UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-9148
THE PITTSTON COMPANY
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(Exact name of registrant as specified in its charter)
Virginia 54-1317776
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 Bayberry Court, Richmond, Virginia 23226-8100
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 289-9600
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
As of August 3, 2000, 51,777,782 shares of $1 par value Pittston Brink's
Group Common Stock were outstanding.
1
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<TABLE>
<CAPTION>
Part I - Financial Information
The Pittston Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
June 30 December 31
2000 1999
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,841 131,159
Short-term investments 186 -
Accounts receivable (net of estimated
uncollectible amounts:
2000 - $37,655; 1999 - $36,238) 614,601 638,754
Inventories 40,276 43,979
Prepaid expenses and other current assets 58,767 37,756
Deferred income taxes 51,744 50,255
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Total current assets 856,415 901,903
Property, plant and equipment, (net of accumulated
depreciation, depletion and amortization:
2000 - $685,538; 1999 - $649,607) 930,248 930,476
Intangibles, net of accumulated amortization 297,745 298,501
Deferred pension assets 115,365 122,476
Deferred income taxes 78,928 79,569
Other assets 134,540 135,659
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Total assets $2,413,241 2,468,584
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 97,338 90,085
Current maturities of long-term debt 339,442 32,166
Accounts payable 270,362 301,194
Accrued liabilities 369,257 409,616
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Total current liabilities 1,076,399 833,061
Long-term debt, less current maturities 93,877 395,078
Postretirement benefits other than pensions 242,983 240,770
Workers' compensation and other claims 86,651 87,083
Deferred income taxes 16,319 16,272
Other liabilities 143,859 146,679
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, par value $10 per share:
Authorized: 2,000 shares $31.25
Series C Cumulative Convertible Preferred Stock;
Issued and outstanding: 2000 - 30 shares;
1999 - 30 shares 296 296
Pittston Brink's Group Common Stock, par
value $1 per share:
Authorized: 100,000 shares; Issued and outstanding:
2000 - 51,778 shares;
1999 - 40,861 shares - (Note 1) 51,778 40,861
Pittston BAX Group Common Stock, par
value $1 per share:
Authorized: 50,000 shares - (Note 1)
Issued and outstanding: 1999 - 20,825 shares - 20,825
Pittston Minerals Group Common Stock, par
value $1 per share:
Authorized: 20,000 shares - (Note 1)
Issued and outstanding: 1999 - 10,086 shares - 10,086
Capital in excess of par value 345,023 341,011
Retained earnings 449,557 443,349
Accumulated other comprehensive income (69,642) (56,528)
Employee benefits trust, at market value (23,859) (50,259)
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Total shareholders' equity 753,153 749,641
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Total liabilities and shareholders' equity $2,413,241 2,468,584
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See accompanying unaudited notes to consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net sales $ 91,832 90,956 188,414 199,709
Operating revenues 941,361 881,328 1,863,849 1,727,461
--------------------------------------------------------------------------------
Net sales and
operating revenues 1,033,193 972,284 2,052,263 1,927,170
Costs and expenses:
Cost of sales 98,840 95,972 202,274 211,415
Operating expenses 805,334 732,373 1,584,713 1,445,257
Selling, general and
administrative expenses 125,168 117,851 243,410 224,955
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Total costs and expenses 1,029,342 946,196 2,030,397 1,881,627
Other operating income, net 4,042 3,244 8,002 9,317
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Operating profit 7,893 29,332 29,868 54,860
Interest income 2,158 1,381 3,526 2,586
Interest expense (10,654) (9,310) (20,590) (19,507)
Other income (expense), net (1,345) 95 924 (275)
Income (loss) before income taxes (1,948) 21,498 13,728 37,664
Provision (credit) for income taxes (643) 5,576 4,530 9,082
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Net income (loss) (1,305) 15,922 9,198 28,582
Preferred stock dividends,
net (Note 6) (231) (231) (462) 18,083
--------------------------------------------------------------------------------
Net income (loss) attributed to
common shares $ (1,536) 15,691 8,736 46,665
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Net income (loss) per common share:
Basic $ (0.03) N/A 0.18 N/A
Diluted (0.03) N/A 0.18 N/A
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Pittston Brink's Group (Notes 1 and 2):
Net income per common share:
Basic $ N/A 0.50 N/A 0.93
Diluted N/A 0.50 N/A 0.93
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Pittston BAX Group (Notes 1 and 2):
Net income per common share:
Basic $ N/A 0.16 N/A 0.18
Diluted N/A 0.16 N/A 0.18
--------------------------------------------------------------------------------
Pittston Minerals Group (Notes 1 and 2):
Net income (loss) per common share:
Basic $ N/A (0.79) N/A 0.78
Diluted N/A (0.79) N/A (1.17)
--------------------------------------------------------------------------------
Pro forma net income per common
share (Notes 1 and 2):
Basic N/A 0.32 N/A 0.95
Diluted N/A 0.32 N/A 0.58
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Comprehensive income $ (6,422) 16,396 (4,377) 40,966
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See accompanying unaudited notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
The Pittston Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,198 28,582
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation, depletion and amortization 100,888 87,373
Provision for aircraft heavy maintenance 20,164 24,970
Provision for deferred income taxes 323 99
Provision for pensions, noncurrent 2,235 3,377
Provision for uncollectible accounts receivable 8,127 7,884
Minority interest expense 929 427
Equity in earnings of unconsolidated affiliates,
net of dividends received (2,468) (2,406)
Gain on disposition of investments (1,962) -
Other operating, net 8,409 6,487
Change in operating assets and liabilities,
net of effects of acquisitions and dispositions:
Decrease in accounts receivable 21,281 41,389
(Increase) decrease in inventories 3,863 (11,299)
Increase in prepaid expenses and other current assets (7,923) (7,604)
Increase in other assets (9,560) (5,093)
Decrease in accounts payable and accrued liabilities (61,350) (30,928)
Increase in other liabilities 636 5,538
Decrease in workers' compensation and other
claims, noncurrent (913) (3,304)
Other, net 2,199 738
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Net cash provided by operating activities 94,076 146,230
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Cash flows from investing activities:
Additions to property, plant and equipment (105,497) (124,986)
Aircraft heavy maintenance expenditures (33,627) (31,861)
Acquisitions, net of cash acquired and related
contingency payments (3,784) (429)
Proceeds from disposal of property, plant and equipment 2,332 2,383
Proceeds from disposition of investments 2,275 1,143
Other, net (4,538) 4,749
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Net cash used by investing activities (142,839) (149,001)
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Cash flows from financing activities:
Decrease in short-term borrowings (21,228) (15,873)
Additions to long-term debt 80,091 93,350
Reductions of long-term debt (48,082) (52,035)
Repurchase of stock of the Company - (23,494)
Proceeds from exercise of stock options 482 1,250
Dividends paid (2,818) (5,316)
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Net cash provided (used) by financing activities 8,445 (2,118)
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Net decrease in cash and cash equivalents (40,318) (4,889)
Cash and cash equivalents at beginning of period 131,159 83,894
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Cash and cash equivalents at end of period $ 90,841 79,005
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See accompanying unaudited notes to consolidated financial statements.
</TABLE>
4
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The Pittston Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
(1) The Pittston Company (the "Company") has five operating segments -
Brink's, Incorporated ("Brink's"), Brink's Home Security, Inc. ("BHS"),
BAX Global Inc. ("BAX Global"), Pittston Coal Operations ("Coal
Operations") and Other Operations which consists of Pittston Mineral
Ventures ("Mineral Ventures") and the Company's timber, gas and
equipment rebuild operations (collectively, "Allied Operations"). On
December 6, 1999, the Company announced its intention to exit the coal
business through the sale of coal mining operations and reserves. Until
the Company meets the measurement date criteria under Accounting
Principles Board ("APB") Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions", Coal Operations will continue to be reported as an
operating segment. Losses may be recorded upon the future disposition
of the coal assets, including additional expenses primarily related to
certain postretirement medical and multi-employer plans, as well as the
net losses expected to occur from the measurement date to the closing
date of the sale.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial reporting and with applicable quarterly reporting
regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and notes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included. Certain prior period amounts have been
reclassified to conform to the current period's financial statement
presentation. Operating results for the interim periods of 2000 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the
consolidated financial statements and related notes included in the
Company's annual report on Form 10-K for the year ended December 31,
1999.
As previously reported, prior to January 14, 2000, the Company had
three classes of common stock: Pittston Brink's Group Common Stock
("Brink's Stock"), Pittston BAX Group Common Stock ("BAX Stock") and
Pittston Minerals Group Common Stock ("Minerals Stock"), which were
designed to provide shareholders with securities reflecting the
performance of the Brink's Group, the BAX Group and the Minerals Group,
respectively.
