2 0 0 1 A N N U A L R E P O R T
Pittston
2 0 0 1 A N N U A L R E P O R T
The businesses of The Pittston Company are focused on creating
shareholder value through strategies targeted toward revenue and
profit growth, realizing operating efficiencies and providing the
highest levels of service quality.
The Pittston Company common stock trades on the New York
Stock Exchange under the ticker symbol PZB.
To Our Shareholders
During 2001, your Company remained
focused on its strategy of exiting the Coal
business, fixing BAX Global and growing its
security businesses, despite the negative
impacts of market and other external forces.
Of course, the events of September 11 have
had a profound effect on all of us. Although
temporarily affected by the total grounding
of all U.S. civilian flights, BAX Global and
our airline, Air Transport International,
responded above and beyond the call of duty
in coordination with government authorities
and our customers to service the needs of
our country and customers by using BAX
Global’s alternative modes of transport and
by facilitating the prompt return to flight
capability. At the New York operations
of Brink’s, Incorporated, unprecedented
operating conditions and new security risks
were overcome by the stellar professional
performance of our people.
Strategically, 2001 was a year both of
progress and frustration. Operationally,
dramatic steps were taken to reduce costs at
BAX Global, to fix problem areas and expand
service offerings at Brink’s, Incorporated and
to further develop platforms for long-term
growth at Brink’s Home Security. Each of
these accomplishments helped to enhance
already high quality customer service
thereby positioning each business for
improved future financial performance.
BAX Global
forces more obvious than at BAX Global.
Despite a weak global economy, the people of
BAX took great strides to prepare to reap the
benefits of an economic recovery. Expanding
upon the cost initiatives begun in 2000, further
fleet reductions were made in 2001. The result
is an even leaner, more flexible BAX Global,
which remains fully capable of serving its
customers’ transportation and logistics needs.
With worldwide economic conditions
largely responsible for a decline of over $300
million of revenue in 2001, BAX Global was
still able to build its market presence, serve
its customers at record high levels, win major
awards of new business and maintain an envi-
ronment of teamwork, all while remaining
steadfast in its discipline and initiative to
reduce costs. BAX Global’s leading position in
By the end of 2001, nowhere was the evidence
Asia/Pacific is as strong as ever. Its operations
of progress in the face of challenging external
in Europe are larger, more efficient and more of
1
To Our Shareholders continued
a market force than in the past. In the Latin
earn reasonable returns. Latin America offers
America market, BAX Global is poised to
an important opportunity for our services
become a much larger participant.
today and for tomorrow.
Brink’s, Incorporated
After a difficult start to 2001, Brink’s,
Incorporated began to show signs of progress
in the second half of the year, ending the year
with good momentum for 2002. Once again,
Brink’s had strong cash flow in 2001, with
operating profits before depreciation and
amoritization of $154 million; however,
operating margin and profit fell short
of expectations.
At Brink’s, management quickly identi-
fied problem areas and focused throughout the
year on improving pricing and tightly managing
operating costs and capital expenditures.
Several key markets showed improvement in
the second half of 2001. Pricing and costs
showed improvement in the United States,
and the Canadian operations also took steps
to prepare for improved profitability in 2002.
In Europe, a large part of 2001 was devoted
to preparing for, and ultimately playing an
There will always be answers to changing
market conditions and a few operational dis-
appointments. What can never be replaced
are the lives lost in the line of service. During
2001, 12 Brink’s people were murdered. We
were directly affected by the September 11th
attacks on the World Trade Center with the
loss of the life of one employee, Mr. Joseph
[Frank] Trombino, and those of other family
members of our people. We extended to them
our heartfelt condolences and our resolve to
carry on, and our people have done so with
dedication and fervor. Nevertheless, these
losses are a very painful reminder of the dan-
gers around us and a call to never lose sight
of the overriding goal of the Brink’s organiza-
tion: the safety of its employees. Investments
in new technology, continuous review of
procedures, training and audit continue
to be paramount in providing the safest
environment possible.
integral role in, the successful distribution of
Brink’s Home Security
the new euro currency. Brink’s efforts were
Brink’s Home Security also made progress in
very effective and widely applauded by both
2001. In addition to its perennially strong cash
our customer base and government agencies.
flow as represented by its over $100 million in
The well-documented fiscal and social prob-
EBITDA, 2001 marked another year of strong
lems throughout Latin America challenged
economic value generation. New installation
management there. With no obvious signs of
growth was a solid 11% and monthly recurring
economic improvement, these challenges will
revenue grew 7% to $19.2 million at year end.
likely continue. However, we are committed
One of the best indicators of the continued
to staying the course and to continuing to
success of the Brink’s Home Security business
2
model is its historically lowest disconnect rate
Coal
among the industry leaders. The rate
Much time and effort has been devoted to
remained at 7.6% for 2001. By paying close
exiting the Coal business, but exiting in a
attention to the quality of growth and pro-
prudent manner remains an important ele-
viding outstanding customer service, the
ment of our strategy. Although the process
Brink’s Home Security team has found the
has been challenging, we continue to move
key to long term success, where others have
forward. We have experienced fluctuations in
failed. “Customers for life” remains the focus
the coal market, realigned assets for sale in
of this service leader.
response to changing market dynamics and
Brink’s Home Security consistently has
faced potential buyers whose interests conflicted
produced strong returns on capital and created
with those of our shareholders. Nevertheless,
economic value, but the organization also
our resolve has not wavered. We continue to
remains focused on returning to higher
work tirelessly to complete the exiting process
growth in operating results. To this end,
as quickly as possible, consistent with an
mass marketing to the single-family home-
appropriate economic outcome.
owner remains the core of the Brink’s Home
It was a year of both successes and failures.
Security model. However, with the develop-
Yet, I gratefully acknowledge the continued
ment of additional distribution channels,
support and encouragement of our shareholders
the organization is pursuing new means to
to the unwavering pursuit of our strategy –
grow its high-quality customer base, while
support which, I believe, was reflected in our
adding economic value and ultimately
2001 share price performance despite a weak
improving profitability.
stock market. In light of the new world reality
Cash Flow
Strong cash flow is even more important in
uncertain economic times and, in 2001, your
company delivered once again. For the third
year in a row, net cash provided by operating
activities exceeded $300 million. Using this
cash flow as a base, we were able to reduce
total financings by approximately $115
million while continuing to invest in our
businesses. Our balance sheet is solid and
access to capital is secure. Cash flow will
again be an important area of focus in 2002.
and all of the challenges that it presents, the
progress achieved in 2001 was the result of our
people working harder and smarter. I am proud
of their accomplishments. I also appreciate
the invaluable support and counsel provided
to me by our Board of Directors.
Sincerely,
Michael T. Dan
Chairman, President
and Chief Executive Officer
The Pittston Company
3
The Pittston Company
The Pittston Company, with annual 2001
These leading companies are well
revenue of approximately $3.6 billion, is
known for providing the highest levels of
a diversified business and security services
service to their customers. Employees of
company based in Richmond, Virginia.
Pittston and its affiliates recognize that in
Pittston is parent company to recognized
order to build strong, long-lasting customer
leaders in their respective industries:
relationships, there must be an unyielding
Brink’s, Incorporated, the world’s premier
commitment to be the best.
provider of secure transportation and
By providing the proper resources, The
cash management services; Brink’s Home
Pittston Company helps the primary oper-
Security, one of the largest and most
ating units to maintain their positions as
successful residential alarm companies in
some of the world’s leading service providers.
North America, and BAX Global Inc.,
Pittston’s core businesses employ the
a global freight transportation and supply
latest technology as they strive to provide
chain management industry leader. The
customers with solution-driven products
Pittston Company also maintains interests
and services. These companies pride them-
in natural resources and mining.
selves on staying ahead of their markets
Pittston’s strategic focus is on its
by continually expanding and improving
core business and security services compa-
their service offerings.
nies, which offer opportunities for signifi-
The natural resources operations of
cant growth, superior cash flow and
The Pittston Company comprise natural
more consistent and higher returns for
gas, gold and timber assets. Although these
Pittston’s shareholders.
businesses do not have a long term strategic
4
fit with the business and security services
sound financial position. Each of these
units, they will continue to be managed to
attributes creates a more valuable company.
generate stable cash flow and profitability
As The Pittston Company continues to
in a socially and environmentally responsi-
implement its strategy of growing its busi-
ble manner.
ness and security companies and disposing
With its focus on Brink’s, Brink’s
of its natural resource assets, the value
Home Security and BAX Global, The
inherent in its industry leading companies
Pittston Company will concentrate on
becomes more evident.
growing these global and domestic industry
leaders, strengthening their market posi-
* * * *
Financial information related to The
tions and making each a more valuable
Pittston Company’s segments is included
enterprise. While operating performance
in the Notes to the Consolidated Financial
may periodically be impacted by economic
Statements, which are included as part of
conditions, these are companies with highly
the Annual Report.
regarded brands, a track record of premier
customer service and strong cash flow creating
a solid foundation that provides stability in
difficult times and the potential for robust
growth in more vibrant markets. The inher-
ent cash flow strength of Pittston’s operating
companies permits these units to invest in
growth opportunities while maintaining a
5
Brink’s Incorporated
Rising to a position of leadership within an
Brink’s established that trust a long time
industry is a notable accomplishment.
ago and by maintaining it has grown into
Staying there is truly impressive. The secu-
a worldwide industry leader. Through the
rity businesses of The Pittston Company
years commerce has become global, customers
have become leaders in their respective
have redefined themselves, technology has
markets and have maintained their posi-
changed how every business operates and
tions through hard work, attention to
the world has become a riskier place. Yet,
detail, innovation, a focus on their people
through all these changes, when members
and quality customer service.
of the business world or the public sector
Everyone knows that the name
are looking for an organization to help
“Brink’s” is synonymous with security.
manage risk and alleviate the burden of
But the name alone is not a guarantee of
handling valuables they turn to Brink’s.
success and the 37,500 men and women
Brink’s presence in 53 countries across
of Brink’s, Incorporated understand that
six continents assures customers that a
they have been entrusted to protect and
trustworthy name will be in most major
enhance the proud legacy of Brink’s.
markets. With over 7,200 armored vehicles
For over 140 years, financial institu-
around the world, valuables can be safely
tions, commercial enterprises and govern-
moved within Saõ Paolo and Amsterdam
ments around the world have sought a
and from Seoul to London.
security provider they can trust to manage
Being where your customers are is
the risk involved in transporting and pro-
important, but so is the ability to provide
cessing their valuables safely and reliably.
services that truly fit their needs. Banks
6
and savings and loan associations need
looking for providers who can expertly
automated teller machines safely replen-
manage risk, even in an uncertain environ-
ished on a timely basis to satisfy their cus-
ment, as well as those with a solid track
tomers. Brink’s does it. Mints need bulk
record proven over many years. In these
distribution of coin. Brink’s does it. Major
times, few companies can answer the call
financial institutions need logistics assistance
for customers looking for so much. That is
with their vault and processing operations.
why customers call Brink’s.
Brink’s does it. Retailers need a safe and
Brink’s will maintain its leadership
reliable way to transport and reconcile
by incorporating best practices across the
their cash takings. Brink’s does it. Jewelers
globe, enhancing service offerings in antici-
need to move diamonds and jewelry to
pation of customer needs and developing
market securely. Brink’s does it. When
new product offerings and new avenues for
central banks need to eliminate multiple
existing products and services. Brink’s
currencies throughout a continent and
will also look to gain scale within existing
issue one new currency, Brink’s does it.
markets and may enter new markets to be
The Brink’s advantage is clear to its
ready to serve its customers. Most impor-
customers, as they seek multiple product
tantly, Brink’s will always strive to operate
offerings, expand their geographical scope,
in the safest manner possible to protect its
look for service providers with technological
employees and its customer’s assets. Brink’s
strengths, and move to outsource asset-
will continue to lead.
intensive activity to those with the right
resources and know how. Customers are also
7
Pittston annual rep. 2001 3/28/02 2:42 PM Page 8
Brink’s Home Security
In 1983, Brink’s Home Security pioneered
upon achieving customer satisfaction. The
the introduction of high quality, affordable
professionalism of its sales consultants, the
monitored security services to the residential
skill of its certified technicians, and the
mass market. From the beginning, Brink’s
thoroughness of its customer care have
Home Security has been dedicated to creat-
enabled it to lead all major competitors
ing lifetime customers by providing superior,
in customer retention.
dependable service and today the company
It is not only homeowners who have
is proud to deliver high quality service to
recognized the quality of Brink’s Home
over 700,000 customers in more than 100
Security. Brink’s Home Security’s diligent
markets throughout North America.
efforts to ensure the highest quality instal-
Homeowners seek the peace of mind
lation standards have also earned the com-
that comes from the knowledge that their
pany the prestigious Installation Quality
loved ones, their home, and their posses-
(IQ) Certification. Brink’s Home Security
sions are protected. An advanced electronic
is the only national security company to
security system designed, installed, and
earn this designation from the Installation
monitored by Brink’s Home Security helps
Certification Board, an organization of
to deliver that peace of mind.
police, fire, insurance, security, and state
Brink’s Home Security earns the
regulatory professionals.
respect and trust of each customer through
Brink’s Home Security monitors alarm
the dedicated efforts of its over 2,400
signals and responds to customer calls 24
employees. Every customer contact is focused
hours per day seven days a week from its
8
Pittston annual rep. 2001 3/28/02 2:42 PM Page 9
National Service Center in Irving, Texas.
select major homebuilders. These services
The monitoring center was built to meet
include both security and low-voltage
the exacting standards of Underwriters
options such as wiring and cabling for
Laboratories (UL) and has achieved a UL
telephone, television, home networking,
listing every year since the company’s incep-
Internet, home theater, and sound systems.
tion. In 2001, the dedicated professionals
Brink’s Home Security is proud of
of the monitoring department of Brink’s
its progress since 1983. With sales, installa-
Home Security were also honored to receive
tion and service offices in most major
the Award for Customer Contact Excellence
metropolitan areas in the United States
from Customer Interface magazine.
and western Canada, customers can take
The people of Brink’s Home Security
comfort in knowing that they can find
continue to find new ways to serve the
Brink’s Home Security ready to protect
needs of potential customers in different
them almost anywhere.
segments of the market. Brink’s Home
With a mission to create customers for
Security has expanded its services to apart-
life, every Brink’s Home Security employee
ment and condominium complexes where
knows that every day presents a new
people have the same security needs as
opportunity to earn the continued trust
single-family homeowners. Also, Brink’s
and loyalty of its customers by providing
Home Security’s services are being made
the best service possible.
available to more customers through instal-
lations in new residential construction for
9
BAX Global
Companies emerge as industry leaders
Global creates and manages supply chain
because of the strength of relationships
solutions for many of the major players in
they forge with their customers. These rela-
the global marketplace.
tionships are built on the ability of the
In the last year, BAX Global re-branded
company’s people to anticipate customer
its services under a new BAXSuite™ product
needs and to work in tandem with customers
umbrella. Within the North American market,
to bring innovative business solutions to
BAXSuite encompasses BAXGuaranteed™
often complex problems.
products, offering a variety of time-definite
BAX Global does just this for its world-
overnight and second day delivery options
wide customer base of leading corporations.
with money back guarantees and
As an industry leader in multi-modal
BAXStandard™ services including overnight
freight transportation and supply chain
and second-day delivery together with its
management, BAX Global knows that the
successful new product, BAXSaver® service.
world’s top manufacturers demand more than
BAXSaver® was developed as the optimal
just reliable delivery for their heavyweight
cost-effective, time-definite transportation
shipments. BAX Global offers a mode-neutral
solution. This service delivers heavyweight
approach to integrated, time-definite,
shipments within 1-3 days.
transportation services. By doing so, BAX
BAX Global’s services in North
Global has emerged as a true leader in creating
America are supported by a fleet that
the widest array of customer-driven products.
deploys 18 regularly scheduled aircraft, a
Whether managing distribution centers
customized heavy freight sorting facility,
for original equipment manufacturers or
and a national surface network.
providing reverse logistic capabilities
Worldwide, BAX Global maintains a
between manufacturer and end-user, BAX
leadership position in international airfreight,
10
supply chain management and customs
tools to meet the intricate business needs of its
brokerage. In 2001 BAX Global began
global customers. Furthermore, BAX Global
focusing efforts on enhancing its ocean for-
has built a private extranet community for
warding capabilities with new ocean products,
its customers called “MyBAX,” which
allowing BAX Global to offer even more
offers customer-specific information per-
choices to its multinational accounts.
taining to delivery schedules, rate quotes
Leadership in logistics and supply chain
and shipment tracking. During 2002,
management is dependent on the highest
BAX Global is further expanding its
quality customer service, from the initial call
web-based shipping tools to offer online
or e-mail for pickup to final shipment delivery.
shipment processing.
Each step of the way, BAX Global’s nearly
While BAX Global’s capabilities and
10,000 employees take personal ownership
service quality set it apart, its extensive
for 100% customer satisfaction.
global reach further solidifies its place
In logistics today, an integral component
among industry leaders. With over 500
to customer satisfaction is having and man-
offices in over 120 countries and logistics
aging an industry leading global information
facilities located in most every important
technology capability. Customer-driven IT
global business center, BAX Global can
systems will continue to be a critical com-
offer its expertise and resources in the mar-
petency as the complex business of integrated
kets where its customers need them most.
transportation and supply chain manage-
Through its technological proficiency,
ment continues its evolution. Besides its
global reach, logistics expertise, breadth
integrated global information, operations,
of product offering and mode-neutral
finance and communications systems, BAX
transportation ability, BAX Global is well
Global customizes best-in-class supply chain
positioned to grow as an industry leader.
11
The Pittston Company Financial Highlights
(Operating results for continuing operations, except where noted)
(In millions except per share data)
Operating Results
Operating Revenues
Brink’s, Incorporated
Brink’s Home Security
BAX Global
Total Business and Security Services
Other Operations
Total Operating Revenues
Operating Profit (Loss)
Brink’s, Incorporated
Brink’s Home Security
BAX Global(a)
Total Business and Security Services(a)
Other Operations
General Corporate Expense
Total Operating Profit(a)
Depreciation and Amortization
EBITDA(b)
Diluted Net Income from Continuing
Operations per Common Share(c)
Diluted Net Income (Loss)
per Common Share(c)(d)
Diluted Weighted Average
Common Shares Outstanding(c)
Book Value per Common Share(c)(d)
Cash Flow from Operating Activities(d)
Capital Expenditures(d)
Total Assets(d)
Long Term Debt, Less Current Maturities(d)
Shareholders’ Equity(d)
2001
2000
1999
1998
1997
$1,536.3
257.6
1,790.1
$3,584.0
40.2
$3,624.2
$
92.0
54.9
(24.6)
$ 122.3
7.6
(19.3)
$ 110.6
$ 194.4
305.0
$1,462.9
238.1
2,097.6
$3,798.6
35.5
$3,834.1
$
$ 108.5
54.3
(99.6)
63.2
5.7
(21.2)
47.7
$
$ 188.9
294.1
$
0.88
$
0.05
$ 0.31
$ (5.12)
51.4
9.23
$
$ 315.7
205.4
2,402.1
257.4
486.8
50.1
9.22
$
$ 364.8
227.6
2,478.7
313.6
475.8
$1,372.5
228.7
2,083.4
$3,684.6
25.1
$3,709.7
$ 103.5
54.2
61.5
$ 219.2
0.3
(22.9)
$ 196.6
$ 148.9
345.5
$
$
2.19
0.70
49.3
$1,247.7
203.6
1,777.0
$3,228.3
23.3
$3,251.6
$
98.4
53.0
(0.6)
$ 150.8
5.5
(27.9)
$ 128.4
$ 122.3
286.7
$
$
1.17
1.27
49.3
$ 921.9
179.6
1,662.3
$2,763.8
26.5
$2,790.3
$
81.6
52.8
63.3
$ 197.7
4.9
(19.7)
$ 182.9
$
$
$
94.4
277.3
1.94
2.17
49.1
$ 14.86
$ 13.98
$ 13.01
$ 329.3
280.5
2,459.7
395.1
749.6
$ 231.8
256.6
2,331.1
323.3
736.0
$ 268.1
173.8
1,995.9
191.8
685.6
(a) Includes BAX Global related restructuring charges of $57.5 million in 2000 and additional expenses of $36.0 million in 1998.
(b) Excludes BAX Global related restructuring charges of $57.5 million in 2000 and additional expenses of $36.0 million in 1998.
(c) Pro forma for 1999, 1998, and 1997. 2000 includes $1.04 impact for the implementation of Staff Accounting Bulletin No. 101.
(d) Includes Discontinued Operations
The financial highlights set forth above should be read only in conjunction with the 2001 Annual Report, including Management’s
Discussion and Analysis, Notes to Consolidated Financial Statements.
Business and Security Services Information
Operating Revenue Composition
EBITDA Composition
10%
50%
43%
33%
60%
7%
2001
1997
7%
40%
50%
2001
32%
39%
29%
1997
Brink’s Incorporated
Brink’s Home Security
BAX Global
12
FINANCIAL REVIEW
FINANCIAL REVIEW
FINANCIAL REVIEW
FINANCIAL REVIEW
2001 ANNUAL REPORT
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Management's Discussion and Analysis...................2
Statement of Management Responsibility.............27
Independent Auditors' Report.................................28
Consolidated Balance Sheets....................................29
Consolidated Statements of Operations................30
Consolidated Statements of Comprehensive
Income (Loss)...........................................................32
Consolidated Statements of Shareholders'
Equity.........................................................................33
Consolidated Statements of Cash Flows................34
Notes to Consolidated Financial Statements.........35
Selected Financial Data..............................................62
Board of Directors and Senior Management.........64
1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
2001 ANNUAL REPORT
The Pittston Company and subsidiaries (the “Company”)
has four operating segments and one discontinued
segment. The operating segments are Brink’s,
Incorporated (“Brink’s”), Brink’s Home Security, Inc.
(“BHS”), BAX Global Inc. (“BAX Global”) and Other
Operations which consists of the Company’s gold, timber
and natural gas operations. The Results of Operations in
the table reflect only the performance of the Company’s
continuing operations.
The Company intends to exit the coal business through
the disposal of its coal mining operations and reserves
(“Coal Operations”). The Company’s Coal Operations
have been reported as discontinued operations for all
periods presented herein.
For the year ended December 31, 2001, the Company
reported net income of $16.6 million, or $0.31 per diluted
share, compared with a net loss of $256.6 million, or $5.12
per diluted share, for 2000. Net income in 2001 included a
charge of $29.2 million (after-tax) reflecting adjustments to
the estimated loss on disposition of the discontinued
operations. Results in 2000 included a $207.3 million loss
(after-tax) from discontinued operations, a $52.0 million
(after-tax) charge to record the cumulative effect of an
accounting change and a $35.7 million (after-tax)
restructuring charge. For the year ended December 31,
1999, the Company reported net income of $34.7 million,
or $0.70 per pro forma diluted share. Net income in 1999
included a charge of $53.5 million (after-tax) to reflect an
impairment in value of certain long-lived assets of the
Coal Operations.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Continuing Operations
Continuing Operations
Continuing Operations
Continuing Operations
(In millions)
Revenues:
Revenues:
Revenues:
Revenues:
Business and Security Services:
Years Ended December 31
2001
2001
2001
2001
2000
1999
Brink’s
BHS
BAX Global
1,536.3
$$$$ 1,536.3
1,536.3
1,536.3
1,462.9
1,372.5
257.6
257.6
257.6
257.6
238.1
228.7
1,790.1
1,790.1
1,790.1
1,790.1
2,097.6
2,083.4
Business and Security Services
3,584.0
3,584.0
3,584.0
3,584.0
3,798.6
3,684.6
Other Operations
Revenues
40.240.240.240.2
35.5
25.1
3,624.2
$$$$ 3,624.2
3,624.2
3,624.2
3,834.1
3,709.7
Operating profit (loss):ss):ss):ss):
Operating profit (lo
Operating profit (lo
Operating profit (lo
Business and Security Services:
Brink’s
BHS
BAX Global
$$$$
92.092.092.092.0
54.954.954.954.9
108.5
54.3
(24.6)
(24.6)
(24.6)
(24.6)
(99.6)
Business and Security Services
Other Operations
Segment operating profit
122.3
122.3
122.3
122.3
7.67.67.67.6
129.9
129.9
129.9
129.9
63.2
5.7
68.9
103.5
54.2
61.5
219.2
0.3
219.5
General corporate expense
(19.3)
(19.3)
(19.3)
(19.3)
(21.2)
(22.9)
Operating profit
$$$$
110.6
110.6
110.6
110.6
47.7
196.6
Revenue from continuing operations in 2001 decreased
$209.9 million (5%) compared to 2000, primarily due to
lower volume at BAX Global, largely resulting from weak
economic conditions. Operating profit was $110.6 million
in 2001 versus $47.7 million in 2000 which included a $57.5
million restructuring charge at BAX Global (see discussion
below). In 2001, improved operating performance at BAX
Global (even after eliminating the effects of the
restructuring charge on 2000 performance) was partially
offset by a decrease in operating profit at Brink’s.
2
Revenue from continuing operations in 2000 increased
$124.4 million (3%) compared to 1999, primarily due to
growth in revenue at Brink’s. Operating profit was $47.7
million in 2000 versus $196.6 million in 1999 primarily due
to both lower operating results and a $57.5 million
restructuring charge at BAX Global in 2000 (see discussion
below).
The following is a discussion of the operating results for
the Company’s four operating segments: Brink’s, BHS,
BAX Global and Other Operations.
BRINK’S
BRINK’S
BRINK’S
BRINK’S
(In millions)
Revenues:
Revenues:
Revenues:
Revenues:
North America (a)
International
Revenues
Years Ended December 31
2001
2001
2001
2001
2000
1999
$$$$
684.1
684.1
684.1
684.1
852.2
852.2
852.2
852.2
647.2
815.7
588.4
784.1
$$$$ 1,531,531,531,536.36.36.36.3
1,462.9
1,372.5
Operating profit:
Operating profit:
Operating profit:
Operating profit:
North America (a)
International
Segment operating profit
$$$$
$$$$
41.641.641.641.6
50.450.450.450.4
92.092.092.092.0
Depreciation and amortization (b) $$$$
60.160.160.160.1
Goodwill amortization
Capital expenditures
2.12.12.12.1
71.371.371.371.3
53.2
55.3
48.5
55.0
108.5
103.5
58.2
2.0
73.9
51.0
2.0
84.4
(a) Comprises U.S., Canada and Puerto Rico.
(b) Excludes amortization of goodwill.
Comparison of 2001 and 2000
Brink’s worldwide consolidated revenues increased $73.4
million (5%) in 2001 as compared to 2000. This increase
was attributable to both the North America and
International operations and was partially offset by the
impact of the stronger U.S. dollar relative to a year ago.
Brink’s 2001 operating profit of $92.0 million represented a
15% decrease from 2000, with decreases in both the North
America and International regions. Operating profit in
2000 benefited from a $4.9 million settlement associated
with an insurance recovery related to a prior year’s
robbery loss.
