of the Company (other than as a part of a pro rata distribution
or offer to all holders of Common Shares or an issuance upon conversion of
convertible securities of the Company or any of its Subsidiaries that were
not acquired from the Company or any of its Subsidiaries), (2) shall, in
one or more transactions, sell, purchase, lease, exchange, mortgage, pledge
or transfer to or with, or acquire from, the Company or any of its
Subsidiaries, assets on
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terms and conditions less favorable to the Company than the Company would
be able to obtain in an arm's-length negotiation with an unaffiliated third
party, (3) shall engage in any transaction with the Company involving the
sale, purchase, lease, exchange, mortgage, pledge or transfer (in one
transaction or a series of transactions), other than incidental to the
lines of business currently engaged in as of the date hereof by the Company
and such Acquiring Person or Associate or Affiliate, of assets having an
aggregate fair market value of more than $10,000,000, (4) shall receive any
compensation from the Company or any Subsidiaries of the Company other than
compensation for full-time employment as a regular employee at rates in
accordance with past practices of the Company or Subsidiaries of the
Company or (5) shall receive the benefits, directly or (except
proportionately as a shareholder), of any loans, advances, guarantees,
pledges or other financial assistance provided by the Company or any
Subsidiaries of the Company;
(B) during such time as there is an Acquiring Person and Disinterested
Directors do not constitute a majority of the entire Board of Directors of
the Company, there shall be (1) any reclassification of securities of the
Company, including any reverse stock split, (2) any recapitalization of the
Company, (3) any merger, statutory share exchange or consolidation of the
Company with any of its Subsidiaries or (4) any other transaction or series
of transactions (whether or not with or into or otherwise involving an
Acquiring Person), which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the then outstanding
shares of any class of equity securities or of securities exercisable for
or convertible into securities of the Company or any of its Subsidiaries
which is directly or indirectly owned by an Acquiring Person or any
Associate or Affiliate of any Acquiring Person;
(C) any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any of its Subsidiaries or
any Person holding Common Shares for or pursuant to the terms of any such
employee benefit plan), alone or together with all Affiliates and
Associates of such Person, shall become the Beneficial Owner of Common
Shares representing 30% or more of the total Voting Rights of all the
Common Shares then outstanding;
(D) during such time as there is an Acquiring Person and Disinterested
Directors do not constitute a majority of the entire Board of Directors of
the Company, (1) there shall be any reduction in the annual rate of
dividends paid on the Common Shares (except as necessary for valid business
reasons or to reflect any subdivision of the Common Shares or as required
under the laws of the jurisdiction of incorporation of the Company), or (2)
there shall be a failure to increase the annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding Common Shares (except
as necessary for valid business reasons or except to the extent such
increase in the rate of dividends would be prohibited under the laws of the
jurisdiction of incorporation of the Company); then, in each such case,
proper provision shall be made so that each holder of a valid Right, except
as provided in Section 7(e) hereof and below, shall thereafter have a right
to receive, upon exercise thereof for the Purchase Price in accordance with
the terms of this Rights Agreement, such number of one-thousandths
(1/1000ths) of a Preferred Share as shall equal the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which is the
number of one one-thousandths (1/1000ths) of a Preferred Share for which
such Right is then exercisable and the denominator of which is 50% of the
Market Value of the Common Shares on the date of the occurrence of such
Triggering Event. If a Triggering Event has occurred, as soon as
practicable after the date which is the later of the date of such a
Triggering Event or the Distribution Date, the Company covenants and agrees
to use its best efforts to:
(i) prepare and file a registration statement under the Securities
Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights;
(ii) cause such registration statement to become effective as soon
as practicable after such filing;
(iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date; and
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(iv) qualify or register the Preferred Shares purchasable upon
exercise of the Rights under the blue sky laws of such jurisdictions as
may be necessary or appropriate.
The Company may temporarily suspend, for a period of time not to exceed 90
calendar days after the date set forth in the immediately preceding sentence,
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect.
(iii) If an event occurs which would require an adjustment under both
subparagraph (e)(i) or (e)(ii) of this Section 11 and paragraph (a), (b), (c) or
(d) of this Section 11, the adjustment provided for in paragraph (a), (b), (c)
or (d) of this Section 11 shall be in addition to, and shall be made prior to,
any adjustment required pursuant to subparagraph (e)(i) or (e)(ii) of this
Section 11; provided, however, that if a single event occurs that represents
both an Affiliate Merger or Triggering Event and a Business Combination, the
Rights exercisable upon such event shall be exercisable only in a manner set
forth in Section 13(a) of this Rights Agreement and no adjustment shall be made
pursuant to any paragraph of this Section 11.
(f) All calculations under this Section 11 shall be made to the nearest
hundred-thousandth of a share.
(g) If as a result of an adjustment made pursuant to Section 11(b) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in paragraphs (a) through (e), inclusive, of this
Section 11 and the provisions of Sections 7, 9, 10 and 13 hereof with respect to
the Preferred Shares shall apply on like terms to any such other shares.
(h) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other capital stock
relating to a Right shall evidence the right to purchase, for the Purchase
Price, the adjusted number and kind of shares of capital stock purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(i) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares or number or kind of other shares of capital stock
issuable upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the terms which were expressed in the
initial Right Certificates issued hereunder.
(j) In any case in which this Section 11 shall require that an adjustment
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event the issuing to the holder of
any Right exercised after such record date the Preferred Shares and/or other
shares of capital stock or securities of the Company, if any, issuable upon such
exercise over and above the Preferred Shares and/or other shares of capital
stock or securities of the Company, if any, issuable before giving effect to
such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares upon the occurrence of the event requiring
such adjustment.
(k) After the occurrence of an Affiliate Merger, the number of Common
Shares thereafter receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 7, 9, 10, 11 and 13 hereof.
(l) In any case in which this Section 11 requires a change or adjustment to
the 'Common Shares', the 'Preferred Shares', the 'Rights' and/or the 'Purchase
Price', it is understood that, to the extent circumstances dictate, as
determined by the Board in its sole discretion, that any such change or
adjustment should only be made to (i) Brink's Stock, Series A Preferred Shares,
Brink's Rights and/or the Purchase Price relating to Brink's Rights, (ii)
Minerals Stock, Series B Preferred Shares, Minerals Rights and/or the Purchase
Price relating to Minerals Rights or (iii) Burlington Stock, Series D Preferred
Shares, Burlington Rights and/or the Purchase Price relating to Burlington
Rights, any such
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change or adjustment will be deemed to affect only such Stock, such Shares, such
Rights and/or the Purchase Price relating to such Rights.
SECTION 12. Certificate of Adjustment. Whenever an adjustment is made as
provided in Section 11 or Section 13 hereof, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief statement of the
facts accounting for such adjustment, (b) promptly file with the Rights Agent
and with each transfer agent for the Preferred Shares a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 26 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
SECTION 13. Consolidation, Merger, Share Exchange or Sale or Transfer of
Major Part of Assets. (a) In the event that, following the Distribution Date,
directly or indirectly, any transactions specified in the following clauses (i),
(ii) or (iii) hereof (each such transaction being herein referred to as a
'Business Combination') shall be consummated:
(i) the Company shall consolidate with, or merge with and into, any
other Person;
(ii) any Person shall merge with and into the Company and in
connection with such merger, all or part of the Common Shares shall be
changed into or exchanged for capital stock or other securities of any
other Person or cash or any other property or the Company shall enter into
a statutory share exchange with any Person after which the Company is a
Subsidiary of such Person or any Affiliate or Associate of such Person; or
(iii) the Company shall sell, lease, exchange or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall sell, lease, exchange
or otherwise transfer or dispose of), in one or more transactions, the
Major Part of the assets of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons,
then, in each such case, proper provision shall be made so that each holder of a
valid Right shall thereafter have the right to receive, upon the exercise
thereof for the Purchase Price in accordance with the terms of this Rights
Agreement, the securities specified below:
(A) If the Principal Party in such Business Combination has Registered
Common Shares outstanding, each Right shall thereafter represent the right
to receive, upon the exercise thereof at the Purchase Price in accordance
with the terms of this Rights Agreement, such number of Registered Common
Shares of such Principal Party, free and clear of all liens, encumbrances
or other adverse claims, as shall be equal to the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which shall
be the number of one one-thousandths (1/1000ths) of a Preferred Share for
which a Right was exercisable immediately prior to consummation of such
Business Combination and the denominator of which shall be 50% of the
Market Value of each Registered Common Share of such Principal Party on the
date of such Business Combination.