On December 6, 1999, the Company announced that its Board of Directors
(the "Board") had approved the elimination of the tracking stock
capital structure by an exchange of all outstanding shares of Minerals
Stock and BAX Stock for shares of Brink's Stock (the "Exchange"). The
Exchange took place on January 14, 2000 (the "Exchange Date"), on which
date, holders of Minerals Stock received 0.0817 share of Brink's Stock
for each share of their Minerals Stock; and holders of BAX Stock
received 0.4848 share of Brink's Stock for each share of their BAX
Stock based on the shareholder approved formula and calculated as
follows:
<TABLE>
<CAPTION>
(Per share prices) Brink's Stock BAX Stock Minerals Stock
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<S> <C> <C> <C>
Ten day average price* $ 18.92 $ 7.98 $ 1.34
Exchange factor 1.00 1.15 1.15
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Fair Market Value, as defined* $ 18.92 $ 9.17 $ 1.54
Exchange ratio N/A 0.4848 0.0817
--------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
(Per share prices) Brink's Stock BAX Stock Minerals Stock
--------------------------------------------------------------------------
<S> <C> <C> <C>
Closing prices:
December 3, 1999 $ 18.375 $ 10.0625 $ 1.125
December 6, 1999 21.500 10.1250 1.625
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</TABLE>
The "fair market value" of each class of common stock was determined
by taking the average closing price of that class of common stock for the
10 trading days beginning 30 business days prior to the first public
announcement of the exchange proposal. Since the first public announcement
was made on December 6, 1999, the average closing price was calculated
during the 10 trading days beginning October 22, 1999 and ending November
4, 1999.
From and after the Exchange Date, Brink's Stock is the only outstanding
class of common stock of the Company and continues to trade on the New
York Stock Exchange under the symbol "PZB". Prior to the Exchange Date,
Brink's Stock reflected the performance of the Brink's Group only;
after the Exchange Date, Brink's Stock reflects the performance of the
Company as a whole. Shares of Brink's Stock after the Exchange are
hereinafter referred to as "Pittston Common Stock".
As a result of the Exchange on January 14, 2000, the Company issued
10,916 shares of Pittston Common Stock, which consists of 9,490 shares
of Pittston Common Stock equal to 100% of the Fair Market Value, as
defined, of all BAX Stock and Minerals Stock and 1,426 shares of
Pittston Common Stock equal to the additional 15% of the Fair Market
Value of BAX Stock and Minerals Stock exchanged pursuant to the
above-described formula. Of the 10,916 shares issued, 10,196 shares
were issued to holders of BAX Stock and Minerals Stock and 720 shares
were issued to The Pittston Company Employee Benefits Trust (the
"Trust").
Shares issued to holders of BAX Stock and Minerals Stock (excluding
those shares issued to the Trust) were distributed as follows:
<TABLE>
<CAPTION>
Holders of Holders of
(In thousands except per share prices) BAX Stock Minerals Stock
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<S> <C> <C>
Shares outstanding on January 13, 2000 19,475 9,273
Brink's Stock issued pursuant to the Exchange:
Based on 100% of Fair Market Value 8,207 657
Based on 15% of Fair Market Value 1,233 99
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Total shares issued on January 14, 2000 9,440 756
Brink's Stock closing price per share
- December 3, 1999 $ 18.375 18.375
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Value as of December 3, 1999 of Brink's
Stock issued pursuant to the Exchange $ 173,460 13,892
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</TABLE>
As set forth in the Company's Articles of Incorporation approved by the
shareholders, in the event of a dissolution, liquidation or winding up
of the Company, holders of Brink's Stock, BAX Stock and Minerals Stock
would have shared on a per share basis, the funds, if any, remaining
for distribution to the common shareholders. In the case of Minerals
Stock, such percentage had been set, using a nominal number of shares
of Minerals Stock of 4,203 (the "Nominal Shares") in excess of the
actual number of shares of Minerals Stock outstanding. The liquidation
percentages were subject to adjustment in proportion to the relative
change in the total number of shares of Brink's Stock, BAX 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 totals, in the case of Minerals Stock, shall include the Nominal
Shares). As of December 3, 1999, such liquidation percentages would
have been approximately 54%, 27% and 19% for holders of Brink's Stock,
BAX Stock and Minerals Stock, respectively. Including the additional
shares issued pursuant to the Exchange, the liquidation percentages for
former holders of Brink's Stock, BAX Stock and Minerals Stock,
respectively, as of January 14, 2000 would have been approximately 79%,
19% and 2%.
6
<PAGE>
Upon completion of the Exchange on January 14, 2000, there were 49,484
issued and outstanding shares of Pittston Common Stock for use in the
calculation of net income per common share.
(2) The following are reconciliations between the calculations of basic and
diluted net income (loss) per share for the three and six months ended
June 30, 2000 and the pro forma basic and diluted net income per share
for the three and six months ended June 30, 1999.
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
The Company (Pro forma) (Pro forma)
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<S> <C> <C> <C> <C>
Numerator:
Net income (loss) - Basic $(1,305) 15,922 9,198 28,582
Convertible Preferred Stock
dividends, net (231) (231) (462) 18,083
--------------------------------------------------------------------------
Basic net income (loss) per
share numerator (1,536) 15,691 8,736 46,665
Effect of dilutive securities:
Convertible Preferred Stock
dividends, net - - - (18,083)
--------------------------------------------------------------------------
Diluted net income (loss) per
share numerator $(1,536) 15,691 8,736 28,582
Denominator:
Basic weighted average common shares
outstanding 49,971 48,991 49,789 48,912
Effect of dilutive securities:
Stock options - 215 29 212
Assumed conversion of Convertible
Preferred Stock - - - 81
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Diluted weighted average
common shares outstanding 49,971 49,206 49,818 49,205
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</TABLE>
Options to purchase 3,051 shares of Pittston Common Stock, at prices
between $9.82 and $315.06 per share were outstanding during the three
months ended June 30, 2000, but were not included in the computation of
diluted net loss per share because the effect of all options would be
antidilutive. Options to purchase 2,854 shares of Pittston Common
Stock, at prices between $17.00 and $315.06 per share were outstanding
during the six months ended June 30, 2000, but were not included in the
computation of diluted net income per share because the options'
exercise prices were greater than the average market price of the
common shares, and therefore, the effect would be antidilutive. The
conversion of the Series C Cumulative Preferred Stock (the "Convertible
Preferred Stock") to 38 shares of Pittston Common Stock has been
excluded in the computation of diluted net income (loss) per share for
the three and six months ended June 30, 2000 because the effect of the
assumed conversion would be antidilutive.
For purposes of calculating the June 30, 1999 pro forma basic weighted
average common shares outstanding and the basic weighted average common
shares outstanding for the period from January 1, 2000 to January 13,
2000, the Company's basic weighted average common shares outstanding
for BAX Stock and Minerals Stock were converted into shares of Pittston
Common Stock by multiplying such average shares outstanding by the
respective exchange ratios referred to in Note 1. Included in the
Company's 1999 pro forma diluted weighted average common shares
outstanding and 2000 diluted weighted average common shares outstanding
are converted weighted average stock options and converted weighted
average Convertible Preferred Stock to the extent that such conversions
are dilutive. Pro forma converted weighted options for 1999 and
equivalent Pittston Common Stock options outstanding, on BAX Stock and
Minerals Stock, from January 1, 2000 to January 13, 2000 are calculated
7
<PAGE>
by multiplying those weighted average options having an exercise price
less than the average fair market value for Brink's Stock, BAX Stock
and Minerals Stock by the respective exchange ratios. Converted
weighted average Convertible Preferred Stock is calculated by
multiplying the weighted average Convertible Preferred Stock by the
Minerals exchange ratio referred to in Note 1.
Excluded from the Company's 1999 pro forma diluted net income per share
calculations are converted options to the extent that such conversions
are antidilutive. Converted options are calculated by multiplying those
options having an exercise price greater than the average fair market
value for Brink's Stock, BAX Stock and Minerals Stock by the respective
exchange ratios. Converted exercise prices related to these converted
options are calculated by dividing the exercise price of Brink's Stock,
BAX Stock and Minerals Stock by the respective exchange ratios.
Pro forma options to purchase 1,734 shares of Pittston Common Stock, at
prices between $19.46 and $315.06 per share and pro forma options to
purchase 1,832 shares of Pittston Common Stock, at prices between
$19.41 and $315.06 per share were outstanding during the three and six
months ended June 30, 1999, respectively, but were not included in the
computation of diluted net income per share because the options'
exercise prices were greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
The shares of Pittston Common Stock held in the Trust are subject to
the treasury stock method and effectively are not included in the basic
and diluted net income (loss) per share calculations. As of June 30,
2000 and 1999, 1,689 and 2,618 pro forma shares, respectively, of
Pittston Common Stock remained in the Trust.