2001 ANNUAL REPORT
Revenues and operating profit from North America
operations in 2001 increased $36.9 million and decreased
$11.6 million, respectively, from 2000. The 6% increase in
revenues for 2001 primarily related to higher revenues
from armored car operations, which includes ATM
services. Excluding a $4.9 million gain in 2000 from an
insurance settlement related to a prior year’s robbery loss,
operating profit decreased 14% in 2001, primarily due to
increased employee benefits, particularly for medical
benefits and workers’ compensation costs, all risk costs,
higher operating losses incurred by the Global Services
business (air courier and diamond/jewelry) in the U.S.
(partly due to lower volumes and higher transportation
costs) and a downturn in performance of the armored car
business in Canada due to the loss of certain customer
contracts and the effects of a labor dispute during the first
nine months of 2001.
Revenues and operating profit from International
operations in 2001 increased $36.5 million and decreased
$4.9 million, respectively, from 2000. International
revenues in 2001 were reduced by approximately $50
million as a result of the year-over-year strengthening of
the U.S. dollar relative to certain local currencies,
primarily in Latin America and, to a lesser extent, Europe.
Excluding these foreign currency effects, International
revenues increased 11%, primarily due to operations in
Europe and, to a lesser extent, Latin America and Asia
Pacific. The increase in Europe reflected revenues
associated with armored car services performed under
contracts with central banks and banks to distribute the
euro currency throughout Europe, as well as increased
volumes in armored transportation, ATM servicing,
currency processing and air courier operations. Increases
in Latin America (excluding foreign currency effects) were
primarily due to higher revenues in Brazil and Venezuela.
The net decrease in International operating profit was due
to lower results in Latin America which more than offset
improved results in Europe and Asia Pacific. Lower
operating profits in Latin America reflect severe pricing
competition and unfavorable exchange rate effects in
Brazil as well as high labor costs and deteriorating
economic conditions in Argentina. Challenging economic
and competitive conditions in Latin America are expected
to continue. Improved results in Europe included the
3
higher margin euro transportation and distribution work
as well as volume increases in armored transportation,
ATM services and currency processing. Revenues and
operating profits for euro transportation and distribution
were primarily earned during the fourth quarter of 2001.
Operating results in the United Kingdom were well below
the prior year primarily due to costs associated with
expansion into the ATM business, a decline in air courier
volumes and reduced armored transportation business.
Brink’s expects revenues and operating profit in the first
quarter of 2002 to include additional revenues and
operating profit associated with the distribution of the
euro currency, but does not expect this to continue
during the remainder of 2002. International operating
profits for 2001 benefited from approximately $2 million
of pretax gains on the sale of the Company’s investments
in two non-strategic international affiliates.
Brink’s believes that insurance costs for the industry may
increase in future periods as a result of the widely
reported hardening of insurance markets.
Comparison of 2000 and 1999
Brink’s worldwide consolidated revenues in 2000
increased 7% compared to 1999. This increase in revenues
occurred in both the North America and International
regions and was partially offset by the impact of the
stronger U.S. dollar relative to 1999 (approximately $68
million). Brink’s 2000 operating profit represented a 5%
increase over 1999. The increase in operating profit was
primarily due to increased profits in North America of $4.7
million, which benefited from a $4.9 million settlement
associated with an insurance recovery related to a prior
year’s robbery loss. International results increased $0.3
million despite the aforementioned foreign exchange
effect which reduced operating profits by approximately
$3.7 million.
2001 ANNUAL REPORT
Revenues and operating profits from North America
operations in 2000 reflected increases of $58.8 million and
$4.7 million, respectively, from 1999. The 10% increase in
revenues for 2000 primarily related to growth in the
armored car operations and new business. The decrease
in operating profits of $0.2 million, excluding the effects
of the insurance settlement (discussed above), reflects
higher labor costs in expanding markets and increased
workers’ compensation and fuel costs, partially offset by
the revenue increase.
Revenues and operating profit from International
operations in 2000 represented increases of $31.6 million
and $0.3 million, respectively, from 1999. The 4% increase
in revenue was primarily due to operations in Latin
America and Asia/Pacific, partially offset by a decrease in
Europe. The increase in Latin America was primarily due to
improvements in Brazil, while improvements in
Asia/Pacific occurred in Australia and Hong Kong.
Revenue decreases in Europe resulted from the effects of
the weaker euro, partially offset by growth in France.
International revenues for 2000 were negatively impacted
(primarily in Europe) by the strong U.S. dollar
(approximately $68 million).
International operating profits reflected improvements in
the Asia/Pacific region primarily due to lower operating
losses in Australia and higher profits in Hong Kong. Latin
America reported lower operating profits primarily due to
Mexico and weaker business conditions in Colombia,
partially offset by improvements in operating
performance in Brazil, Venezuela and Argentina. Europe
reported lower operating profits as results were
negatively impacted by the strong U.S. dollar ($3.8
million), primarily versus the euro and lower operating
profits in the Netherlands due in large part to higher labor
costs.
4
BRINK’S HOME SECURITY
BRINK’S HOME SECURITY
BRINK’S HOME SECURITY
BRINK’S HOME SECURITY
(Dollars in millions,
Years Ended December 31
subscriber data in thousands)
2001
2001
2001
2001
2000
1999
Revenues (a)
Revenues (a)
Revenues (a)
Revenues (a)
257.6
$$$$ 257.6
257.6
257.6
238.1
228.7
Operating profit:
Operating profit:
Operating profit:
Operating profit:
Recurring services (b)
Investment in new subscribers (c)
Segment operating profit (d)
Monthly recurring revenues (e)
100.9
100.9
100.9
100.9
(46.0)
(46.0)
(46.0)
(46.0)
96.4
77.7
(42.1)
(23.5)
$$$$
$$$$
54.954.954.954.9
19.219.219.219.2
54.3
18.0
54.2
16.8
Annualized disconnect rate
7.6%7.6%7.6%7.6%
7.6%
7.8%
Number of subscribers:
Beginning of period
Installations
Disconnects
End of period
Average number of subscribers
Depreciation and amortization (f) $$$$
70.670.670.670.6
Amortization of deferred revenue
23.923.923.923.9
Net cash deferrals on
new subscribers (g)
Capital expenditures
14.414.414.414.4
81.381.381.381.3
675.3
675.3
675.3
675.3
90.990.990.990.9
643.3
82.0
585.6
105.6
(52.7)
(52.7)
(52.7)
(52.7)
(50.0)
(47.9)
713.5
713.5
713.5
713.5
693.5
693.5
693.5
693.5
675.3
643.3
659.8
62.1
20.6
15.1
74.5
614.3
49.9
-
-
80.6
(a) The change in accounting principle (described below) reduced
operating revenue by $3.1 million and $6.4 million for 2001 and 2000,
respectively.
(b) Recurring services reflects the normal monthly operating profit
generated from the existing subscriber base plus, in 2001 and 2000, the
amortization of deferred revenues and deferred subscriber acquisition
costs (primarily selling expenses).
(c) Investment in new subscribers in 2001 and 2000 primarily includes the
marketing and selling expenses, net of the deferral of certain direct costs,
incurred in the acquisition of new subscribers. Investment in new
subscribers in 1999 includes the marketing and selling expenses, net of
nonrefundable installation revenues.
(d) Operating profit would have been $1.1 million lower in 2001 and $2.3
million higher in 2000 if the accounting had been under the method used
prior to the change in accounting principle (described below).
(e) 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 and maintenance
services. The monthly recurring revenues exclude the amortization of
deferred revenues.
Includes amortization of deferred subscriber acquisition costs of $10.4
(f)
million and $8.5 million in 2001 and 2000, respectively.
(g) Nonrefundable payments on new installations which were deferred,
net of deferred direct selling expenses.
2001 ANNUAL REPORT
Total segment operating profit is the function of recurring
services minus the cost of the investment in new
subscribers. Recurring services in 2000 and 2001, and in
future years, reflects the normal monthly monitoring
earnings generated from the existing subscriber base plus
the amortization of deferred revenues and deferred direct
costs from installations (see discussion below). It is
impacted by changes in the average monitoring fee per
subscriber, the amount of operational costs, the size of
the subscriber base and the amount of deferred revenues
less deferred direct costs amortized in a given year.
Investment in new subscribers is the net expense
(primarily marketing and selling expenses) incurred in
adding to the subscriber base every year. The amount of
such investment charged to income may be influenced by
several factors, including the growth rate of new
subscriber installations and the level of costs incurred in
attracting new subscribers. As a result, increases in the
rate of investment (the addition of new subscribers) may
have a negative effect on segment operating profit but a
positive impact on cash flow and economic value.
Comparison of 2001 and 2000
Revenues for BHS increased 8% in 2001 versus 2000,
primarily due to the 5% growth in the average subscriber
base. Monthly recurring revenues, measured at year end,
grew 7% from 2000 to 2001 as the subscriber base grew 6%
from year end to year end.
Segment operating profit for 2001 grew by $0.6 million to
$54.9 million as subscriber volume-related growth in
recurring services was partially offset by increased field
service costs and the $3.9 million increase (9%) in the
investment in new subscribers (the number of
installations increased 11% in 2001 versus 2000).
Comparison of 2000 and 1999
Revenues for BHS were $238.1 million in 2000 versus
$228.7 million for 1999. Excluding the effect of the change
in accounting principle, revenues in 2000 would have
been $6.4 million higher, or $244.4 million, an increase of
7% over the prior year. Such increase resulted primarily
from the 7% growth in the average subscriber base.
Monthly recurring revenues, measured at year-end, grew
7% from 1999 to 2000.
5
Segment operating profit for 2000 was $54.3 million but
would have been $56.7 million under the accounting
principles used to report 1999 results. This $2.4 million
increase in operating profit from the $54.2 million
reported in 1999 was due primarily to the growth in
recurring services caused by the year over year increase in
the subscriber base. This was partially offset by the
increased cost of the investment in new subscribers.
BAX GLOBAL
BAX GLOBAL
BAX GLOBAL
BAX GLOBAL
(In millions)
Revenues:
Revenues:
Revenues:
Revenues:
Americas
International
Eliminations/other
2001 ANNUAL REPORT
Years Ended December 31
2001
2001
2001
2001
2000
1999
1,008.1
$$$$ 1,008.1
1,008.1
1,008.1
1,236.6
1,244.0
845.0
845.0
845.0
845.0
917.3
892.4
(63.0)
(63.0)
(63.0)
(63.0)
(56.3)
(53.0)
Prior to the change in accounting principle in 2000, BHS
charged against earnings as incurred, all marketing and
selling costs associated with obtaining new subscribers
and recognized as revenue all nonrefundable payments
received from such subscribers to the extent that costs
exceeded such revenues. In December 1999, the
Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (“SAB 101”), “Revenue
Recognition in Financial Statements,” followed by a
related interpretation in October 2000. These releases
provide interpretive guidance on applying generally
accepted accounting principles covering revenue
recognition and related costs. Pursuant to this guidance,
BHS now defers all new installation revenue and the
portion of the new installation costs deemed to be direct
costs of subscriber acquisition. Such revenues and costs
are amortized over the expected term of the relationship
with the subscriber.
The above was accounted for as a change in accounting
principle. Accordingly, full year 2000 and 2001 results
reflect the impact of the accounting change which was
effective January 1, 2000. The Company recorded a
noncash, pretax charge of $84.7 million ($52.0 million
after-tax) in 2000 to reflect the cumulative effect of the
change in accounting principle on years prior to 2000.
Revenues
1,790.1
$$$$ 1,790.1
1,790.1
1,790.1
2,097.6
2,083.4
Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Americas (a)
International (a)
Other
$$$$
(43.0)
(43.0)
(43.0)
(43.0)
(96.2)
35.635.635.635.6
33.2
75.1
31.0
(17.2)
(17.2)
(17.2)
(17.2)
(36.6)
(44.6)
Segment operating profit (loss)
$$$$
(24.6)
(24.6)
(24.6)
(24.6)
(99.6)
Depreciation and amortization (b) $$$$
49.449.449.449.4
Goodwill amortization
Capital expenditures
7.47.47.47.4
33.133.133.133.1
53.8
7.5
60.1
61.5
32.6
7.8
94.5
Intra U.S. revenue
$$$$
457.3
457.3
457.3
457.3
604.6
654.5
Worldwide expedited freight services:
Revenues
Weight in pounds
1,427.2
$$$$ 1,427.2
1,427.2
1,427.2
1,724.2
1,742.3
1,453.4
1,453.4
1,453.4
1,453.4
1,764.9
1,802.3
(a) Includes restructuring charges of $54.6 million for Americas and $2.9
million for International for 2000.
(b) Excludes amortization of goodwill.
BAX Global operates throughout most of the world. The
Americas includes the U.S., Latin America and Canada;
International includes BAX Global’s Atlantic and Asia-
Pacific operating regions. Each region includes both
expedited and non-expedited freight services. Non-
expedited freight services primarily include deferred
delivery freight shipments, supply chain management and
ocean freight services. Revenues and profits on expedited
freight services are shared among the origin and
destination countries on most export volumes.
6
2001 ANNUAL REPORT
In 2001, International revenues decreased $72.3 million
(8%) and operating profit increased $2.4 million (7%) as
compared to 2000. The decrease in revenues was primarily
a result of weak economic conditions in the U.S. and Asia-
Pacific. Results for the Atlantic region in 2000 included a
$2.9 million restructuring charge (see discussion below).
Although International operating profit in 2001 was
impacted by lower export volumes from the Asia-Pacific
region, cost savings from the previously mentioned 2000
restructuring plan and continuing efforts to reduce
overhead costs resulted in essentially flat profit
performance from 2000 to 2001 despite the decline in
revenue.
The decrease in 2001 eliminations/other revenue was
largely due to the refocusing of certain U.S.-based
logistics revenues from a global to an Americas role.
Eliminations/other revenue in 2000 included $5.8 million of
these logistics revenues. Such revenues in 2001 are
included within the Americas. Other operating loss for
2001 decreased $19.4 million as compared to 2000. The
improvement is primarily due to lower global
administrative expenses stemming from cost control
efforts, as well as the reclassification of the U.S.-based
logistics costs noted above. Other operating loss included
goodwill amortization of $7.4 million in 2001, $7.5 million
in 2000 and $7.8 million in 1999. Goodwill will no longer be
amortized beginning in 2002. See Note 1 to the
Consolidated Financial Statements.
The terrorist attacks in the U.S. in September 2001 directly
impacted BAX Global’s operating results to the extent that
it was not able to provide air cargo service to its
customers for a short period in September. The attacks
could also have an effect on BAX Global’s future operating
costs depending on security measures required by the
Federal Aviation Administration. BAX Global has
implemented a customer surcharge for certain of the
incremental security costs on international shipments.
Insurance premiums paid by BAX Global and its
competitors are expected to increase as a result of the
widely reported hardening of insurance markets.
Accordingly, BAX Global’s U.S. business, the region with
the largest export and domestic volume, may significantly
impact the trend of results in BAX Global’s worldwide
expedited freight services. In addition, BAX Global’s
operations include an international customs brokerage
business as well as a federally certificated airline, Air
Transport International (“ATI”). ATI’s results include the
results of charter air service and are included in the
Americas region. Eliminations/other revenues primarily
include intercompany revenue eliminations on shared
services. Other operating profit (loss) primarily consists of
global support costs including global information
technology costs and goodwill amortization.
Comparison of 2001 and 2000
The 15% decrease in BAX Global’s worldwide operating
revenues in 2001 as compared to 2000 was attributable to
both the Americas and International regions. Worldwide
operating loss in 2001 was $24.6 million, compared to $99.6
million in 2000. The 2000 operating loss included a
restructuring charge of $57.5 million (discussed below).
Revenues in the Americas decreased $228.5 million (18%)
in 2001 compared to 2000 as a result of lower demand for
expedited freight primarily caused by weak economic
conditions particularly in the U.S. and Asia. Domestic
expedited volumes and yields in 2001 declined over the
prior year. Lower demand is expected to continue to
impact results during the first half of 2002. Results in 2000
for the Americas included a restructuring charge of $54.6
million (discussed below), a bad debt provision related to
one customer of $4.5 million and a charge of
approximately $4 million relating to the decision to
terminate a logistics contract due to inadequate operating
returns. Beginning in 2001, certain U.S.-based logistics
revenues and costs were refocused from a global to a
largely Americas role, resulting in certain revenues and
costs that were classified as Other during 2000 being
classified within the Americas results in 2001. Other
operating loss in 2000 included $7.1 million of such costs.
Excluding the effects of the above-mentioned 2000
charges and the effects of the change in allocation, the
Americas operating loss in 2001 increased $2.8 million
over 2000. Lower freight volume reduced revenue by
approximately $230 million, but the effect on operating
profit of the lower volume was largely offset by cost
savings associated with the 2000 restructuring plan and
ongoing cost reduction efforts.
7
Comparison of 2000 and 1999
BAX Global’s worldwide operating revenues were $2.1
billion in 2000 and 1999. In 2000, a slight decrease (1%) in
the Americas revenues was offset by an increase in
International revenues (3%), when compared to revenues
in 1999. Domestic and International fuel surcharges
resulted in a small increase in yields for 2000 as compared
to 1999. In 2000, BAX Global reported an operating loss of
$99.6 million, including the restructuring charge of $57.5
million discussed below, as compared to an operating
profit in 1999 of $61.5 million. BAX Global’s operating loss
of $42.1 million, before the restructuring charge, was
primarily due to significantly lower performance in the
Americas region which was partially offset by improved
International results. Operating profit in 1999 included a
benefit of $1.6 million related to 1998 incentive accrual
reversals. The majority of that benefit impacted BAX
Global’s International region.
Revenues in the Americas decreased $7.4 million (1%) in
2000 as compared to 1999. The decrease in revenue was
primarily due to a decrease in domestic expedited
volume, partially offset by increases in domestic
expedited yields resulting primarily from fuel surcharges.
In 2000, the Americas operating loss included
restructuring charges of $54.6 million. The decrease in the
operating performance in the Americas region, excluding
the effects of the restructuring charges, was primarily due
to lower volumes, higher service costs for the fleet of
aircraft, higher administrative costs (including $2.8 million
related to staff reductions, not included in the
restructuring charge) and increases in fuel costs which
were not fully covered 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 expenditures on aircraft modifications in 1999 and
information systems placed in service in late 1999. The
Americas operating results also included a bad debt
provision of approximately $4.5 million related to the
bankruptcy of a customer during the third quarter of 2000
and a charge of approximately $4 million resulting from
the decision to terminate a logistics contract due to
inadequate operating returns.
2001 ANNUAL REPORT
In 2000, International revenues and operating profit
increased $24.9 million (3%) and $2.2 million (7%),
respectively, compared to 1999. In 2000, the International
operations reported operating profits of $33.2 million
which included a restructuring charge of $2.9 million in
the Atlantic region. The increase in revenue resulted from
growth in the Atlantic and Pacific regions. The increase in
operating profit was primarily due to continued growth in
the Pacific region from increased supply chain
management and transportation services to the high
technology industry. Operating profit in 1999 reflected the
benefit of approximately $1.3 million relating to the
previously mentioned reversal of excess incentive
accruals.
The increase in eliminations/other revenue was consistent
with increased revenues on shipments across national
borders. Other operating loss decreased $8.0 million
primarily due to lower global administrative expenses.
2000 Restructuring Plan
Over the course of 2000, the operating performance of
BAX Global’s Americas region was negatively impacted by
lower than expected demand and higher transportation,
operating and administrative costs relative to that lower
demand. As such, BAX Global evaluated alternatives
directed at returning its Americas operations to
profitability, including ways to improve sales performance
and to reduce transportation, operating and
administrative expenses. During the fourth quarter of
2000, BAX Global finalized a restructuring plan aimed at
reducing the capacity and cost of its airlift capabilities in
the U.S. as well as reducing station operating expenses,
sales, general and administrative costs in the Americas
and Atlantic regions. The actions taken included:
•
•
•
The removal of ten planes from the fleet, nine of
which were dedicated to providing lift capacity in BAX
Global’s commercial cargo system.
The closure of nine operating stations and
realignment of domestic operations.
The reduction of employee-related costs through the
elimination of approximately 300 full-time positions
including aircraft crew and station operating, sales
and business unit overhead positions.
8
In addition, certain Atlantic region operations were
streamlined in order to reduce overhead costs and
improve overall performance in that region. The Atlantic
region planned restructuring efforts involved severance
costs and station closing costs in the UK, Denmark, Italy
and South Africa. Approximately 50 positions were
eliminated, most of which were positions at or above
manager level.
The following is a summary of the 2000 charges related to
the restructuring:
(In millions)
Americas Atlantic
Region
Region BAX Global
Total
Fleet related charges
$
49.7
Severance costs
Station and other closure costs
1.1
3.8
Restructuring charge
$
54.6
-
1.2
1.7
2.9
49.7
2.3
5.5
57.5
Approximately $45.2 million of the restructuring charge
was noncash and approximately $0.3 million of the charge
was paid in 2000. The following analyzes the changes in
the remaining liabilities for such costs:
(In millions)
Fleet
Charges
Station
and
Severance Other Total
December 31, 2000
$ 6.6
Adjustments
Payments
0.6
(5.1)
December 31, 2001
$ 2.1
2.0
(0.4)
(1.5)
0.1
3.4
(0.4)
(0.9)
2.1
12.0
(0.2)
(7.5)
4.3
Substantially all severance costs have been paid out. The
remaining accrual primarily includes contractual
commitments for aircraft and facilities. The majority of the
remaining accrual for fleet charges is expected to be paid
out by the end of 2002. Approximately $0.5 million of the
remaining accrual for station and other costs is expected
to be paid by the end of 2002, with the balance expected
to be paid through the end of 2007.
The Company decreased its accrual for restructuring in
2001 by a net $0.2 million as a result of changes in the
estimate of certain liabilities.
2001 ANNUAL REPORT
Other Operations
Other Operations
Other Operations
Other Operations
Other Operations comprises the Company’s gold, timber
and natural gas operations. The Company’s long-term
plan is to ultimately exit these activities in order to focus
resources on its core Business and Security Services
segments. The nature and timing of the exit and any
interim actions could result in gains or losses material to
operating results in one or more periods.
(In millions)
Revenues:
Revenues:
Revenues:
Revenues:
Gold
Timber
Natural gas
Revenues
Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Gold
Timber
Natural gas (a)
Years Ended December 31
2001
2001
2001
2001
2000
1999
$$$$
14.614.614.614.6
18.218.218.218.2
7.47.47.47.4
$$$$
40.240.240.240.2
$$$$
(1.0)
(1.0)
(1.0)
(1.0)
(2.7)
(2.7)
(2.7)
(2.7)
11.311.311.311.3
16.6
13.0
5.9
35.5
(1.6)
(1.6)
8.9
5.7
13.7
7.5
3.9
25.1
(5.3)
(0.3)
5.9
0.3
Segment operating profit
$$$$
7.67.67.67.6
(a) Natural gas royalties are included within other operating income.
Lower net sales for the Company’s gold operations during
2001 as compared to 2000 was primarily the result of a
decrease in ounces of gold sold and a strong U.S. dollar,
partially offset by higher gold realizations. The decrease in
the operating loss in 2001 as compared to 2000 reflected
the effects of a stronger U.S. dollar and higher gold
realizations, partially offset by lower sales and production
volume. In addition, the operating loss in 2000 included
expenses of $0.4 million associated with the
discontinuation of exploration activities in Nevada and a
charge of $1.1 million relating to the impairment of an
open pit project in Australia.
The 22% increase in net sales for the Company’s gold
operations in 2000 as compared to 1999 resulted from a
20% increase in the ounces of gold sold and slightly
higher realizations. The lower operating loss in 2000 as
compared to 1999 was due to improved operating
performance, partially offset by expenses of $0.4 million
associated with the discontinuation of exploration
activities in Nevada and a charge of $1.1 million relating to
the impairment of an open pit project in Australia.
9
The increase in revenues from the Company’s timber
operations in 2001 as compared to 2000 was primarily due
to increased timber sales volumes, partially offset by a
decline in lumber prices. The increase in operating loss
for 2001 as compared to 2000 was largely the result of the
lower lumber prices.
Revenues and operating losses for the Company’s timber
operations increased in 2000 as compared to 1999,
reflecting start-up activity and costs.
The increase in revenues and operating profit from the
Company’s natural gas operations in 2001 and 2000 as
compared to 2000 and 1999, respectively, resulted from
higher natural gas prices and increases in productive
assets.
Discontinued Operations
Discontinued Operations
Discontinued Operations
Discontinued Operations
As noted previously, Coal Operations were reported as
discontinued operations of the Company as of December
31, 2000. The Company’s plan of disposal includes the sale
of its active and idle coal mining operations (including 24
company or contractor operated mines and 5 active
plants) and reserves, as well as other assets which support
those operations. Included in the assets expected to be
disposed of is the Company’s interest in Dominion
Terminal Associates (“DTA”), a coal port facility in
Newport News, Virginia.
The Company originally anticipated disposing of these
properties and support operations during the year ended
December 31, 2001. Although the Company has been
actively engaged in the implementation of its plan of
disposal, due to various factors, the first sale of a portion
of its coal properties was not completed until early 2002.
At that time, the Company concluded a portion of the
plan through the sale of certain properties in West
Virginia. The Company currently expects to complete the
sale or shut down of unsold operations during 2002.
The assets to be disposed of primarily include inventory,
the Company’s partnership interest in DTA and property,
plant and equipment, and it is expected that certain
liabilities, primarily reclamation costs related to active
properties will be assumed by the purchaser(s). Total
proceeds from the sale of Coal Operations, which could
include cash, the present value of minimum future
royalties to be received and liabilities to be transferred,
are expected to exceed $100 million.
2001 ANNUAL REPORT
Based on developments in the fourth quarter of 2001 and
the annual reevaluation of certain benefit plan
obligations, the Company revised its estimates of
operating performance from the measurement date to the
expected date of disposal, inactive employee liability
charges, the value of certain benefit plans, and changes in
assets and liabilities, and as a result, increased its
expected pretax loss on the disposal by $54.3 million
($29.2 million after-tax), as detailed below.