(B) If the Principal Party in such Business Combination does not have
Registered Common Shares outstanding, each Right shall thereafter represent
the right to receive, upon the exercise thereof at the Purchase Price in
accordance with the terms of this Rights Agreement, at the election of the
holder of such Right at the time of the exercise thereof:
(1) such number of Common Shares of the Surviving Person in such
Business Combination as shall be equal to the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which
shall be the number of one one-thousandths (1/1000ths) of a Preferred
Share for which a Right was exercisable immediately prior to the
consummation of such Business Combination and the denominator of which
shall be 50% of the Book Value of each Common Share of such Surviving
Person immediately after giving effect to such Business Combination; or
(2) such number of Common Shares of the Principal Party in such
Business Combination (if the Principal Party is not also the Surviving
Person in such Business Combination) as shall be equal to the result
obtained by multiplying the Purchase Price by a fraction, the numerator
of which shall be the number of one one-thousandths (1/1000ths) of a
Preferred Share for which a Right was exercisable immediately prior to
the consummation of such Business
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Combination and the denominator of which shall be 50% of the Book Value
of each Common Share of the Principal Party immediately after giving
effect to such Business Combination; or
(3) if the Principal Party in such Business Combination is an
Affiliate of one or more Persons which has Registered Common Shares
outstanding, such number of Registered Common Shares of whichever of
such Affiliates of the Principal Party has Registered Common Shares with
the greatest aggregate Market Value on the date of consummation of such
Business Combination as shall be equal to the result obtained by
multiplying the Purchase Price by a fraction, the numerator of which
shall be the number of one one-thousandths (1/000ths) of a Preferred
Share for which a Right was exercisable immediately prior to the
consummation of such Business Combination and the denominator of which
shall be 50% of the Market Value of each Registered Common Share of such
Affiliate on the date of such Business Combination.
All Common Shares of any Person for which any Right may be exercised after
consummation of a Business Combination as provided in this Section 13(a) shall,
when issued upon exercise thereof in accordance with this Rights Agreement, be
validly issued, fully paid and nonassessable and free of preemptive rights,
rights of first refusal or any other restrictions or limitations on the transfer
or ownership thereof.
(b) After consummation of any Business Combination (i) each issuer of
Common Shares for which Rights may be exercised as set forth in paragraph (a) of
this Section 13 shall be liable for, and shall assume, by virtue of such
Business Combination, all the obligations and duties of the Company pursuant to
this Rights Agreement, (ii) the term 'Company' shall thereafter be deemed to
refer to such issuer, (iii) each such issuer shall take such steps in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its Common Shares thereafter deliverable upon the exercise of the Rights, and
(iv) the number of Common Shares of each such issuer thereafter receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Sections 7, 9, 10, 11 and 13
hereof.
(c) The Company shall not consummate any Business Combination unless each
issuer of Common Shares for which Rights may be exercised, as set forth in
paragraph (a) of this Section 13, shall have sufficient authorized Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto:
(i) a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, shall be effective under
the Securities Act; and
(ii) the Company and each such issuer shall have:
(A) executed and delivered to the Rights Agent a supplemental
agreement providing for the obligation of such issuer to issue Common
Shares upon the exercise of Rights in accordance with the terms set
forth in paragraphs (a) and (b) of this Section 13 and further providing
that such issuer, at its own expense, will:
(I) use its best efforts to cause a registration statement under
the Securities Act on an appropriate form, with respect to the Rights
and the Common Shares of such issuer purchasable upon exercise of the
Rights, to remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date;
(II) use its best efforts to qualify or register the Rights and
the Common Shares of such issuer purchasable upon exercise of the
Rights under the blue sky laws of such jurisdictions as may be
necessary or appropriate; and
(III) use its best efforts to list the Rights and the Common
Shares purchasable upon exercise of the Rights on each national
securities exchange on which the Common Shares were listed prior to
the consummation of the Business Combination or, if the Common Shares
were not listed on a national securities exchange prior to the
consummation of the Business Combination, on a national securities
exchange;
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(B) furnished to the Rights Agent an opinion of independent counsel
stating that such supplemental agreement is a valid, binding and
enforceable agreement of such issuer; and
(C) filed with the Rights Agent a certificate of a nationally
recognized firm of independent accountants setting forth the number of
Common Shares of such issuer which may be purchased upon the exercise of
each Right after the consummation of such Business Combination.
(d) In the event a Business Combination shall be consummated at any time
after the occurrence of an Affiliate Merger or a Triggering Event, the Rights
that have not been exercised prior to such time shall thereafter become
exercisable in the manner set forth in paragraph (a) of this Section 13.
SECTION 14. Additional Covenants. (a) Notwithstanding any other provision
of this Rights Agreement, no adjustment to the number of Preferred Shares (or
fractions of a share) or other shares of capital stock for which a Right is
exercisable or the number of Rights outstanding or associated with each Common
Share or any similar or other adjustment shall be made or be effective if such
adjustment would have the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such adjustment, including, without
limitation, the benefits under Section 11 and Section 13 hereof, unless the
terms of this Rights Agreement are amended so as to preserve such benefits.
(b) The Company covenants and agrees that it shall not effect any Business
Combination or Affiliate Merger if at the time of, or immediately after such
Business Combination or Affiliate Merger, there are any rights, options,
warrants or other instruments of any Person which is a party to such Business
Combination or Affiliate Merger outstanding which would eliminate or diminish
the benefits intended to be afforded by the Rights.
(c) In the event the nature of the organization of any Person shall
preclude or limit the acquisition of Common Shares of such Person upon exercise
of the Rights as required by Section 13(a) hereof as a result of a Business
Combination, it shall be a condition to such Business Combination that such
Person shall take such steps (including, but not limited to, a reorganization)
as may be necessary to assure that the benefits intended to be derived under
Section 13 hereof upon the exercise of the Rights are assured to the holders
thereof.
SECTION 15. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 15(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to Rights listed or admitted to
trading on a national securities exchange or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company may, but shall not be required to, issue fractions of
shares upon exercise of the Rights or to distribute certificates which evidence
fractional shares. In lieu of fractional shares, the Company may elect to (i)
utilize a depository arrangement as provided by the terms of the Preferred
Shares or (ii) in the case of a fraction of a share other than one
one-thousandth (1/1000th) of a share or any integral multiple thereof, pay to
the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share, if any are outstanding and publicly
traded (or the current market value of
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one Common Share in the event that the Preferred Shares are not outstanding and
publicly traded). For purposes of this Section 15(b), the current market value
of a Preferred Share (or Common Share) shall be the closing price of a Preferred
Share (or Common Share) (as determined pursuant to the second sentence of
Section 1(u) of this Rights Agreement) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
SECTION 16. Rights of Action. (a) All rights of action in respect of this
Rights Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Rights Agreement and shall be entitled to specific
performance of the obligations of any Person under, and injunctive relief
against actual or threatened violations of the obligations of any Person subject
to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the reasonable
costs and expenses, including attorneys' fees, incurred in such action.
SECTION 17. Transfer and Ownership of Rights and Right Certificate. (a)
Prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares.
(b) After the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e) hereof, only on the registry books of the
Rights Agent if surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the Person in whose
name a Right Certificate (or, prior to the Distribution Date, the associated
Common Shares certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated certificate for Common
Shares made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
SECTION 18. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be entitled to vote or receive dividends
or be deemed, for any purpose, the holder of the Preferred Shares or of any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company,
including, without limitation, any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25 hereof),
or to receive dividends or other distributions or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
SECTION 19. Concerning the Rights Agent. (a) The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Rights Agreement and the exercise and performance of its
duties hereunder. The Company also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or wilful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
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acceptance and administration of this Rights Agreement, including the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Rights Agreement in reliance upon any Right Certificate
or certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons.
SECTION 20. Merger or Consolidation or Change of Rights Agent. (a) Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Rights Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 22
hereof. In case, at the time such successor Rights Agent shall succeed to the
agency created by this Rights Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
SECTION 21. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Rights Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any
Acquiring Person) be proved or established by the Company prior to taking
or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, the President, the Chief Financial
Officer, a Vice President, the Treasurer or the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Rights Agreement in reliance upon
such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Rights Agreement or in
the Right Certificates (except as to its
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countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect
of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Rights Agreement
or in any Right Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or 13 hereof or responsible for
the manner, method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after
actual notice of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares or Common Shares to be issued pursuant
to this Rights Agreement or any Right Certificate or as to whether any
Preferred Shares or Common Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Vice President,
the Secretary or the Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties and it
shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the Rights Agent under this Rights Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company
or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct provided reasonable care was
exercised in the selection and continued employment thereof.
(j) ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, IN NO
EVENT SHALL THE RIGHTS AGENT BE LIABLE FOR SPECIAL, INDIRECT OR
CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER (INCLUDING, BUT NOT
LIMITED TO, LOST PROFITS), EVEN IF THE RIGHTS AGENT HAS BEEN ADVISED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.
SECTION 22. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and the Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Shares and
the Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it
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has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Rights Agent or by the holder of a Right Certificate (who
shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York (or of any other state of the United States
so long as such corporation is authorized to conduct a stock transfer or
corporate trust business in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by Federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and the Preferred Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 22, however, or any defect therein shall not affect
the legality or validity of the resignation or removal of the Rights Agent or
the appointment of the successor Rights Agent, as the case may be.