The following are reconciliations between the Group calculations of
basic and diluted net income (loss) per share by Group:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
Brink's BAX Minerals
Group Group Group
-------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income (loss) $ 19,605 3,051 (6,734)
Convertible Preferred Stock
dividends, net - - (231)
-------------------------------------------------------------------------
Basic net income (loss) per
share numerator 19,605 3,051 (6,965)
Effect of dilutive securities:
Convertible Preferred Stock
dividends, net - - -
-------------------------------------------------------------------------
Diluted net income (loss) per
share numerator $ 19,605 3,051 (6,965)
Denominator:
Basic weighted average common
shares outstanding 38,974 19,183 8,770
Effect of dilutive securities:
Stock options 197 38 -
Assumed conversion of the Convertible
Preferred Stock - - -
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Diluted weighted average common
shares outstanding 39,171 19,221 8,770
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</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
Brink's BAX Minerals
Group Group Group
-------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income (loss) $ 36,403 3,472 (11,293)
Convertible Preferred Stock
dividends, net - - 18,083
-------------------------------------------------------------------------
Basic net income per share numerator 36,403 3,472 6,790
Effect of dilutive securities:
Convertible Preferred Stock
dividends, net - - (18,083)
-------------------------------------------------------------------------
Diluted net income (loss) per
share numerator $ 36,403 3,472 (11,293)
Denominator:
Basic weighted average common
shares outstanding 38,939 19,110 8,671
Effect of dilutive securities:
Stock options 200 25 -
Assumed conversion of the Convertible
Preferred Stock - - 992
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Diluted weighted average common
shares outstanding 39,139 19,135 9,663
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</TABLE>
Options to purchase 765 and 784 shares of Brink's Stock, at prices
between $27.25 and $39.56 per share were outstanding during the three
and six months ended June 30, 1999, respectively, but were not included
in the computation of diluted net income per share because the options'
exercise prices were greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
Options to purchase 1,903 shares of BAX Stock, at prices between $10.31
and $27.91 per share and options to purchase 2,044 shares of BAX Stock,
at prices between $9.41 and $27.91 per share, were outstanding during
the three and six months ended June 30, 1999, respectively, but were
not included in the computation of diluted net income per share because
the options' exercise prices were greater than the average market price
of the common shares, and therefore the effect would be antidilutive.
Options to purchase 558 shares of Minerals Stock, at prices between
$1.59 and $25.74 per share, were outstanding during the three months
ended June 30, 1999 but were not included in the computation of diluted
net loss per share because the effect of all options would be
antidilutive. Options to purchase 698 shares of Minerals Stock, at
prices between $1.81 and $25.74 per share, were outstanding during the
six months ended June 30, 1999, but were not included in the
computation of diluted net loss per share because the options' exercise
prices were greater than the average market price of the common shares,
and therefore, the effect would be antidilutive.
The conversion of the Convertible Preferred Stock to 460 shares of
Minerals Stock has been excluded in the computation of diluted net loss
per share in the three months ended June 30, 1999 because the effect of
the assumed conversion would be antidilutive.
The shares of Brink's Stock, BAX Stock and Minerals Stock held in the
Trust are subject to the treasury stock method and effectively are not
included in the basic and diluted net income (loss) per share
calculations. As of June 30, 1999, 1,818 shares of Brink's Stock, 1,592
shares of BAX Stock and 335 shares of Minerals Stock remained in the
Trust.
9
<PAGE>
(3) Depreciation, depletion and amortization of property, plant and
equipment totaled $47,883 and $92,227 in the second quarter and first
six months of 2000, respectively, compared to $38,628 and $75,565 in
the second quarter and first six months of 1999, respectively.
(4) Cash payments made for interest and income taxes, net of refunds
received, were as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest $ 10,482 9,106 22,478 19,366
--------------------------------------------------------------------------
Income taxes $ 8,410 17,782 18,802 22,431
--------------------------------------------------------------------------
</TABLE>
(5) The cumulative impact of foreign currency translation deducted from
shareholders' equity was $68,840 and $59,623 at June 30, 2000 and
December 31, 1999, respectively. The cumulative impact of cash flow
hedges deducted and added to shareholders' equity was ($1,334) and
$2,540 at June 30, 2000 and December 31, 1999, respectively.
(6) Under the share repurchase programs authorized by the Board, the
Company purchased shares in the periods presented as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pittston Common Stock:
Shares - N/A - N/A
Cost $ - N/A - N/A
Brink's Stock:
Shares N/A - N/A 100.0
Cost $ N/A - N/A 2,514
Convertible Preferred Stock:
Shares - - - 83.9
Cost $ - - - 20,980
Excess carrying amount (a)$ - - - 19,201
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</TABLE>
(a) The excess of the carrying amount of the Convertible Preferred
Stock over the cash paid to holders for repurchases made during the
periods. This amount is deducted from preferred dividends in the
Company's Consolidated Statement of Operations.
On March 15, 1999, the Company purchased 83.9 shares (or 839 depositary
shares) of its Convertible Preferred Stock for $20,980. The Convertible
Preferred Stock is convertible into Pittston Common Stock and has an
annual dividend rate of $31.25 per share. Preferred dividends included
on the Company's Consolidated Statement of Operations for the six
months ended June 30, 1999 are net of the $19,201, which is the excess
of the carrying amount over the cash paid to the holders of the
Convertible Preferred Stock.
At June 30, 2000, the Company had the remaining authority to purchase
over time 900 shares of Pittston Common Stock and an additional $7,556
of its Convertible Preferred Stock. The remaining aggregate purchase
cost limitation for all common stock was $22,184 at June 30, 2000.
10
<PAGE>
The Pittston Company and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion is a summary of the key factors management considers
necessary or useful in reviewing the Company's results of operations,
liquidity and capital resources.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
Three Months Ended June 30Six Months Ended June 30
(In thousands) 2000 1999 2000 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and operating revenues:
Business and security services:
Brink's $ 364,463 334,586 718,159 665,349
BHS 60,453 57,016 120,205 112,137
BAX Global 516,445 489,726 1,025,485 949,975
------------------------------------------------------------------------------
Total business and
security services 941,361 881,328 1,863,849 1,727,461
------------------------------------------------------------------------------
Natural resources:
Coal Operations 82,117 85,612 168,379 189,123
Other Operations 9,715 5,344 20,035 10,586
------------------------------------------------------------------------------
Total natural resources 91,832 90,956 188,414 199,709
------------------------------------------------------------------------------
Net sales and operating
revenues $ 1,033,193 972,284 2,052,263 1,927,170
------------------------------------------------------------------------------
Operating profit (loss):
Business and security services:
Brink's $ 21,548 22,517 45,503 42,500
BHS 15,003 14,333 29,869 28,337
BAX Global (13,539) 8,747 (16,407) 13,188
------------------------------------------------------------------------------
Total business and
security services 23,012 45,597 58,965 84,025
------------------------------------------------------------------------------
Natural resources:
Coal Operations (10,812) (10,638) (22,151) (19,031)
Other Operations 1,285 66 3,728 685
------------------------------------------------------------------------------
Total natural resources (9,527) (10,572) (18,423) (18,346)
------------------------------------------------------------------------------
Segment operating profit 13,485 35,025 40,542 65,679
General corporate expense (5,592) (5,693) (10,674) (10,819)
------------------------------------------------------------------------------
Operating profit $ 7,893 29,332 29,868 54,860
------------------------------------------------------------------------------
</TABLE>
The Pittston Company (the "Company") has five operating segments - Brink's,
Incorporated ("Brink's"), Brink's Home Security, Inc. ("BHS"), BAX Global
Inc. ("BAX Global"), Pittston Coal Operations ("Coal Operations") and Other
Operations which consists of Pittston Mineral Ventures ("Mineral Ventures")
and the Company's timber, gas and equipment rebuild operations (collectively,
"Allied Operations").
On January 14, 2000, the Company completed an exchange of its Pittston BAX
Group Common Stock ("BAX Stock") and Pittston Minerals Group Common Stock
("Minerals Stock") into Pittston Brink's Group Common Stock ("Brink's
Stock"), at exchange ratios of 0.4848 share of Brink's Stock for each share
of BAX Stock and 0.0817 share of Brink's Stock for each share of Minerals
Stock. Brink's Stock, hereinafter referred to as Pittston Common Stock, now
constitutes the Company's only class of common stock and continues to trade
on the New York Stock Exchange under the symbol "PZB". See the
"Capitalization" section for further discussion.
11
<PAGE>
On December 6, 1999, the Company announced its intention to exit the coal
business through the sale of coal mining operations and reserves. Until the
Company meets the measurement date criteria under Accounting Principles Board
("APB") Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions", Coal Operations will
continue to be reported as an operating segment. Losses may be recorded upon
the future disposition of the coal assets, including additional expenses
primarily related to certain postretirement medical and multi-employer plans,
as well as the net losses expected to occur from the measurement date to the
closing date of the sale. The process of finding a buyer for the coal assets
is continuing and remains on schedule for year-end.
In the second quarter of 2000, the Company reported a net loss of $1.3
million compared with net income of $15.9 million in the second quarter of
1999. Operating profit totaled $7.9 million in the 2000 second quarter
compared with $29.3 million in prior year's second quarter. Lower operating
results at BAX Global ($22.3 million), Brink's ($1.0 million) and Coal
Operations ($0.2 million) were partially offset by increases in operating
results at Other Operations ($1.2 million) and BHS ($0.7 million). Corporate
expenses in the second quarter of 2000 remained relatively unchanged as
compared to the second quarter of 1999. See further discussion of operating
segments' financial results below.