Losses included in discontinued operations in the
Company’s Consolidated Statements of Operations were
as follows:
(In millions)
Years Ended December 31
2001
2001
2001
2001
2000
1999
Pretax loss from the operations of the
discontinued segment
$$$$
Income tax benefit
Loss from the operations of the
discontinued segment, after-tax
----
----
----
(32.4)
(122.0)
(14.2)
(48.7)
(18.2)
(73.3)
Estimated operating losses during
the disposal period
(22.2)
$$$$ (22.2)
(22.2)
(22.2)
(45.0)
Health Benefit Act liabilities and
curtailment of benefit plans
(8.0)
(8.0)
(8.0)
(8.0)
(163.3)
Estimated loss on the disposal
(24.1)
(24.1)
(24.1)
(24.1)
(85.9)
Estimated pretax loss on the disposal
of the discontinued segment
(54.3)
(54.3)
(54.3)
(54.3)
(294.2)
Income tax benefit
(25.1)
(25.1)
(25.1)
(25.1)
(105.1)
Estimated loss on the disposal of the
discontinued segment, after-tax
(29.2)
(29.2)
(29.2)
(29.2)
(189.1)
Loss from discontinued
-
-
-
-
-
-
operations
(29.2)
$$$$ (29.2)
(29.2)
(29.2)
(207.3)
(73.3)
During the fourth quarter of 2001, the Company recorded
$22.2 million of estimated operating losses that are
expected to be incurred through the expected end of the
disposal period. This charge reflects projected operating
performance of the discontinued operations during the
extension of the expected period of disposal, including an
estimated $41.8 million of 2002 inactive employee costs,
and is net of adjustments to the estimated operating
losses for 2001 of $45.0 million which were recorded in the
prior year. Such adjustments included a refund of $23.4
10
million (including interest) of Federal Black Lung Excise
Tax (“FBLET”) received during the fourth quarter of 2001,
an accrual of $9.5 million for litigation settlements that are
expected to be paid during early 2002 and the impact of
worse than expected operating performance in 2001. The
$41.8 million of estimated 2002 inactive employee costs
increased from the actual 2001 inactive employee costs
incurred of $28.7 million, primarily due to higher retiree
medical benefit charges resulting from changes in
actuarial assumptions.
In 2000, the Company recorded a $161.7 million obligation
under the Coal Industry Retiree Health Benefit Act of 1992
(the “Health Benefit Act”), which represents the
actuarially determined undiscounted liability for such
obligations (discussed in detail below). During 2001, the
Company recorded an additional charge of $8.0 million to
reflect the current actuarially determined undiscounted
liability for obligations under the Health Benefit Act. This
liability will continue to be adjusted based on actuarial
studies in the future. During 2000, the Company also
recorded a net curtailment loss of $1.6 million, comprising
a $6.0 million net curtailment loss on the Company’s
medical benefit plans and a $4.4 million net curtailment
gain on the Company’s pension plans.
A charge of $24.1 million was recorded in the fourth
quarter of 2001 to record a revaluation of the estimated
loss on the disposition of the Coal Operations. This
additional net expense reflects changes in the expected
proceeds to be received and changes in the expected
values of assets and liabilities through the anticipated
dates of sale or shutdown. It also includes the recording
of a multi-employer pension plan withdrawal liability of
$8.2 million associated with its planned exit from the coal
business. The ultimate withdrawal liability, if any, is
subject to several factors, including funding and benefit
levels of the plans and the ultimate timing and form of the
sale transactions. Accordingly, the actual amount of this
liability could change materially.
Income tax benefits attributable to the loss on the
disposal of the discontinued segment include the benefits
of percentage depletion generated from the active
operations during the sale period.
2001 ANNUAL REPORT
Estimates regarding losses on the disposal of coal assets
and operating losses during the disposal period, the
ultimate outcome of the disposal of the coal business,
including the timing of sales, the value to be received for
assets sold and liabilities assumed by the purchasers, and
the value of liabilities retained by the Company are
subject to known and unknown risks, uncertainties and
contingencies, many of which are beyond the control of
the Company, that could cause actual results,
performance or achievements to differ materially from
those which are anticipated. Such risks, uncertainties and
contingencies include, but are not limited to, overall
economic and business conditions, demand and
competitive factors in the coal industry, the results of
ongoing labor negotiations with respect to two of the
Company’s deep mines in Virginia, the interest of third
parties in some or all of the Company’s remaining coal
assets, completion of sales of coal assets on mutually
agreeable terms, the impact of the announced disposal
process on the coal business’ ability to operate in the
normal course, the impact of delays in the issuance or the
non-issuance of mining permits, the timing of and
consideration received for the sale of the coal assets, costs
associated with shutting down those operations that are
not sold, funding and benefit levels of the multi-employer
pension plans, geological conditions and variations in the
spot prices of coal.
Operating Performance of Discontinued
Operating Performance of Discontinued
Operating Performance of Discontinued
Operating Performance of Discontinued
Operations
Operations
Operations
Operations
Since estimated operating losses during the sales period
for the discontinued operations are recorded as part of
the estimated loss on the disposal of the discontinued
segment, actual operating results of operations during this
period are not included in consolidated results of
operations. The following table shows selected financial
information for Coal Operations during 2001, as compared
to amounts recognized as part of the loss from
discontinued operations in 2000 and amounts reported
within consolidated results of operations in 1999.
(In millions)
Sales
Operating loss before
inactive employee costs
Inactive employee costs
Operating loss
Years Ended December 31
2001
2001
2001
2001
2000
1999
$$$$
384.0000
384.
384.
384.
401.0
436.7
(3.0)
(3.0)
(3.0)
(3.0)
(28.7)
(28.7)
(28.7)
(28.7)
(7.0)
(30.0)
(89.0)
(35.0)
(31.7)
(31.7)
(31.7)
(31.7)
(37.0)
(124.0)
Loss before income taxes
$$$$
(29.5)
(29.5)
(29.5)
(29.5)
(32.4)
(122.0)
11
Sales in 2001 for the discontinued coal operations
decreased $17.0 million as compared to 2000, primarily
due to a decrease in volumes, partially offset by higher
realizations. Excluding inactive employee costs, the
operating loss in 2001 of $3.0 million was $4.0 million
lower than in 2000. Results in 2001 included a pretax gain
on the receipt of $23.4 million of FBLET refunds during the
fourth quarter, partially offset by increased costs
associated with difficult geological conditions, an accrual
for litigation settlements of $9.5 million as well as higher
idle and closed mine costs.
Sales in 2000 for the discontinued coal operations
decreased $35.7 million as compared to 1999, primarily
due to a decrease in volumes. In addition, coal sales were
impacted by lower realizations per ton due to weaker
market conditions. The operating loss in 1999 includes a
charge of $82.3 million related to the impairment of long-
lived assets and a joint venture interest as well as other
mine closure costs, substantially all of which were
noncash. Excluding this charge and inactive employee
costs, the operating loss in 2000 of $7.0 million was $0.3
million higher than in 1999, primarily due to decreases in
the gross margin due to lower realizations and higher
production costs.
Unaudited quarterly financial information for the
discontinued coal operations operating results was as
follows:
Operating profit (loss) before
inactive employee costs
Inactive employee costs
Operating loss
(4.9)
(6.5)
(11.4)
Loss before income taxes
$
(10.8)
(2.5)
(6.4)
(8.9)
(8.3)
(1.1)
(6.7)
(7.8)
(7.3)
5.5
(9.1)
(3.6)
(3.1)
2000 Quarters:
2000 Quarters:
2000 Quarters:
2000 Quarters:
Sales
$
98.2
92.8
106.3
103.7
Operating profit (loss) before
inactive employee costs
Inactive employee costs
Operating loss
(3.0)
(8.2)
(11.2)
Loss before income taxes
$
(8.5)
(3.5)
(7.3)
(10.8)
(10.2)
0.2
(7.3)
(7.1)
(6.4)
(0.7)
(7.2)
(7.9)
(7.3)
2001 ANNUAL REPORT
Retained Assets, Liabilities and Contingencies of
Retained Assets, Liabilities and Contingencies of
Retained Assets, Liabilities and Contingencies of
Retained Assets, Liabilities and Contingencies of
Discontinued Operations
Discontinued Operations
Discontinued Operations
Discontinued Operations
Certain assets and liabilities are expected to be retained
by the Company, including net working capital and other
assets (excluding inventory), certain parcels of land,
income and non-income tax assets and liabilities, certain
inactive employee liabilities primarily for postretirement
medical benefits, workers’ compensation and black lung
obligations, and reclamation related liabilities associated
with certain closed coal mining sites in Virginia, West
Virginia and Kentucky. In addition, the Company expects
to continue to be liable for other contingencies, including
its unconditional guarantee of the payment of the
principal and premium, if any, on coal terminal revenue
refunding bonds (principal amount of $43.2 million).
The following is a summary as of December 31, 2001 of the
carrying values of assets and liabilities that the Company
expects to retain:
(In millions)
Assets:
December 31, 2001
Net working capital and other assets
$$$$
Property and equipment, net
Net deferred tax assets (Note 15)
Liabilities:
Inactive workers’ compensation
Black lung obligations (Note 13)
20.520.520.520.5
5.65.65.65.6
244.4
244.4
244.4
244.4
33.533.533.533.5
45.445.445.445.4
266.6
266.6
266.6
266.6
159.9
159.9
159.9
159.9
24.724.724.724.7
43.243.243.243.2
17.917.917.917.9
Legacy Liabilities
Legacy Liabilities
Legacy Liabilities
Legacy Liabilities
The Company sometimes refers to a significant portion of
the above liabilities to be retained as “legacy” liabilities.
Such “legacy” liabilities are generally defined as those
employee-benefit obligations related to former coal
employees and other beneficiaries or reclamation
liabilities related to inactive sites which the Company
expects to retain. Such “legacy” liabilities are to be
satisfied over time by direct payments from the Company
or indirect payments from trust funds (for example, the
Voluntary Employees’ Beneficiary Association (“VEBA”)
trust which has been established by the Company. See
Note 13 to the Consolidated Financial Statements.
12
(In millions)
2001 Quarters:
2001 Quarters:
2001 Quarters:
2001 Quarters:
Sales
1st
2nd
3rd
4th
Health Benefit Act (Note 13)
Company-sponsored retiree medical (Note 13)
Reclamation liabilities for inactive properties
$
98.2
101.9
99.3
84.6
DTA
Other liabilities
Under accounting principles generally accepted in the
U.S. (“GAAP”), some of the “legacy” liabilities are not yet
fully recorded on the balance sheet or reflect the sum of
the undiscounted expected cash payments which extend
over a long period of time.
To facilitate an understanding of the currently estimated
value of the Company’s “legacy” liabilities, as of
December 31, 2001, the full value of such liabilities,
discounted to a present value (for those liabilities with
extended payment dates) is reflected in the “Legacy”
Value column. PLEASE NOTE THAT THIS IS NOT A GAAP
PLEASE NOTE THAT THIS IS NOT A GAAP
PLEASE NOTE THAT THIS IS NOT A GAAP
PLEASE NOTE THAT THIS IS NOT A GAAP
PRESENTATION AND THIS TABLE SHOULD ONLY BE
PRESENTATION AND THIS TABLE SHOULD ONLY BE
PRESENTATION AND THIS TABLE SHOULD ONLY BE
PRESENTATION AND THIS TABLE SHOULD ONLY BE
READ IN CONJUN
CTION WITH THE CONSOLIDATED
READ IN CONJUNCTION WITH THE CONSOLIDATED
CTION WITH THE CONSOLIDATED
CTION WITH THE CONSOLIDATED
READ IN CONJUN
READ IN CONJUN
FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS.
FINANCIAL STATEMENTS.
(In millions)
Legacy liabilities discounted at 7.25%:
Company-sponsored
retiree medical (a)
Black lung (b)
Undiscounted legacy liabilities:
Health Benefit Act (c)
Workers’ compensation
Reclamation
Legacy liabilities
Legacy assets:
VEBA
Balance
“Legacy”
Sheet
Value
$
267
45
160
34
25
$
531
$
17
454
59
85
34
25
657
17
(a) See Note 13 to the Consolidated Financial Statements. Of the
Company’s total liability for postretirement benefits other than pensions of
$464 million as of December 31, 2001, approximately $454 million relates to
Coal Operations. Under GAAP only $267 million has been charged to
expense as of December 31, 2001 and therefore reflected on the balance
sheet.
(b) See Note 13 to the Consolidated Financial Statements. Of the
Company’s total black lung liability of $59 million as of December 31, 2001,
only $45 million has been charged to expense through December 31, 2001
and therefore reflected on the balance sheet as of December 31, 2001.
(c) See Note 13 to the Consolidated Financial Statements. All of the
Company’s total estimated payments for Health Benefit Act premiums of
approximately $160 million have been recorded as of December 31, 2001.
Such payments are expected to be paid out over the next seventy or more
years and will vary with changes in the numbers of participants, medical
inflation and statutory changes to the 1992 law under which such benefits
are paid. Accordingly, such payments have not been discounted to a net
present value for financial reporting purposes. To reflect the time value of
money, an estimate of the present value of these payments has been made
using a 7.25% discount rate and such estimate ranges from $80 to $85
million.
The above estimated liability values are as of December
31, 2001. Such values will be adjusted annually to reflect
actual experience, annual actuarial revaluations and
periodic revaluations of reclamation liabilities.
2001 ANNUAL REPORT
The Company expects to have ongoing expenses
associated with its Coal Operations including interest
costs and amortization expenses on its retiree medical
and black lung obligations, changes, if any, in valuations
of liabilities for inactive workers’ compensation benefits,
Health Benefit Act benefits and retained reclamation
liabilities, and certain ongoing costs, if any, for abandoned
sites or operations. Such expenses are currently included
in the loss from discontinued operations since they are
considered to be costs of the discontinued operations.
Upon completion of the disposal of the Company’s Coal
Operations, these expenses will continue to be charged
annually against the Company’s earnings. Using
assumptions in existence as of December 31, 2001, the
Company estimates that such expenses over the next five
years will approximate $45 million to $55 million per
annum.
The liabilities presented above are based on a variety of
estimates, including actuarial assumptions, as described
below in the Critical Accounting Policies and the Use of
Judgment and in the Notes to the Consolidated Financial
Statements.
Significant Contractual Obligations of
Significant Contractual Obligations of
Significant Contractual Obligations of
Significant Contractual Obligations of
Discontinued Operations
Discontinued Operations
Discontinued Operations
Discontinued Operations
The following table includes certain significant contractual
obligations of the Company’s discontinued operations.
See Notes 6 and 18 to the Consolidated Financial
Statements for additional information related to these
and other obligations. Most of these contractual
obligations are expected to be transferred to the
purchasers of related properties.
Payments Due by Period
2003-
2005-
Later
(In millions)
2002
2004
2006 Years
Total
Operating leases (a)
$ 11.2
5.6
-
-
16.8
Unconditional purchase
obligations (b):
Coal royalties
Equipment
Total
3.3
15.5
5.5
-
$ 30.0
11.1
5.1
-
5.1
44.3
-
44.3
58.2
15.5
90.5
(a) Payments for operating leases are recognized as an expense in the
Consolidated Statement of Operations as incurred.
(b) Payments made pursuant to unconditional purchase obligations are
recognized as an expense in the Consolidated Statement of Operations as
incurred. Unconditional purchase obligations generally specify a minimum
amount of service or product to be consumed by the Company, and the
Company currently expects to consume at least the minimum levels
specified in its contracts.
13
Federal Black Lung Excise Tax
Federal Black Lung Excise Tax
Federal Black Lung Excise Tax
Federal Black Lung Excise Tax
On February 10, 1999, the U.S. District Court of the Eastern
District of Virginia entered a final judgment in favor of
certain of the Company’s subsidiaries, ruling that the
Federal Black Lung Excise Tax (“FBLET”) is
unconstitutional as applied to export coal sales. A total of
$0.8 million (including interest) was refunded in 1999 for
the FBLET that those companies paid for the first quarter
of 1997. The Company sought refunds of the FBLET it paid
on export coal sales for all open statutory periods and
received refunds of $23.4 million (including interest)
during the fourth quarter of 2001. The Company continues
to pursue the refund of other FBLET payments. Due to
uncertainty as to the ultimate additional future amounts to
be received, if any, which could amount to as much as $20
million (before interest and applicable income taxes), as
well as the timing of any additional FBLET refunds, the
Company has not currently recorded receivables for such
additional FBLET refunds in its estimate of operating
losses to be incurred during the disposal period.
Foreign Operations
Foreign Operations
Foreign Operations
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 U.S. dollar. Because the financial
results of the Company are reported in U.S. dollars, its
results are affected by changes in the value of the various
foreign currencies in relation to the U.S. dollar. Changes
in exchange rates may also affect transactions which are
denominated in currencies other than the functional
currency. The diversity of foreign operations helps to
mitigate a portion of the impact that foreign currency
fluctuations in any one country may have on the
translated results. With the introduction of the euro,
transaction gains and losses no longer occur on
transactions between countries that have adopted the
euro. The Company, from time to time, uses foreign
currency forward contracts to hedge transactional risks
associated with foreign currencies. (See “Market Risk
Exposures” below.) All transaction gains or losses are
included in net income for the period along with
translation adjustments of net monetary assets and
liabilities denominated in the local currency relating to
operations in countries with highly inflationary
economies, such as the Company’s Venezuelan
subsidiary.
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.
2001 ANNUAL REPORT
EuroEuroEuroEuro
The Company’s Brink’s and BAX Global subsidiaries have
operations in various European countries that have
adopted a common currency (the “euro”). To date, Brink’s
and BAX Global operations have not experienced any
significant problems with the euro currency conversion.
Corporate Expenses
Corporate Expenses
Corporate Expenses
Corporate Expenses
In 2001, general corporate expenses totaled $19.3 million
compared with $21.2 million and $22.9 million in 2000 and
1999, respectively. Corporate expenses in 2001 reflected
lower employee-related costs. Corporate expenses in 1999
included professional fees and expenses of approximately
$1.3 million related to the Company’s December 6, 1999
announcement to eliminate its tracking stock capital
structure.
Interest Expense
Interest Expense
Interest Expense
Interest Expense
Interest expense totaled $32.4 million in 2001 compared
with $43.4 million in 2000 and $38.2 million in 1999. The
decrease in interest expense in 2001 as compared to 2000
was primarily due to lower average borrowings and
borrowing costs. The increase in interest expense in 2000
as compared to 1999 was primarily due to higher average
interest rates and higher average borrowings. Interest
costs for 2000 under the revolving credit facility were
higher than the 1999 costs under the previous credit
agreement.
Other Income (Expense), Net
Other Income (Expense), Net
Other Income (Expense), Net
Other Income (Expense), Net
Other expense, net, increased to $2.8 million in 2001 as
compared to $0.2 million in 2000, primarily due to costs in
2001 of $7.0 million associated with the sale of a revolving
interest in certain of BAX Global’s accounts receivable
representing the related discounts and fees. These costs
were partially offset by a gain of $3.9 million on the sale of
marketable securities.
Other expense, net, in 2000 of $0.2 million represented a
decrease of $8.6 million from other income, net of $8.4
million for 1999, primarily due to a gain in 1999 on the sale
of marketable securities. Other factors increasing expense
in 2000 include expenses associated with the sale of
accounts receivable at BAX Global.
Income Taxes
Income Taxes
Income Taxes
Income Taxes
In 2001, 2000 and 1999, the provision for income taxes
from continuing operations was greater than the statutory
federal income tax rate of 35% primarily due to goodwill
amortization and state income taxes, partially offset by
lower taxes on foreign income. In 2000, the $57.5 million
BAX Global restructuring charge and lower consolidated
pretax income caused non-deductible items (principally
goodwill amortization) to be a more significant factor in
14
calculating the effective tax rate. As a result of Coal
Operations being reported under discontinued
operations, the tax benefits of percentage depletion are
not reflected in the effective tax rate of continuing
operations. The Company will no longer amortize
goodwill beginning in 2002 (see Note 1 to the
Consolidated Financial Statements). As a result, the
negative impact to the effective tax rate caused by non-
deductible goodwill amortization will no longer be a
factor beginning in 2002.
Based on the Company’s historical and future expected
taxable earnings, management believes it is more likely
than not that the Company will realize the benefit of the
net deferred tax assets at December 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
Summary of cash flows available for financing:
2001 ANNUAL REPORT
In 2001, reductions in net working capital, capital
expenditures and heavy maintenance spending resulted
in a similarly sized benefit as that derived in 2000 from the
initial sale of accounts receivable. Despite the decline in
income from continuing operations in 2000 as compared
to 1999, the sale of receivables and lower capital
expenditures increased cash flows available for financing
by almost $89 million.
The Company’s consolidated cash flows available for
financing depends on each of the operating segments’
cash flows.
(In millions)
Cash flows available for financing:
Brink’s
BHS
BAX Global
Years Ended December 31
2001
2001
2001
2001
2000
1999
$$$$
38.238.238.238.2
25.825.825.825.8
46.446.446.446.4
(16.0)
(16.0)
(16.0)
(16.0)
0.40.40.40.4
(4.2)
(4.2)
(4.2)
(4.2)
34.6
22.1
(3.3)
13.3
(90.6)
(25.3)
85.0
17.0
23.0
91.1
-
12.2
5.6
2.5
(In millions)
Income from continuing
Years Ended December 31
2001
2001
2001
2001
2000
1999
Sale of accounts receivable
Corporate and Other Operations
Discontinued operations
Cash flows available for financing
$$$$
90.690.690.690.6
operations
$$$$
45.845.845.845.8
2.7
108.0
Noncash restructuring and
other charges
Depreciation and amortization
Heavy maintenance provision
Working capital
Sale of accounts receivable
Discontinued operations
Other
----
194.4
194.4
194.4
194.4
32.432.432.432.4
27.527.527.527.5
(16.0)
(16.0)
(16.0)
(16.0)
6.96.96.96.9
24.724.724.724.7
47.8
188.9
40.2
-
148.9
50.2
(48.3)
(28.6)
85.0
30.4
18.1
-
16.1
34.7
Operating activities
315.7
315.7
315.7
315.7
364.8
329.3
Capital expenditures
(193.1)
(193.1)
(193.1)
(193.1)
(214.4)
(268.9)
Heavy maintenance expenditures
Discontinued operations
Other
(15.5)
(15.5)
(15.5)
(15.5)
(11.1)
(11.1)
(11.1)
(11.1)
(5.4)
(5.4)
(5.4)
(5.4)
(50.5)
(7.4)
(1.4)
(52.9)
(10.5)
5.5
Investing activities
(225.1)
(225.1)
(225.1)
(225.1)
(273.7)
(326.8)
Cash flows available for financing
$$$$
90.690.690.690.6
91.1
2.5
The Company’s cash flows available for financing were
approximately $90 million in both 2001 and 2000, up from
$2.5 million in 1999.
Cash flows available for financing at Brink’s and BHS in
2001 approximated those in 2000. Cash flows available for
financing at Brink’s increased in 2000 over 1999 primarily
as the result of lower capital expenditures and lower
growth in working capital.
The improvement in cash flows available for financing at
BAX Global in 2001 over 2000 is primarily due to $62.1
million lower spending for capital expenditures and
aircraft heavy maintenance (discussed below) and
reduction in net working capital. BAX Global’s cash flow
deficit before financings in 2000 increased by $65 million
from 1999 due to the decline in operating performance
and higher levels of working capital.
15
Discontinued operations’ cash flow available for financing
in 2000 was higher than 2001 and 1999 primarily as a result
of a $44.4 million reduction in working capital used in
2000. Discontinued operations in 2001 included $23.4
million of Federal Black Lung Excise Tax refunds. Included
in the discontinued operations cash flows available for
financing are payments for benefits for inactive coal
employees, reclamation and other liabilities. The
Company expects to continue to be liable for such
payments after it disposes of its Coal Operations.
Capital and Aircraft Heavy Maintenance
Capital and Aircraft Heavy Maintenance
Capital and Aircraft Heavy Maintenance
Capital and Aircraft Heavy Maintenance
Expenditures
Expenditures
Expenditures
Expenditures
Capital expenditures for 2001 of $193.1 million were $21.3
million lower than for 2000. Of the 2001 capital
expenditures, $71.3 million (37%) was spent by Brink’s,
$81.3 million (42%) was spent by BHS, $33.1 million (17%)
was spent by BAX Global and $7.2 million (4%) was spent
by Other Operations. Lower capital expenditures in 2001
as compared to 2000 were primarily due to lower levels of
spending at BAX Global in 2001 resulting from a decrease
in the number of planes operated by the Company’s Air
Transport International unit.
Aircraft heavy maintenance expenditures decreased $35.0
million in 2001 to $15.5 million as compared to 2000,
primarily due to a decrease in the number of planes in
maintenance, largely as the result of the decrease in the
total number of planes operated by the Company’s Air
Transport International unit. The Company expects to
spend between $30 million and $35 million on aircraft
heavy maintenance in 2002.
Capital expenditures in 2002 are currently expected to
range from $220 million to $240 million, depending on
operating results throughout the year. Expected capital
expenditures for 2002 reflect an increase in customer
installations at BHS, security and information technology
spending at Brink’s and increased spending on
information technology at BAX Global. An additional
amount ranging from $15 million to $20 million of
necessary or committed expenditures relating to the
discontinued operations is expected during 2002. Capital
expenditures for the discontinued operations reflect
spending in the first half of 2002 on the development of a
deep mine in order to improve the marketability of certain
coal assets. The foregoing amounts exclude expenditures
that have been or are expected to be financed through
operating leases.
2001 ANNUAL REPORT
Financing Activities
Financing Activities
Financing Activities
Financing Activities
Net cash flows used in financing activities were $101.7
million for 2001 compared with $124.5 million in 2000. Both
years reflect a reduction in the Company’s debt levels.
Repayments in 2001 used cash generated from operations.
The 2000 level reflected repayments under a bank credit
facility (described below) with the proceeds from the sale
of $85.0 million of accounts receivable at BAX Global, as
well as from the proceeds of increased borrowings in late
1999 and repayments of a portion of the debt of Brink’s
France and Venezuela affiliates during 2000.
The Company has a $362.5 million credit agreement under
which it may borrow on a revolving basis up to $185
million over a three-year term ending October 2003 and
up to $177.5 million over a one-year term ending October
2002. The Company expects to negotiate an extension for
a significant portion of the facility which ends in October
2002. Approximately $226.3 million was available for
borrowing with this facility at December 31, 2001.
The Company has two multi-currency revolving bank
credit facilities that total $95.0 million in available credit
line, of which $46.8 million was available at December 31,
2001 for additional borrowing. Various foreign
subsidiaries maintain other secured and unsecured lines
of credit and overdraft facilities with a number of banks.
Amounts outstanding under these agreements are
included in short-term borrowings.
The Company completed a $75.0 million private
placement of Senior Notes in 2001. The Senior Notes are
scheduled to be repaid in 2005 through 2008. The
Company has the option to prepay all or a portion of the
Series A or Series B Notes prior to maturity with a
prepayment penalty. The $75 million proceeds from
issuance of the Senior Notes were used to repay
borrowings under the revolving credit facility.
The U.S. bank credit agreement, the agreement under
which the Senior Notes were issued and the multi-
currency revolving bank credit facilities each contain
various financial and other covenants. The financial
covenants limit the Company’s total indebtedness,
provide for minimum coverage of interest costs, and
require the Company to maintain a minimum level of net
worth. The Company was in compliance with all financial
covenants at December 31, 2001. If the Company were not
to comply with the terms of its various loan agreements,
the repayment terms could be accelerated.
16
2001 ANNUAL REPORT
Other Commercial Commitments
Other Commercial Commitments
Other Commercial Commitments
Other Commercial Commitments
The following table includes certain commercial
commitments of the Company as of December 31, 2001.
See Notes 10, 12 and 19 of the Consolidated Financial
Statements for additional information related to these and
other commitments.
Amount of Commitment Expiring each Period
2003-
2005-
Later
(In millions)
2002
2004
2006 Years
Total
Undrawn letters
of credit
$
28.2
DTA guarantee (a)
Operating leases (b)
-
2.1
-
-
14.0
-
-
-
4.0
43.2
-
32.2
43.2
16.1
(a) See Note 19.