SECTION 23. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change made in accordance with the provisions of this Rights Agreement. In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the earlier of the Redemption Date or the
Expiration Date, the Company (a) shall, with respect to Common Shares so issued
or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities, notes
or debentures issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Right Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Right Certificate
would be issued, and (ii) no such Right Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
SECTION 24. Redemption and Termination. (a) The Board of Directors of the
Company may, at its option, at any time prior to the earliest of (i) the Close
of Business on the tenth calendar day following the Share Acquisition Date, (ii)
the occurrence of a Triggering Event or (iii) the Expiration Date, order the
redemption of all, but not less than all, the then outstanding Rights at a
Redemption Price of $.01 per Right (which may, in the discretion of the Board of
Directors of the Company, in lieu of cash be paid with securities deemed by the
Board of Directors, in the exercise of its sole discretion, to be equivalent in
value thereto); provided, however, that immediately upon and after the date that
an Acquiring Person becomes an Acquiring Person, the Rights may be redeemed only
if the Board of Directors of the Company, with the concurrence of a majority of
the Disinterested Directors then in office, determines that such redemption is,
in their judgment, in the best interests of the Company and its shareholders.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. Within ten calendar days after the action of the Board of Directors of
the Company ordering the redemption of the Rights, the Company shall give notice
of such redemption to the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry
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books of the transfer agent for the Common Shares. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been duly given, whether or not the holder of
Rights receives such notice. In any case, failure to give such notice by mail,
or any defect in the notice, to any particular holder of Rights shall not affect
the sufficiency of the notice to other holders of Rights.
SECTION 25. Notice of Certain Events. (a) In case the Company shall propose
(i) to take any action of the type described in paragraph (a), (b), (c) or (d)
of Section 11 hereof that would require an adjustment thereunder, (ii) to effect
any Business Combination or (iii) to effect the liquidation, dissolution or
winding up of the Company, then, in such case, the Company shall give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of such proposed action, which shall specify any record date for the purposes of
determining any participation therein by the holders of the Preferred Shares, or
the date on which such action is to take place and the date of any participation
therein by the holders of the Preferred Shares, if any such date is to be fixed,
and such notice shall be so given at least 20 days prior to any such record
date, the taking of such action or the date of participation therein by the
holders of the Preferred Shares, whichever shall be the earliest.
(b) In case an Affiliate Merger or Triggering Event shall occur, then, in
any such case, the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such Affiliate Merger or Triggering Event, which shall specify
the Affiliate Merger and the Triggering Event and the consequences of such
Affiliate Merger or Triggering Event to holders of Rights under Section 11(e)
hereof.
SECTION 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
The Pittston Company
P.O. Box 120070
100 First Stamford Place
Stamford, Connecticut 06912-0070
Attention: Secretary
Subject to the provisions of Section 22 hereof, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
any Right Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
Chemical Bank
450 West 33rd Street
New York, N.Y. 10001-2697
Attention: Ms. Laura Picone
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares.
SECTION 27. Supplements and Amendments. At any time prior to the
Distribution Date and subject to the last sentence of this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Rights Agreement (including, without limitation, the
date on which the Distribution Date shall occur) without the approval of any
holder of the Rights. From and after the Distribution Date and subject to
applicable law, the Company and the Rights Agent shall, if the Company so
directs, amend this Rights Agreement without the approval of any holders of
Right Certificates (i) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision of this Rights Agreement, or (ii) to make any
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other provisions in regard to matters or questions arising hereunder which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company which states that a
proposed supplement or amendment to this Rights Agreement is in compliance with
the provisions of this Section 27, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in this Rights
Agreement to the contrary, (1) at any time when there shall be an Acquiring
Person, this Rights Agreement may be supplemented or amended only if the Board
of Directors of the Company, with the concurrence of a majority of the
Disinterested Directors then in office, determines that such supplement or
amendment is in their judgment in the best interests of the Company and its
shareholders and (2) no supplement or amendment to this Rights Agreement shall
be made which reduces the Redemption Price or provides for an earlier Expiration
Date.
SECTION 28. Successors. All the covenants and provisions of this Rights
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 29. Benefits of This Rights Agreement; Determinations and Actions
by the Board of Directors, etc. (a) Nothing in this Rights Agreement shall be
construed to give to any persons or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
(b) The Board of Directors of the Company (with, where specifically
provided for herein, the concurrence of a majority of the Disinterested
Directors then in office) shall have the exclusive power and authority to
administer this Rights Agreement and to exercise all rights and power
specifically granted to the Board of Directors of the Company (with, where
specifically provided for herein, the concurrence of a majority of the
Disinterested Directors then in office) or to the Company, or as may be
necessary or advisable in the administration of this Rights Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Rights Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Rights Agreement
(including, without limitation, a determination to redeem or not redeem the
Rights or to amend this Rights Agreement and a determination of whether a
Triggering Event has occurred). All such actions, calculations, interpretations,
and determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board of Directors
of the Company (with, where specifically provided for herein, the concurrence of
a majority of the Disinterested Directors then in office) in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board of
Directors of the Company or the Disinterested Directors to any liability to the
holders of the Rights.
SECTION 30. Severability. If any term, provision, covenant or restriction
of this Rights Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 31. Governing Law. This Rights Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
Commonwealth of Virginia and for all purposes shall be governed by and construed
in accordance with the laws of such Commonwealth applicable to contracts to be
made and performed entirely within such Commonwealth; provided, however,that the
provisions of Sections 19, 20, 21 and 22 of this Rights Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 32. Counterparts. This Rights Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
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SECTION 33. Descriptive Headings. Descriptive headings of the several
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
THE PITTSTON COMPANY,
by ..................................
Name:
Title:
Attest:
by ..................................
Name:
Title:
CHEMICAL BANK, as Rights Agent,
by ..................................
Name:
Title:
Attest:
by ..................................
Name:
Title:
24
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EXHIBIT A
ARTICLES OF AMENDMENT
TO THE RESTATED ARTICLES OF INCORPORATION
OF THE PITTSTON COMPANY
SETTING FORTH THE POWERS, PREFERENCES,
RIGHTS, QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF THE COMPANY'S SERIES A
PARTICIPATING CUMULATIVE PREFERRED STOCK
SERIES B PARTICIPATING CUMULATIVE PREFERRED STOCK,
SERIES C PARTICIPATING CUMULATIVE PREFERRED STOCK
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act, The
Pittston Company (the 'Corporation'), a corporation organized and existing under
the Virginia Stock Corporation Act, in accordance with Section 13.1-604 thereof,
DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the first paragraph under Division II of Article III of the
Restated Articles of Incorporation, as amended, of the Company (the 'Articles of
Incorporation'), the Board of Directors of the Corporation on December [xx],
1995, duly adopted the following resolution creating, effective as of December
[xx+1], 1995, three series of Preferred Stock designated as Series A
Participating Cumulative Preferred Stock, Series B Participating Cumulative
Preferred Stock and Series D Participating Cumulative Preferred Stock:
RESOLVED that pursuant to the authority vested in the Board of Directors of
the Corporation, Article III of the Restated Articles of Incorporation of the
Corporation be, and it hereby is, amended to provide the preferences,
limitations and relative rights of two series of Preferred Stock of the
Corporation, which amendment shall be accomplished by deleting the text after
the first paragraph under Division II of Article III of the Restated Articles of
Incorporation and adding the following text after the first paragraph under
Division II of Article III of the Restated Articles of Incorporation:
'TERMS OF THE PREFERRED STOCK ARE AS FOLLOWS:
A. SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK
1. Designation and Number of Shares. The shares of such series shall be
designated as 'Series A Participating Cumulative Preferred Stock' (the 'Series A
Preferred Stock'). The number of shares initially constituting the Series A
Preferred Stock shall be 50,000; provided, however, that if more than a total of
50,000 shares of Series A Preferred Stock shall be issuable upon the exercise of
Pittston Brink's Group Rights issued pursuant to the Amended and Restated Rights
Agreement dated as of December [xx], 1995, between the Corporation and Chemical
Bank, as Rights Agent (the 'Rights Agreement'), the Board of Directors of the
Corporation, pursuant to Section 13.1-639 of the Virginia Stock Corporation Act,
shall direct by resolution or resolutions that articles of amendment to these
Articles of Incorporation be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Section 13.1-604 thereof,
providing for the total number of shares of Series A Preferred Stock authorized
to be issued to be increased (to the extent that the Articles of Incorporation
then permit) to the largest number of whole shares (rounded up to the nearest
whole number) issuable upon exercise of such Rights.