In the first six months of 2000, the Company reported net income of $9.2
million compared with $28.6 million in the first six months of 1999.
Operating profit totaled $29.9 million in the first six months of 2000
compared with $54.9 million in the prior year's comparable period. Lower
operating results at BAX Global ($29.6 million) and Coal Operations ($3.1
million) were partially offset by increases in operating profit for Other
Operations ($3.0 million), Brink's ($3.0 million) and BHS ($1.5 million).
Corporate expenses for the first six months of 2000 and 1999 remained
relatively unchanged. See further discussion of operating segments' financial
results below.
Preferred dividends included on the Company's Statement of Operations for the
six months ended June 30, 1999 were net of $19.2 million, which was the
excess of the carrying amount of the Convertible Preferred Stock over the
cash paid to the holders of the Convertible Preferred Stock for repurchases
made during the period.
BRINK'S
The following is a table of selected financial data for Brink's on a
comparative basis:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues:
North America (a) $ 159,078 142,286 314,675 279,724
International 205,385 192,300 403,484 385,625
--------------------------------------------------------------------------------
Total operating revenues $ 364,463 334,586 718,159 665,349
--------------------------------------------------------------------------------
Operating profit:
North America (a) $ 13,559 12,106 25,043 20,049
International 7,989 10,411 20,460 22,451
--------------------------------------------------------------------------------
Total segment profit $ 21,548 22,517 45,503 42,500
--------------------------------------------------------------------------------
Depreciation and amortization $ 15,714 12,937 30,611 25,258
Cash capital expenditures 14,060 25,275 37,266 43,915
--------------------------------------------------------------------------------
</TABLE>
(a) Does not include Latin America, which is classified with International
operations.
Brink's worldwide consolidated revenues totaled $364.5 million in the second
quarter of 2000, a 9% increase over second quarter 1999 revenues of $334.6
million. Brink's operating profit of $21.5 million in the second quarter of
2000 represented a 4% decrease from the $22.5 million reported in the prior
year's quarter.
12
<PAGE>
The increase in Brink's revenues was attributable to both North American and
International operations. Increased revenues in North America primarily
related to new business from armored car operations and currency and coin
processing services. International revenue increases were primarily
attributable to European operations. During the second quarter of 2000,
Brink's French affiliate accelerated its reporting by one month to current
month reporting, which increased revenue by approximately $22 million; this
was more than offset by the effects of an industry-wide strike in France in
May (estimated at approximately $8 million) and foreign translation effects
(primarily the impact of the US dollar versus the Euro) on reported revenues
(approximately $16 million).
Brink's operating profit decreased $1.0 million in the second quarter of 2000
versus the same quarter of 1999. The increase in North American operating
profit over the prior year's $1.4 million was more than offset by the
decrease from International operations ($2.4 million). Higher North American
operating profits were largely the result of new business and improved
profitability of armored car operations, which includes ATM services, and, to
a lesser extent, improved results in currency and coin processing services.
International operations were impacted by lower operating profit in Europe
and Latin America for the second quarter of 2000, partially offset by
improved results in Asia/Pacific which were primarily due to a decrease in
the losses in Australia. Latin America reported lower operating profits
primarily due to weaker business conditions in Venezuela and Chile, which
outweighed improvements in operating performance in Argentina. Operating
profit in Europe was negatively impacted by a two week nationwide strike of
security personnel in France, which reduced operating profit by an estimated
amount of approximately $5 million. This decrease was partially offset by the
acceleration of reporting in France by one month to the current month
reporting, which added approximately $2 million to operating profit in the
second quarter of 2000. The industry-wide strike in France, which ended in
May 2000, is not expected to have a material negative impact on ongoing
operations.
Brink's worldwide consolidated revenues totaled $718.2 million in the first
six months of 2000, a $52.8 million (8%) increase over the same period of
1999. Brink's operating profit of $45.5 million in the first six months of
2000 represented a 7% increase over the $42.5 million reported in the prior
year period.
The increase in Brink's revenues for the first six months of 2000 compared to
the same period of 1999 was attributable to both North American and
International operations. Increased revenues in North America primarily
related to growth in armored car operations and new business. International
revenue increases were attributable to operations in Latin America,
Asia/Pacific and Europe. As noted above, International revenues were
negatively impacted by the strong US dollar (approximately $31 million) and
the strike in France partially offset by the additional revenues from the
acceleration by one month of the reporting by France.
The Brink's operating profit increase of $3.0 million in the first six months
of 2000 compared to the same period of 1999 was primarily attributable to
operations in North America. Higher North American operating profits were
largely the result of improved profitability of armored car operations and to
a lesser extent, improved results in currency and coin processing services.
International operating profits reflect improvements in the Asia/Pacific
region primarily due to a decrease in the losses in Australia. Latin America
reported lower operating profits primarily due to weaker business conditions
in Venezuela, which outweighed improvements in operating performance in
Brazil and Argentina. Operating profit in Europe was negatively impacted by
the previously mentioned two week nationwide strike of security personnel in
France during the second quarter, which reduced operating profit by an
estimated amount of approximately $5 million. This reduction was partially
offset by the acceleration of reporting in France discussed above, which
added approximately $2 million to operating profit for the first six months
of 2000.
13
<PAGE>
BRINK'S HOME SECURITY
The following is a table of selected financial data for BHS on a comparative
basis:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(Dollars in thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating profit:
Monitoring and service $ 21,058 19,429 41,687 38,442
Net marketing, sales
and installation (6,055) (5,096) (11,818) (10,105)
--------------------------------------------------------------------------------
Total segment profit $ 15,003 14,333 29,869 28,337
--------------------------------------------------------------------------------
Monthly recurring revenues (a) 17,495 16,111
--------------------------------------------------------------------------------
Annualized disconnect rate, net 8.2% 8.0% 7.9% 8.0%
--------------------------------------------------------------------------------
Number of subscribers:
Beginning of period 652,578 600,643 643,277 585,565
Installations 20,713 25,824 42,255 52,675
Disconnects, net (13,412) (12,087) (25,653) (23,860)
------------------------------------------------------------------------------
End of period 659,879 614,380 659,879 614,380
------------------------------------------------------------------------------
Depreciation and amortization $ 14,051 12,736 27,289 24,695
Cash capital expenditures 18,221 19,927 35,400 39,238
--------------------------------------------------------------------------------
</TABLE>
(a)Monthly recurring revenues are calculated based on the number of subscribers
at period end multiplied by the average fee per subscriber received in the last
month of the period for monitoring, maintenance and related services.
Revenues for BHS increased by $3.4 million (6%) to $60.5 million in the
second quarter of 2000 compared to the same period of 1999. In the first six
months of 2000, revenues for BHS increased $8.1 million (7%) to $120.2
million compared to the first six months of 1999. This increase in revenues
for the three and six month periods was due to higher ongoing monitoring and
service revenues, reflecting a 7% increase in the subscriber base as well as
slightly higher average monitoring fees. As a result of such growth, monthly
recurring revenues at June 30, 2000 of $17.5 million grew 9% versus June 30,
1999.
Operating profit in the second quarter and first six months of 2000 increased
$0.7 million (5%) and $1.5 million (5%), respectively, compared to the same
periods of 1999. Operating profit was favorably impacted by increases
generated from monitoring and service activities of $1.6 million (8%) and
$3.2 million (8%) for the second quarter and first six months of 2000,
respectively, as compared to the prior year periods. These improvements were
due primarily to the growth in the subscriber base combined with slightly
higher average monitoring fees partially offset by an increase in
depreciation expense, which includes the write-off of capitalized subscriber
installation costs related to disconnects. Growth in overall operating profit
was negatively affected by an increase in the net cost of marketing, sales
and installation related to gaining new subscribers, which increased $1.0
million and $1.7 million during the second quarter and first six months of
2000, respectively, as compared to the same periods of 1999. This increase in
net cost was primarily due to an increase in costs (including some start-up
expenses) of newer channels of distribution (including dealer and new
construction programs) as BHS moves to expand its methods of acquiring new
customers. These costs were partially offset by the impact of fewer system
installations and higher average connection fees. Net cost of marketing,
sales and installation activities on a per install and overall basis during
2000 may continue to be impacted by the growth in new distribution channels
and several initiatives implemented in the fourth quarter of 1999, including
increasing the connection fee per installation and a tightening of the
company's credit policy.