(b) Maximum residual guarantees of certain operating leases.
At December 31, 2001, the Company has sold an
undivided interest in certain of its BAX Global U.S.
accounts receivable balances, which amounts are not
included in the Consolidated Balance Sheets or in the
previous table. See Note 11 to the Consolidated Financial
Statements. Under this program, the Company sells
without recourse an undivided ownership interest in a
pool of accounts receivable to a third party (the
“conduit”). The conduit issues debt to fund their
purchase, and the Company used the proceeds it received
from the initial purchase primarily to pay down its
outstanding debt. The Company has no obligation related
to the conduit’s debt, and there is no existing obligation
to repurchase sold receivables. Upon termination of the
program, the conduit would cease purchasing new
receivables and collections related to the sold receivables
would be retained by the conduit. If the program is
terminated, the Company would more than likely use its
credit sources to finance the higher level of receivables.
As of December 31, 2001, debt as a percentage of
capitalization (total debt and shareholders’ equity) was
38% compared to 45% at December 31, 2000.
Significant Contractual Obl
igations of Continuing
Significant Contractual Obligations of Continuing
igations of Continuing
igations of Continuing
Significant Contractual Obl
Significant Contractual Obl
Operations
Operations
Operations
Operations
The following table includes certain significant contractual
obligations of the Company’s continuing operations. See
Notes 6, 10 and 12 to the Consolidated Financial
Statements for additional information related to these and
other obligations.
Payments Due by Period
2003-
2005-
Later
(In millions)
2002
2004
2006 Years
Total
Included in operating and
investing activities:
Operating leases (a)
$ 123.4 165.9
85.7
141.6
516.6
Unconditional purchase
obligations (b):
ACMI (c)
Equipment
Total
41.2
34.2
8.1
-
-
-
-
-
75.4
8.1
$ 172.7 200.1
85.7
141.6
600.1
Included in financing
activities:
Long-term debt (d)
$ 17.2 158.6
48.7
45.6
270.1
(a) Payments for operating leases are recognized as an expense in the
Consolidated Statement of Operations as incurred.
(b) Payments made pursuant to unconditional purchase obligations are
recognized as an expense in the Consolidated Statement of Operations as
incurred. Unconditional purchase obligations generally specify a minimum
amount of service or product to be consumed by the Company, and the
Company currently expects to consume at least the minimum levels
specified in its contracts.
(c) Aircraft, crew, maintenance and insurance agreements.
(d) Long-term debt (including capital lease obligations) is reduced when
payments of principal are made. Table excludes interest payments.
The Company is required to meet certain return
conditions when returning leased aircraft to lessors. The
Company accrues for costs associated with the return of
these aircraft over the life of the lease for landing gear and
other structural costs and from the inception of the lease
until the first heavy maintenance check or overhaul is
incurred for airframe and engine costs. At December 31,
2001, the Company had $35.7 million accrued for aircraft
return conditions.
17
U.S. Pension Plans
U.S. Pension Plans
U.S. Pension Plans
U.S. Pension Plans
The Company has noncontributory defined benefit
pension plans covering substantially all nonunion
employees in the U.S. who meet certain requirements.
Information regarding these plans and the Company’s
other pension plans can be found in Note 13 to the
Consolidated Financial Statements.
Due to investment losses during the generally down
markets of 2000 and 2001 as well as increases in liabilities
resulting from service credits earned by employees during
those years, the Company expects its costs for its U.S.
plans to increase by approximately $4 million in 2002 from
the approximately $4 million in net expense recorded in
2001. Although the Company is not required to make any
contributions to the plan during 2002, it may elect to do so
should investment returns fail to improve over the levels
seen in 2000 and 2001.
Dividends
Dividends
Dividends
Dividends
The Board intends to declare and to pay dividends, if
declared, on Pittston Common Stock based on the
earnings, financial condition, cash flow and business
requirements of the Company. At present, the annual
dividend rate for Pittston Common Stock is $0.10 per
share. In February 2002, the Board declared a quarterly
cash dividend of $0.025 and $7.8125 per share on Pittston
Common Stock and Convertible Preferred Stock,
respectively, payable on March 1, 2002 to shareholders of
record on February 15, 2002.
During 2001 and 2000, the Company paid dividends on
Pittston Common Stock of $5.1 million ($0.10 per share)
and $5.0 million ($0.10 per share), respectively. During
1999, the Company paid an aggregate of $8.7 million of
dividends amounting to $0.10 per share, $0.025 per share
and $0.24 per share of Brink’s Stock, Minerals Stock and
BAX Stock, respectively. (See Capitalization below.)
In 2001, 2000 and 1999, dividends paid on the Convertible
Preferred Stock amounted to $0.7 million, $0.9 million and
$1.6 million, respectively. The lower cash dividends in 2001
as compared to 2000 and in 2000 as compared to 1999,
reflect the effects of repurchases of the Company’s
Convertible Preferred Stock. Under the share repurchase
programs authorized by the Board, the Company
2001 ANNUAL REPORT
purchased $2.2 million (8,100 shares) of Convertible
Preferred Stock at various times during 2000. There was no
repurchase activity in 2001. See Capitalization (below) for
further information on the Company’s share repurchase
program.
Market Risk Exposures
Market Risk Exposures
Market Risk Exposures
Market Risk Exposures
The Company has activities in 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 Company utilizes various derivative and non-
derivative hedging instruments, as discussed below, to
hedge its foreign currency, interest rate, and commodity
exposures when appropriate. The risk that counterparties
to such instruments may be unable to perform is
minimized by limiting the counterparties used to major
financial institutions with investment grade credit ratings.
Management of the Company does not expect any losses
due to such counterparty default.
The Company maintains a control system to monitor
changes in interest rate, foreign currency and commodity
exposures that may adversely impact expected future cash
flows. The risk management control systems involve the
use of analytical techniques to estimate the expected
impact of changes in interest rates, foreign currency
exchange rates and commodity prices on the Company’s
future cash flows. The Company does not use derivative
instruments for purposes other than hedging.
The sensitivity analyses discussed below for the market
risk exposures were based on facts and circumstances in
effect at December 31, 2001. Actual results will be
determined by a number of factors that are not under
management’s control and could vary significantly from
those disclosed.
18
Interest Rate Risk
The Company uses both fixed and floating rate debt
denominated primarily in U.S. dollars to finance its
operations. Floating rate debt obligations, including the
Company’s U.S. bank credit facility, expose the Company
to fluctuations in interest expense due to changes in the
general level of interest rates. To a lesser extent, the
Company uses debt denominated in foreign currencies,
primarily including euros, Venezuelan bolivars, Brazilian
reals and British pounds. Venezuela is considered a highly
inflationary economy, and therefore, changes in that
country’s interest rates may be partially offset by
corresponding changes in the currency exchange rates
that will affect the U.S. dollar value of the underlying debt.
In order to limit the variability of the interest expense on
its debt, the Company has converted the floating rate cash
flows on a portion ($90 million at December 31, 2001) of its
$185.0 million revolving credit facility to fixed-rate cash
flows by entering into interest rate swap agreements
which involve the exchange of floating rate interest
payments for fixed rate interest payments. In addition to
the U.S. dollar denominated fixed interest rate swaps, the
Company also has fixed rate debt, including the
Company’s Senior Notes. The fixed rate debt and interest
rate swaps are subject to fluctuations in their fair values as
a result of changes in interest rates.
Based on interest rate levels in effect on the floating rate
debt outstanding at December 31, 2001, a hypothetical
10% increase in these rates would increase interest
expense by approximately $0.4 million over a twelve-
month period. (In other words, the Company’s weighted
average interest rate on its floating rate debt was 4.3% per
annum at December 31, 2001. If that average rate were to
increase by 43 basis points to 4.7%, the interest expense
associated with these borrowings would increase by $0.4
million annually). Debt designated as hedged to fixed
rates by the interest rate swaps has been excluded from
this amount. The effect on the fair value of fixed rate debt
and interest rate swaps for a hypothetical 10% uniform
shift (as a percentage of market interest rates) in the yield
curves for interest rates in various countries from year-
end 2001 levels is not material.
Foreign Currency Risk
The Company, through its Brink’s and BAX Global
operations, has certain exposures to the effects of foreign
exchange rate fluctuations on the results of foreign
operations which are reported in U.S. dollars.
2001 ANNUAL REPORT
The Company is exposed periodically to the foreign
currency rate fluctuations that affect transactions not
denominated in the functional currency of domestic and
foreign operations. To mitigate these exposures, the
Company, from time to time, enters into foreign currency
forward contracts.
In addition, the Company has net investments in a
number of foreign subsidiaries. Cumulative translation
adjustments of the net assets of the foreign subsidiaries
are recorded as a separate component of shareholders’
equity. The translation adjustments for hyperinflationary
economies in which the Company operates (currently
Venezuela) are recorded as a component of net income.
Due to the long-term nature of its investments in foreign
subsidiaries, the Company generally does not hedge this
exposure.
The effects of a hypothetical simultaneous 10%
appreciation in the U.S. dollar from year end 2001 levels
against all other currencies of countries in which the
Company operates were measured for their potential
impact on, 1) translation of earnings into U.S. dollars
based on 2001 results, 2) transactional exposures, and 3)
translation of investments in foreign subsidiaries. The
hypothetical effects would be approximately $2.7 million
unfavorable for the translation of earnings into U.S.
dollars, approximately $2.7 million favorable earnings
effect for transactional exposures, and approximately
$28.6 million unfavorable change to the Company’s
cumulative translation adjustment (equity).
Commodities Price Risk
The Company consumes and sells various commodities in
the normal course of its business and, from time to time,
utilizes derivative instruments to minimize the variability
in forecasted cash flows due to price movements in these
commodities. The derivative contracts are entered into in
accordance with guidelines set forth in the Company’s
hedging policies.
The Company utilizes forward swap contracts for the
purchase of jet fuel to fix a portion of forecasted jet fuel
costs at specific price levels and it utilizes option
strategies to hedge a portion of the remaining risk
associated with jet fuel. In some cases, the Company is
able to adjust its pricing through the use of surcharges on
customers to partially offset large increases in the cost of
the jet fuel.
19
The Company utilizes forward sales contracts and option
strategies to hedge the selling price on a portion of its
forecasted natural gas and gold sales.
The following table represents the Company’s
outstanding commodity hedge contracts as of December
31, 2001. Amounts presented as the fair value after a
hypothetical 10% change in commodity prices reflect a
hypothetical 10% reduction in the future price of jet fuel
and a hypothetical 10% increase in the future prices of
gold and natural gas.
Estimated Fair Value
Notional
With 10%
(In millions, except as noted)
Amount
Actual Price Change
Forward gold sale contracts (a)
222.0 $
(1.6)
(5.8)
Forward swap and option contracts:
Jet fuel purchases (b)
Natural gas sales (c)
29.0
1.7
(2.7)
2.0
(4.4)
1.6
(a) Notional amount in thousands of ounces of gold. Notional amount
includes all forward sale contracts of 45% owned entity. Fair value also
reflects the Company’s 45% portion of the entities’ fair value.
(b) Notional amount in millions of gallons of fuel.
(c) Notional amount in millions of MMBTUs.
CONTINGENT LIABILITIES
CONTINGENT LIABILITIES
CONTINGENT LIABILITIES
CONTINGENT LIABILITIES
Environmental Remedi
ation
Environmental Remediation
ation
ation
Environmental Remedi
Environmental Remedi
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 facility was sold in 1983. Under the
settlement agreement, the Company is obligated to pay
80% of the hydrocarbon remediation costs. The Company
is in the process of remediating the site under an
approved plan. The Company estimates its portion of the
actual remaining clean-up and operational and
maintenance costs, on an undiscounted basis, to be
between $3.8 and $8.1 million. Management is unable to
determine that any amount within that range is a better
estimate due to a variety of uncertainties which include
unforeseen circumstances existing at the site, changes in
the regulatory standards under which the clean-up is
being conducted, and additional costs due to inflation.
The estimate of costs and the timing of payments could
change significantly based upon any one of the
uncertainties described immediately above.
2001 ANNUAL REPORT
Taking into account the proceeds from a previous
settlement with its insurers of claims relating to this
matter, it is the Company’s belief that the ultimate amount
for which it will be liable resulting from the remediation
of the Tankport site will not have a material adverse
impact on the Company’s financial position.
Capitalization
Capitalization
Capitalization
Capitalization
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 the
Board 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 took place on January 14, 2000, on
which date, holders of Minerals Stock received 0.0817
shares of Brink’s Stock for each share of their Minerals
Stock; and holders of BAX Stock received 0.4848 shares of
Brink’s Stock for each share of their BAX Stock. 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, the
Brink’s Stock reflected the performance of the Brink’s
Group only; after the Exchange Date, the 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 of all outstanding shares of
BAX Stock and Minerals Stock for Pittston Common Stock,
the Company issued 10.9 million shares of Pittston
Common Stock, which consists of 9.5 million shares of
Pittston Common Stock equal to 100% of the Fair Market
Value, as defined, of all BAX Stock and Minerals Stock and
1.4 million 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 10.9 million shares issued, 10.2
million shares were issued to holders of BAX Stock and
Minerals Stock and 0.7 million shares were issued to The
Pittston Company Employee Benefits Trust.
20
The Company has the authority to issue up to 2.0 million
shares of preferred stock, par value $10 per share. In
January 1994, the Company issued $80.5 million (0.2
million shares) of Series C Cumulative Convertible
Preferred Stock (the “Convertible Preferred Stock”). See
Note 3 for the impact of the Exchange on 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 and bears a liquidation preference
of $500 per share, plus an attributed amount equal to
accrued and unpaid dividends, if any, thereon.
On May 4, 2001, the Board approved a revised authority to
purchase over time up to 1.0 million shares of Pittston
Common Stock and any or all of the issued and
outstanding shares of the Convertible Preferred Stock
with an aggregate purchase price limitation of $30 million
for all such purchases. Such shares are to be purchased
from time to time in the open market or in private
transactions, as conditions warrant. The Company made
no such purchases during 2001.
Accounting Change
2000
Accounting Change ---- 2000
2000
2000
Accounting Change
Accounting Change
Pursuant to guidance issued in Staff Accounting Bulletin
(“SAB”) No. 101, “Revenue Recognition in Financial
Statements,” by the Securities and Exchange Commission
in December 1999, and a related interpretation issued in
October 2000, BHS changed its method of accounting for
nonrefundable installation revenues and a portion of the
related direct costs of obtaining new subscribers
(primarily sales commissions).
Under the new method, all of the nonrefundable
installation revenues and a portion of the new installation
costs deemed to be direct costs of subscriber acquisition
are deferred and recognized in income over the estimated
term of the subscriber relationship. Prior to 2000, BHS
charged against earnings as incurred, all marketing and
selling costs associated with obtaining new subscribers
and recognized as revenue all nonrefundable payments
received from such subscribers to the extent that costs
exceeded such revenues. The accounting change was
implemented in 2000 and the Company reported a
noncash, after-tax charge of $52.0 million ($84.7 million
pretax), to reflect the cumulative effect of the accounting
2001 ANNUAL REPORT
change on years prior to 2000. The pretax cumulative
effect charge of $84.7 million was comprised of a net
deferral of $121.1 million of revenues partially offset by
$36.4 million of customer acquisition costs. The change
decreased operating profit for 2000 by $2.3 million,
reflecting a net decrease in revenues of $6.4 million and a
net decrease in operating expenses of $4.1 million. Net
income for 2000 was reduced by $1.4 million ($0.03 per
diluted share).
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No.
141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other Intangible Assets," were issued in
June 2001. SFAS No. 141 requires that the purchase
method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 142
will be adopted in the first quarter of 2002 and, in
accordance with the new standard, goodwill and
intangible assets with indefinite useful lives will no longer
be amortized, but will be tested for impairment at least
annually. The Company’s goodwill amortization in each of
2001 and 2000 was approximately $9.5 million ($0.12 per
diluted share after-tax). During 2002, the Company will
perform a transitional goodwill impairment test as of
January 1, 2002 and will record any resulting impairment
charges, if necessary, as the cumulative effect of an
accounting change as of January 1, 2002. The impact of the
implementation of this statement, other than
discontinuing goodwill amortization, if any, on the
earnings and financial position of the Company will be
evaluated during the first half of 2002.
SFAS No. 143, “Accounting for Asset Retirement
Obligations,” was issued in June 2001 and addresses
financial accounting and reporting for obligations
associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No.
143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in
which it becomes an obligation, if a reasonable estimate
of fair value can be made. The Company will adopt SFAS
No. 143 in 2003. The Company is currently evaluating the
effect that implementation of the new standard may have
on its results of operations and financial position.
21
SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets,” was issued in August 2001. This
statement supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of,” and
will provide a single accounting model for long-lived
assets held-for-sale. SFAS No. 144 will also supersede the
provisions of Accounting Principles Board Opinion
(“APB”) No. 30, “Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions,” with
regard to reporting the effects of a disposal of a segment
of a business and will require expected future operating
losses from discontinued operations to be reported in the
periods in which the losses are incurred (rather than as of
the measurement date as required by APB No. 30). In
addition, SFAS No. 144 expands the definition of asset
dispositions that may qualify for discontinued operations
treatment in the future. SFAS No. 144 is effective for new
transactions entered into after adoption of this statement.
Critical Accounting Policies and the Use of
Critical Accounting Policies and the Use of
Critical Accounting Policies and the Use of
Critical Accounting Policies and the Use of
Judgment
Judgment
Judgment
Judgment
The Company’s Consolidated Financial Statements have
been prepared by management using U.S. generally
accepted accounting principles (“GAAP”). GAAP
sometimes permits more than one method of accounting
to be used. The Company has described the significant
accounting policies it employs in the Notes to the
Consolidated Financial Statements.
The application of accounting principles requires the use
of estimates and judgments which are the responsibility of
management. Management makes such estimates and
judgments based on, among other things, knowledge of
operations, markets, historical trends and likely future
changes, similarly situated businesses and, when
appropriate, the opinions of advisors with knowledge and
experience in certain fields. Many assumptions,
judgments and estimates are straightforward. However,
due to the nature of certain assets and liabilities, there are
risks and uncertainties associated with some of the
judgments, assumptions and estimates which are required
to be made. Reported results could have been materially
different under a different set of assumptions and
estimates for certain accounting principle applications.
2001 ANNUAL REPORT
The explanations following are intended to briefly explain
some of the issues related to the application of selected
accounting principles, the judgments made in their
application and potential changes to reported results if
actual conditions and results differ from assumptions.
Due to the complexity associated with the application of
many accounting principles and the exercise of judgment,
this is not intended to cover all potential changes.
Deferred Tax Assets
Deferred Tax Assets
Deferred Tax Assets
Deferred Tax Assets
It is common for companies to record expenses and
accruals before, often well before, such expenses and
costs are actually paid. An example of this is
postretirement medical benefits. Such benefits are
generally recorded as expenses while the participants are
active employees but the related cash payments are not
made until after their retirement. In the U.S. and most
other countries and tax jurisdictions, many deductions for
tax return purposes cannot be taken until the expenses
are actually paid. Similarly, certain tax credits and tax loss
carryforwards cannot be used until future periods when
sufficient taxable income is generated. In these
circumstances, under GAAP, companies accrue for the tax
benefit expected to be received in future years if, in the
judgment of management, it is “more likely than not” that
the company will receive such benefits. Such benefits
(deferred tax assets) are often offset, in whole or in part by
the effects of deferred tax liabilities which relate primarily
to deductions available for tax return purposes under
existing tax laws and regulations before such expenses are
reported as expenses under GAAP.
As of December 31, 2001, the Company had in excess of
$300 million of net deferred tax assets on its consolidated
balance sheet. For more details associated with this net
balance, see Note 15 to the accompanying Consolidated
Financial Statements.
Since there is no absolute assurance that these assets will
be ultimately realized, management periodically reviews
its deferred tax positions to determine if it is more likely
than not that such assets will be realized. Such periodic
reviews include, among other things, the nature and
amount of the tax income and expense items, the
expected timing when certain assets will be used or
liabilities will be required to be reported and the
reliability of historical profitability of businesses expected
to provide future earnings. Furthermore, management
22
considers tax-planning strategies it can employ in order to
increase the likelihood that the use of tax assets will be
achieved. These strategies are also considered in the
periodic reviews. If after conducting such a review,
management determines that the realization of the tax
asset does not meet the “more likely than not” criteria, an
offsetting valuation reserve would be recorded thereby
reducing net earnings and the deferred tax asset in that
period.
Of the net deferred tax assets at December 31, 2001,
approximately 90% relates to the Company’s operations in
the U.S., including individual state tax jurisdictions.
Because of its expectation that the historically reliable
profitability of the Company’s U.S. portion of the Business
and Security Services operations will continue and the
lengthy period over which certain of the recorded
expenses will become available for deduction on tax
returns, management has concluded that it is more likely
than not that these net deferred tax assets will be realized.
For international operations, the Company has evaluated
its ability to fully utilize the net assets on an individual
country basis and due to doubts about such usability for
certain countries, has recorded a $10.3 million valuation
allowance through December 31, 2001.
If expectations for future performance, the timing of
deductibility of expenses, or tax statutes change in the
future, during a periodic review the Company could
decide to raise the valuation allowance, thereby
increasing the tax provision.
Goodwill and Property and Equipment Valuations
Goodwill and Property and Equipment Valuations
Goodwill and Property and Equipment Valuations
Goodwill and Property and Equipment Valuations
The Company regularly reviews the current operating
performance and future expectations for earnings and
cash flows of its businesses in order to evaluate the
appropriateness of the carrying values of goodwill and
other long-lived assets, primarily property and equipment.
To determine if an impairment exists, the Company
compares estimates of the future undiscounted net cash
flows of the asset to its carrying value. For purposes of
assessing impairment, assets are grouped at the lowest
level for which there are identifiable cash flows that are
largely independent of the cash flows of other groups of
assets.
2001 ANNUAL REPORT
The carrying values of long-lived assets in the Company’s
coal operations have already been reduced to their
expected net realizable value under discontinued
operations accounting. Due to historically solid earnings
and cash flow, the carrying values of long-lived assets of
Brink’s and BHS are believed to be appropriate.
The carrying values of BAX Global’s assets are also
believed to be appropriate and do not require a valuation
adjustment, despite BAX Global’s incurrence of losses for
the two years ended December 31, 2001. Changes to the
Company’s operations, resources used, and cost structure
resulted in a reduced operating loss in 2001, despite the
significant decline in revenue caused by the global
recession. In management’s opinion, the changes
implemented at BAX Global plus a return to more normal
levels of global economic performance will result in
substantial improvement in operating performance and
cash flow over time. Based on such judgment, the
Company prepared a multi-year forecast of operating
performance and undiscounted cash flow which exceeds
the carrying values of the associated assets. Accordingly,
no reduction in the carrying value of BAX Global’s assets
is deemed necessary at this time.
Had the Company expected no long-term improvement in
the economy and the performance of BAX Global, the
Company may have concluded that its goodwill or fixed
assets were impaired and, in such circumstances, would
have reduced the carrying values of such assets and
recognized a loss.
SFAS No. 142 “Goodwill and Other Intangible Assets” was
issued in June 2001. During 2002, the Company will
perform a transitional goodwill impairment test as of
January 1, 2002 using the guidelines provided for in the
statement. If an impairment is determined under these
guidelines, the Company will record such charge, if any,
as the cumulative effect of an accounting change as of
January 1, 2002.
Discontinued Operations
Discontinued Operations
Discontinued Operations
Discontinued Operations
The Company’s accounting for its coal business as a
discontinued operation requires estimates relating to
timing, valuation and operating performance. See the
discussion of Discontinued Operations above and in Note
18 to the Consolidated Financial Statements.
23
If the Company did not have both the intent and the
ability to complete the disposal of its coal business, it
would not have designated such operations as
discontinued. In estimating timing of the disposal process,
management has considered information from its
discussions with and assessments of prospective buyers,
the advice of its outside advisors and other factors. Based
on this information, management has developed what it
considers to be the most likely scenario for the sale and/or
shutdown of the coal operations. Of course, there are
many potential scenarios which would also result in the
disposal of the business. The actual timing of the sale or
shutdown of the various mines, preparation plants and
other units of the coal business will affect, either
negatively or positively, the recorded accruals for
discontinued operations.
The value of proceeds to be received and the assets and
liabilities to be retained have been estimated by the
Company based on management’s knowledge of such
operations, assets and liabilities, current market
conditions, the opinion of its advisors and
communications with interested parties. The value of the
proceeds to be received and assets and liabilities to be
retained will ultimately be determined in negotiations
with purchasers and may be higher or lower than those
amounts currently estimated. The value of liabilities
associated with most employee and retiree benefits,
which comprise the majority of the liabilities to be
retained, are reevaluated annually (see Multi-Year
Employee and Retiree Benefit Obligations below).
The Company’s accrual of operating losses expected to be
incurred during the disposal process includes estimates of
revenues, operating costs and the expected timing of the
sale or disposal of individual operating units. Actual
revenues, operating costs and performance may be higher
or lower than estimated based on market conditions,
mine and facility performance, spending levels and the
actual timing of the sale or shutdown of individual
operations.
Year Employee and Retiree Benefit
MultiMultiMultiMulti----Year Employee and Retiree Benefit
Year Employee and Retiree Benefit
Year Employee and Retiree Benefit
Obligations
Obligations
Obligations
Obligations
The Company provides its employees and retirees
benefits arising from both Company-sponsored plans (e.g.
defined benefit pension plans) and statutory
requirements (e.g. medical benefits for otherwise
ineligible former employees and non employees under
the Health Benefit Act). Certain of these benefit
obligations require payments to be made by the Company
or by trusts funded by the Company over long periods of
time.
2001 ANNUAL REPORT
The primary benefits which require cash payments over
multiple years are:
• Defined Benefit Pension Benefits
•
Postretirement Medical Benefits
• Health Benefit Act Medical Benefits
•
• Workers’ Compensation Benefits
Black Lung Benefits
As is normal for such benefits, cash payments will be
made for periods ranging from the current year to well
over fifty years from now for certain benefits. The amount
of such payments and related expenses will be affected
over time by inflation, investment returns and market
interest rates, changes in the numbers of plan participants
and changes in the benefit obligations and/or laws and
regulations covering the benefit obligations.
Because of the complex interrelationship of some of the
assumptions, the significance of the benefit obligations
and the length of time over which payments will be made,
the Company reevaluates all significant benefit
obligations at least annually. Such reevaluations include
actuarial valuations, reviews of historical information and
forecasts for future trends for key assumptions, and an
evaluation of changes in applicable laws or regulations. As
a result of such reevaluations, the Company records
increases or decreases in liabilities and associated
expenses over time as required under GAAP.
There are several assumptions which are important in
determining the carrying values of such liabilities and the
resulting annual expense. Such assumptions along with
the primary plans which are impacted by changes in the
assumptions follow.