2. Dividends or Distributions. (a) Subject to the prior and superior rights
of the holders of shares of any other series of Preferred Stock or other class
of capital stock not by its terms ranking on a parity with, or junior to, the
shares of Series A Preferred Stock with respect to dividends, the holders of
shares of the Series A Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of the assets of the Corporation legally
available therefor, (1) quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being referred
to herein as a 'Quarterly Dividend Payment Date'), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of Series A Preferred Stock, of $10.00 per whole share
(rounded to the nearest cent) less the amount of all cash dividends declared on
the Series A Preferred Stock pursuant to the following clause (2) since the
immediately
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preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock, and (2) dividends payable in
cash on the payment date for each cash dividend declared on Brink's Stock in an
amount per whole share (rounded to the nearest cent) equal to the Brink's
Formula Number (as defined below) then in effect times the cash dividends then
to be paid on each share of Brink's Stock. In addition, if the Corporation shall
pay any dividend or make any distribution on Brink's Stock payable in assets,
securities or other forms of noncash consideration (other than dividends or
distributions solely in shares of Brink's Stock), then, in each such case, the
Corporation shall simultaneously pay or make on each outstanding share of Series
A Preferred Stock a dividend or distribution in like kind of the Brink's Formula
Number then in effect times such dividend or distribution on each share of
Brink's Stock. As used herein, the 'Brink's Formula Number' shall be 1000;
provided, however, that if at any time after December [xx], 1995, the
Corporation shall (x) declare or pay any dividend on Brink's Stock payable in
shares of Brink's Stock or make any distribution on Brink's Stock in shares of
Brink's Stock, (y) subdivide (by a stock split or otherwise) the outstanding
shares of Brink's Stock into a larger number of shares of Brink's Stock or (z)
combine (by a reverse stock split or otherwise) the outstanding shares of
Brink's Stock into a smaller number of shares of Brink's Stock, then in each
such event the Brink's Formula Number shall be adjusted to a number determined
by multiplying the Brink's Formula Number in effect immediately prior to such
event by a fraction, the numerator of which is the number of shares of Brink's
Stock that are outstanding immediately after such event and the denominator of
which is the number of shares of Brink's Stock that are outstanding immediately
prior to such event (and rounding the result to the nearest whole number); and
provided further that if at any time after December [xx], 1995, the Corporation
shall issue any shares of its capital stock in a reclassification or change of
the outstanding shares of Brink's Stock (including any such reclassification or
change in connection with a merger in which the Corporation is the surviving
corporation), then in each such event the Brink's Formula Number shall be
appropriately adjusted to reflect such reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in Section 2(a) above immediately prior to or at
the same time it declares a dividend or distribution on Brink's Stock (other
than a dividend or distribution solely in shares of Brink's Stock); provided,
however, that, in the event no dividend or distribution (other than a dividend
or distribution in shares of Brink's Stock) shall have been declared on Brink's
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a dividend or distribution declared thereon, which record date shall
be the same as the record date for any corresponding dividend or distribution on
Brink's Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series A Preferred
Stock; provided, however, that dividends on such shares which are originally
issued after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and on or
prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding.
(d) So long as any shares of the Series A Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on Brink's Stock unless, in each case,
the dividend required by this Section 2 to be declared on the Series A Preferred
Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
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<PAGE>
3. Voting Rights. The holders of shares of Series A Preferred Stock shall
have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the product of (1) the Brink's Formula Number then
in effect for each share of Series A Preferred Stock held of record on each
matter on which holders of Brink's Stock are entitled to vote times (2) the
maximum number of votes which the holders of Brink's Stock then have with
respect to such matter.
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock, the holders of shares of
Brink's Stock and the holders of any other class of capital stock entitled
to vote in the election of directors shall vote together as one class for
the election of directors of the Corporation. In addition, the holders of
Series A Preferred Stock and the holders of Brink's Stock shall vote
together as one class on all other matters submitted to a vote of holders
of Brink's Stock.
(c) If at the time of any annual meeting of shareholders for the
election of directors, the equivalent of six quarterly dividends (whether
or not consecutive) payable on any share or shares of Series A Preferred
Stock are in default, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two. In addition to
voting together with other holders of capital stock as set forth in Section
3(a) for the election of other directors of the Corporation, the holders of
record of the Series A Preferred Stock, voting separately as a class to the
exclusion of such other holders, shall be entitled at said meeting of
shareholders (and at each subsequent annual meeting of shareholders),
unless all dividends in arrears have been paid or declared and set apart
for payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to
cast a number of votes per share of Series A Preferred Stock equal to the
Brink's Formula Number. Until the default in payments of all dividends
which permitted the election of said directors shall cease to exist any
director who shall have been so elected pursuant to the next preceding
sentence may be removed at any time, either with or without cause, only by
the affirmative vote of the holders of the shares at the time entitled to
cast a majority of the votes entitled to be cast for the election of any
such director at a special meeting of such holders called for that purpose,
and any vacancy thereby created may be filled by the vote of such holders.
If and when such default shall cease to exist, the holders of the Series A
Preferred Stock shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default
in payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been elected
directors pursuant to said special voting rights shall forthwith terminate,
and the number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section 3(c) shall be in
addition to any other voting rights granted to the holders of the Series A
Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Brink's Stock as set forth herein) for authorizing
or taking any corporate action.
4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity
3
<PAGE>
stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock;
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subparagraph (a) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
5. Liquidation Rights. Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, no distribution shall be made
(a) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution, or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received an amount equal to the accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (i) $40 per share or (ii) an aggregate
amount per share equal to the Formula Number then in effect times the aggregate
amount to be distributed per share to holders of Brink's Stock, or (b) to the
holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
6. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination, statutory share exchange or other
transaction in which the shares of Brink's Stock are exchanged for or changed
into other stock or securities, cash or any other property, then in any such
case the then outstanding shares of Series A Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share equal to the
Brink's Formula Number then in effect times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case may be,
into which or for which each share of Brink's Stock is exchanged or changed.
7. Redemption; No Sinking Fund. (a) The outstanding shares of Series A
Preferred Stock may be redeemed at the option of the Board of Directors as a
whole, but not in part, at any time at which, in the good faith determination of
the Board of Directors, no person beneficially owns more than 10% of the
aggregate voting power represented by all the outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of Directors
of the Corporation, at a cash price per share equal to (i) 125% of the product
of the Formula Number times the Market Value (as such term is hereinafter
defined) of Brink's Stock, plus (ii) all dividends which on the redemption date
have accrued on the shares to be redeemed and have not been paid or declared and
a sum sufficient for the payment thereof set apart, without interest. The
'Market Value' on any date shall be deemed to be the average of the daily
closing prices, per share, of Brink's Stock for the 30 consecutive Trading Days
immediately prior to the date in question. The closing price for each Trading
Day shall be the last sale price, regular way, or, in case no such sale takes
place on such Trading Day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system if Brink's Stock is listed or admitted to trading
on a national securities exchange or, if Brink's Stock is not listed or admitted
to trading on any national securities exchange, the last quoted price or, if not
so
4
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quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System or such other system then in use, or, if on any such
Trading Day Brink's Stock is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in Brink's Stock selected by the Board of Directors of the
Corporation. If on any such Trading Day no market maker is making a market in
Brink's Stock, the fair value of Brink's Stock on such Trading Day shall mean
the fair value of Brink's Stock as determined in good faith by the Board of
Directors of the Corporation. 'Trading Day' shall mean a day on which the
principal national securities exchange on which Brink's Stock is listed or
admitted to trading is open for the transaction of business or, if Brink's Stock
is not listed or admitted to trading on any national securities exchange, a
Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which
banking institutions in the Borough of Manhattan, the City of New York, are
authorized or obligated by law or executive order to close.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
8. Ranking. The Series A Preferred Stock shall rank senior to Brink's
Stock, Minerals Stock and Burlington Stock, on a parity with the Corporation's
Series B Participating Cumulative Preferred Stock, par value $10 per share, and
the Corporation's Series D Participating Cumulative Preferred Stock, par value
$10 per share, and junior to all other series of Preferred Stock of the
Corporation, unless the Board of Directors shall specifically determine
otherwise in fixing the powers, preferences and relative, participating,
optional and other special rights of the shares of such series and the
qualifications, limitations and restrictions thereof.
9. Fractional Shares. The Series A Preferred Stock shall be issuable upon
exercise of Pittston Brink's Group Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is not smaller than
one one-thousandth (1/1000th) of a share or any integral multiple of such
fraction. At the election of the Corporation, prior to the first issuance of a
share or a fraction of a share of Series A Preferred Stock, either (1)
certificates may be issued to evidence such authorized fraction of a share of
Series A Preferred Stock, or (2) any such authorized fraction of a share of
Series A Preferred Stock may be evidenced by depository receipts pursuant to an
appropriate agreement between the Corporation and a depository selected by the
Corporation; provided that such agreement shall provide that the holders of such
depository receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Series A Preferred Stock.
10. Reacquired Shares. Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancelation become authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors pursuant to the provisions
of the first paragraph of Division II of Article III.