14
<PAGE>
BAX GLOBAL
The following is a table of selected financial data for BAX Global on a
comparative basis:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues:
Americas (a) $ 308,369 292,634 618,828 570,886
International 221,816 209,748 434,221 405,410
Eliminations/other (13,740) (12,656) (27,564) (26,321)
--------------------------------------------------------------------------------
Total operating revenues $ 516,445 489,726 1,025,485 949,975
--------------------------------------------------------------------------------
Operating profit (loss):
Americas (b) $ (11,476) 12,292 (12,238) 20,647
International (b) 8,884 7,606 16,260 14,064
Other (b) (10,947) (11,151) (20,429) (21,523)
--------------------------------------------------------------------------------
Total segment profit (loss) $ (13,539) 8,747 (16,407) 13,188
--------------------------------------------------------------------------------
Depreciation and amortization $ 14,905 9,695 28,478 19,286
Cash capital expenditures 13,589 16,822 25,564 33,065
--------------------------------------------------------------------------------
Worldwide expedited freight services:
Revenues $ 421,133 406,917 837,283 794,671
Weight (million pounds) 441 425 873 839
--------------------------------------------------------------------------------
</TABLE>
(a) Includes Intra-US revenue of $150.5 and $149.9 million for the quarters
ended June 30, 2000 and 1999, respectively and $306.7 and $293.5 for the six
months ended June 30, 2000 and 1999, respectively.
(b) Expenses associated with major information technology projects and
certain overhead costs have been reallocated in 1999 from Other to the
Americas and International, respectively.
Worldwide revenues for the 2000 second quarter increased 5% over the 1999
second quarter to $516.4 million. The operating loss in the second quarter of
2000 was $13.5 million, compared to a profit of $8.7 million in the second
quarter of 1999.
Operating revenues in the second quarter of 2000 increased $26.7 million
compared to the same period of 1999, due to increases in both Americas and
International revenues. The International revenue increase of $12.1 million
(6%) reflects continued growth in the Pacific region from increased supply
chain management and transportation services in the high technology industry.
Americas revenues increased $15.7 million (5%) primarily due to increases in
export volumes. Domestic expedited revenues remained relatively flat as
improved yields (largely a result of fuel surcharges) offset a decline in
volumes.
Operating results for the second quarter of 2000 declined $22.3 million
compared to the same period of 1999, reflecting significantly lower
performance in the Americas region partially offset by improved international
results. The operating loss in the Americas region was primarily the result
of higher service costs for its fleet of aircraft, softer than expected
demand, higher costs of infrastructure put in place to deliver consistent
year-round service and increases in fuel costs (for both air and ground
transportation) which were not covered in their entirety by hedging
activities and fuel surcharges which were implemented in the first half of
2000. Operating results in the Americas were also impacted by higher
depreciation and amortization expense, reflecting the depreciation associated
with higher expenditures on aircraft-related modifications in 1999 and
information systems placed in service in late 1999. International operating
profits increased primarily due to continued growth in supply chain
management and transportation services in the Pacific region. Other operating
results for the second quarter of 2000 include costs of approximately $1.3
million associated with an employment agreement with a former executive.
15
<PAGE>
BAX Global is currently pursuing actions to reduce overall operating costs in
the Americas region in order to bring such costs in line with volume
requirements while still maintaining appropriate levels of customer service.
Since March 31, 2000, as part of a realignment of the fleet, five planes have
been removed from a total of forty-three planes committed to North American
operations. Decisions to be made by management as a result of this process
could affect future earnings and the carrying value of BAX Global's assets.
It is not currently possible to estimate the potential outcome of these
decisions or their impact, if any, on the financial position and/or results
of operations of the Company.
A supplier, which formerly provided the majority of BAX Global's 727 lift
capacity and which also operates controlled lift for the freight forwarding
community, filed for Chapter 11 bankruptcy protection in early May of 2000.
Since that time, BAX Global has lessened its dependency on this supplier,
through a negotiated reduction in lift capacity, which resulted in a decrease in
total cost but an increase in the unit cost of its existing lift commitment with
this supplier.
Worldwide revenues for the first six months of 2000 increased 8% over the
same period of 1999 to $1.0 billion. The operating loss in the first six
months of 2000 was $16.4 million, compared to a profit of $13.2 million in
the first six months of 1999.
Operating revenues in the first six months of 2000 increased as a result of
increases in both International and Americas revenues. The increase in
International revenues of $28.8 million (7%) was primarily due to continued
growth in the Pacific region from increased supply chain management and
transportation services in the high technology industry. Americas revenues
increased $47.9 million (8%) primarily as a result of increased export
volumes. Domestic and international fuel surcharges in the first quarter of
2000 resulted in a small increase in yields.
Operating results for the first six months of 2000 declined $29.6 million
compared to the same period of 1999, reflecting significantly lower
performance in the Americas region partially offset by improved International
results. The operating loss in the Americas was primarily the result of
higher service costs for its fleet of aircraft, softer than expected demand,
higher costs of infrastructure put in place to deliver consistent year-round
service and increases in fuel costs which were not covered in their entirety
by fuel surcharges and hedging activities. Operating results in the Americas
were also impacted by higher depreciation and amortization expense,
reflecting the depreciation associated with higher aircraft-related
expenditures in 1999 and information systems placed in service in late 1999
partially offset by improved performance in working capital. International
profits increased primarily due to continued growth in supply chain
management and transportation services in the Pacific region. In the first
six months of 1999, the International results included a benefit of
approximately $1.3 million from the reversal of excess incentive accruals.
In addition, Other operating results for the first six months of 2000 include
expenses of approximately $1.3 million associated with an employment
agreement with a former executive.
16
<PAGE>
COAL OPERATIONS
The following is a table of selected financial data for Coal Operations on a
comparative basis:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Coal margin $ (364) 5,585 141 10,409
Other operating income 1,087 623 2,079 3,280
--------------------------------------------------------------------------------
Margin and other income 723 6,208 2,220 13,689
--------------------------------------------------------------------------------
Idle equipment and closed mines 684 2,259 1,407 4,080
Inactive employee costs 7,239 8,450 15,595 18,293
Selling, general and
administrative (a) 3,612 6,137 7,369 10,347
--------------------------------------------------------------------------------
Total other costs and expenses (a) 11,535 16,846 24,371 32,720
--------------------------------------------------------------------------------
Total segment loss (a) $(10,812) (10,638) (22,151) (19,031)
--------------------------------------------------------------------------------
Depreciation and amortization $ 5,409 7,729 11,771 15,448
Cash capital expenditures 2,804 3,030 6,187 6,526
--------------------------------------------------------------------------------
Coal sales (tons):
Metallurgical 969 957 1,973 2,493
Steam 1,853 1,985 3,734 3,911
--------------------------------------------------------------------------------
Total coal sales 2,822 2,942 5,707 6,404
--------------------------------------------------------------------------------
Production/purchased (tons):
Production 2,413 2,700 4,896 5,409
Purchased 341 665 648 1,444
--------------------------------------------------------------------------------
Total 2,754 3,365 5,544 6,853
--------------------------------------------------------------------------------
Coal margin per ton $ (0.13) 1.90 0.02 1.62
--------------------------------------------------------------------------------
</TABLE>
(a) Prior year selling, general and administrative costs included in
operating profit for Coal Operations and Other Operations have been reclassified
to conform to the current year's segment presentation.
Net sales for the second quarter of 2000 were $82.1 million, a decrease of 4%
from the 1999 second quarter. Operating loss was $10.8 million in the current
year quarter compared to $10.6 million in the prior year quarter.
Coal Operations' net sales for the second quarter of 2000 decreased over the
prior year's quarter largely as a result of reduced sales volume which
declined slightly by 0.1 million tons from the 2.9 million tons sold in the
second quarter of 1999. Metallurgical sales volumes were essentially flat as
increases in domestic metallurgical coal sales volume were partially offset
by a decline in export metallurgical coal sales volume reflecting the
continued softness in the export market. Steam coal sales in the second
quarter of 2000 decreased by 0.1 million tons (7%) to 1.9 million tons.
The operating loss in the second quarter of 2000 compared to the same period
in 1999 reflects a $5.9 million decline in total coal margin offset by a $0.5
million increase in other operating income and decreases in idle and closed
mine costs ($1.6 million), inactive employee costs ($1.2 million) and
selling, general and administrative costs ($2.5 million). The reduction in
selling, general and administrative costs is primarily due to a bad debt
provision recorded in 1999 related to the bankruptcy of a significant user of
Coal Operations' metallurgical coal. Operating results in the second quarter
of 2000 benefited from lower pension and postretirement benefit expenses as
well as lower amortization expense primarily the result of an impairment
charge recorded in the fourth quarter of 1999.
The decline in total coal margin for the second quarter of 2000 of $2.03 per
ton compared to the same period of 1999 is primarily attributable to higher
production costs. Virginia metallurgical and steam margins were negatively
impacted by higher production costs due to temporary adverse mining
conditions at some of the Company's mines, as well as increased workers'
compensation costs related to accidents during the quarter. Metallurgical
margins were also impacted by continued softness in export markets. West
Virginia steam margins were negatively impacted by higher production costs
resulting from the "mountaintop removal" controversy discussed below.