Discount Rate (Pension Plans, Postretirement
Medical Benefits Under Company-Sponsored Plans
and “Black Lung” Benefits)
The discount rate is used to determine the present value
of future payments. This rate reflects returns expected
from high quality bonds and will fluctuate over time with
market interest rates. In general, the Company’s liability
changes in an inverse relationship to interest rates, i.e. the
lower the discount rate, the higher the associated liability
for the noted benefit obligations. With the decline in
market interest rates in 2001, the company reduced the
discount rate used to value the affected plans to 7.25%. It
is likely that such discount rate will change in the future as
interest rates change.
24
Return on Assets (Pension Plan)
The Company’s primary defined benefit pension plan had
assets at December 31, 2001 of approximately $459 million.
The annual calculation of expense for the pension plan
assumes a 10% long-term investment return for such
assets. For the ten-year period ended in 2001, the actual
averaged annualized return on the plan’s assets exceeded
10%. The Company has no current intent to adjust the
expected long-term rate of return on plan assets.
The offset (or “credit”) to expense associated with the
assumed investment return fluctuates based on the level
of plan assets (over time, the higher the level of assets, the
higher the credit and vice versa) and the assumed rate of
return (the higher the rate, the higher the credit and vice
versa). Plan assets for the Company’s primary defined
benefit plan have declined by approximately $45 million
over the two years ended December 31, 2001 as a result of
general investment market conditions. In addition, the
plan paid out approximately $42 million in benefits during
the same time period. Accordingly, the investment credit
is expected to decline. This will have the effect of
increasing the Company’s net pension expense.
Inflation Assumptions on Salary Levels (Pension
Plan) and Medical Inflation (Postretirement Medical
Benefits, Health Benefit Act Medical Benefits,
Workers’ Compensation Benefits)
Pension expense and liabilities will vary with the expected
rate of salary increases – the higher or lower the annual
increase, the higher or lower the liability and expense.
The Company has no current intent to change its 4%
salary increase assumption.
Changes in medical inflation will affect liability and
expense amounts differently for the three plans noted.
There is a direct link for postretirement medical under the
Company’s plan on expected spending for 2002 and for
later years. Future cash payments associated with the
Health Benefit Act will reflect some but not all of the
effect of medical inflation as a result of statutory
limitations on premium growth. Workers’ Compensation
liability and expense is also impacted but to a lesser
degree as a result of the generally short payout period
associated with medical benefits.
2001 ANNUAL REPORT
With the increase in medical inflation seen over the last
few years, the Company raised the assumed level of
inflation in its plans in 2001. Because of the volatility of
medical inflation it is likely that there will be future
adjustments, although the direction and extent of such
adjustments cannot be predicted at the present time.
Besides the effects of changes in medical costs, workers’
compensation costs are affected by the severity and types
of injuries, changes in state and federal regulations and
their application and the quality of programs which assist
an employee’s return to work. The Company’s liability for
future payments for workers’ compensation claims is
evaluated regularly with the assistance of its plan
administrator based on loss and payment history, updated
forecasts of claim values, industry experience and
projections of expected growth in future years. Based on
such a reevaluation, the Company records changes to its
liability balances.
Numbers of Participants (All Plans)
The valuations of all of these benefit plans are affected by
the life expectancy of the participants. Accordingly, the
Company relies on actuarial information to predict the
number and life expectancy of participants. Further, due
to the complexity of the contractual relationship with the
United Mine Workers of America (“UMWA”) for
postretirement medical benefits and the application of
regulations associated with, the Health Benefit Act, the
Company’s related liability and expense has and will
continue to fluctuate up and down as new participants are
made known to the Company and as the Company and
others investigate such applications. As a result, the
Company’s liabilities under its plans will vary as the
expected number and life expectancy of participants
change.
Changes in Laws
The Company’s valuations of its liabilities are determined
under existing laws and regulations. Changes in laws and
regulations which affect the ultimate level of liabilities and
expense are reflected once the changes are final and their
impact can be reasonably estimated. Recent changes in
black lung regulations could increase the Company’s total
liability. Future changes in laws directed at reducing
national levels of medical inflation and /or changing the
funding available for medical benefits (e.g. coverage of
pharmaceuticals under Medicare) could significantly
reduce the Company’s ultimate liability for certain
postretirement medical benefits.
25
2001 ANNUAL REPORT
third parties in some or all of the Company’s remaining
coal assets, completion of sales of coal assets on mutually
agreeable terms, the impact of the announced sale on the
coal business’ ability to operate in the normal course,
costs associated with shutting down those operations that
are not sold, the funding and benefit levels of the multi-
employer pension plans, the terms of any settlement of
litigation involving the coal business, government reforms
and initiatives in Latin America, strategic decisions by
Brink’s competitors with respect to their Latin American
operations, the continued use of Brink’s euro distribution
services by customers in Europe, variations in the timing
of the distribution of the euro, the willingness of BAX
Global’s customers to pay for security-related cost
increases, the ultimate amount of such security-related
cost increases, BAX Global’s ability to continue to
effectively manage costs, the market for the businesses
comprising the Company’s Other Operations and the
ability to conclude sales of those businesses on mutually
agreeable terms, changes in the scope or method of
remediation of the Tankport property, the actual cost of
the remediation of the Tankport property, the position
taken by various governmental entities with respect to the
claims for FBLET refunds, actual retirement experience of
the Company’s coal employees, black lung claims
incidence, actual dependent information, coal industry
turnover rates, actual medical and legal costs relating to
benefits, inflation rates, interest rates, overall economic
and business conditions, foreign currency exchange rates,
the demand for the Company’s products and services, the
impact of initiatives to control costs and increase
profitability, pricing and other competitive industry
factors, fuel prices, new government regulations and
legislative initiatives (particularly with respect to the
insurance and airline industries and with respect to black
lung benefits), issuance of permits, judicial decisions,
variations in costs or expenses, changes in liabilities under
and investment performance of the Company’s
noncontributory defined benefit plan, geological
conditions, actual coal property reclamation costs,
variations in the spot prices of coal and the ability of
counterparties to perform.
Forward
Looking Information
Forward----Looking Information
Looking Information
Looking Information
Forward
Forward
Certain of the matters discussed herein, including
statements regarding the timing and outcome of the
discontinuation of the Company’s Coal Operations,
expected proceeds from the sale of the coal business, the
retention of certain assets and liabilities following the sale
of the coal assets, estimated losses on the disposal of the
coal assets, “legacy” liabilities, Brink’s expectations with
regard to future economic and competitive conditions in
Latin America, the impact of the euro distribution on
Brink’s revenues and operating profits, insurance costs
and availability, the expected impact of lower demand for
expedited freight on BAX Global’s results during 2002, the
impact that the recent terrorist attacks may have on BAX
Global’s operating costs, the long-term plan to ultimately
dispose of the businesses comprising Other Operations
in order to focus resources on the Business and Security
Services segments, the timing of the payment of charges
related to BAX Global’s restructuring, the amount and
timing of FBLET refunds, the payment of amounts relating
to litigation at the Coal Operations, possible multi-
employer pension plan liability relating to the Company’s
planned exit from the coal business, costs of benefit
obligations relating to the coal business including black
lung benefits, projections about market risk and
expectations regarding counter-party performance, the
impact of the euro on operations at Brink’s and BAX
Global, realization of deferred tax assets, the carrying
values of assets of the operating segments, expected
improvements in BAX Global’s operating performance
and cash flow over time, expected impacts of black lung
obligations, projected heavy maintenance and capital
spending, contributions to or costs associated with the
Company’s noncontributory defined benefit plans,
environmental clean-up estimates and the impact of
remediation costs on the Company’s financial statements,
ongoing expenses associated with Coal Operations
following the Company’s exit from the business and the
impact of accounting changes on the Company’s financial
statements, 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, the timing, terms and form of the
Company’s exit from the coal business, the interest of
26
2001 ANNUAL REPORT
STATEMENT OF MANAGEMENT RESPONSIBILITY
STATEMENT OF MANAGEMENT RESPONSIBILITY
STATEMENT OF MANAGEMENT RESPONSIBILITY
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 accounting
principles generally accepted in the United States of America. 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 safe-guarded, that transactions are executed in accordance
with management’s authorization and that the accounting records provide a reliable basis for the preparation of the
consolidated 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 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 enable us to meet our
responsibility for the integrity of the Company’s consolidated financial statements.
27
2001 ANNUAL REPORT
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT
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 (the “Company”)
as of December 31, 2001 and 2000, and the related consolidated statements of operations, comprehensive income (loss),
shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. 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 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, 2001 and 2000, and the results of their operations and
their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
As more fully discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting
for nonrefundable installation revenues and the related direct costs of acquiring new subscribers in 2000 as a result of the
implementation of Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.”
KPMG LLP
Richmond, Virginia
January 30, 2002
28
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
ASSETS
ASSETS
ASSETS
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, (net of estimated uncollectible
amounts: 2001 - $41.8; 2000 - $39.8)
Prepaid expenses and other current assets
Deferred income taxes
Discontinued operations
Total current assets
Property and equipment, net
Goodwill, net
Prepaid pension assets
Deferred income taxes
Other assets
Discontinued operations
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings
Current maturities of long-term debt
Accounts payable
Accrued liabilities
Discontinued operations
Total current liabilities
Long-term debt
Postretirement benefits other than pensions
Workers’ compensation and other claims
Deferred revenue
Deferred income taxes
Other liabilities
Discontinued operations
Total liabilities
Commitments and contingent liabilities (Notes 6, 11, 12, 13, 15, 18 and 19)
Shareholders’ equity:
Preferred stock, par value $10 per share,
$31.25 Series C Cumulative Convertible Preferred Stock
Authorized: 0.161 shares; issued and outstanding: 2001 and 2000 – 0.021 shares
Common stock, par value $1 per share:
Authorized: 100.0 shares
Issued and outstanding: 2001 – 54.3 shares; 2000 – 51.8 shares
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Employee benefits trust, at market value
Total shareholders’ equity
2001 ANNUAL REPORT
December 31
2001
2001
2001
2001
2000
$$$$
86.786.786.786.7
493.3
493.3
493.3
493.3
57.557.557.557.5
103.1
103.1
103.1
103.1
19.919.919.919.9
760.5
760.5
760.5
760.5
818.1
818.1
818.1
818.1
224.8
224.8
224.8
224.8
109.0
109.0
109.0
109.0
233.2
233.2
233.2
233.2
155.7
155.7
155.7
155.7
92.792.792.792.7
97.8
560.1
57.8
81.4
16.5
813.6
831.5
233.0
118.4
229.7
142.0
110.5
$$$$
2,394.0
2,394.0
2,394.0
2,394.0
2,478.7
$$$$
27.827.827.827.8
17.217.217.217.2
256.6
256.6
256.6
256.6
540.0
540.0
540.0
540.0
3.3.3.3.3333
844.9
844.9
844.9
844.9
252.9
252.9
252.9
252.9
399.6
399.6
399.6
399.6
84.184.184.184.1
126.1
126.1
126.1
126.1
20.720.720.720.7
160.0
160.0
160.0
160.0
29.629.629.629.6
1,917.9
1,917.9
1,917.9
1,917.9
51.0
34.4
316.0
493.2
3.7
898.3
311.4
401.1
85.1
123.8
16.7
142.3
24.2
2,002.9
0.20.20.20.2
0.2
54.354.354.354.3
400.1
400.1
400.1
400.1
193.3
193.3
193.3
193.3
(112.9)
(112.9)
(112.9)
(112.9)
(58.9)
(58.9)
(58.9)
(58.9)
476.1
476.1
476.1
476.1
51.8
348.8
182.6
(82.1)
(25.5)
475.8
Total liabilities and shareholders’ equity
$$$$
2,394.0
2,394.0
2,394.0
2,394.0
2,478.7
See accompanying Notes to Consolidated Financial Statements.
29
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Revenues
Revenues
Revenues
Revenues
Expenses:
Expenses:
Expenses:
Expenses:
Operating expenses
Selling, general and administrative expenses
Restructuring charge
Total expenses
Other operating income, net
Operating profit
Operating profit
Operating profit
Operating profit
Interest income
Interest expense
Minority interest
Other income (expense), net
Income from continuing operations before income taxes
and cumulative effect of change in accounting principle
Provision for income taxes
Income from continuing operations before
Income from continuing operations before
Income from continuing operations before
Income from continuing operations before
cumulative effect of change in accounting principle
cumulative effect of change in accounting principle
cumulative effect of change in accounting principle
cumulative effect of change in accounting principle
2001 ANNUAL REPORT
Years Ended December 31
2001
2001
2001
2001
$$$$
3,624.2
3,624.2
3,624.2
3,624.2
3,090.6
3,090.6
3,090.6
3,090.6
445.6
445.6
445.6
445.6
(0.2)
(0.2)
(0.2)
(0.2)
3,536.0
3,536.0
3,536.0
3,536.0
22.422.422.422.4
110.6
110.6
110.6
110.6
4.74.74.74.7
(32.4)
(32.4)
(32.4)
(32.4)
(6.9)
(6.9)
(6.9)
(6.9)
(2.8)
(2.8)
(2.8)
(2.8)
73.273.273.273.2
27.427.427.427.4
45.845.845.845.8
2000
3,834.1
3,264.2
477.8
57.5
3,799.5
13.1
47.7
4.2
(43.4)
(3.7)
(0.2)
4.6
1.9
2.7
Discontinued operations, net of income taxes:
Loss from operations, net of $14.2 (2000) and $48.7 (1999) income tax benefits
Estimated loss on disposition, net of $25.1 (2001) and $105.1 (2000)
----
(18.2)
income tax benefits
Loss from discontinued operations
Income (loss) before cumulative effect of change
in accounting principle
Cumulative effect of change in accounting principle,
net of $32.7 income tax benefit
Net income (loss)
Net income (loss)
Net income (loss)
Net income (loss)
Preferred stock dividends, net
Net income (loss) attributed to common shares
Net income (loss) per common share (a):
Net income (loss) per common share (a):
Net income (loss) per common share (a):
Net income (loss) per common share (a):
Basic:
Continuing operations
Discontinued operations
Cumulative effect of change in accounting principle
Diluted:
Continuing operations
Discontinued operations
Cumulative effect of change in accounting principle
(29.2)
(29.2)
(29.2)
(29.2)
(29.2)
(29.2)
(29.2)
(29.2)
16.616.616.616.6
----
16.616.616.616.6
(0.7)
(0.7)
(0.7)
(0.7)
15.915.915.915.9
0.880.880.880.88
(0.57)
(0.57)
(0.57)
(0.57)
----
0.310.310.310.31
0.880.880.880.88
(0.57)
(0.57)
(0.57)
(0.57)
----
0.310.310.310.31
$$$$
$$$$
$$$$
$$$$
$$$$
(189.1)
(207.3)
(204.6)
(52.0)
(256.6)
0.8
(255.8)
0.07
(4.14)
(1.04)
(5.11)
0.05
(4.13)
(1.04)
(5.12)
(a) Per share amounts for 1999 are pro forma after giving effect for the January 14, 2000 exchange of tracking stock shares previously
outstanding for Pittston’s Brink’s Group Common Stock as more fully described in Notes to the Consolidated Financial Statements.
30
1999
3,709.7
3,065.7
457.8
-
3,523.5
10.4
196.6
3.7
(38.2)
(1.0)
8.4
169.5
61.5
108.0
(73.3)
-
(73.3)
34.7
-
34.7
17.6
52.3
2.55
(1.49)
-
1.06
2.19
(1.49)
-
0.70
EMENTS OF OPERATIONS (CONTINUED)
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
CONSOLIDATED STAT
EMENTS OF OPERATIONS (CONTINUED)
EMENTS OF OPERATIONS (CONTINUED)
CONSOLIDATED STAT
CONSOLIDATED STAT
2001 ANNUAL REPORT
Net income (loss) per common share for 1999:
Net income (loss) per common share for 1999:
Net income (loss) per common share for 1999:
Net income (loss) per common share for 1999:
Basic:
Continuing operations (b)
Discontinued operations
Diluted:
Continuing operations
Discontinued operations
Pro forma for change in accounting principle:
Pro forma for change in accounting principle:
Pro forma for change in accounting principle:
Pro forma for change in accounting principle:
Income from continuing operations
Net income (loss)
Net income (loss) attributed to common shares
Net income (loss) per common share:
Basic:
Continuing operations
Net income (loss) attributed to common shares
Diluted:
Continuing operations
Net income (loss) attributed to common shares
Year Ended December 31, 1999
Brink’s
Group
BAX
Group
Minerals
Group
$
$
$
$
2.16
-
2.16
2.15
-
2.15
1.73
-
1.73
1.72
-
1.72
0.93
(8.26)
(7.33)
(0.98)
(7.63)
(8.61)
Years Ended December 31
1999
2000
Pro forma (c)
$
$
$
$
$
$
$
2.7
(204.6)
(203.8)
0.07
(4.07)
0.05
(4.08)
103.2
29.8
47.5
2.46
0.97
2.09
0.60
(b) Minerals Group basic income from continuing operations includes $19.2 million ($2.15 per basic share of Minerals Group Stock) of the
excess of carrying value of convertible preferred stock over the cash paid to holders for repurchase.
(c) Pro forma disclosure of earnings and earnings per share information gives effect to the 2000 change in accounting principle for the
adoption of SAB 101 as if it had been in effect for all periods presented.
See accompanying Notes to Consolidated Financial Statements.
31
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
Net income (loss)
2001
2001
2001
2001
16.616.616.616.6
$$$$
Years Ended December 31
2000
(256.6)
1999
34.7
2001 ANNUAL REPORT
Other comprehensive income (loss):
Foreign currency:
Translation adjustments
Reclassification adjustment for loss included in net income
Foreign currency translation
Marketable securities:
Unrealized gains (losses) on marketable securities
Tax expense related to unrealized gains on marketable securities
Reclassification adjustment for gains realized in net income (loss)
Tax expense related to gains realized in net income (loss)
Unrealized gains (losses) on securities, net of tax
Cash flow hedges:
Deferred benefit (expense) on cash flow hedges
Tax benefit (expense) related to deferred benefit (expense)
on cash flow hedges
Reclassification adjustment for cash flow hedge expense (benefits)
realized in net income (loss)
Tax expense (benefit) related to cash flow hedge
realized in net income (loss)
Deferred cash flow hedges, net of tax
Minimum pension liability adjustment:
Adjustment to minimum pension liability in international subsidiary
Tax benefit related to minimum pension liability adjustment
Minimum pension liability adjustment, net of tax
(28.4)
(28.4)
(28.4)
(28.4)
0.50.50.50.5
(27.9)
(27.9)
(27.9)
(27.9)
3.53.53.53.5
(1.2)
(1.2)
(1.2)
(1.2)
(4.0)
(4.0)
(4.0)
(4.0)
1.41.41.41.4
(0.3)
(0.3)
(0.3)
(0.3)
2.42.42.42.4
(1.0)
(1.0)
(1.0)
(1.0)
3.93.93.93.9
(1.4)
(1.4)
(1.4)
(1.4)
3.93.93.93.9
(9.9)
(9.9)
(9.9)
(9.9)
3.43.43.43.4
(6.5)
(6.5)
(6.5)
(6.5)
(14.1)
-
(14.1)
(0.1)
-
(0.3)
0.1
(0.3)
(8.0)
1.8
(7.7)
2.8
(11.1)
-
-
-
Other comprehensive loss
(30.8)
(30.8)
(30.8)
(30.8)
(25.5)
Comprehensive income (loss)
$$$$
(14.2)
(14.2)
(14.2)
(14.2)
(282.1)
Supplemental comprehensive income (loss) information, net of tax:
Cumulative foreign currency translation loss adjustments
Cumulative unrealized gains (losses) on marketable securities
Cumulative deferred benefit (expense) on cash flow hedges
Cumulative minimum pension liability
Total accumulated other comprehensive loss
$$$$
(101.6)
(101.6)
(101.6)
(101.6)
(0.1)
(0.1)
(0.1)
(0.1)
(4.7)
(4.7)
(4.7)
(4.7)
(6.5)
(6.5)
(6.5)
(6.5)
$$$$
(112.9)
(112.9)
(112.9)
(112.9)
(73.7)
0.2
(8.6)
-
(82.1)
See accompanying Notes to Consolidated Financial Statements.
(10.7)
-
(10.7)
0.9
(0.3)
(0.6)
0.2
0.2
12.2
(3.6)
(4.2)
1.4
5.8
-
-
-
(4.7)
30.0
(59.6)
0.5
2.5
-
(56.6)
32
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2001, 2000 and 1999
2001 ANNUAL REPORT
(In millions)
Balance as of December 31, 1998 (a)
Net income
Other comprehensive loss
Share repurchase program:
Common stock
Preferred stock
Employee benefits trust:
Shares issued
Remeasurement
Shares used for employee benefit programs
Common stock dividends (b)
Preferred stock dividends
Other
Balance as of December 31, 1999 (c)
Net loss
Other comprehensive loss
Exchange of stock (d)
Share repurchase program:
Preferred stock
Employee benefits trust:
Remeasurement
Shares used for employee benefit programs
Tax benefit of stock options exercised
Common stock dividends
Preferred stock dividends
Balance as of December 31, 2000
Net income
Other comprehensive loss
Employee benefits trust:
Shares issued
Remeasurement
Shares used for employee benefit programs
Tax benefit of stock options exercised
Common stock dividends
Preferred stock dividends
Other
Balance as of December 31, 2001
Preferred
Stock
1.1
Common
Stock
71.0
$
Capital
in Excess
of Par
Value
403.1
Accumulated
Other
Retained Comprehensive
Earnings
401.2
Loss
(51.9)
Employee
Benefits
Trust
(88.5)
-
-
-
(0.8)
-
-
-
-
-
-
0.3
-
-
-
-
-
(0.1)
-
0.9
-
-
-
-
-
71.8
-
-
(20.0)
-
-
(1.0)
(39.3)
0.6
(21.0)
(1.3)
-
-
(0.1)
341.0
-
-
20.2
34.7
-
(1.5)
19.2
-
-
-
(8.7)
(1.6)
0.1
443.4
(256.6)
-
-
-
(4.7)
-
-
-
-
-
-
-
-
(56.6)
-
(25.5)
-
Total
736.0
34.7
(4.7)
(2.6)
(20.9)
-
-
17.4
(8.7)
(1.6)
-
749.6
-
-
-
-
(1.5)
21.0
18.7
-
-
-
(50.3)
-
-
(0.2)
(256.6)
(25.5)
-
(0.1)
-
(3.8)
1.7
-
-
(2.2)
-
-
-
-
-
0.2
-
-
-
-
-
-
-
-
-
0.2
$
-
-
-
-
-
51.8
-
-
2.5
-
-
-
-
-
-
54.3
(8.3)
(0.4)
0.1
-
-
348.8
-
-
51.6
2.4
(2.7)
0.1
-
-
(0.1)
400.1
-
-
-
(5.0)
(0.9)
182.6
16.6
-
-
-
-
-
(5.1)
(0.7)
(0.1)
193.3
-
-
-
-
-
(82.1)
-
(30.8)
-
-
-
-
-
-
-
(112.9)
8.3
16.7
-
-
-
(25.5)
-
-
(54.1)
(2.4)
23.1
-
-
-
-
(58.9)
-
16.3
0.1
(5.0)
(0.9)
475.8
16.6
(30.8)
-
-
20.4
0.1
(5.1)
(0.7)
(0.2)
476.1
(a) Includes Brink’s Group Common Stock – 41.0 shares; BAX Group Common Stock – 20.8 shares and Minerals Group Common Stock – 9.2
shares.
(b) Includes $3.9 for Brink’s Group, $4.6 for BAX Group and $0.2 for Minerals Group.
(c) Includes Brink’s Group Common Stock – 40.9 shares; BAX Group Common Stock – 20.8 shares and Minerals Group Common Stock – 10.1
shares.
(d) On January 14, 2000, the Company eliminated its tracking stock capital structure by an exchange of all outstanding shares of Minerals
Group Common Stock and BAX Group Common Stock for shares of Brink’s Group Common Stock.
See accompanying Notes to Consolidated Financial Statements.
33
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Cash flows from operating activities:
Cash flows from operating activities:
Cash flows from operating activities:
Cash flows from operating activities:
Net income (loss)
$$$$
Adjustments to reconcile net income (loss) to net cash provided by continuing operations:
Estimated loss on disposition of discontinued operations, net of tax
Operating loss of discontinued operations, net of tax
Cumulative effect of change in accounting principle, net of tax
Noncash restructuring and other charges
Depreciation and amortization
Provision for aircraft heavy maintenance
Deferred income taxes
Provision for uncollectible accounts receivable
Other operating, net
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable
Prepaid expenses and other current assets
Accounts payable and accrued liabilities
Other assets
Other liabilities
Other, net
Net cash provided by continuing operations
Net cash provided by discontinued operations
Net cash provided by operating activities
Cash flows from investing
activities:
Cash flows from investing activities:
activities:
activities:
Cash flows from investing
Cash flows from investing
Capital expenditures
Aircraft heavy maintenance expenditures
Proceeds from disposal of:
Property and equipment
Other assets and investments
Acquisitions
Discontinued operations, net
Other, net
Net cash used by investing activities
Cash flows from financing activities:
Cash flows from financing activities:
Cash flows from financing activities:
Cash flows from financing activities:
Long-term debt:
Additions
Repayments
Short-term borrowings (repayments), net
Repurchase of stock
Dividends
Other, net
Net cash provided (used) by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.
34
2001 ANNUAL REPORT
Years Ended December 31
2000
2001
2001
2001
2001
1999
16.616.616.616.6
(256.6)
34.7
29.229.229.229.2
----
----
----
194.4
194.4
194.4
194.4
32.432.432.432.4
(6.7)
(6.7)
(6.7)
(6.7)
12.012.012.012.0
19.419.419.419.4
41.841.841.841.8
5.05.05.05.0
(21.3)
(21.3)
(21.3)
(21.3)
(14.7)
(14.7)
(14.7)
(14.7)
1.81.81.81.8
(1.1)
(1.1)
(1.1)
(1.1)
308.8
308.8
308.8
308.8
6.96.96.96.9
315.7
315.7
315.7
315.7
189.1
18.2
52.0
47.8
188.9
40.2
(28.1)
22.9
23.3
40.5
(4.5)
11.9
(27.3)
13.3
2.8
334.4
30.4
364.8
-
73.3
-
-
148.9
50.2
12.8
14.7
7.2
(57.5)
0.4
25.4
(6.5)
9.6
-
313.2
16.1
329.3
(193.1)
(193.1)
(193.1)
(193.1)
(15.5)
(15.5)
(15.5)
(15.5)
(214.4)
(50.5)
(268.9)
(52.9)
2.02.02.02.0
7.37.37.37.3
(8.4)
(8.4)
(8.4)
(8.4)
(11.1)
(11.1)
(11.1)
(11.1)
(6.3)
(6.3)
(6.3)
(6.3)
4.1
-
(3.9)
(7.4)
(1.6)
8.8
9.5
(4.1)
(10.5)
(8.7)
(225.1)
(225.1)
(225.1)
(225.1)
(273.7)
(326.8)
107.7
107.7
107.7
107.7
(185.8)
(185.8)
(185.8)
(185.8)
(23.0)
(23.0)
(23.0)
(23.0)
----
(5.4)
(5.4)
(5.4)
(5.4)
4.84.84.84.8
(101.7)
(101.7)
(101.7)
(101.7)
(11.1)
(11.1)
(11.1)
(11.1)
97.897.897.897.8
86.786.786.786.7
332.0
(410.1)
(39.2)
(2.2)
(5.6)
0.6
(124.5)
(33.4)
131.2
97.8
$$$$
193.8
(122.0)
4.4
(23.5)
(9.8)
1.9
44.8
47.3
83.9
131.2
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED
NOTES TO CONSOLIDATED
Note 1
Note 1
Note 1
Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING
SUMMARY OF SIGNIFICANT ACCOUNTING
SUMMARY OF SIGNIFICANT ACCOUNTING
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
POLICIES
POLICIES
POLICIES
Basis of Presentation
Basis of Presentation
Basis of Presentation
Basis of Presentation
The Pittston Company, a Virginia corporation, has three
operating segments within its “Business and Security
Services” businesses: Brink’s, Incorporated (“Brink’s”);
Brink’s Home Security, Inc. (“BHS”); and BAX Global Inc.