11. Amendment. None of the powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock as provided
herein shall be amended in any manner which would alter or change the powers,
preferences, rights or privileges of the holders of Series A Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of more
than 66 2/3% of the outstanding shares of Series A Preferred Stock, voting as a
separate class.
B. SERIES B PARTICIPATING CUMULATIVE PREFERRED STOCK
1. Designation and Number of Shares. The shares of such series shall be
designated as 'Series B Participating Cumulative Preferred Stock' (the 'Series B
Preferred Stock'). The number of shares initially constituting the Series B
Preferred Stock shall be 20,000; provided, however, that if more than a total of
20,000 shares of Series B Preferred Stock shall be issuable upon the exercise of
Pittston Minerals Group Rights issued pursuant to the Amended and Restated
Rights Agreement dated as of December [xx], 1995, between the Corporation and
Chemical Bank, as Rights Agent (the 'Rights Agreement'), the Board of Directors
of the Corporation, pursuant to Section 13.1-639 of the Virginia
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Stock Corporation Act, shall direct by resolution or resolutions that articles
of amendment to these Articles of Incorporation be properly executed,
acknowledged, filed and recorded, in accordance with the provisions of Section
13.1-604 thereof, providing for the total number of shares of Series B Preferred
Stock authorized to be issued to be increased (to the extent that the Articles
of Incorporation then permit) to the largest number of whole shares (rounded up
to the nearest whole number) issuable upon exercise of such Rights.
2. Dividends or Distributions. (a) Subject to the prior and superior rights
of the holders of shares of any other series of Preferred Stock or other class
of capital stock not by its terms ranking on a parity with, or junior to, the
shares of Series B Preferred Stock with respect to dividends, the holders of
shares of the Series B Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of the assets of the Corporation legally
available therefor, (1) quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being referred
to herein as a 'Quarterly Dividend Payment Date'), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of Series B Preferred Stock, of $10.00 per whole share
(rounded to the nearest cent) less the amount of all cash dividends declared on
the Series B Preferred Stock pursuant to the following clause (2) since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Preferred Stock, and (2) dividends payable in
cash on the payment date for each cash dividend declared on Minerals Stock in an
amount per whole share (rounded to the nearest cent) equal to the Minerals
Formula Number (as defined below) then in effect times the cash dividends then
to be paid on each share of Minerals Stock. In addition, if the Corporation
shall pay any dividend or make any distribution on Minerals Stock payable in
assets, securities or other forms of noncash consideration (other than dividends
or distributions solely in shares of Minerals Stock), then, in each such case,
the Corporation shall simultaneously pay or make on each outstanding share of
Series B Preferred Stock a dividend or distribution in like kind of the Minerals
Formula Number then in effect times such dividend or distribution on each share
of Minerals Stock. As used herein, the 'Minerals Formula Number' shall be 1,000;
provided, however, that if at any time after December [xx], 1995, the
Corporation shall (x) declare or pay any dividend on Minerals Stock payable in
shares of Minerals Stock or make any distribution on Minerals Stock in shares of
Minerals Stock, (y) subdivide (by a stock split or otherwise) the outstanding
shares of Minerals Stock into a larger number of shares of Minerals Stock or (z)
combine (by a reverse stock split or otherwise) the outstanding shares of
Minerals Stock into a smaller number of shares of Minerals Stock, then in each
such event the Minerals Formula Number shall be adjusted to a number determined
by multiplying the Minerals Formula Number in effect immediately prior to such
event by a fraction, the numerator of which is the number of shares of Minerals
Stock that are outstanding immediately after such event and the denominator of
which is the number of shares of Minerals Stock that are outstanding immediately
prior to such event (and rounding the result to the nearest whole number); and
provided further that if at any time after December [xx], 1995, the Corporation
shall issue any shares of its capital stock in a reclassification or change of
the outstanding shares of Minerals Stock (including any such reclassification or
change in connection with a merger in which the Corporation is the surviving
corporation), then in each such event the Minerals Formula Number shall be
appropriately adjusted to reflect such reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the Series
B Preferred Stock as provided in Section 2(a) above immediately prior to or at
the same time it declares a dividend or distribution on Minerals Stock (other
than a dividend or distribution solely in shares of Minerals Stock); provided,
however, that, in the event no dividend or distribution (other than a dividend
or distribution in shares of Minerals Stock) shall have been declared on
Minerals Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $2.00 per
share on the Series B Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a
record date for the determination of holders of shares of Series B Preferred
Stock entitled to receive a dividend or distribution declared thereon, which
record date shall be the same as the record date for any corresponding dividend
or distribution on Minerals Stock.
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(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series B Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series B Preferred
Stock; provided, however, that dividends on such shares which are originally
issued after the record date for the determination of holders of shares of
Series B Preferred Stock entitled to receive a quarterly dividend and on or
prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series B in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
(d) So long as any shares of the Series B Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on Minerals Stock unless, in each case,
the dividend required by this Section 2 to be declared on the Series B Preferred
Stock shall have been declared.
(e) The holders of the shares of Series B Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
3. Voting Rights. The holders of shares of Series B Preferred Stock shall
have the following voting rights:
(a) Each holder of Series B Preferred Stock shall be entitled to a
number of votes equal to the product of (1) the Minerals Formula Number
then in effect for each share of Series A Preferred Stock held of record on
each matter on which holders of Minerals Stock are entitled to vote times
(2) the maximum number of votes which the holders of Minerals Stock then
have with respect to such matter.
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series B Preferred Stock, the holders of shares of
Minerals Stock and the holders of any other class of capital stock entitled
to vote in the election of directors shall vote together as one class for
the election of directors of the Corporation. In addition, the holders of
Series B Preferred Stock and the holders of Minerals Stock shall vote
together as one class on all other matters submitted to a vote of holders
of Minerals Stock.
(c) If at the time of any annual meeting of shareholders for the
election of directors, the equivalent of six quarterly dividends (whether
or not consecutive) payable on any share or shares of Series B Preferred
Stock are in default, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two. In addition to
voting together with other holders of capital stock as set forth in Section
3(a) for the election of other directors of the Corporation, the holders of
record of the Series B Preferred Stock, voting separately as a class to the
exclusion of such other holders, shall be entitled at said meeting of
shareholders (and at each subsequent annual meeting of shareholders),
unless all dividends in arrears have been paid or declared and set apart
for payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series B Preferred Stock being entitled to
cast a number of votes per share of Series B Preferred Stock equal to the
Minerals Formula Number. Until the default in payments of all dividends
which permitted the election of said directors shall cease to exist any
director who shall have been so elected pursuant to the next preceding
sentence may be removed at any time, either with or without cause, only by
the affirmative vote of the holders of the shares at the time entitled to
cast a majority of the votes entitled to be cast for the election of any
such director at a special meeting of such holders called for that purpose,
and any vacancy thereby created may be filled by the vote of such holders.
If and when such default shall cease to exist, the holders of the Series B
Preferred Stock shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default
in payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been elected
directors pursuant to said special voting rights shall forthwith terminate,
and the number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section 3(c) shall be in
addition to any other voting rights granted to the holders of the Series B
Preferred Stock in this Section 3.
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(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series B Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Minerals Stock as set forth herein) for authorizing
or taking any corporate action.
4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series B Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series B
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except dividends paid ratably on the Series B Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock;
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series B Preferred Stock, or any shares of stock ranking on a parity with
the Series B Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subparagraph (a) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
5. Liquidation Rights. Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, no distribution shall be made
(a) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution, or winding up) to the Series B Preferred Stock
unless, prior thereto, the holders of shares of Series B Preferred Stock shall
have received an amount equal to the accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (i) $40 per share or (ii) an aggregate
amount per share equal to the Minerals Formula Number then in effect times the
aggregate amount to be distributed per share to holders of Minerals Stock, or
(b) to the holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except distributions made ratably on the Series B Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
6. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination, statutory share exchange or other
transaction in which the shares of Minerals Stock are exchanged for or changed
into other stock or securities, cash or any other property, then in any such
case the then outstanding shares of Series B Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share equal to the
Minerals Formula Number then in effect times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case may be,
into which or for which each share of Minerals Stock is exchanged or changed.