17
<PAGE>
Idle equipment and closed mine costs decreased $1.6 million in the 2000
second quarter from the comparable 1999 quarter primarily due to the idlement
of the Meadow River mine in West Virginia in early 1999. This mine was
subsequently closed during the fourth quarter of 1999. Inactive employee
costs, which represent long-term employee liabilities for pension and retiree
medical costs for inactive employees, decreased 14% over the prior year's
quarter as a result of lower premiums related to the Coal Industry Retiree
Benefit Act of 1992 and lower pension expense. Full year pension expense for
2000 is expected to be lower than 1999 primarily due to favorable demographic
changes and an increase in the discount rate from 7.0% to 7.5%.
Coal Operations net sales for the first six months of 2000 decreased over the
prior year largely due to reduced sales volume which declined 0.7 million
tons from the 6.4 million tons sold in the first six months of 1999. Through
June 30, 2000, metallurgical coal sales volume decreased 21% or 0.5 million
tons as compared to the first half of 1999. This volume decrease represented
an increase in domestic metallurgical coal sales which was more than offset
by a decrease in export metallurgical coal sales due to continued softness in
export markets. Steam coal sales in the first six months of 2000 decreased by
0.2 million tons (5%) to 3.7 million tons.
Coal Operations generated an operating loss of $22.2 million in the first six
months of 2000 as compared to $19.0 million for the same period of 1999. This
decrease in results reflects a $10.3 million decline in total coal margin and
a $1.2 million decline in other operating income (as 1999 included a benefit
of $2.5 million from the settlement of litigation), partially offset by
decreases in idle and closed mine costs ($2.7 million), inactive employee
costs ($2.7 million) and selling, general and administrative costs ($3.0
million). As noted above, operating results benefited from lower pension and
postretirement benefit expenses as well as lower amortization expense in the
first six months of 2000.
Total coal margin declined by $1.60 per ton for the first six months of 2000
compared to the same period of 1999. Virginia margins were negatively
impacted by higher production costs due to temporary adverse mining
conditions at some of the Company's mines as well as continued softness in
export markets. West Virginia steam margins were negatively impacted by
higher production costs resulting from the "mountaintop removal" controversy
discussed below.
Idle equipment and closed mine costs decreased $2.7 million in the first six
months of 2000 from the comparable 1999 period primarily due to the idlement
of the Meadow River mine in West Virginia in early 1999. This mine was
subsequently closed during the fourth quarter of 1999. Of the $3.3 million
liability recorded in the fourth quarter of 1999 for other closure costs of
the Meadow River mine, approximately $1.6 million has been paid as of June
30, 2000. It is anticipated that substantially all of the remaining liability
will be paid by the end of 2000. Inactive employee costs, which represent
long-term employee liabilities for pension and retiree medical costs for
inactive employees, decreased 15% over the same period last year as a result
of slightly lower premiums related to the Coal Industry Retiree Benefit Act
of 1992, lower medical benefit expense for workers on temporary lay-off
primarily related to the first quarter 1999 idlement of Meadow River mine and
lower pension expense.
A controversy related to a method of mining called "mountaintop removal" that
began in mid-1998 in West Virginia involving an unrelated party resulted in a
suspension in the issuance of several mining permits for a portion of 1999.
Although the suspension has been lifted, there has been a delay in the timely
issuance to Vandalia Resources, Inc. ("Vandalia"), a wholly-owned subsidiary
of Pittston Coal, of several mine permits necessary for its uninterrupted
mining. Vandalia is actively pursuing the issuance of these permits, but
when, or if, these permits will be issued is currently unknown. During the
first six months of 2000, the delay in obtaining these permits did not result
in a significant number of jobs lost but did impact production efficiencies
and costs by requiring mining in less productive areas. Failure to obtain
approval of these permits will ultimately result in the depletion of
permitted reserves. Such depletion would force the cessation of mining and
the corresponding loss of jobs. Vandalia and other affected parties in West
Virginia are currently exploring all legal and legislative remedies that may
be available to resolve this matter.
18
<PAGE>
Coal Operations continues cash funding for charges recorded in prior years
for facility closure costs recorded as restructuring and other charges in the
Statement of Operations. The following table analyzes the changes in
liabilities during the first six months of 2000 for such costs:
<TABLE>
<CAPTION>
Employee
Mine Termination,
and Medical
Plant and
Closure Severance
(In thousands) Costs Costs Total
------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance as of December 31, 1999 $ 6,596 13,622 20,218
Payments 548 815 1,363
------------------------------------------------------------------------------
Balance as of June 30, 2000 $ 6,048 12,807 18,855
------------------------------------------------------------------------------
</TABLE>
OTHER OPERATIONS
The following is a table of selected financial data for Other Operations on a
comparative basis:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales:
Mineral Ventures $ 3,857 3,459 8,417 6,664
Allied Operations (a) 5,858 1,885 11,618 3,922
--------------------------------------------------------------------------------
Total net sales $ 9,715 5,344 20,035 10,586
--------------------------------------------------------------------------------
Operating profit (loss):
Mineral Ventures $ (485) (1,238) 178 (2,028)
Allied Operations (a) (b) 1,770 1,304 3,550 2,713
--------------------------------------------------------------------------------
Total segment profit $ 1,285 66 3,728 685
--------------------------------------------------------------------------------
Depreciation and amortization:
Mineral Ventures $ 842 937 1,805 1,652
Allied Operations 364 341 726 679
--------------------------------------------------------------------------------
Total depreciation
and amortization $ 1,206 1,278 2,531 2,331
--------------------------------------------------------------------------------
</TABLE>
Certain 1999 amounts have been restated to conform to the current year
classifications.
(a) Includes timber, natural gas and equipment rebuild operations.
(b) Prior year selling, general and administrative costs included in
operating profit for Coal Operations and Other Operations have been
reclassified to conform to the current year's segment presentation.
Mineral Ventures generated net sales during the second quarter of 2000 of
$3.9 million, an 11% increase from the $3.5 million reported in the second
quarter of 1999. The increase in net sales was the result of an increase in
ounces of gold sold and higher gold realizations. Ounces of gold sold
increased from 12.1 thousand ounces in the second quarter of 1999 to 13.0
thousand ounces in the same period of 2000. The operating loss for the second
quarter of 2000 was $0.5 million compared to $1.2 million in the same period
of 1999 reflecting a $13 per ounce (5%) decrease in the cash cost of gold
sold, in addition to a $12 per ounce (4%) increase in average realization.
Cash cost per ounce, in US dollar terms, was lower in the second quarter of
2000 due to a weaker Australian dollar, partially offset by higher production
costs.
Mineral Ventures generated net sales during the first six months of 2000 of
$8.4 million, a 26% increase from the $6.7 million reported in the first six
months of 1999. The increase in net sales was the result of an increase in
ounces of gold sold and higher gold realizations. Ounces of gold sold
increased from 23.2 thousand ounces in the first six months of 1999 to 27.5
thousand ounces in the same period of 2000. Operating profit for the first
six months of 2000 was $0.2 million compared to an operating loss of $2.0
million in the same period of 1999, reflecting a $31 per ounce (12%) decrease
in the cash cost of gold sold, in addition to a $19 per ounce (6%) increase
in average realization. Cash cost per ounce in US dollar terms was lower in
the first half of 2000 due to increased production and productivity, and, to
a lesser extent, a weaker Australian dollar.
19
<PAGE>
Net sales from the gas, timber and equipment rebuild businesses amounted to
$5.9 million and $1.9 million in the second quarter of 2000 and 1999,
respectively. The improvement was primarily due to higher natural gas prices
and increased revenues from timber (reflecting the start-up of the hard wood
chip mill during the third quarter of 1999) and continued growth in equipment
rebuilds. Operating profit from the gas, timber and equipment rebuild
businesses amounted to $1.8 million and $1.3 million in the second quarters
of 2000 and 1999, respectively. The increase was primarily due to increased
natural gas prices, offset by lower operating profits from the timber
business.
Net sales from the gas, timber and equipment rebuild businesses amounted to
$11.6 million and $3.9 million in the first six months of 2000 and 1999,
respectively. The improvement was primarily due to the previously mentioned
higher natural gas prices and increased revenues from timber and equipment
rebuilds. Operating profit from the gas, timber and equipment rebuild
businesses amounted to $3.6 million and $2.7 million in the first six months
of 2000 and 1999, respectively. The increase was mainly due to higher natural
gas prices and related royalties as well as additional equipment rebuild
business partially offset by lower operating profit from the timber business.
FOREIGN OPERATIONS
A portion of the Company's financial results is derived from activities in
over 100 countries each with a local currency other than the US dollar.
Because the financial results of the Company are reported in US dollars, they
are affected by changes in the value of the various foreign currencies in
relation to the US dollar. Changes in exchange rates may also affect
transactions which are denominated in currencies other than the functional
currency. The Company periodically enters into such transactions in the
course of its business. The diversity of foreign operations helps to mitigate
a portion of the impact that foreign currency fluctuations may have in any
one country on the translated results. The Company, from time to time, uses
foreign currency forward contracts to hedge transactional risks associated
with foreign currencies. Translation adjustments of net monetary assets and
liabilities denominated in the local currency relating to operations in
countries with highly inflationary economies are included in net income,
along with all transaction gains or losses for the period. A subsidiary in
Venezuela operates in such a highly inflationary economy.