(“BAX Global”).
The fourth operating segment is Other Operations, which
consists of gold, timber and natural gas operations. The
Pittston Company also has a discontinued segment,
Pittston Coal Operations (“Coal Operations”). The Pittston
Company and its subsidiaries are referred to herein as the
“Company.”
The Company’s common stock trades on the New York
Stock Exchange under the symbol “PZB.”
Prior to January 14, 2000, the Company had three classes of
common stock, each designed to track a segment of the
Company’s businesses: Pittston Brink’s Group Common
Stock (“Brink’s Stock”), Pittston BAX Group Common Stock
(“BAX Stock”) and Pittston Minerals Group Common Stock
(“Minerals Stock”).
The Company eliminated its tracking stock capital structure
on January 14, 2000 by exchanging all outstanding shares of
Minerals Stock and BAX Stock for shares of Brink’s Stock
(the “Exchange”). See Notes 3 and 20 for additional
information concerning the Exchange.
Principles of Consolidation
Principles of Consolidation
Principles of Consolidation
Principles of Consolidation
The Consolidated Financial Statements reflect the accounts
of the Company and its majority-owned subsidiaries. The
Company’s interest in 20% to 50% owned companies are
accounted for using the equity method (“equity affiliates”)
unless control exists, in which case, consolidation
accounting is used. Undistributed earnings of equity
affiliates included in consolidated retained earnings
approximated $34.1 million at December 31, 2001. All
material 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.
2001 ANNUAL REPORT
Revenue Recognition
Revenue Recognition
Revenue Recognition
Revenue Recognition
Brink’s - Services related to armored car transportation,
including ATM servicing, cash logistics, coin sorting and
wrapping are performed in accordance with the terms of
customer contracts. Revenue is recognized when services
are performed.
BHS - Monitoring revenues are recognized monthly as
services are provided pursuant to the terms of customer
contracts. Amounts collected in advance from customers
are deferred and recognized as income over the applicable
monitoring period, which is generally one year or less.
Beginning in 2000, nonrefundable installation revenues and
a portion of the related direct costs of acquiring new
subscribers (primarily sales commissions) are deferred and
recognized over the estimated term of the subscriber
relationship, which is generally 15 years. When an
installation is identified for disconnection, any
unamortized deferred revenues and deferred costs related
to that installation are recognized at that time. Prior to 2000,
BHS charged against earnings as incurred, all marketing
and selling costs associated with obtaining new subscribers
and recognized as revenue all nonrefundable payments
received from such subscribers to the extent that costs
exceeded such revenues.
BAX Global - 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. Revenues and operating
results determined under existing recognition policies do
not materially differ from those which would result from an
allocation of revenue between reporting periods based on
relative transit times in each reporting period with
expenses recognized as incurred.
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand
deposits and investments with original maturities of three
months or less.
Property and Equipment
Property and Equipment
Property and Equipment
Property and Equipment
Property and equipment is accounted for at cost.
Depreciation is calculated principally on the straight-line
method.
Estimated Useful Lives
Buildings
Home security systems
Vehicles
Other machinery and equipment
Years
10 to 40
15
3 to 12
3 to 20
35
Expenditures for routine maintenance and repairs on
property and equipment, including aircraft, are charged to
expense, and the costs of renewals and betterments are
capitalized. Major renewals, betterments and modifications
on aircraft are capitalized and amortized over the lesser of
the remaining life of the asset or lease term. Scheduled
airframe and periodic engine overhaul costs are capitalized
when incurred and amortized over the flying time to the
next scheduled major maintenance or overhaul date,
respectively.
BHS retains ownership of most home security systems
installed at subscriber locations. Costs for those systems
are capitalized and depreciated over the estimated lives of
the assets. Each period, the Company charges to
depreciation expense the carrying value of security systems
estimated to be permanently disconnected based on
historical reconnection experience.
Goodwill
Goodwill
Goodwill
Goodwill
Goodwill has been amortized through 2001 on a straight-
line basis over the estimated periods benefited up to a
maximum of 40 years.
Impairment of Long
Lived Assets
Impairment of Long----Lived Assets
Lived Assets
Lived Assets
Impairment of Long
Impairment of Long
Long-lived assets that are deemed impaired are recorded at
the lower of the carrying amount or fair value in
accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of.” The Company reviews long-lived
assets, including fixed assets and goodwill, for impairment
whenever events or changes in circumstances indicate that
the carrying value of the asset may not be recoverable. To
determine if impairment exists, the Company compares
estimates of the future undiscounted net cash flows of the
asset to its carrying value. For purposes of assessing
impairment, assets are grouped at the lowest level for
which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets.
2001 ANNUAL REPORT
Stock
Based Compensation
Stock----Based Compensation
Based Compensation
Based Compensation
Stock
Stock
The Company accounts for its stock-based compensation
plans using the intrinsic value method prescribed in
Accounting Principles Board Opinion (“APB”) No. 25,
“Accounting for Stock Issued to Employees” and related
Interpretations. Accordingly, since options are granted at
the average market price of the stock at date of grant, the
Company has not recognized any compensation expense
related to its stock option plans for the years ended
December 31, 2001, 2000 and 1999. Pro forma disclosures of
net earnings and earnings per share calculated as if the fair
value method of accounting provided for in SFAS No. 123,
“Accounting for Stock-Based Compensation,” had been
applied are presented in Note 14.
Postretirement Benefits Other Than Pensions
Postretirement Benefits Other Than Pensions
Postretirement Benefits Other Than Pensions
Postretirement Benefits Other Than Pensions
Postretirement benefits other than pensions, except for
those established pursuant to the Coal Industry Retiree
Health Benefit Act of 1992 (the “Health Benefit Act”), are
accounted for in accordance with SFAS 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 and during the average
remaining life expectancy for inactive participants.
Postretirement benefit obligations established by the
Health Benefit Act are recorded as a liability when they are
probable and estimable in accordance with Emerging
Issues Task Force (“EITF”) No. 92-13, “Accounting for
Estimated Payments in Connection with the Coal Industry
Retiree Health Benefit Act of 1992.” Prior to the Company’s
formal plan to exit the coal business in December 2000, the
Company recognized expense when payments were made,
similar to the accounting for multi-employer plans, as
provided in EITF 92-13.
Income Taxes
Income Taxes
Income Taxes
Income Taxes
Income taxes are accounted for in accordance with SFAS
No. 109, “Accounting for Income Taxes,” which requires
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities 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 these items
are expected to reverse.
36
Foreign Currency Translation
Foreign Currency Translation
Foreign Currency Translation
Foreign Currency Translation
The Company’s Consolidated Financial Statements are
reported in U.S. dollars. Assets and liabilities of foreign
subsidiaries are translated using rates of exchange at the
balance sheet date and related revenues and expenses are
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.
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
Derivative instruments and hedging activities are
accounted for in accordance with SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities,” as amended. SFAS No. 133, which was adopted
in 1998 by the Company, requires that all derivative
instruments be recorded in the Consolidated Balance
Sheet at fair value. If the derivative has been designated as
a cash flow hedge, changes in the fair value of derivatives
are recognized in other comprehensive income until the
hedged transaction is recognized in earnings.
Use of Estimates
Use of Estimates
Use of Estimates
Use of Estimates
In accordance with accounting principles generally
accepted in the U.S., management of the Company has
made a number of estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these
Consolidated Financial Statements. Actual results could
differ materially from those estimates.
Accounting Change
2000
Accounting Change ---- 2000
2000
2000
Accounting Change
Accounting Change
Pursuant to guidance issued in Staff Accounting Bulletin
(“SAB”) No. 101, “Revenue Recognition in Financial
Statements,” by the Securities and Exchange Commission
in December 1999, and a related interpretation issued in
October 2000, BHS changed its method of accounting for
nonrefundable installation revenues and a portion of the
related direct costs of obtaining new subscribers (primarily
sales commissions).
2001 ANNUAL REPORT
Under the new method, all of the nonrefundable
installation revenues and a portion of the new installation
costs deemed to be direct costs of subscriber acquisition
are deferred and recognized in income over the estimated
term of the subscriber relationship. Prior to 2000, BHS
charged against earnings as incurred, all marketing and
selling costs associated with obtaining new subscribers and
recognized as revenue all nonrefundable payments
received from such subscribers to the extent that costs
exceeded such revenues.
The accounting change was implemented in 2000 and the
Company reported a noncash, after-tax charge of $52.0
million ($84.7 million pretax), to reflect the cumulative
effect of the accounting change on years prior to 2000. The
pretax cumulative effect charge of $84.7 million comprised
a net deferral of $121.1 million of revenues partially offset
by $36.4 million of customer acquisition costs. The change
in accounting principle decreased operating profit for 2000
by $2.3 million, reflecting a net decrease in revenues of $6.4
million and a net decrease in operating expenses of $4.1
million. Net income for 2000 was reduced by $1.4 million
($0.03 per diluted share). Of the $121.1 million of revenues
deferred by the adoption of the new accounting principle
at the beginning of 2000, $18.0 million was recognized as
revenue in 2001 and $19.6 million was recognized as
revenue in 2000.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Recent Accounting Pronouncements
SFAS No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other Intangible Assets," were issued in
June 2001. SFAS No. 141 requires that the purchase method
of accounting be used for all business combinations
initiated after June 30, 2001. SFAS No. 142 will be adopted in
the first quarter of 2002 and, in accordance with the new
standard, goodwill and intangible assets with indefinite
useful lives will no longer be amortized, but will be tested
for impairment at least annually. The Company’s goodwill
amortization in each of 2001 and 2000 was approximately
$9.5 million ($0.12 per diluted share after-tax). During 2002,
the Company will perform a transitional goodwill
impairment test as of January 1, 2002 and will record any
resulting impairment charges, if necessary, as the
cumulative effect of an accounting change as of January 1,
2002. The impact of the implementation of this statement
other than discontinuing goodwill amortization, if any, on
the earnings and financial position of the Company will be
evaluated during the first half of 2002.
37
SFAS No. 143, “Accounting for Asset Retirement
Obligations,” was issued in June 2001 and addresses
financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. SFAS No. 143
requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which
it becomes an obligation, if a reasonable estimate of fair
value can be made. The Company will adopt SFAS No. 143
in 2003. The Company is currently evaluating the effect that
implementation of the new standard may have on its
results of operations and financial position.
SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets,” was issued in August 2001. This
statement supersedes SFAS No. 121 and will provide a
single accounting model for long-lived assets held-for-sale.
SFAS No. 144 will also supersede the provisions of APB No.
30, “Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions,” with regard to
reporting the effects of a disposal of a segment of a
business and will require expected future operating losses
from discontinued operations to be reported in the periods
in which the losses are incurred (rather than as of the
measurement date as required by APB No. 30). In addition,
SFAS No. 144 expands the definition of asset dispositions
that may qualify for discontinued operations treatment in
the future. SFAS No. 144 is effective for new transactions
entered into after adoption of this statement.
2001 ANNUAL REPORT
Brink’s operates in the U.S. as well as 53 international
countries. Services offered by Brink’s include contract-
carrier armored car, ATM servicing, air courier (global
services), coin wrapping and cash logistics.
BHS is engaged in the business of marketing, selling,
installing, monitoring and servicing electronic security
systems primarily in owner-occupied, single-family
residences.
BAX Global is a worldwide transportation and supply chain
management company offering multi-modal freight
forwarding to business-to-business shippers through a
global network. In North America, BAX Global provides
overnight, second day and deferred freight delivery.
Internationally, BAX Global is engaged in time-definite air
and sea delivery, freight forwarding, supply chain
management services and international customs
brokerage. Worldwide, BAX Global specializes in
developing supply chain management programs for
companies wanting to quickly enter new markets or
consolidate regional activity.
The Company has no single customer that represents more
than 10% of its total revenue.
Other Operations consists of the Company’s gold, timber
and natural gas businesses. The Company’s long-term plan
is to ultimately exit these activities to focus resources on its
core Business and Security Services segments.
Note 2
Note 2
Note 2
Note 2
SEGMENT INFORMATION
SEGMENT INFORMATION
SEGMENT INFORMATION
SEGMENT INFORMATION
Financial information for these segments is contained in
the tables that follow.
The Company conducts business in four different
operating segments: Brink’s, BHS, BAX Global (collectively
“Business and Security Services”) and Other Operations.
These reportable segments are identified by the Company
based on how resources are allocated and how operating
decisions are made. Management evaluates performance
and allocates resources based on operating profit or loss
excluding corporate allocations.
(In millions)
Revenues:
Revenues:
Revenues:
Revenues:
Business and Security Services:
Years Ended December 31
2222001001001001
2000
1999
Brink’s
BHS
BAX Global
1,536.3
$$$$ 1,536.3
1,536.3
1,536.3
1,462.9
1,372.5
257.6
257.6
257.6
257.6
238.1
228.7
1,790.1
1,790.1
1,790.1
1,790.1
2,097.6
2,083.4
3,584.0
Business and Security Services 3,584.0
3,584.0
3,584.0
3,798.6
3,684.6
Other Operations
40.240.240.240.2
35.5
25.1
Revenues
3,624.2222
$$$$ 3,624.
3,624.
3,624.
3,834.1
3,709.7
38
(In millions)
2001
2001
2001
2001
2000
1999
(In millions)
Years Ended December 31
2001 ANNUAL REPORT
December 31
2001
2001
2001
2001
2000
1999
Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Business and Security Services:
Brink’s (a)
BHS
BAX Global (b)
$$$$
92.092.092.092.0
54.954.954.954.9
(24.6)
(24.6)
(24.6)
(24.6)
Business and Security Services
122.3
122.3
122.3
122.3
Other Operations (c)
Segment operating profit
General corporate expense
7.67.67.67.6
129.9
129.9
129.9
129.9
(19.3)
(19.3)
(19.3)
(19.3)
Operating profit
$$$$
110.6
110.6
110.6
110.6
108.5
54.3
(99.6)
63.2
5.7
68.9
(21.2)
47.7
103.5
54.2
61.5
219.2
0.3
219.5
(22.9)
196.6
Assets:
Assets:
Assets:
Assets:
Business and Security Services:
Brink’s (a)
BHS
BAX Global
$ 738.0
$ 738.0
$ 738.0
$ 738.0
372.6
372.6
372.6
372.6
594.1
594.1
594.1
594.1
719.1
353.4
724.5
686.3
294.7
834.6
Business and Security Services
1,704.7
1,704.7
1,704.7
1,704.7
1,797.0
1,815.6
Other Operations (b)
41.941.941.941.9
39.4
42.8
Identifiable segment assets
1,746.6
1,746.6
1,746.6
1,746.6
1,836.4
1,858.4
General corporate (c)
Assets of continuing
operations
534.8
534.8
534.8
534.8
515.3
386.1
2,281.4
2,281.4
2,281.4
2,281.4
2,351.7
2,244.5
(a) Includes equity interest in net income of unconsolidated equity
affiliates of $5.5 million in 2001, $4.3 million in 2000 and $4.6 million in
1999.
Discontinued operations
112.6
112.6
112.6
112.6
127.0
215.2
Total assets (d)
$ 2,394.0
$ 2,394.0
$ 2,394.0
$ 2,394.0
2,478.7
2,459.7
(b) 2000 includes restructuring charges of $57.5 million (see Note 17).
(c) Includes equity interest in net income (loss) of unconsolidated equity
affiliates of ($0.6) million in 2001, $0.4 million in 2000 and ($0.3) million in
1999.
(In millions)
Capital expenditures:
Capital expenditures:
Capital expenditures:
Capital expenditures:
Business and Security Services:
Years Ended December 31
2001
2001
2001
2001
2000
1999
Brink’s
BHS
BAX Global
$$$$
71.371.371.371.3
81.381.381.381.3
33.133.133.133.1
73.9
74.5
60.1
84.4
80.6
94.5
Business and Security Services
185.7
185.7
185.7
185.7
208.5
259.5
Other Operations
General corporate
7.27.27.27.2
0.20.20.20.2
5.1
0.8
9.3
0.1
Capital expenditures
$$$$
193.1
193.1
193.1
193.1
214.4
268.9
Depreciation and amortization, excluding goodwill:
Depreciation and amortization, excluding goodwill:
Depreciation and amortization, excluding goodwill:
Depreciation and amortization, excluding goodwill:
Business and Security Services:
Brink’s:
BHS (a)
BAX Global (b)
$$$$
60.160.160.160.1
70.670.670.670.6
49.449.449.449.4
58.2
62.1
53.8
51.0
49.9
32.6
Business and Security Services
180.1
180.1
180.1
180.1
174.1
133.5
Other Operations
General corporate
Goodwill amortization:
Goodwill amortization:
Goodwill amortization:
Goodwill amortization:
Brink’s
BAX Global
4.34.34.34.3
0.50.50.50.5
4.9
0.4
4.7
0.9
184.9
184.9
184.9
184.9
179.4
139.1
2.12.12.12.1
7.47.47.47.4
9.59.59.59.5
2.0
7.5
9.5
2.0
7.8
9.8
Depreciation and amortization
$$$$
194.4
194.4
194.4
194.4
188.9
148.9
(a) Includes amortization of deferred subscriber acquisition costs of $10.4
million in 2001 and $8.5 million in 2000.
(b) Excludes amortization of aircraft heavy maintenance expenditures.
(a) Includes investments in unconsolidated equity affiliates of $26.0 million,
$22.1 million and $18.9 million in 2001, 2000 and 1999, respectively.
(b) Includes investments in unconsolidated equity affiliates of $3.4 million,
$4.4 million and $7.1 million in 2001, 2000 and 1999, respectively.
(c) Primarily deferred tax assets, retained coal assets and cash and cash
equivalents.
(d) Includes property and equipment, net located in the U.S. of $548.7
million, $553.2 million and $553.9 million as of December 31, 2001, 2000 and
1999, respectively. Property and equipment, net located outside the U.S. was
$269.4 million, $278.3 million, $279.3 million as of December 31, 2001, 2000
and 1999, respectively.
All Company revenues are recorded in the country where
the service is initiated/performed with the exception of
BAX Global’s expedited freight service where revenue is
shared among the origin and destination countries. The
Company’s net assets in non-U.S. subsidiaries were $286.0
million and $248.4 million at December 31, 2001 and 2000,
respectively.
(In millions)
Revenue by region:
Revenue by region:
Revenue by region:
Revenue by region:
United States
International
Eliminations
Revenues
Years Ended December 31
2001
2001
2001
2001
2000
1999
1,810.0
$$$$ 1,810.0
1,810.0
1,810.0
1,877.1
1,877.1
1,877.1
1,877.1
1,961.3
1,929.1
1,912.7
1,849.9
(62.9)
(62.9)
(62.9)
(62.9)
(56.3)
(52.9)
3,624.2
$$$$ 3,624.2
3,624.2
3,624.2
3,834.1
3,709.7
ing profit (loss) by region:
Operating profit (loss) by region:
Operat
ing profit (loss) by region:
ing profit (loss) by region:
Operat
Operat
United States (a)
International (a)
General corporate expense
$$$$
43.443.443.443.4
86.586.586.586.5
(19.3)
(19.3)
(19.3)
(19.3)
Operating profit
$$$$
110.6
110.6
110.6
110.6
(26.5)
95.4
(21.2)
47.7
124.2
95.3
(22.9)
196.6
(a) 2000 includes restructuring charges of $54.6 million and $2.9 million in
the U.S. and International, respectively, (see Note 17).
39
Note 3
Note 3
Note 3
Note 3
CAPITAL STOCK
CAPITAL STOCK
CAPITAL STOCK
CAPITAL STOCK
Common Stock
Common Stock
Common Stock
Common Stock
As discussed in Notes 1 and 20, on January 14, 2000, the
Company eliminated its tracking stock capital structure by
exchanging all outstanding shares of Minerals Stock and
BAX Stock for 10.9 million shares of Brink’s Stock. The
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. The exchange ratios were derived
using a shareholder-approved formula that was based on
the relative fair market values of each stock, as defined in
the Company’s Articles of Incorporation.
After January 14, 2000, Brink’s Stock became the only
outstanding class of common stock of the Company and is
hereinafter referred to as “Pittston Common Stock.”
Convertible Preferred Stock
Convertible Preferred Stock
Convertible Preferred Stock
Convertible Preferred Stock
The Company has 21,000 shares of its $31.25 Series C
Cumulative Convertible Preferred Stock (the “Convertible
Preferred Stock”) outstanding. The Convertible Preferred
Stock provides for an annual cumulative dividend of $31.25
per share and bears a liquidation preference of $500 per
share. Subsequent to the Exchange, each share of the
Convertible Preferred Stock is convertible at the option of
the holder at an adjusted conversion price of $393.82 per
share of Pittston Common Stock (equivalent to a
conversion ratio of approximately 1.27 shares of Pittston
Common Stock for each share of Convertible Preferred
Stock) subject to adjustment in certain circumstances.
The Company, may at its option, redeem the Convertible
Preferred Stock, in whole or in part, for cash at a price of
$506.25 per share beginning February 1, 2002, $503.125 per
share beginning February 1, 2003, and $500 per share
beginning February 1, 2004, plus any accrued and unpaid
dividends. Except under certain circumstances or as
prescribed by Virginia law, shares of the Convertible
Preferred Stock are nonvoting.
Other than the above shares, there are no other preferred
shares outstanding. At December 31, 2001, the Company
has authority to issue an additional 140,000 shares of
Convertible Preferred Stock, par value $10 per share.
2001 ANNUAL REPORT
Repurchase Program
Repurchase Program
Repurchase Program
Repurchase Program
In May 2001, the Board approved a revised authority, which
remains in effect, to purchase over time up to 1.0 million
shares of Pittston Common Stock, and any or all of the
issued and outstanding shares of the Convertible Preferred
Stock with an aggregate purchase price limitation of $30
million for all such common and preferred share
purchases. Such shares are to be purchased from time to
time in the open market or in private transactions, as
conditions warrant.
The Company purchased shares of Convertible Preferred
Stock and Brink’s Stock in the periods presented as
follows:
(Dollars in millions,
shares in thousands)
Brink’s Stock:
Shares
Cash paid to repurchase
Years Ended December 31
2001
2001
2001
2001
2000
1999
N/AN/AN/AN/A
N/AN/AN/AN/A
N/A
N/A
100.0
2.6
Convertible Preferred Stock:
Shares
Cash paid to repurchase
Excess carrying amount (a)
$$$$
$$$$
----
----
----
8.1
2.2
1.7
83.9
20.9
19.2
(a) The excess of the carrying amount of the Convertible Preferred Stock
over the cash paid to holders for repurchases made during the years is
deducted from preferred dividends in the Company’s Consolidated
Statement of Operations.
Dividends
Dividends
Dividends
Dividends
During 2001 and 2000, the Company paid dividends of $5.1
million and $5.0 million, respectively, on Pittston Common
Stock. During 1999, the Company paid dividends of $3.9
million on Brink’s Stock, $4.6 million on BAX Stock, and $0.2
million on Minerals Stock, respectively. In 2001, 2000 and
1999, dividends paid on the Convertible Preferred Stock
amounted to $0.7 million, $0.9 million and $1.6 million,
respectively.
In February 2002, the Board declared a cash dividend of
$0.025 and $7.8125 per share on Pittston Common Stock
and Convertible Preferred Stock, respectively, payable on
March 1, 2002 to shareholders of record on February 15,
2002.
40
Series A Preferred Stock Rights Agreement
Series A Preferred Stock Rights Agreement
Series A Preferred Stock Rights Agreement
Series A Preferred Stock Rights Agreement
Under the Amended and Restated Rights Agreement dated
as of January 14, 2000, as amended effective November 30,
2001, holders of Pittston Common Stock have rights to
purchase a new Series A Participating Cumulative Preferred
Stock (the “Series A Preferred Stock”) of the Company at
the rate of one right for each share of Pittston Common
Stock. Each 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 $60.00,
subject to adjustment.
Each fractional share of Series A Preferred Stock will be
entitled to participate in dividends and to vote on an
equivalent basis with one whole share of Pittston Common
Stock. Each right will not be exercisable until after a third
party acquires more than 15% of the total voting rights of
all outstanding Pittston Common Stock or on such date as
may be designated by the Board after commencement of a
tender offer or exchange offer by a third party for more
than 15% of the total voting rights of all outstanding
Pittston Common 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 more than 15% of
all outstanding Pittston Common Stock, the rights will
entitle each holder to purchase, at the purchase price, that
number of fractional shares of Series A 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. As an alternative
to the purchase described in the previous sentence, the
Board may elect to exchange the rights for other forms of
consideration, including that number of shares of common
stock obtained by dividing the purchase price by the
market price of the common stock at the time of the
exchange or for cash equal to the purchase price. The
rights may be redeemed by the Company at a price of $0.01
per right and expire on September 25, 2007.
Employee Benefits Trust
Employee Benefits Trust
Employee Benefits Trust
Employee Benefits Trust
The Pittston Company Employee Benefits Trust (the
“Trust”) holds shares of Pittston Common Stock to fund
obligations under certain compensation and employee
benefit programs that provide for the issuance of stock. In
2001 ANNUAL REPORT
2001, the Company issued an additional 2.5 million shares
of Pittston Common Stock to the Trust. In 2000, the Trust
exchanged its BAX Stock and Minerals Stock for 0.7 million
shares of Pittston Common Stock in the Exchange. As of
December 31, 2001 and 2000, 2.7 million and 1.3 million
shares, respectively, of Pittston Common Stock were held
by the Trust. The fair value of the shares owned by the
Trust are accounted for as a reduction of shareholders’
equity. The shares of the Pittston Common Stock 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.