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7. Redemption; No Sinking Fund. (a) The outstanding shares of Series B
Preferred Stock may be redeemed at the option of the Board of Directors as a
whole, but not in part, at any time at which, in the good faith determination of
the Board of Directors, no person beneficially owns more than 10% of the
aggregate voting power represented by all the outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of Directors
of the Corporation, at a cash price per share equal to (i) 125% of the product
of the Minerals Formula Number times the Market Value (as such term is
hereinafter defined) of Minerals Stock, plus (ii) all dividends which on the
redemption date have accrued on the shares to be redeemed and have not been paid
or declared and a sum sufficient for the payment thereof set apart, without
interest. The 'Market Value' on any date shall be deemed to be the average of
the daily closing prices, per share, of Minerals Stock for the 30 consecutive
Trading Days immediately prior to the date in question. The closing price for
each Trading Day shall be the last sale price, regular way, or, in case no such
sale takes place on such Trading Day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system if Minerals Stock is listed or admitted to trading
on a national securities exchange or, if Minerals Stock is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use, or,
if on any such Trading Day Minerals Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in Minerals Stock selected by the
Board of Directors of the Corporation. If on any such Trading Day no market
maker is making a market in Minerals Stock, the fair value of Minerals Stock on
such Trading Day shall mean the fair value of Minerals Stock as determined in
good faith by the Board of Directors of the Corporation. 'Trading Day' shall
mean a day on which the principal national securities exchange on which Minerals
Stock is listed or admitted to trading is open for the transaction of business
or, if Minerals Stock is not listed or admitted to trading on any national
securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday which is
not a day on which banking institutions in the Borough of Manhattan, the City of
New York, are authorized or obligated by law or executive order to close.
(b) The shares of Series B Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
8. Ranking. The Series B Preferred Stock shall rank senior to Brink's
Stock, Minerals Stock and Burlington Stock, on a parity with the Corporation's
Series A Participating Cumulative Preferred Stock, par value $10 per share, and
the Corporation's Series D Participating Cumulative Preferred Stock, par value
$10 per share, and junior to all other series of Preferred Stock of the
Corporation, unless the Board of Directors shall specifically determine
otherwise in fixing the powers, preferences and relative, participating,
optional and other special rights of the shares of such series and the
qualifications, limitations and restrictions thereof.
9. Fractional Shares. The Series B Preferred Stock shall be issuable upon
exercise of Pittston Minerals Group Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is not smaller than
one one-thousandth (1/1000th) of a share or any integral multiple of such
fraction. At the election of the Corporation, prior to the first issuance of a
share or a fraction of a share of Series B Preferred Stock, either (1)
certificates may be issued to evidence such authorized fraction of a share of
Series B Preferred Stock, or (2) any such authorized fraction of a share of
Series B Preferred Stock may be evidenced by depository receipts pursuant to an
appropriate agreement between the Corporation and a depository selected by the
Corporation; provided that such agreement shall provide that the holders of such
depository receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Series B Preferred Stock.
10. Reacquired Shares. Any shares of Series B Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancelation become authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors pursuant to the provisions
of the first paragraph of Division II of Article III.
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11. Amendment. None of the powers, preferences and relative, participating,
optional and other special rights of the Series B Preferred Stock as provided
herein shall be amended in any manner which would alter or change the powers,
preferences, rights or privileges of the holders of Series B Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of more
than 66 2/3% of the outstanding shares of Series B Preferred Stock, voting as a
separate class.'
C. SERIES C PARTICIPATING CUMULATIVE PREFERRED STOCK
1. Designation and Number of Shares. The shares of such series shall be
designated as 'Series D Participating Cumulative Preferred Stock' (the 'Series D
Preferred Stock'). The number of shares initially constituting the Series D
Preferred Stock shall be 50,000; provided, however, that if more than a total of
50,000 shares of Series D Preferred Stock shall be issuable upon the exercise of
Pittston Burlington Group Rights issued pursuant to the Amended and Restated
Rights Agreement dated as of December [xx], 1995, between the Corporation and
Chemical Bank, as Rights Agent (the 'Rights Agreement'), the Board of Directors
of the Corporation, pursuant to Section 13.1-639 of the Virginia Stock
Corporation Act, shall direct by resolution or resolutions that articles of
amendment to these Articles of Incorporation be properly executed, acknowledged,
filed and recorded, in accordance with the provisions of Section 13.1-604
thereof, providing for the total number of shares of Series D Preferred Stock
authorized to be issued to be increased (to the extent that the Articles of
Incorporation then permit) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of such Rights.
2. Dividends or Distributions. (a) Subject to the prior and superior rights
of the holders of shares of any other series of Preferred Stock or other class
of capital stock not by its terms ranking on a parity with, or junior to, the
shares of Series D Preferred Stock with respect to dividends, the holders of
shares of the Series D Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of the assets of the Corporation legally
available therefor, (1) quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being referred
to herein as a 'Quarterly Dividend Payment Date'), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or a
fraction of a share of Series D Preferred Stock, of $10.00 per whole share
(rounded to the nearest cent) less the amount of all cash dividends declared on
the Series D Preferred Stock pursuant to the following clause (2) since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series D Preferred Stock, and (2) dividends payable in
cash on the payment date for each cash dividend declared on Burlington Stock in
an amount per whole share (rounded to the nearest cent) equal to the Burlington
Formula Number (as defined below) then in effect times the cash dividends then
to be paid on each share of Burlington Stock. In addition, if the Corporation
shall pay any dividend or make any distribution on Burlington Stock payable in
assets, securities or other forms of noncash consideration (other than dividends
or distributions solely in shares of Burlington Stock), then, in each such case,
the Corporation shall simultaneously pay or make on each outstanding share of
Series D Preferred Stock a dividend or distribution in like kind of the
Burlington Formula Number then in effect times such dividend or distribution on
each share of Burlington Stock. As used herein, the 'Burlington Formula Number'
shall be 1,000; provided, however, that if at any time after December [xx],
1995, the Corporation shall (x) declare or pay any dividend on Burlington Stock
payable in shares of Burlington Stock or make any distribution on Burlington
Stock in shares of Burlington Stock, (y) subdivide (by a stock split or
otherwise) the outstanding shares of Burlington Stock into a larger number of
shares of Burlington Stock or (z) combine (by a reverse stock split or
otherwise) the outstanding shares of Burlington Stock into a smaller number of
shares of Burlington Stock, then in each such event the Burlington Formula
Number shall be adjusted to a number determined by multiplying the Burlington
Formula Number in effect immediately prior to such event by a fraction, the
numerator of which is the number of shares of Burlington Stock that are
outstanding immediately after such event and the denominator of which is the
number of shares of Burlington Stock that are outstanding immediately prior to
such event (and rounding the result to the nearest whole number); and provided
further that if at any time after December [xx], 1995, the Corporation shall
issue any shares of its capital stock in a reclassification or change of the
outstanding shares of Burlington Stock (including any such reclassification or
change in
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connection with a merger in which the Corporation is the surviving corporation),
then in each such event the Burlington Formula Number shall be appropriately
adjusted to reflect such reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the Series
D Preferred Stock as provided in Section 2(a) above immediately prior to or at
the same time it declares a dividend or distribution on Burlington Stock (other
than a dividend or distribution solely in shares of Burlington Stock); provided,
however, that, in the event no dividend or distribution (other than a dividend
or distribution in shares of Burlington Stock) shall have been declared on
Burlington Stock during the period between any Quarterly Dividend Payment Date
and the next subsequent Quarterly Dividend Payment Date, a dividend of $2.00 per
share on the Series D Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a
record date for the determination of holders of shares of Series D Preferred
Stock entitled to receive a dividend or distribution declared thereon, which
record date shall be the same as the record date for any corresponding dividend
or distribution on Burlington Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series D Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series D Preferred
Stock; provided, however, that dividends on such shares which are originally
issued after the record date for the determination of holders of shares of
Series D Preferred Stock entitled to receive a quarterly dividend and on or
prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series D in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
(d) So long as any shares of the Series D Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on Burlington Stock unless, in each case,
the dividend required by this Section 2 to be declared on the Series D Preferred
Stock shall have been declared.
(e) The holders of the shares of Series D Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
3. Voting Rights. The holders of shares of Series D Preferred Stock shall
have the following voting rights:
(a) Each holder of Series D Preferred Stock shall be entitled to a
number of votes equal to the product of (1) the Burlington Formula Number
then in effect for each share of Series A Preferred Stock held of record on
each matter on which holders of Burlington Stock are entitled to vote times
(2) the maximum number of votes which the holders of Burlington Stock then
have with respect to such matter.
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series D Preferred Stock, the holders of shares of
Burlington Stock and the holders of any other class of capital stock
entitled to vote in the election of directors shall vote together as one
class for the election of directors of the Corporation. In addition, the
holders of Series D Preferred Stock and the holders of Burlington Stock
shall vote together as one class on all other matters submitted to a vote
of holders of Burlington Stock.
(c) If at the time of any annual meeting of shareholders for the
election of directors, the equivalent of six quarterly dividends (whether
or not consecutive) payable on any share or shares of Series D Preferred
Stock are in default, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two. In addition to
voting together with other holders of capital stock as set forth in Section
3(a) for the election of other directors of the Corporation, the holders of
record of the Series D Preferred Stock, voting separately as a class to the
exclusion of such other holders, shall be entitled at said meeting of
shareholders (and at each subsequent annual meeting of shareholders),
unless all dividends in arrears have been paid or declared and set apart
for payment prior thereto, to vote for the election of two directors of the
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Corporation, the holders of any Series D Preferred Stock being entitled to
cast a number of votes per share of Series D Preferred Stock equal to the
Burlington Formula Number. Until the default in payments of all dividends
which permitted the election of said directors shall cease to exist any
director who shall have been so elected pursuant to the next preceding
sentence may be removed at any time, either with or without cause, only by
the affirmative vote of the holders of the shares at the time entitled to
cast a majority of the votes entitled to be cast for the election of any
such director at a special meeting of such holders called for that purpose,
and any vacancy thereby created may be filled by the vote of such holders.