The Company is also subject to other risks customarily associated with doing
business in foreign countries, including labor and economic conditions,
political instability, controls on repatriation of earnings and capital,
nationalization, expropriation and other forms of restrictive action by local
governments. The future effects, if any, of such risks on the Company cannot
be predicted.
OTHER OPERATING INCOME, NET
Other operating income, net, which is a component of each operating segment's
previously discussed operating profit, generally includes the Company's share
of net earnings or losses of unconsolidated foreign affiliates, royalty
income, gains and losses from foreign currency exchange and from sales of
coal operating assets. Other operating income, net for the three and six
months ended June 30, 2000 was $4.0 million and $8.0 million, respectively,
compared to $3.2 million and $9.3 million, respectively, in the three and six
months ended June 30, 1999. The increase in other operating income for the
second quarter of 2000 as compared to the same period of 1999 was primarily
due to increased earnings of unconsolidated foreign affiliates and increased
royalty income. Other operating income for the first six months of 1999
includes a $2.5 million gain from the settlement of litigation at Coal
Operations.
INTEREST EXPENSE, NET
Net interest expense increased $0.6 million (7%) and $0.1 million (1%) in the
second quarter and first six months of 2000 as compared to the same period of
1999. This increase was predominantly due to higher average borrowings and
higher US interest rates partially offset by lower interest rates and lower
average borrowings in Venezuela.
OTHER INCOME/EXPENSE, NET
Other income/expense, net for the three and six months ended June 30, 2000
was expense of $1.3 million and income of $0.9 million, respectively,
compared to income of $0.1 million and expense of $0.3 million, respectively,
for the three and six months ended June 30, 1999. The $1.4 million additional
expense for the three-month period was primarily due to an increase in
minority interest (due to improved results of consolidated affiliates) and
lower foreign currency net translation gains. The $1.2 million additional
20
<PAGE>
income for the six month period was primarily due to a $1.9 million gain on
an investment held by Coal Operations recorded in the first quarter of 2000,
partially offset by an increase in minority interest (due to improved results
of consolidated affiliates) and lower foreign currency net translation gains.
INCOME TAXES
In both the 2000 and 1999 periods presented, the provision for income taxes
was less than the statutory federal income tax rate of 35% primarily due to
the tax benefits of percentage depletion and lower taxes on foreign income,
partially offset by provisions for goodwill amortization and state income
taxes.
The difference in the effective tax rate for the periods presented is
primarily a result of the change in the Company's reporting entities due to
the elimination of the tracking stock capital structure. Under the prior
reporting structure, a separate effective tax rate was estimated for each
Group and was applied to each Group's year-to-date pretax earnings. The
quarterly tax provision reflected in the consolidated financial statements of
the Company was a combination of the three Group's tax provisions. This
resulted in quarterly (not annual) fluctuations in the consolidated tax rate.
However, with the elimination of the tracking stock capital structure, the
Company reports its results of operations as one entity and a consolidated
effective tax rate is computed. As a result, the effective tax rate is
expected to be relatively consistent from quarter to quarter, exclusive of
the impact of the potential coal sale or other extraordinary or currently
unanticipated items.
FINANCIAL CONDITION
CASH FLOW REQUIREMENTS
Net cash provided by operating activities during the first six months of 2000
totaled $94.1 million compared with $146.2 million in the first six months of
1999. This decrease resulted primarily from an increase in the cash required
to fund working capital, combined with lower earnings partially offset by
higher non-cash charges. The increase in cash required to fund working
capital was primarily due to additional working capital requirements at BAX
Global. Non-cash charges were impacted by higher depreciation (primarily at
BAX Global) and lower pension expense which primarily reflects a decrease in
service cost due to favorable demographic changes and an increase in the
discount rate from 7.0% to 7.5%. Both pension and postretirement medical
expenses are expected to continue at lower levels through the end of the year.
INVESTING ACTIVITIES
Cash capital expenditures for the first six months of 2000 approximated
$105.5 million, down from approximately $125.0 million in the comparable
period of 1999. Of the 2000 cash capital expenditures, $37.3 million was
spent by Brink's, $35.4 million was spent by BHS, $25.6 million was spent by
BAX Global, and $6.6 million was spent by Natural Resource Operations. Lower
cash capital expenditures in the first six months of 2000 versus the same
period of 1999 were primarily due to lower levels of spending at BAX Global
for aircraft modifications, at Brink's for IT expenditures, and at BHS for
customer installations. For the full year of 2000, company-wide cash capital
expenditures are projected to range between $220 and $230 million. The
foregoing amounts exclude expenditures that have been or are expected to be
financed through capital leases and any acquisition expenditures. Net cash
used in investing activities for the first six months of 2000 also includes
approximately $2.2 million of cash proceeds relating to the sale of an
investment held by the Company's Coal Operations and $3.8 million of cash
used to fund other acquisitions.
During the first six months of 2000, heavy maintenance expenditures of $33.6
million increased $1.8 million over the same period in 1999. This increase
was primarily due to an increase in the number of planes in maintenance, as
well as an overall increase in the costs of certain heavy maintenance
procedures over the last few years.
FINANCING
The Company intends to fund cash capital expenditures through cash flow from
operating activities or through operating leases if the latter are
financially attractive. Any additional funding that may be required will be
financed through the Company's revolving credit agreements or other borrowing
arrangements.
21
<PAGE>
Net cash provided by financing activities was $8.4 million for the first six
months of 2000, compared with net cash used of $2.1 million for the same
period in 1999. Activities in 1999 included additional net borrowings used to
finance the purchase of the Company's Preferred Stock. The 2000 levels
reflected repayments under the Facility (described below) due primarily to
excess borrowings at December 31, 1999 as well as repayments of a portion of
the debt of Brink's France and Venezuela.
The Company has a $350.0 million credit agreement with a syndicate of banks
(the "Facility"). The Facility includes a $100.0 million term loan and also
permits additional borrowings, repayments and reborrowings of up to an
aggregate of $250.0 million. As of June 30, 2000 and December 31, 1999
borrowings of $100.0 million were outstanding under the term loan portion of
the Facility and $206.4 million and $185.0 million, respectively, of
additional borrowings were outstanding under the remainder of the Facility.
The maturity date of both the term loan and the revolving credit portion of
the Facility is May 2001. Therefore, the borrowings under the Facility have
been reclassified from long-term debt to current debt. The Company is
currently negotiating a replacement facility and expects to be able to obtain
sufficient financing to cover its needs. Due to the changes in the lending
markets since the Company last entered into a revolving credit facility, it
is expected that lending rates will be higher.
MARKET RISKS AND HEDGING AND DERIVATIVE ACTIVITIES
The Company has activities in well over 100 countries and a number of
different industries. These operations expose the Company to a variety of
market risks, including the effects of changes in foreign currency exchange
rates and interest rates. In addition, the Company consumes and sells certain
commodities in its businesses, exposing it to the effects of changes in the
prices of such commodities. These financial and commodity exposures are
monitored and managed by the Company as an integral part of its overall risk
management program. The diversity of foreign operations helps to mitigate a
portion of the impact that foreign currency rate fluctuations may have in any
one country on the translated results. The Company's risk management program
considers this favorable diversification effect as it measures the Company's
exposure to financial markets and as appropriate, seeks to reduce the
potentially adverse effects that the volatility of certain markets may have
on its operating results. In addition, the Company, in some cases, is able to
adjust its pricing to cover a portion of the increase in the cost of certain
commodities (primarily jet fuel). The Company has not had any material change
in its market risk exposures since December 31, 1999.
CAPITALIZATION
As previously discussed, prior to January 14, 2000, the Company had three
classes of common stock: Brink's Stock, BAX Stock and Minerals Stock, which
were designed to provide shareholders with securities reflecting the
performance of the Brink's Group, the BAX Group and the Minerals Group,
respectively.
On December 6, 1999, the Company announced that its Board of Directors (the
"Board") had approved the elimination of the tracking stock capital structure
by an exchange of all outstanding shares of Minerals Stock and BAX Stock for
shares of Brink's Stock (the "Exchange"). The Exchange took place on January
14, 2000 (the "Exchange Date"), on which date, holders of Minerals Stock
received 0.0817 share of Brink's Stock for each share of their Minerals
Stock; and holders of BAX Stock received 0.4848 share of Brink's Stock for
each share of their BAX Stock based on the shareholder approved formula and
calculated as follows:
<TABLE>
<CAPTION>
(Per share prices) Brink's Stock BAX Stock Minerals Stock
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Ten day average price* $ 18.92 $ 7.98 $ 1.34
Exchange factor 1.00 1.15 1.15
--------------------------------------------------------------------------------
Fair Market Value, as defined* $ 18.92 $ 9.17 $ 1.54
Exchange ratio N/A 0.4848 0.0817
--------------------------------------------------------------------------------
Closing prices:
December 3, 1999 $ 18.375 $ 10.0625 $ 1.125
December 6, 1999 21.500 10.1250 1.625
--------------------------------------------------------------------------------
</TABLE>
*The "Fair Market Value" of each class of common stock was determined by
taking the average closing price of that class of common stock for the 10
trading days beginning 30 business days prior to the first public
announcement of the exchange proposal. Since the first public announcement
was made on December 6, 1999, the average closing price was calculated during
the 10 trading days beginning October 22, 1999 and ending November 4, 1999.