Note 4
Note 4
Note 4
Note 4
EARNINGS PER SHAREEEE
EARNINGS PER SHAR
EARNINGS PER SHAR
EARNINGS PER SHAR
The following is a reconciliation between the calculations
of basic and diluted income from continuing operations
per common share:
(In millions)
Numerator:
Numerator:
Numerator:
Numerator:
Years Ended December 31
2001
2001
2001
2001
2000
1999(a)
Income from continuing operations
$$$$ 45.845.845.845.8
2.7
108.0
Preferred stock dividends
Excess carrying amount (b)
Basic income from continuing
(0.7)
(0.7)
(0.7)
(0.7)
(0.9)
----
1.7
(1.6)
19.2
operations per share numerator
45.145.145.145.1
Preferred stock dividends
Excess carrying amount (b)
Diluted income from continuing
----
----
3.5
0.9
125.6
1.6
(1.7)
(19.2)
operations per share numerator
$$$$ 45.145.145.145.1
2.7
108.0
Denominator:
Denominator:
Denominator:
Denominator:
Basic weighted average
common shares outstanding
51.251.251.251.2
50.1
49.1
Effect of dilutive securities:
Stock options
Convertible Preferred Stock
Diluted weighted average
0.20.20.20.2
----
-
-
0.1
0.1
common shares outstanding
51.451.451.451.4
50.1
49.3
(a) Shares are pro forma for the Exchange using rates described in Notes 3
and 20.
(b) See “Repurchase Program” in Note 3.
41
The shares of Pittston Common Stock held in the Pittston
Company Employee Benefits Trust are excluded from the
basic and diluted income from continuing operations per
common share calculations. Shares held by the Trust that
were excluded were 2.7 million and 1.3 million in 2001 and
2000, respectively and 2.3 million pro forma shares in 1999.
The Company excludes the effect of antidilutive securities
from the computations of diluted income from continuing
operations per common share. The equivalent weighted
average shares of common stock that were excluded were
2.0 million and 2.8 million in 2001 and 2000, respectively and
2.2 million pro forma shares in 1999.
The following is a reconciliation between the calculations
of basic and diluted income (loss) from continuing
operations per share for the year ended December 31,
1999:
(In millions)
Numerator:
Numerator:
Numerator:
Numerator:
Brink’s
Group
BAX Minerals
Group
Group
Income (loss) from continuing
operations
$
84.2
33.2
Preferred stock dividends
Excess carrying amount (a)
Basic income from
continuing operations per
-
-
-
-
share numerator
84.2
33.2
Preferred stock dividends
Excess carrying amount (a)
Diluted income (loss) from
continuing operations
-
-
-
-
(9.4)
(1.6)
19.2
8.2
1.6
(19.2)
per share numerator
$
84.2
33.2
(9.4)
Denominator:
Denominator:
Denominator:
Denominator:
Basic weighted average common
shares outstanding
39.1
19.2
Effect of dilutive securities:
Stock options
Convertible Preferred Stock
Diluted weighted average common
0.1
-
0.1
-
shares outstanding
39.2
19.3
(a) See “Repurchase Program” in Note 3.
8.9
-
0.7
9.6
2001 ANNUAL REPORT
For 1999, shares of Brink’s Stock, BAX Stock and Minerals
Stock held in the Trust are excluded from the basic and
diluted income (loss) from continuing operations per
common share calculations. Shares held by the Trust that
were excluded in 1999 were 1.6 million, 1.4 million and 0.8
million shares for the Brink’s Group, BAX Group and
Minerals Group, respectively.
The Company excludes the effect of antidilutive securities
from the computations of diluted income (loss) from
continuing operations per common share. The equivalent
weighted average shares of common stock that were
excluded for 1999 were 1.2 million, 1.9 million and 0.6
million shares for the Brink’s Group, BAX Group and
Minerals Group, respectively.
Note 5
Note 5
Note 5
Note 5
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
(In millions)
Cash payments for:
Income taxes, net
Interest
Capitalized interest
Years Ended December 31
2001
2001
2001
2001
2000
1999
$$$$ 20.120.120.120.1
31.131.131.131.1
----
28.2
44.8
-
38.9
36.3
1.4
Cash payments for income taxes are net of the benefits of
$6.7 million and $10.3 million for the years ended 2001 and
1999, respectively, related to the Company’s discontinued
coal operations.
Dividends distributed to employee benefit plans in the
form of common stock were $0.4 million, $0.3 million and
$0.5 million for the years ended December 31, 2001, 2000
and 1999, respectively.
Note 6
Note 6
Note 6
Note 6
PMENT
PROPERTY AND EQUIPMENT
PROPERTY AND EQUI
PMENT
PMENT
PROPERTY AND EQUI
PROPERTY AND EQUI
(In millions)
Land
Buildings
Vehicles
Aircraft and related assets
Home security systems
Other machinery and equipment
December 31
$$$$
2001
2001
2001
2001
48.948.948.948.9
227.0
227.0
227.0
227.0
145.6
145.6
145.6
145.6
85.585.585.585.5
455.9
455.9
455.9
455.9
537.1
537.1
537.1
537.1
2000
49.5
225.4
146.5
82.1
387.5
503.6
1,500.0
1,500.0
1,500.0
1,500.0
1,394.6
Accumulated depreciation
and amortization
681.9
681.9
681.9
681.9
Property and equipment, net
$$$$
818.1
818.1
818.1
818.1
563.1
831.5
42
Depreciation of property and equipment aggregated $174.2
million in 2001, $170.9 million in 2000 and $138.5 million in
1999.
Note 10
Note 10
Note 10
Note 10
TERM DEBT
LONG----TERM DEBT
LONG
TERM DEBT
TERM DEBT
LONG
LONG
In 2000, $27.4 million of certain aircraft-related assets were
written down to fair value pursuant to BAX Global’s
restructuring plan (see Note 17).
At December 31, 2001, the Company had noncancelable
commitments to purchase $23.6 million of equipment, of
which $15.5 million was for the Company’s discontinued
operations.
Note 7
Note 7
Note 7
Note 7
GOODWILL
GOODWILL
GOODWILL
GOODWILL
Goodwill is the excess of fair value over cost of net tangible
and identifiable intangible assets of businesses acquired.
Goodwill is net of accumulated amortization of $128.1
million and $120.4 million at December 31, 2001 and 2000,
respectively. Amortization of goodwill aggregated $9.5
million in 2001 and 2000 and $9.8 million in 1999. With the
adoption of SFAS No. 142, beginning on January 1, 2002,
goodwill will no longer be amortized (see Note 1).
Note 8
Note 8
Note 8
Note 8
D LIABILITIES
ACCRUED LIABILITIES
ACCRUE
D LIABILITIES
D LIABILITIES
ACCRUE
ACCRUE
December 31
(In millions)
2001
2001
2001
2001
Payroll and other employee liabilities
$$$$
106.3
106.3
106.3
106.3
Workers’ compensation and other claims
Taxes
Postretirement benefits other than pensions
Aircraft maintenance
Accrued loss of discontinued operations
42.142.142.142.1
89.989.989.989.9
38.538.538.538.5
35.735.735.735.7
46.046.046.046.0
Other
Accrued liabilities
181.5
181.5
181.5
181.5
$$$$
540.0
540.0
540.0
540.0
2000
106.2
35.6
82.0
35.1
21.6
41.7
171.0
493.2
Note 9
Note 9
Note 9
Note 9
OTHER LIABILITIES
OTHER LIABILITIES
OTHER LIABILITIES
OTHER LIABILITIES
(In millions)
Liability for DTA (see Note 19)
$$$$
Black lung
Minority interest
Pension
Other
December 31
2001
2001
2001
2001
2000
43.243.243.243.2
38.438.438.438.4
35353535.5.5.5.5
22.922.922.922.9
20.020.020.020.0
43.2
41.2
28.6
16.5
12.8
Other liabilities
$$$$
160.0
160.0
160.0
160.0
142.3
2001 ANNUAL REPORT
December 31
2001
2001
2001
2001
2000
$$$$
55.055.055.055.0
20.020.020.020.0
75.075.075.075.0
----
----
-
-
-
59.8
-
185.0
(In millions)
Senior Notes:
Series A, 7.84%, due 2005-2007
Series B, 8.02%, due 2008
Bank credit facilities:
U.S. Revolving Bank Credit Facility:
One-year commitment, due 2001
One-year commitment, due 2002
Three-year commitment, due 2003
136.2
136.2
136.2
136.2
Argentine revolving credit facility
(year-end rate 12.44%)
French credit facilities (year-end
weighted average rate
----
15.0
5.28% in 2001 and 5.47% in 2000)
14.414.414.414.4
17.3
Venezuelan term loan due
2003 (year-end rate 31.20% in 2001
and 27.59% in 2000)
6.66.66.66.6
11.4
Other (year-end weighted average
rate 13.46% in 2001 and 6.41% in 2000)
Capital leases (average rates:
5.72% in 2001 and 7.09% in 2000)
Total long-term debt
Current maturities of long-term debt:
Bank credit facilities
Capital leases
13.213.213.213.2
170.4
170.4
170.4
170.4
24.724.724.724.7
270.1
270.1
270.1
270.1
11.011.011.011.0
6.26.26.26.2
Total current maturities of long-term debt
17.217.217.217.2
Total long-term debt excluding
30.1
318.6
27.2
345.8
26.0
8.4
34.4
current maturities
252.9
$$$$ 252.9
252.9
252.9
311.4
Minimum repayments of long-term debt for years 2003
through 2006 total $149.9 million, $8.7 million, $24.5 million
and $24.2 million, respectively.
In January 2001, the Company completed a $75.0 million
private placement of Senior Notes. The Notes comprise $55
million of 7.84% Senior Notes, Series A due 2005-2007 and
$20 million of 8.02% Senior Notes, Series B due in 2008.
Proceeds from the Notes were used to repay borrowings
under the U.S. revolving bank credit facility. Interest on the
43
Notes is payable semiannually, and the Company is
required to repay $18.3 million principal of the Series A
Notes in each of January 2005, 2006 and 2007. The Company
has the option to prepay all or a portion of the Notes prior
to maturity with a prepayment penalty.
At December 31, 2001, the Company had undrawn
unsecured letters of credit totaling $32.2 million. These
letters of credit primarily support the Company’s
obligations under various self-insurance programs, credit
facilities, and aircraft lease obligations.
2001 ANNUAL REPORT
The Company has a $362.5 million credit agreement with a
syndicate of banks under which it may borrow $185.0
million on a revolving basis over a three-year term ending
October 2003 and up to $177.5 million on a revolving basis
over a one-year term ending October 2002. At December
31, 2001, $226.3 million was available for borrowing under
this facility. The Company has the option to borrow based
on a Libor-based offshore rate, a base rate, or a competitive
bid among the individual banks plus a margin determined
by the Company’s credit rating. The margin is 0.85% on the
one-year commitment and 0.825% on the three-year
commitment. The credit agreement provides for margin
increases should the Company’s credit rating be reduced,
but does not accelerate payments. The applicable interest
rate is increased by 0.125% during any period that amounts
outstanding under the facility exceed $181.25 million. The
Company also pays an annual facility fee of 0.15% on the
one-year commitment and 0.175% on the three-year
commitment.
The Company has two multi-currency revolving bank credit
facilities that total $95.0 million in available credit line, of
which $46.8 million was available at December 31, 2001 for
additional borrowing. Various foreign subsidiaries maintain
other secured and unsecured lines of credit and overdraft
facilities with a number of banks. Amounts outstanding
under these agreements are included in short-term
borrowings.
The Company’s Brink’s, BHS, BAX Global and Coal
Operations subsidiaries have guaranteed the U.S. bank
credit facility and Notes. The U.S. revolving bank credit
agreement, the agreement under which the Notes were
issued and the multi-currency revolving bank credit
facilities each contain various financial and other
covenants. The financial covenants, among other things,
limit the Company’s total indebtedness, provide for
minimum coverage of interest costs, and require the
Company to maintain a minimum level of net worth. The
Company was in compliance with all financial covenants at
December 31, 2001. If the Company were not to comply
with the terms of its various loan agreements, the
repayment terms could be accelerated.
The Company entered into capital lease obligations of $7.5
million in 2001 and $7.0 million in 2000.
Note 11
Note 11
Note 11
Note 11
ACCOUNTS RECEIVABLE AND ASSET
ACCOUNTS RECEIVABLE AND ASSET
ACCOUNTS RECEIVABLE AND ASSET
ACCOUNTS RECEIVABLE AND ASSET
SECURITIZATION
SECURITIZATION
SECURITIZATION
SECURITIZATION
December 31
(In millions)
Trade
Other
Estimated uncollectible amounts
2001
2001
2001
2001
$$$$
496.3
496.3
496.3
496.3
38.838.838.838.8
535.1
535.1
535.1
535.1
41.841.841.841.8
Accounts receivable, net
$$$$
493.3
493.3
493.3
493.3
2000
547.7
52.2
599.9
39.8
560.1
In December 2000, the Company entered into a five-year
agreement to sell a revolving interest in BAX Global’s U.S.
domestic accounts receivable through a commercial paper
conduit program. The primary purpose of the agreement
was to obtain access to a lower cost source of funds.
Qualifying accounts receivable of BAX Global’s U.S.
operations are sold on a monthly basis, without recourse,
to BAX Funding Corporation (“BAX Funding”), a wholly
owned, consolidated special-purpose subsidiary of BAX
Global. BAX Funding then sells an undivided interest in the
entire pool of accounts receivable to a bank-sponsored
conduit entity. The conduit issues commercial paper to
finance the purchase of its interest in the receivables.
Under the program, BAX Funding may sell up to a $90.0
million interest in the receivables pool to the conduit.
During the term of the agreement, the conduit’s interest in
daily collections of accounts receivable is reinvested in
newly originated receivables.
At the end of the five-year term, or in the event certain
circumstances cause an early termination of the program,
the daily reinvestment will be discontinued and collections
will be used to pay down the conduit’s interest in the
receivables pool. Early termination of the program may
occur if certain ratios, including ratios of delinquent and
defaulted accounts, are exceeded. Early termination may
also be triggered if other events occur as described in the
agreement, including the acceleration of debt repayments
of the Company’s $362.5 million U.S. revolving bank credit
facility.
44
The conduit has a priority collection interest in the entire
pool of receivables and, as a result, BAX Funding has
retained credit risk to the extent the pool exceeds the
amount sold. BAX Funding pays the conduit a discount
based on the conduit’s borrowing cost plus incremental
fees. BAX Global is the designated servicer of the
receivables pool and is responsible for collections,
reinvestment, and periodic reporting to the conduit. The
Pittston Company has guaranteed the performance of BAX
Global with respect to the agreement.
In December 2000, BAX Funding sold an $85.0 million
revolving interest in the accounts receivable to the conduit.
Proceeds from the sale were used to reduce borrowings.
The transaction is accounted for as a sale of accounts
receivable under SFAS No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities.”
(In millions)
Accounts receivable purchased by
BAX Funding:
Total pool
Revolving interest sold to conduit
Amount included in Consolidated
December 31
2001
2001
2001
2001
2000
$$$$ 81.881.881.881.8
(69.0)
(69.0)
(69.0)
(69.0)
124.3
(85.0)
Balance Sheets of the Company
$$$$ 12.812.812.812.8
39.3
The fair value of the Company’s retained interest in the
receivables approximates carrying value. BAX Funding’s
retained interest is reported as accounts receivable in the
Consolidated Balance Sheet. The discount and related
expenses of $7.0 million in 2001 and $0.6 million in 2000 are
reported as other income (expense) in the Consolidated
Statement of Operations. The Company has not recorded a
servicing asset or liability because it believes the servicing
compensation BAX Global receives is representative of
market rates and because the average servicing period for
accounts receivable approximates one month.
Note 12
Note 12
Note 12
Note 12
OPERATING LEASES
OPERATING LEASES
OPERATING LEASES
OPERATING LEASES
The Company and its subsidiaries lease facilities, aircraft,
vehicles, computers and other equipment under long-term
operating and capital leases with varying terms. Most of the
operating leases contain renewal and/or purchase options.
Information relating to capital leases is included in Note 10.
2001 ANNUAL REPORT
As of December 31, 2001, aggregate future minimum lease
payments for continuing operations under operating leases
were as follows:
Equipment
(In millions)
Facilities
Aircraft
and Other
Total
2002
2003
2004
2005
2006
Later Years
$
74.8
58.1
44.3
32.1
25.5
125.4
15.2
10.7
4.6
0.2
-
-
33.4
27.1
21.1
16.0
11.9
16.2
Total
$
360.2
30.7
125.7
123.4
95.9
70.0
48.3
37.4
141.6
516.6
The above table includes amounts due under
noncancellable leases with initial or remaining lease terms
in excess of one year and under certain vehicle leases with
remaining lease terms of less than one year, where the
Company has the option and expects to continue to renew
the leases.
Net rent expense amounted to $142.3 million in 2001, $146.9
million in 2000 and $145.4 million in 1999.
The Company has leases on four facilities under each of
which it has the option to either renew the lease, purchase
the facility at original cost, or pay a guaranteed residual. At
December 31, 2001, the maximum guaranteed residuals on
these four leases totaled $16.1 million.
At December 31, 2001, the Company had contractual
commitments with third parties to provide aircraft usage
and services to BAX Global, which expire in 2002 through
2004. The fixed and determinable portion of the obligations
under these agreements aggregate approximately $41.2
million in 2002, $27.6 million in 2003 and $6.6 million in
2004.
Note 13
Note 13
Note 13
Note 13
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS
The employee benefit plans and other liabilities described
below cover employees and retirees of both continuing
and discontinued operations of the Company. Accordingly,
a portion of these benefit expenses have been included in
the results of discontinued operations for the years
presented.
45
Pension Plans
Pension Plans
Pension Plans
Pension Plans
The Company has noncontributory defined benefit
pension plans covering substantially all U.S. nonunion
employees who meet certain minimum requirements. The
Company also has other contributory and noncontributory
defined benefit plans for eligible non-U.S. employees.
Benefits under most of the plans are based on salary
(including commissions, bonuses, overtime and premium
pay) and years of service. The Company’s policy is to fund
at least the minimum actuarially determined amounts
necessary in accordance with applicable regulations.
The net pension expense (excluding curtailment gain) for
2001, 2000 and 1999 for all plans is as follows:
2001 ANNUAL REPORT
Reconciliations of the PBO, plan assets, funded status and
prepaid pension expense at December 31, 2001 and 2000
for all of the Company’s pension plans are as follows:
PBO at beginning of year
Service cost
Interest cost
Curtailment gain
Plan participants’ contributions
Benefits paid
Actuarial loss
Plan amendments
Foreign currency exchange rate changes
December 31
2002002002001111
$$$$
527.5
527.5
527.5
527.5
26.026.026.026.0
38.538.538.538.5
----
1.01.01.01.0
(24.0)
(24.0)
(24.0)
(24.0)
30.530.530.530.5
----
(4.5)
(4.5)
(4.5)
(4.5)
2000
474.8
23.6
35.0
(5.8)
0.5
(25.1)
28.9
0.7
(5.1)
Years Ended December 31
PBO at end of year
$$$$
595.0
595.0
595.0
595.0
527.5
Service cost
Interest cost on Projected Benefit
Obligation (“PBO”)
Return on assets–expected
Other amortization, net
Net pension expense
2001
2001
2001
2001
2000
$$$$
26.026.026.026.0
23.6
38.538.538.538.5
35.0
(58.6)
(58.6)
(58.6)
(58.6)
(55.3)
0.50.50.50.5
6.46.46.46.4
$$$$
(0.3)
3.0
1999
24.4
32.5
(48.9)
2.8
10.8
Pursuant to its formal plan to exit the coal business, the
Company recorded a curtailment gain during 2000 of $4.4
million comprising a $5.8 million reduction in PBO, partially
offset by reductions in unrecognized experience losses
and prior service costs.
The Company’s U.S. defined benefit pension plans
represent 84% of PBO and 83% of plan assets at December
31, 2001. The assumptions used in determining the net
pension expense and funded status for the Company’s U.S.
pension plans were as follows:
Discount rate-Expense
Discount rate-Funded status
Expected long-term rate of return
on assets (Expense and funded
2001
2001
2001
2001
7.5%7.5%7.5%7.5%
7.25%7.25%7.25%7.25%
2000
7.5%
7.5%
1999
7.0%
7.5%
Fair value of plan assets at beginning
of year
$$$$
621.3
621.3
621.3
621.3
Return on assets – actual
Plan participants’ contributions
Employer contributions
Benefits paid
Foreign currency exchange rate changes
(40.9)
(40.9)
(40.9)
(40.9)
1.01.01.01.0
2.32.32.32.3
(24.0)
(24.0)
(24.0)
(24.0)
(5.4)
(5.4)
(5.4)
(5.4)
660.5
(11.0)
0.5
2.4
(25.1)
(6.0)
Fair value of plan assets at end of year
$$$$
554.3
554.3
554.3
554.3
621.3
Funded status
$$$$
(40.7)
(40.7)
(40.7)
(40.7)
93.8
Unrecognized experience loss
Unrecognized prior service cost
Other
Net pension assets
Current pension liabilities
Noncurrent pension liabilities
Adjustment to minimum pension liability
135.3
135.3
135.3
135.3
1.71.71.71.7
(0.5)
(0.5)
(0.5)
(0.5)
95.895.895.895.8
0.20.20.20.2
22.922.922.922.9
4.7
2.0
0.5
101.0
0.9
16.5
for international subsidiary
(9.9)
(9.9)
(9.9)
(9.9)
-
Prepaid pension assets
$$$$
109.0
109.0
109.0
109.0
118.4
Selected information for the Company plans that have
PBOs greater than plan assets are aggregated below.
status)
10.0%10.0%10.0%10.0%
10.0%
10.0%
Average rate of increase in
salaries (Expense and funded
Projected benefit obligations
status) (a)
4.0%4.0%4.0%4.0%
4.0%
4.0%
Accumulated benefit obligations
(a) For 2000 and 2001, salary scale assumptions vary by age and industry and
approximate 4% per annum.
Fair value of plan assets
December 31
2001
2001
2001
2001
2000
$$$$
555.0
555.0
555.0
555.0
489.4
489.4
489.4
489.4
498.9
498.9
498.9
498.9
28.3
22.8
9.4
46
Expense included in continuing operations in 2001, 2000
and 1999 for other multi-employer pension plans was $1.2
million, $0.9 million and $0.8 million, respectively.
Savings Plans
Savings Plans
Savings Plans
Savings Plans
The Company sponsors a 401(k) Savings-Investment Plan to
assist eligible U.S. employees in providing for retirement.
Employee contributions are matched at rates of between
50% to 100% up to 5% of compensation (subject to certain
limitations). Contribution expense in continuing
operations under the plan aggregated $9.8 million in 2001,
$8.4 million in 2000 and $7.8 million in 1999. Contribution
expense included in discontinued operations was $0.7
million in 2001 and 2000 and $0.9 million in 1999.
The Company sponsors other defined contribution benefit
plans based on hours worked or other measurable factors.
Contributions under all of these plans aggregated $3.2
million in 2001, $2.8 million in 2000 and $1.5 million in 1999.
Postretirement Benefits Other Than Pensions
Postretirement Benefits Other Than Pensions
Postretirement Benefits Other Than Pensions
Postretirement Benefits Other Than Pensions
The Company provides certain postretirement health care
and life insurance benefits for eligible active and retired
employees in the U.S. and Canada (the “Company-
sponsored plans”). The Company also provides benefits to
certain eligible Coal Operation employees and others as
required by the Health Benefit Act, discussed below.
Pursuant to its plan to exit the coal business, the Company
recorded an undiscounted liability in 2000 to reflect the
estimated retiree medical costs associated with the Health
Benefit Act. Liabilities at December 31, 2001 and 2000
recorded on the Company’s balance sheet are as follows:
Company-sponsored plans
Health Benefit Act
Current
Noncurrent
December 31
2001
2001
2001
2001
$$$$
278.2
278.2
278.2
278.2
159.9
159.9
159.9
159.9
438.1
438.1
438.1
438.1
38.538.538.538.5
$$$$
399.6
399.6
399.6
399.6
2000
274.5
161.7
436.2
35.1
401.1
2001 ANNUAL REPORT
Company-Sponsored Plans
For the years 2001, 2000 and 1999, the components of net
periodic postretirement costs (excluding curtailment loss)
related to Company-sponsored plans for these
postretirement benefits were as follows:
December 31
2001
2001
2001
2001
2000
1999
Service cost
$$$$
0.90.90.90.9
0.8
1.4
Interest cost on Accumulated
Postretirement Benefit Obligation
(“APBO”)
Amortization of losses
26.426.426.426.4
3.73.73.73.7
Net periodic postretirement costs
$$$$
31.031.031.031.0
23.8
3.6
28.2
23.1
5.1
29.6
Pursuant to its formal plan to exit the coal business, the
Company recorded a curtailment loss during 2000 of $6.0
million.
Reconciliations of the APBO, funded status and accrued
postretirement benefit cost for Company-sponsored plans
at December 31, 2001 and 2000 are as follows:
December 31
APBO at beginning of year
Service cost
Interest cost
Benefits paid
Actuarial loss, net
Curtailment loss
2001
2001
2001
2001
$$$$
376.4
376.4
376.4
376.4
0.90.90.90.9
26.426.426.426.4
(27.3)
(27.3)
(27.3)
(27.3)
87.587.587.587.5
----
APBO and funded status at end of year (a)
463.9
463.9
463.9
463.9
Unrecognized experience loss
(185.7)
(185.7)
(185.7)
(185.7)
Accrued postretirement benefit cost at
2000
335.2
0.8
23.8
(24.5)
35.1
6.0
376.4
(101.9)
end of year
$$$$
278.2
278.2
278.2
278.2
274.5
(a) Currently unfunded.
At December 31, 2001, approximately 98% of the APBO
related to Coal Operations. The APBO was determined
using the unit credit method and an assumed discount rate
of 7.25% in 2001 and 7.5% in 2000. For Company-sponsored
plans, the assumed health care cost trend rate used in 2001
was 10% for 2002, declining 1% per year to 5% in 2007 and
thereafter; and in 2000 was 5% for all retirees. The assumed
Medicare cost trend rate used in 2001 and 2000 was 5%.
47
A one percentage point increase (decrease) each year in
the assumed health care cost trend rate used for 2001
would increase (decrease) the aggregate service and
interest components of expense for 2001, and increase
(decrease) the APBO of Company-sponsored plans at
December 31, 2001 as follows:
(In millions)
Higher (lower):
Effect of 1% Change in
Health Care Trend Rates
Increase
Decrease
Service and interest cost in 2001
$$$$
3.73.73.73.7
APBO at December 31, 2001
54.354.354.354.3
(3.1)
(45.6)
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. The Health Benefit Act established a
trust fund to which “signatory operators” and “related
persons”, including The Pittston Company and certain of
its subsidiaries (collectively, the “Pittston Companies”), are
jointly and severally liable to pay annual premiums for
assigned beneficiaries, together with a pro rata share for
certain beneficiaries who never worked for such employers
(“unassigned beneficiaries”) including in the Company’s
case, the Pittston Companies, in amounts determined on
the basis set forth in the Health Benefit Act. In October
1993 and at various times in subsequent years, the Pittston
Companies have received notices from the Social Security
Administration (the “SSA”) with regard to the assigned
beneficiaries for which the Pittston Companies are
responsible under the Health Benefit Act. 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; the
statutory authorization to obtain such funds is currently
expected to cease by 2005. In the determination of the
Pittston Companies’ ultimate obligation under the Health
Benefit Act, such funding has been taken into
consideration.