If and when such default shall cease to exist, the holders of the Series D
Preferred Stock shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default
in payments of dividends. Upon the termination of the foregoing special
voting rights, the terms of office of all persons who may have been elected
directors pursuant to said special voting rights shall forthwith terminate,
and the number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section 3(c) shall be in
addition to any other voting rights granted to the holders of the Series D
Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series D Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Burlington Stock as set forth herein) for
authorizing or taking any corporate action.
4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series D Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series D
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series D Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series D Preferred Stock,
except dividends paid ratably on the Series D Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series D Preferred Stock;
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series D Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series D Preferred Stock, or any shares of stock ranking on a parity with
the Series D Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under subparagraph (a) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
5. Liquidation Rights. Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, no distribution shall be made
(a) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution, or winding up) to the Series D Preferred Stock
unless, prior thereto, the holders of shares of Series D Preferred Stock shall
have received an
12
<PAGE>
amount equal to the accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, plus an amount equal to
the greater of (i) $40 per share or (ii) an aggregate amount per share equal to
the Burlington Formula Number then in effect times the aggregate amount to be
distributed per share to holders of Burlington Stock, or (b) to the holders of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series D Preferred Stock, except
distributions made ratably on the Series D Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.
6. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination, statutory share exchange or other
transaction in which the shares of Burlington Stock are exchanged for or changed
into other stock or securities, cash or any other property, then in any such
case the then outstanding shares of Series D Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share equal to the
Burlington Formula Number then in effect times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case may be,
into which or for which each share of Burlington Stock is exchanged or changed.
7. Redemption; No Sinking Fund. (a) The outstanding shares of Series D
Preferred Stock may be redeemed at the option of the Board of Directors as a
whole, but not in part, at any time at which, in the good faith determination of
the Board of Directors, no person beneficially owns more than 10% of the
aggregate voting power represented by all the outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of Directors
of the Corporation, at a cash price per share equal to (i) 125% of the product
of the Burlington Formula Number times the Market Value (as such term is
hereinafter defined) of Burlington Stock, plus (ii) all dividends which on the
redemption date have accrued on the shares to be redeemed and have not been paid
or declared and a sum sufficient for the payment thereof set apart, without
interest. The 'Market Value' on any date shall be deemed to be the average of
the daily closing prices, per share, of Burlington Stock for the 30 consecutive
Trading Days immediately prior to the date in question. The closing price for
each Trading Day shall be the last sale price, regular way, or, in case no such
sale takes place on such Trading Day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system if Burlington Stock is listed or admitted to
trading on a national securities exchange or, if Burlington Stock is not listed
or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System or such other system then
in use, or, if on any such Trading Day Burlington Stock is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in Burlington Stock selected by
the Board of Directors of the Corporation. If on any such Trading Day no market
maker is making a market in Burlington Stock, the fair value of Burlington Stock
on such Trading Day shall mean the fair value of Burlington Stock as determined
in good faith by the Board of Directors of the Corporation. 'Trading Day' shall
mean a day on which the principal national securities exchange on which
Burlington Stock is listed or admitted to trading is open for the transaction of
business or, if Burlington Stock is not listed or admitted to trading on any
national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday
which is not a day on which banking institutions in the Borough of Manhattan,
the City of New York, are authorized or obligated by law or executive order to
close.
(b) The shares of Series D Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
8. Ranking. The Series D Preferred Stock shall rank senior to Brink's
Stock, Minerals Stock and Burlington Stock, on a parity with the Corporation's
Series A Participating Cumulative Preferred Stock, par value $10 per share, and
the Corporation's Series B Participating Cumulative Preferred Stock, par value
$10 per share, and junior to all other series of Preferred Stock of the
Corporation, unless the Board of Directors shall specifically determine
otherwise in fixing the powers, preferences and relative, participating,
optional and other special rights of the shares of such series and the
qualifications, limitations and restrictions thereof.
13
<PAGE>
9. Fractional Shares. The Series D Preferred Stock shall be issuable upon
exercise of Pittston Burlington Group Rights issued pursuant to the Rights
Agreement in whole shares or in any fraction of a share that is not smaller than
one one-thousandth (1/1000th) of a share or any integral multiple of such
fraction. At the election of the Corporation, prior to the first issuance of a
share or a fraction of a share of Series D Preferred Stock, either (1)
certificates may be issued to evidence such authorized fraction of a share of
Series D Preferred Stock, or (2) any such authorized fraction of a share of
Series D Preferred Stock may be evidenced by depository receipts pursuant to an
appropriate agreement between the Corporation and a depository selected by the
Corporation; provided that such agreement shall provide that the holders of such
depository receipts shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the Series D Preferred Stock.
10. Reacquired Shares. Any shares of Series D Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancelation become authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors pursuant to the provisions
of the first paragraph of Division II of Article III.
11. Amendment. None of the powers, preferences and relative, participating,
optional and other special rights of the Series D Preferred Stock as provided
herein shall be amended in any manner which would alter or change the powers,
preferences, rights or privileges of the holders of Series D Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of more
than 66 2/3% of the outstanding shares of Series D Preferred Stock, voting as a
separate class.'
IN WITNESS WHEREOF, The Pittston Company has caused these Articles of
Amendment to be duly executed in its corporate name on this 27th day of July,
1993.
THE PITTSTON COMPANY,
by ..................................
Name:
Title:
Attest:
by ..................................
Name:
Title:
14
<PAGE>
EXHIBIT B-1
[FORM OF RIGHT CERTIFICATE FOR BRINK'S RIGHTS]
CERTIFICATE NO. SCR- RIGHTS
NOT EXERCISABLE AFTER SEPTEMBER 25, 1997, OR EARLIER IF REDEEMED. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER NO CIRCUMSTANCES MAY THIS RIGHT
CERTIFICATE OR THE RIGHTS EVIDENCED BY THIS RIGHT CERTIFICATE BE TRANSFERRED TO
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS EACH
SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) OR TO ANY PERSON WHO SUBSEQUENTLY
BECOMES SUCH A PERSON AND ANY PURPORTED TRANSFER OF RIGHTS TO ANY SUCH PERSON
SHALL BE, AND SHALL RENDER THE RIGHTS PURPORTED TO BE TRANSFERRED, NULL AND
VOID.
PITTSTON BRINK'S GROUP RIGHT CERTIFICATE
THE PITTSTON COMPANY
This certifies that , or registered assigns, is the
registered owner of the number of Pittston Brink's Group Rights (the 'Rights')
set forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Amended and Restated Rights Agreement dated as
of December [xx], 1995 (the 'Rights Agreement'), between The Pittston Company, a
Virginia corporation (the 'Company'), and Chemical Bank, a New York banking
corporation, as Rights Agent (the 'Rights Agent'), unless the Rights evidenced
hereby shall have been previously redeemed, to purchase from the Company at any
time after the Distribution Date (as defined in the Rights Agreement) and prior
to 5:00 p.m., New York City time, on September 25, 1997 (the 'Expiration Date'),
at the principal office of the Rights Agent, or its successors as Rights Agent,
in New York, New York, one one-thousandth (1/1000th) of a fully paid,
nonassessable share of Series A Participating Cumulative Preferred Stock, par
value $10 per share, of the Company (the 'Preferred Shares'), at a purchase
price of $40 per one one-thousandth (1/1000th) of a share (the 'Purchase
Price'), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of December [xx], 1995. As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
Under no circumstances may this Right Certificate or the Rights evidenced
by this Right Certificate be transferred to an Acquiring Person or an Affiliate
or Associate of an Acquiring Person (as each such term is defined in the Rights
Agreement) or to any Person who subsequently becomes such a Person and any
purported transfer of Rights to any such Person shall be, and shall render the
Rights purported to be transferred, null and void.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Rights Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right
<PAGE>
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number and kind of shares as
the Rights evidenced by the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right Certificate shall be
exercised in part, the holder shall be entitled to received upon surrender
hereof another Right Certificate or Right Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or securities deemed by the Board of Directors to be
equivalent in value) of $.01 per Right at any time prior to the earliest of (i)
5:00 p.m. New York City time on the tenth calendar day following the Share
Acquisition Date, (ii) the occurrence of a Triggering Event or (iii) the
Expiration Date; provided, however, that after there shall be an Acquiring
Person the Rights may be redeemed only if a majority of the Disinterested
Directors determines that such redemption is in the best interests of the
Company (all terms as defined in the Rights Agreement).