22
<PAGE>
From and after the Exchange Date, Brink's Stock is the only outstanding class
of common stock of the Company and continues to trade on the New York Stock
Exchange under the symbol "PZB". Prior to the Exchange Date, Brink's Stock
reflected the performance of the Brink's Group only; after the Exchange Date,
Brink's Stock reflects the performance of The Pittston Company as a whole.
Shares of Brink's Stock after the Exchange are hereinafter referred to as
"Pittston Common Stock".
As a result of the Exchange on January 14, 2000, the Company issued
10,916,367 shares of Pittston Common Stock, which consists of 9,490,227
shares of Pittston Common Stock equal to 100% of the Fair Market Value, as
defined, of all BAX Stock and Minerals Stock and 1,426,140 shares of Pittston
Common Stock equal to the additional 15% of the Fair Market Value of BAX
Stock and Minerals Stock exchanged pursuant to the above-described formula.
Of the 10,916,367 shares issued, 10,195,630 shares were issued to holders of
BAX Stock and Minerals Stock and 720,737 shares were issued to The Pittston
Company Employee Benefits Trust (the "Trust").
Shares issued to holders of BAX Stock and Minerals Stock (excluding those
shares issued to the Trust) were distributed as follows:
<TABLE>
<CAPTION>
Holders of Holders of
(In millions except per share prices) BAX Stock Minerals Stock
--------------------------------------------------------------------------------
<S> <C> <C>
Shares outstanding on January 13, 2000 19.5 9.3
Brink's Stock issued pursuant to the Exchange:
Based on 100% of Fair Market Value 8.2 0.7
Based on 15% of Fair Market Value 1.2 0.1
------------------------------------------------------------------------------
Total shares issued on January 14, 2000 9.4 0.8
Brink's Stock closing price per share -
- December 3, 1999 $ 18.375 18.375
------------------------------------------------------------------------------
Value as of December 3, 1999 of Brink's
Stock issued pursuant to the Exchange $ 173.5 13.9
------------------------------------------------------------------------------
</TABLE>
As set forth in the Company's Articles of Incorporation approved by the
shareholders, in the event of a dissolution, liquidation or winding up of the
Company, holders of Brink's Stock, BAX Stock and Minerals Stock would have
shared on a per share basis, the funds, if any, remaining for distribution to
the common shareholders. In the case of Minerals Stock, such percentage had
been set, using a nominal number of shares of Minerals Stock of 4.2 million
(the "Nominal Shares") in excess of the actual number of shares of Minerals
Stock outstanding. The liquidation percentages were subject to adjustment in
proportion to the relative change in the total number of shares of Brink's
Stock, BAX 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 totals, in the case of Minerals Stock, shall include the
Nominal Shares). As of December 3, 1999, such liquidation percentages would
have been approximately 54%, 27% and 19% for holders of Brink's Stock, BAX
Stock and Minerals Stock, respectively. Including the additional shares
issued pursuant to the Exchange the liquidation percentages for former
holders of Brink's Stock, BAX Stock and Minerals Stock, respectively, as of
January 14, 2000 would have been approximately 79%, 19% and 2%.
Upon completion of the Exchange on January 14, 2000, there were a total of
49.5 million issued and outstanding shares of Pittston Common Stock for use
in the calculation of net income per common share.
23
<PAGE>
Under the share repurchase programs authorized by the Board, the Company
purchased shares in the periods presented:
<TABLE>
<CAPTION>
(Dollars in millions, Three Months Ended June 30 Six Months Ended June 30
shares in thousands) 2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pittston Common Stock:
Shares - N/A - N/A
Cost $ - N/A - N/A
Brink's Stock:
Shares N/A - N/A 100.0
Cost $ N/A - N/A 2.5
Convertible Preferred Stock:
Shares - - - 83.9
Cost $ - - - 21.0
Excess carrying amount (a) $ - - - 19.2
--------------------------------------------------------------------------------
</TABLE>
(a) The excess of the carrying amount of the Series C Cumulative
Convertible Preferred Stock (the "Convertible Preferred Stock") over the cash
paid to holders for repurchases made during the periods. This amount is deducted
from preferred dividends in the Company's Consolidated Statement of Operations.
On March 15, 1999, the Company purchased 0.08 million shares (or 0.8 million
depositary shares) of its Convertible Preferred Stock for $21.0 million. The
Convertible Preferred Stock is convertible into Pittston Common Stock and has
an annual dividend rate of $31.25 per share. Preferred dividends included on
the Company's Consolidated Statement of Operations for the quarter ended
March 31, 1999 are net of $19.2 million, which is the excess of the carrying
amount of the Convertible Preferred Stock over the cash paid to the holders
of the Convertible Preferred Stock.
As of June 30, 2000, the Company had the remaining authority to purchase over
time 0.9 million shares of Pittston Common Stock and an additional $7.5
million of its Convertible Preferred Stock. The remaining aggregate purchase
cost limitation for all common stock was $22.2 million as of June 30, 2000.
DIVIDENDS
The Board intends to declare and pay dividends, if any, on Pittston Common
Stock based on the earnings, financial condition, cash flow and business
requirements of the Company.
During the first six months of 2000, the Board declared and the Company paid
cash dividends of 5.0 cents per share of Pittston Common Stock. During the
first six months of 1999, the Board declared and the Company paid cash
dividends of 5.0 cents per share of Brink's Stock, 12.0 cents per share of
BAX Stock and 2.5 cents per share of Minerals Stock. Dividends paid on the
Convertible Preferred Stock in the first six months of 2000 and 1999 were
$0.5 million and $1.1 million, respectively.
24
<PAGE>
FORWARD LOOKING INFORMATION
Certain of the matters discussed herein, including statements regarding
metallurgical coal market conditions, the impact at BHS of growth in new
distribution channels and certain initiatives on the net cost of marketing,
sales and installation costs, BAX Global's initiative to reduce overall
operating costs in the Americas, a BAX Global supplier's bankruptcy status
and its impact on operations and financial results, benefits expense,
issuance of mining permit approvals, payment of liabilities associated with
the closure of the Meadow River mine, changes in foreign exchange rates,
projections about market risk and capital spending, the sale of coal assets
and the recording of losses relating thereto, the impact of the Brink's
France strike on ongoing operations, higher lending rates on Company
borrowings, and financing alternatives involve forward looking information
which is subject to known and unknown risks, uncertainties, and contingencies
which could cause actual results, performance or achievements, to differ
materially from those which are anticipated. Such risks, uncertainties and
contingencies, many of which are beyond the control of the Company, include,
but are not limited to, overall economic and business conditions in the
United States and other countries, the demand for the Company's products and
services, the success of new distribution channels at BHS, the effective
implementation of BHS initiatives related to the net cost of marketing, sales
and installation, the effective implementation of BAX Global's initiatives to
reduce overall operating costs, pricing and other competitive factors in the
industry, geological conditions, new government regulations and/or
legislative initiatives, variations in costs or expenses, variations in the
prices of coal, the timing and ultimate outcome of financing alternatives,
the timing and ultimate outcome of selling coal assets, delays in the
issuance of mining permits and the ability of counterparties to perform.
25
<PAGE>
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's annual meeting of shareholders was held on May 5, 2000.
(b) Not required.
(c) The following persons were elected for terms expiring in 2003, by the
following votes:
For Withheld
Roger G. Ackerman 44,141,607 1,510,645
Betty C. Alewine 44,145,410 1,506,841
Carl S. Sloane 44,148,155 1,504,096
The selection of KPMG LLP as independent certified public accountants
to audit the accounts of the Registrant and its subsidiaries for the
year 2000 was approved by the following vote:
For Against Abstentions
45,226,850 336,156 89,245
The adoption of the Registrant's Management Performance Improvement
Plan was approved by the following vote:
For Against Abstentions
40,438,695 4,065,121 1,148,435
The amendments of the Registrant's Non-Employee Directors' Stock Option
Plan were approved by the following vote:
For Against Abstentions
35,039,982 9,449,367 1,162,901
The amendments of the Registrant's 1988 Stock Option Plan were approved
by the following vote:
For Against Abstentions
40,519,379 3,965,529 1,167,343
The amendment and restatement of the Registrant's Key Employees'
Deferred Compensation Program and ratification of amendments thereto
dated as of December 31, 1996, were approved by the following vote:
For Against Abstentions
42,645,215 1,828,497 1,178,539
26
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
3(b) The Registrant's Bylaws, as amended through July 14, 2000.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the second quarter of
2000.
27
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PITTSTON COMPANY
August 8, 2000 By /s/ Robert T. Ritter
---------------------------------------
Robert T. Ritter
(Vice President -
Chief Financial Officer)