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement or to issue certificates or utilize a depository
arrangement as provided in the terms of the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company, including, without limitation, any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of:
THE PITTSTON COMPANY,
by ..................................
[Name:]
[Title:]
Attest:
by ..................................
[Name:]
[Title:]
Countersigned:
CHEMICAL BANK, as Rights Agent,
by ..................................
Authorized Signature
2
<PAGE>
EXHIBIT B-2
[FORM OF RIGHT CERTIFICATE FOR MINERALS RIGHTS]
CERTIFICATE NO. MR- RIGHTS
NOT EXERCISABLE AFTER SEPTEMBER 25, 1997, OR EARLIER IF REDEEMED. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER NO CIRCUMSTANCES MAY THIS RIGHT
CERTIFICATE OR THE RIGHTS EVIDENCED BY THIS RIGHT CERTIFICATE BE TRANSFERRED TO
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS EACH
SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) OR TO ANY PERSON WHO SUBSEQUENTLY
BECOMES SUCH A PERSON AND ANY PURPORTED TRANSFER OF RIGHTS TO ANY SUCH PERSON
SHALL BE, AND SHALL RENDER THE RIGHTS PURPORTED TO BE TRANSFERRED, NULL AND
VOID.
PITTSTON MINERALS GROUP RIGHT CERTIFICATE
THE PITTSTON COMPANY
This certifies that , or registered assigns, is the
registered owner of the number of Pittston Minerals Group Rights (the 'Rights')
set forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Amended and Restated Rights Agreement dated as
of December [xx], 1995 (the 'Rights Agreement'), between The Pittston Company, a
Virginia corporation (the 'Company'), and Chemical Bank, a New York banking
corporation, as Rights Agent (the 'Rights Agent'), unless the Rights evidenced
hereby shall have been previously redeemed, to purchase from the Company at any
time after the Distribution Date (as defined in the Rights Agreement) and prior
to 5:00 p.m., New York City time, on September 25, 1997 (the 'Expiration Date'),
at the principal office of the Rights Agent, or its successors as Rights Agent,
in New York, New York, one one-thousandth (1/1000th) of a fully paid,
nonassessable share of Series B Participating Cumulative Preferred Stock, par
value $10 per share, of the Company (the 'Preferred Shares'), at a purchase
price of $40 per one one-thousandth (1/1000th) of a share (the 'Purchase
Price'), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of December [xx], 1995. As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
Under no circumstances may this Right Certificate or the Rights evidenced
by this Right Certificate be transferred to an Acquiring Person or an Affiliate
or Associate of an Acquiring Person (as each such term is defined in the Rights
Agreement) or to any Person who subsequently becomes such a Person and any
purported transfer of Rights to any such Person shall be, and shall render the
Rights purported to be transferred, null and void.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
<PAGE>
This Rights Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to received upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or securities deemed by the Board of Directors to be
equivalent in value) of $.01 per Right at any time prior to the earliest of (i)
5:00 p.m. New York City time on the tenth calendar day following the Share
Acquisition Date, (ii) the occurrence of a Triggering Event or (iii) the
Expiration Date; provided, however, that after there shall be an Acquiring
Person the Rights may be redeemed only if a majority of the Disinterested
Directors determines that such redemption is in the best interests of the
Company (all terms as defined in the Rights Agreement).
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement or to issue certificates or utilize a depository
arrangement as provided in the terms of the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company, including, without limitation, any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of:
THE PITTSTON COMPANY,
by ..................................
[Name:]
[Title:]
Attest:
by ..................................
[Name:]
[Title:]
Countersigned:
CHEMICAL BANK, as Rights Agent,
by ..................................
Authorized Signature
2
<PAGE>
EXHIBIT B-3
[FORM OF RIGHT CERTIFICATE FOR BURLINGTON RIGHTS]
CERTIFICATE NO. SCR- RIGHTS
NOT EXERCISABLE AFTER SEPTEMBER 25, 1997, OR EARLIER IF REDEEMED. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER NO CIRCUMSTANCES MAY THIS RIGHT
CERTIFICATE OR THE RIGHTS EVIDENCED BY THIS RIGHT CERTIFICATE BE TRANSFERRED TO
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS EACH
SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) OR TO ANY PERSON WHO SUBSEQUENTLY
BECOMES SUCH A PERSON AND ANY PURPORTED TRANSFER OF RIGHTS TO ANY SUCH PERSON
SHALL BE, AND SHALL RENDER THE RIGHTS PURPORTED TO BE TRANSFERRED, NULL AND
VOID.
PITTSTON BURLINGTON GROUP RIGHT CERTIFICATE
THE PITTSTON COMPANY
This certifies that , or registered assigns, is the
registered owner of the number of Pittston Burlington Group Rights (the
'Rights') set forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Amended and Restated Rights
Agreement dated as of December [xx], 1995 (the 'Rights Agreement'), between The
Pittston Company, a Virginia corporation (the 'Company'), and Chemical Bank, a
New York banking corporation, as Rights Agent (the 'Rights Agent'), unless the
Rights evidenced hereby shall have been previously redeemed, to purchase from
the Company at any time after the Distribution Date (as defined in the Rights
Agreement) and prior to 5:00 p.m., New York City time, on September 25, 1997
(the 'Expiration Date'), at the principal office of the Rights Agent, or its
successors as Rights Agent, in New York, New York, one one-thousandth (1/1000th)
of a fully paid, nonassessable share of Series D Participating Cumulative
Preferred Stock, par value $10 per share, of the Company (the 'Preferred
Shares'), at a purchase price of $40 per one one-thousandth (1/1000th) of a
share (the 'Purchase Price'), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of December [xx], 1995. As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
Under no circumstances may this Right Certificate or the Rights evidenced
by this Right Certificate be transferred to an Acquiring Person or an Affiliate
or Associate of an Acquiring Person (as each such term is defined in the Rights
Agreement) or to any Person who subsequently becomes such a Person and any
purported transfer of Rights to any such Person shall be, and shall render the
Rights purported to be transferred, null and void.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
<PAGE>
This Rights Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to received upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or securities deemed by the Board of Directors to be
equivalent in value) of $.01 per Right at any time prior to the earliest of (i)
5:00 p.m. New York City time on the tenth calendar day following the Share
Acquisition Date, (ii) the occurrence of a Triggering Event or (iii) the
Expiration Date; provided, however, that after there shall be an Acquiring
Person the Rights may be redeemed only if a majority of the Disinterested
Directors determines that such redemption is in the best interests of the
Company (all terms as defined in the Rights Agreement).
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement or to issue certificates or utilize a depository
arrangement as provided in the terms of the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company, including, without limitation, any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of:
THE PITTSTON COMPANY,
by ..................................
[Name:]
[Title:]
Attest:
by ..................................
[Name:]
[Title:]
Countersigned:
CHEMICAL BANK, as Rights Agent,
by ..................................
Authorized Signature
2
<PAGE>
[ON REVERSE SIDE OF RIGHT CERTIFICATE]
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE RIGHTS REPRESENTED BY THIS RIGHT
CERTIFICATE.)
FOR VALUE RECEIVED.........................................................
hereby sells, assigns and transfers unto........................................
...............................................................................
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
...............................................................................
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
.......................... Attorney, to transfer the within Right Certificate
on the books of the within-named Company, with full power of substitution.
Dated: , 19
.....................................
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such
terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: , 19
.....................................
Signature
Signature Guaranteed:
NOTICE
The signature on the foregoing Form of Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
3
EXHIBIT 23.2
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors and Shareholders
The Pittston Company
The audits referred to in our reports dated September 29, 1995 for Pittston
Burlington Group and Pittston Brink's Group, included the related financial
statement schedules as of December 31, 1994, and for each of the years in the
three-year period ended December 31, 1994, included in the registration
statement. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion, the Groups'
financial statement schedules, when considered in relation to the respective
basic combined financial statements of Pittston Burlington Group and Pittston
Brink's Group taken as a whole, present fairly in all material respects the
information set forth therein.
We consent to the use of our reports dated January 25, 1995 on the consolidated
financial statements and schedules for The Pittston Company and subsidiaries and
on the financial statements for the Pittston Minerals Group and our reports
dated September 29, 1995 on the financial statements and schedules for the
Pittston Burlington Group and the Pittston Brink's Group included herein or
incorporated by reference and to the reference to our firm under the heading
"Experts" in the prospectus.
Our reports dated January 25, 1995 for Pittston Minerals Group and September 29,
1995 for Pittston Burlington Group and Pittston Brink's Group contain an
explanatory paragraph that states that the financial statements of Pittston
Minerals Group, Pittston Burlington Group and Pittston Brink's Group should be
read in connection with the audited consolidated financial statements of The
Pittston Company and subsidiaries.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
September 29, 1995