2001 ANNUAL REPORT
Prior to December 31, 2000, the Company accounted for its
obligations under the Health Benefit Act as a participant in
a multi-employer benefit plan and thus, recognized the
annual cost of these obligations on a pay-as-you-go basis.
For 2001, 2000 and 1999, cash payments for such amounts
were approximately $9.7 million, $9.0 million and $10.4
million, respectively. Pursuant to its formal plan to exit the
coal business, the Company recorded its estimated
undiscounted liability relating to such obligations at
December 31, 2000 as a $161.7 million charge to the net loss
from discontinued operations. The obligations at
December 31, 2001 were $159.9 million. Such obligations, if
discounted at 7.25% would provide a present value
estimate of approximately $80 to $85 million. The Company
currently estimates that the annual cash funding under the
Health Benefit Act for the Pittston Companies’ assigned
beneficiaries will continue at about the same annual level
for the next several years and should begin to decline
thereafter as the number of such assigned beneficiaries
decreases.
In addition, under the Health Benefit Act, the Pittston
Companies are jointly and severally liable for certain
postretirement health benefits under the Company-
sponsored plans discussed above. The Company’s
accumulated postretirement benefit obligation for such
benefits is estimated to be approximately $380 million as of
December 31, 2001.
The ultimate costs that will be incurred by the Company
under the Health Benefit Act and its postretirement
medical plans could be significantly affected by, among
other things, the rate of inflation for medical costs, changes
in the number of beneficiaries, governmental funding
arrangements and such federal health benefit legislation of
general application as may be enacted.
Pneumoconiosis (Black Lung) Expense
Pneumoconiosis (Black Lung) Expense
Pneumoconiosis (Black Lung) Expense
Pneumoconiosis (Black Lung) Expense
(In millions)
Actuarial present value of
self-insured black lung benefits
Unrecognized loss
Accumulated book reserves
December 31
2001
2001
2001
2001
2000
$$$$
58.758.758.758.7
(13.3)
(13.3)
(13.3)
(13.3)
$$$$
45.445.445.445.4
53.6
(6.1)
47.5
48
The Company acts as self-insurer with respect to almost all
black lung benefits. Provision is made for estimated
benefits based on annual reports prepared by independent
actuaries. Unamortized losses, representing the excess of
the present value of expected future benefits over the
accumulated book reserves, are amortized over the
average remaining life expectancy of participants
(approximately 10 years). The U.S. Department of Labor
issued new regulations that are intended to expand
entitlement provisions and that may have the effect of
limiting an employer’s ability to rebut claims. The new
regulation is being disputed by companies in the coal
industry. Due to the dispute and to the Company’s
judgment that any additional amounts owed are not
estimable, the Company has not included any additional
amounts related to the new regulations in the actuarial
present value of self-insured black lung benefits. Prior to
December 31, 2000, assumptions used in the calculation of
the actuarial present value of black lung benefits were
based on actual retirement experience of the Company’s
coal employees, black lung claims incidence, actual
dependent information, industry turnover rates, actual
medical and legal cost experience and projected inflation
rates. As of December 31, 2000, certain assumptions were
modified to reflect the planned sale of Coal Operations.
The amount of expense incurred for annual black lung
benefits was $5.2 million for 2001, $5.3 million for 2000 and
$5.1 million for 1999.
VEBAVEBAVEBAVEBA
The Company has established a Voluntary Employees’
Beneficiary Association (“VEBA”) which is intended to tax
efficiently fund certain retiree medical liabilities primarily
for retired coal miners and their dependents. The VEBA
may receive partial funding from the proceeds of the
planned sale of the Company’s coal business as well as
other sources over time. The Company contributed $15.0
million to the VEBA in December 1999. As of December 31,
2001, the balance in the VEBA was $16.6 million and was
included in other noncurrent assets.
Note 14
Note 14
Note 14
Note 14
BASED COMPENSATION PLANS
STOCK----BASED COMPENSATION PLANS
STOCK
BASED COMPENSATION PLANS
BASED COMPENSATION PLANS
STOCK
STOCK
The Company has stock and incentive plans related to
employees which allow for stock options, performance unit
awards, stock appreciation rights and stock awards.
2001 ANNUAL REPORT
Stock Option Plans
Stock Option Plans
Stock Option Plans
Stock Option Plans
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 the average quoted
market value at the date of grant. All grants under the 1988
Plan made in 2001, 2000 and 1999 have a maximum term of
six years and substantially all of these grants either vest
over three years from the date of grant or vest 100% at the
end of the third year. The Non-Employee Plan options are
granted with a maximum term of ten years vesting in full at
the end of six months. There are 1.8 million shares
underlying options for both plans that are authorized, but
not yet granted.
As of January 14, 2000, with the elimination of the
Company’s tracking stock capital structure, the 1988 Plan
and Non-Employee Plan were amended to provide that all
future grants would be made solely in Pittston Common
Stock and that all outstanding options related to BAX Stock
and Minerals Stock would be converted into options to
purchase Pittston Common Stock. On January 14, 2000,
options to purchase a total of 2.0 million shares of BAX
Stock and 0.6 million shares of Minerals Stock were
converted into options to purchase 1.0 million shares of
Pittston Common Stock.
The table below summarizes the activity in all plans for
options of Pittston Common Stock for 2001, 2000 and 1999.
Pittston Common Stock options:
Pittston Common Stock options:
Pittston Common Stock options:
Pittston Common Stock options:
Outstanding at December 31, 1998
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 1999
BAX Stock options converted in the Exchange
Minerals Stock options converted in
the Exchange
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2000
Granted
Exercised
Forfeited or expired
Aggregate
Exercise
Price
$
49.2
11.5
(2.4)
(8.8)
49.5
30.7
4.5
16.1
(0.6)
(11.4)
88.8
24.9
(5.0)
(19.7)
Shares
1.9
0.4
(0.1)
(0.4)
1.8
1.0
-
1.1
(0.1)
(0.4)
3.4
1.2
(0.3)
(0.6)
Outstanding at December 31, 2001
3.7
$
89.0
49
The table below summarizes the activity in all plans for
options of BAX Stock and Minerals Stock prior to the
Exchange.
BAX Group Stock options:
BAX Group Stock options:
BAX Group Stock options:
BAX Group Stock options:
Outstanding at December 31, 1998
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 1999
Converted in the Exchange
Aggregate
Exercise
Price
$
36.1
4.8
(0.2)
(10.0)
30.7
(30.7)
Shares
2.1
0.5
-
(0.6)
2.0
(2.0)
Outstanding at December 31, 2000 and 2001
-
$
-
Minerals Group Stock options:
Minerals Group Stock options:
Minerals Group Stock options:
Minerals Group Stock options:
Outstanding at December 31, 1998
Granted
Forfeited or expired
Outstanding at December 31, 1999
Converted in the Exchange
0.6
0.2
(0.2)
0.6
(0.6)
$
8.9
0.3
(4.7)
4.5
(4.5)
Outstanding at December 31, 2000 and 2001
-
$
-
Options exercisable at the end of 2001, 2000 and 1999 for
Pittston Common Stock were 1.7 million, 1.9 million and 0.9
million, respectively. Options exercisable at the end of 1999
for BAX Stock were 1.0 million; and for Minerals Stock were
0.3 million.
The following table summarizes information about stock
options outstanding as of December 31, 2001.
Stock Options
Outstanding
Stock Options
Exercisable
Weighted
Average
Remaining Weighted
Contractual Average
Exercise
Price
Life
(Years)
Shares
Weighted
Average
Exercise
Price
Shares
Range of
Exercise Prices
Pittston Common Stock
Pittston Common Stock
Pittston Common Stock
Pittston Common Stock
$10.55 to 19.76
20.05 to 25.57
26.69 to 30.60
31.21 to 35.19
37.01 to 40.86
43.59 to 315.06
Total
1.3
1.2
0.4
0.3
0.4
0.1
3.7
4.5
4.6
3.8
1.5
2.2
1.6
$
15.98
0.3 $ 15.69
22.13
27.24
31.60
38.09
56.52
0.3
23.79
0.3
27.35
0.3
31.60
0.4
38.09
0.1
56.52
1.7
Employee Stock Purchase Plan
Employee Stock Purchase Plan
Employee Stock Purchase Plan
Employee Stock Purchase Plan
Under the 1994 Employee Stock Purchase Plan (the “ESPP”),
as amended, the Company is authorized to issue up to 1.0
2001 ANNUAL REPORT
million shares of Pittston Common Stock (of which 0.6
million shares had been issued as of December 31, 2001) to
its employees who have at least six months of service,
complete minimum annual work requirements and
contribute to the ESPP. Under the terms of the ESPP,
employees may elect each six-month period (beginning
January 1 and July 1), to have up to 10 percent of their
annual earnings up to an annual limit of $12,750 withheld to
purchase Company common stock. The purchase price of
the stock is 85% of the lower of its beginning-of-the-period
or end-of-the-period market price. Under the ESPP, the
Company sold 0.1 million shares of Pittston Common Stock
to employees during each of 2001, 2000 and 1999 and sold
0.1 million shares of BAX Stock, and 0.2 million shares of
Minerals Stock, to employees during 1999.
Pro forma Disclosures
Pro forma Disclosures
Pro forma Disclosures
Pro forma Disclosures
The Company’s method of accounting for stock-based
compensation plans is discussed in Note 1. Had
compensation costs for the Company’s plans been
determined based on the fair value of awards at the grant
dates, consistent with the optional recognition
requirement of SFAS No. 123, “Accounting for Stock Based
Compensation,” net income and net income per share
would approximate the pro forma amounts indicated
below:
(In millions, except
per share amounts)
Years Ended December 31
2002002002001111
2000
1999 (a)
Net income (loss) attributed
Net income (loss) attributed
Net income (loss) attributed
Net income (loss) attributed
to common shares
to common shares
to common shares
to common shares
As Reported
Pro Forma
$$$$
15.915.915.915.9
10.910.910.910.9
(255.8)
(260.2)
Net income (loss) per common share
Net income (loss) per common share
Net income (loss) per common share
Net income (loss) per common share
Basic, As Reported
Basic, Pro Forma
Diluted, As Reported
Diluted, Pro Forma
$$$$
0.310.310.310.31
0.210.210.210.21
0.310.310.310.31
0.210.210.210.21
(5.11)
(5.21)
(5.12)
(5.21)
52.3
47.2
1.06
0.96
0.70
0.60
(a) Pro forma for the Exchange (see Note 20).
Year Ended December 31, 1999
BAX Minerals
Brink’s
Group Group Group
84.2
81.2
2.16
2.08
2.15
2.07
33.2
31.3
1.73
1.63
1.72
1.63
(65.1)
(65.3)
(7.33)
(7.35)
(8.61)
(8.63)
(In millions, except
per share amounts)
Net income (loss) attributed
Net income (loss) attributed
Net income (loss) attributed
Net income (loss) attributed
to common sharesresresres
to common sha
to common sha
to common sha
As Reported
Pro Forma
Net income (loss) per common share
Net income (loss) per common share
Net income (loss) per common share
Net income (loss) per common share
Basic, As Reported
Basic, Pro Forma
Diluted, As Reported
Diluted, Pro Forma
50
The fair value of each stock option grant used to compute
pro forma net income and net income per share
disclosures is estimated at the time of the grant using the
Black-Scholes option-pricing model. The weighted-average
assumptions used in the model are as follows:
Note 15
Note 15
Note 15
Note 15
INCOME TAXES
INCOME TAXES
INCOME TAXES
INCOME TAXES
The provision (benefit) for income taxes from continuing
operations consists of the following:
2001
2001
2001
2001
2000
1999
(In millions)
U.S. Federal
Foreign
State
Total
2001 ANNUAL REPORT
Expected dividend yield:
Pittston Common Stock
0.5%0.5%0.5%0.5%
0.4%
BAX Stock
Minerals Stock
Expected volatility:
Pittston Common Stock
BAX Stock
Minerals Stock
Risk-Free interest rate:
N/AN/AN/AN/A
N/AN/AN/AN/A
38%38%38%38%
N/AN/AN/AN/A
N/AN/AN/AN/A
N/A
N/A
31%
N/A
N/A
Pittston Common Stock
4.8%4.8%4.8%4.8%
6.0%
BAX Stock
Minerals Stock
Expected term (in years):
Pittston Common Stock
BAX Stock
Minerals Stock
N/AN/AN/AN/A
N/AN/AN/AN/A
4.64.64.64.6
N/AN/AN/AN/A
N/AN/AN/AN/A
N/A
N/A
4.5
N/A
N/A
0.3%
1.7%
4.3%
32%
64%
44%
6.0%
6.0%
6.0%
4.3
4.4
2.8
Using these assumptions in the Black-Scholes model, the
weighted-average fair value of options granted during 2001,
2000 and 1999 for the Pittston Common Stock is $9.6
million, $5.5 million and $3.9 million, respectively. The
weighted-average fair value of options granted during 1999
for the BAX Stock is $2.5 million and for the Minerals Stock
is $0.1 million.
Under SFAS No. 123, compensation expense is also
recognized for the fair value of employee stock purchase
rights. Because the Company settles its employee stock
purchase rights under the ESPP at the end of each six-
month offering period, the fair value of these purchase
rights was calculated using actual market settlement data.
The weighted-average fair value of the stock purchase
rights granted in 2001, 2000 and 1999 was $0.4 million, $0.5
million and $0.2 million for Pittston Common Stock,
respectively, and was $0.1 million for BAX Stock, and less
than $0.1 million for Minerals Stock, in 1999.
2001:
2001:
2001:
2001:
Current
Deferred
Total
2000:
Current
Deferred
Total
1999:
Current
Deferred
Total
$
6.7
3.3
$
10.0
$
0.6
(14.2)
$
(13.6)
$
16.4
23.0
$
39.4
23.9
(5.9)
18.0
25.7
(8.9)
16.8
28.8
(11.7)
17.1
3.5
(4.1)
(0.6)
3.7
(5.0)
(1.3)
3.5
1.5
5.0
34.1
(6.7)
27.4
30.0
(28.1)
1.9
48.7
12.8
61.5
The significant components of the deferred tax expense
(benefit) from continuing operations were as follows:
(In millions)
Years Ended December 31
2001
2001
2001
2001
2000
1999
Net operating loss carryforwards
$$$$
Alternative minimum tax credits
Change in the valuation allowance
for deferred tax assets
5.25.25.25.2
4.24.24.24.2
1.31.31.31.3
Other deferred tax expense (benefit)
(17.4)
(17.4)
(17.4)
(17.4)
(24.1)
(8.2)
1.8
2.4
Total
$$$$
(6.7)
(6.7)
(6.7)
(6.7)
(28.1)
(7.7)
(2.7)
1.5
21.7
12.8
The tax benefit for compensation expense related to the
exercise of certain employee stock options for tax
purposes in excess of compensation expense for financial
reporting purposes is recognized as an adjustment to
shareholders’ equity.
51
The components of the net deferred tax asset are as
follows:
(In millions)
Deferred tax assets:
Deferred tax assets:
Deferred tax assets:
Deferred tax assets:
Accounts receivable
154.8
Postretirement benefits other than pensions 154.8
154.8
154.8
December 31
2001
2001
2001
2001
2000
$$$$
11.211.211.211.2
41.241.241.241.2
121.6
121.6
121.6
121.6
60.860.860.860.8
52.052.052.052.0
40.140.140.140.1
55.455.455.455.4
9.6
159.1
37.8
107.5
49.8
67.3
44.3
54.0
(10.3)
(10.3)
(10.3)
(10.3)
(9.0)
526.8
526.8
526.8
526.8
520.4
99.499.499.499.4
26.426.426.426.4
32.432.432.432.4
17.717.717.717.7
6.06.06.06.0
29.329.329.329.3
211.2
211.2
211.2
211.2
315.6
$$$$ 315.6
315.6
315.6
109.9
22.4
40.0
13.3
6.0
34.4
226.0
294.4
Workers’ compensation and other claims
Other assets and liabilities
Estimated loss on coal assets
Net operating loss carryforwards
Alternative minimum tax credits
Deferred revenue
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred tax liabilities:
Deferred tax liabilities:
Deferred tax liabilities:
Property and equipment
Prepaid assets
Prepaid pension assets
Other assets
Investments in foreign affiliates
Miscellaneous
Total deferred tax liabilities
Net deferred tax asset (a)
2001 ANNUAL REPORT
result of Coal Operations being reported under
discontinued operations, the tax benefits of percentage
depletion are no longer reflected in the effective tax rate of
continuing operations.
Years Ended December 31
2001
2001
2001
2001
2000
1999
(In millions)
Income (loss) from continuing
operations before income taxes
and accounting change:
United States
Foreign
Total
$$$$
3.23.23.23.2
(65.1)
109.2
70.070.070.070.0
69.7
60.3
$$$$
73.273.273.273.2
4.6
169.5
Tax provision computed at
statutory rate
$$$$
25.625.625.625.6
1.6
59.3
Increases (reductions) in taxes due to:
State income taxes (net of federal
tax benefit)
Goodwill amortization
(0.4)
(0.4)
(0.4)
(0.4)
2.12.12.12.1
(0.8)
2.1
3.3
2.3
Difference between total taxes on
foreign income and the U.S.
federal statutory rate
(1.5)
(1.5)
(1.5)
(1.5)
(2.7)
(3.7)
Change in the valuation allowance
for deferred tax assets
Miscellaneous
Actual tax provision from
1.31.31.31.3
0.30.30.30.3
1.8
1.5
(0.1)
(1.2)
(a) Deferred tax assets and liabilities related to discontinued operations,
which the Company expects to retain, are reflected in the above table.
continuing operations
$$$$
27.427.427.427.4
1.9
61.5
The valuation allowance relates to deferred tax assets in
certain foreign jurisdictions. Based on the Company’s
historical and expected future taxable earnings,
management believes it is more likely than not that the
Company will realize the benefit of the existing deferred
tax assets, net of the valuation allowance, at December 31,
2001.
The following table accounts for the difference between
the actual tax provision from continuing operations and the
amounts obtained by applying the statutory U.S. federal
income tax rate of 35% in 2001, 2000 and 1999 to the income
(loss) from continuing operations before income taxes and
cumulative effect of change in accounting principle. As a
As of December 31, 2001, the Company has not recorded
U.S. deferred income taxes on $123.9 million of
undistributed earnings of its foreign subsidiaries and
equity affiliates. It is expected that these earnings will
either be permanently reinvested in the operations within
the respective country or, if repatriated, will be
substantially offset by tax credits. If such earnings were
remitted to the U.S. and no credits were available,
additional U.S. tax expense of $43.4 million would be
recognized.
The U.S. entities in the Company’s continuing and
discontinued segments file a consolidated U.S. federal
income tax return.
As of December 31, 2001, the Company had $40.1 million 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.
52
The tax benefit of net operating loss carryforwards as of
December 31, 2001 was $52.0 million and related to U.S.
federal and various state and foreign taxing jurisdictions.
The gross amount of such net operating losses was $246.2
million as of December 31, 2001. The expiration periods
primarily range from 5 years to an unlimited period.
The Company and its subsidiaries are subject to tax
examinations in various U.S. and foreign jurisdictions. The
Company believes that it has adequately provided for all
income tax liabilities and that final resolution of any
examinations will not have a material effect on its financial
position or results of operations.
Note 16
Note 16
Note 16
Note 16
RISK MANAGEMENTMENTMENTMENT
RISK MANAGE
RISK MANAGE
RISK MANAGE
The Company has risk management policies designed to
manage, among other things, its currency, commodity and
interest rate risks. The Company’s policies are intended to
reduce the effect of short-term market variability on the
Company’s results of operation and cash flow.
The Company utilizes various hedging instruments to
hedge a portion of its foreign currency, interest rate, and
commodity exposures. The Company does not use
derivative instruments for purposes other than hedging.
The risk that counterparties to such instruments may be
unable to perform is minimized by limiting the
counterparties to major financial institutions with
investment grade credit ratings. The Company does not
expect any losses due to counterparty default.
Derivative Finan
cial Instruments
Derivative Financial Instruments
cial Instruments
cial Instruments
Derivative Finan
Derivative Finan
and Hedging Activities
and Hedging Activities
and Hedging Activities
and Hedging Activities
Interest Rate Risk Management
The Company’s risk management policy requires a balance
to be maintained within certain ranges between fixed and
floating rate debt and the Company uses interest rate
swaps to assist in meeting this objective. The Company has
designated its interest rate hedges as cash flow hedges for
accounting purposes.
The Company has entered into interest rate swaps with a
total notional value at December 31, 2001 of $90.0 million.
These swaps effectively change the variable cash flows on
$90.0 million of the $185.0 million revolving credit facility,
to fixed cash flows. The swaps outstanding at December 31,
2001 fix the interest rate on $90.0 million of debt at 5.1%
2001 ANNUAL REPORT
including the margin on the revolving credit facility
through October 2002 ($65 million of the swaps continue in
effect through October 2003 and fix the rate in the
incremental year at 5.5% including the margin).
Changes in fair value on interest rate swaps are recorded in
other comprehensive income and subsequently
reclassified to interest expense in the same period in which
the interest on the floating-rate debt obligations affects
earnings. During each of the three years ended December
31, 2001, the Company’s interest rate swaps were
completely effective as defined under SFAS No. 133 and no
amounts were included in earnings as a result of the
interest rate swaps being ineffective, nor were any amounts
excluded from the assessment of effectiveness. At
December 31, 2001, $1.6 million of unrecognized pretax
loss was included in accumulated other comprehensive
income and of this amount, $0.9 million is expected to be
recognized in earnings in 2002.
Commodities Risk Management
The Company consumes or sells various commodities in
the normal course of its business and utilizes derivative
instruments to minimize the variability in forecasted cash
flows due to price movements in certain of these
commodities. Transactions involving commodities that are
the subject of the Company’s risk management policy
include:
•
•
purchases of jet fuel for BAX Global’s North
American fleet operations; and
revenues of the Company’s gold and natural gas
operations.
The Company enters into swap contracts and collars to
hedge a portion of its forecasted jet fuel purchases for use
in the BAX Global aircraft operation. Depending on market
conditions, the Company has on occasion charged its
customers a fuel surcharge to offset historically high jet
fuel prices. At December 31, 2001, the outstanding notional
amount of hedges for jet fuel totaled 29 million gallons.
Both the Company and its 45%-owned equity affiliate enter
into forward gold sales contracts to fix the Australian dollar
selling price on a portion of forecasted gold sales. At
December 31, 2001, the notional amount of gold under
forward sales contracts was approximately 222,000 ounces,
representing approximately 54% of the gold operations’
proven and probable reserves.
The Company enters into swap contracts and collars to
hedge a portion of its forecasted natural gas sales. At
December 31, 2001, the outstanding notional amount of
hedges was 1.7 million MMbtu.
53
The Company has designated its commodity hedges as
cash flow hedges for accounting purposes. Effectiveness is
assessed based on the total changes in the estimated
present value of cash flows for its jet fuel and natural gas
hedges. The effectiveness of gold hedges is assessed based
on changes in the spot rate of gold and the Australian
dollar exchange rate and other changes in expected cash
flows are excluded from the assessment.
For jet fuel, the changes in fair value are recorded in other
comprehensive income and subsequently reclassified to
earnings, as a component of costs of sales, in the same
period as the jet fuel is used. For gold and natural gas
contracts, the changes in fair value are recorded in other
comprehensive income and subsequently reclassified to
earnings, as a component of revenue, in the same period as
the gold or natural gas is sold.
(In millions, except)
number of months)
Jet
Fuel
Natural
Gas
Gold
Ineffective amounts recognized
in 2001 earnings
$
(0.1)
-
-
Amounts excluded in
assessment of effectiveness
$
N/A
N/A
0.6
Net gain (loss) in other comprehensive
loss at December 31, 2001
expected to be reclassified to
earnings in 2002
$
(1.8)
1.2
(0.3)
Maximum number of months
hedges outstanding
18
15
44
Foreign Currency Risk Management
The Company is exposed to foreign currency exchange
fluctuations due to certain transactions the Company is a
party to. Certain customers are billed for BAX Global’s
services in currencies that are different than the functional
currency of the subsidiary that recognizes the sale. Certain
transportation costs incurred by BAX Global’s non-U.S.
subsidiaries are denominated in currencies that are
different than the subsidiaries’ functional currency. The
Company’s BAX Global operation has a wholly owned
international subsidiary that serves as a finance
coordination center. The subsidiary has the U.S. dollar as
its functional currency, and has intercompany receivables
and payables that are not denominated in U.S. dollars.
2001 ANNUAL REPORT
The Company utilizes foreign currency forward contracts
to minimize the variability in cash flows due to foreign
currency risks. The contracts have not been designated for
accounting purposes as hedges in accordance with SFAS
No. 133 and accordingly changes in the fair value of
foreign currency forward contracts are reported in
earnings. The Company’s foreign currency forward
contracts provide an economic hedge of the risk associated
with the changes in currency rates on the related assets
and liabilities.
As of December 31, 2001, the maximum length of time over
which the Company is hedging its exposure to the
variability in future cash flows associated with foreign
currency forecasted transactions is six months.
NonNonNonNon----Derivative Financial Instruments
Derivative Financial Instruments
Derivative Financial Instruments
Derivative Financial Instruments
Non-derivative financial instruments, which potentially
subject the Company to concentrations of credit risk,
consist principally of cash and cash equivalents and trade
receivables. The Company places its cash and cash
equivalents with high credit quality financial institutions.
Also, by policy, the Company limits the amount of credit
exposure to any one financial institution. Concentrations of
credit risk with respect to trade receivables are reduced as
a result of the diversification benefit provided by the large
number of customers comprising the Company’s customer
base, and their dispersion across many different industries
and geographic areas. Credit limits, ongoing credit
evaluation and account-monitoring procedures are utilized
to minimize the risk of loss from nonperformance on trade
receivables.
The carrying amounts of cash and cash equivalents,
accounts receivable, accounts payable and accrued
liabilities approximate fair value because of the short-term
nature of these instruments.
The fair value of the Company’s variable-rate short-term
and long-term debt approximates the carrying amount. The
fair value of the Company’s fixed rated long-term debt is
$76.3 million compared to its $75.0 million carrying value.
Fair value is estimated by discounting the future cash flows
at rates in effect at December 31, 2001 for similar debt
instruments.
54
Note 17
Note 17
Note 17
Note 17
RESTRUCTURING
RESTRUCTURING
RESTRUCTURING
RESTRUCTURING
Over the course of 2000, the operating performance of BAX
Global’s Americas region was negatively impacted by lower
than expected demand and higher transportation,
operating and administrative costs relative to that lower
demand. As such, BAX Global evaluated alternatives
directed at returning its Americas operations to
profitability, including ways to improve sales performance
and to reduce transportation, operating and administrative
expenses. During the fourth quarter of 2000, BAX Global
finalized a restructuring plan aimed at reducing the
capacity and cost of its airlift capabilities in the U.S. as well
as reducing station operating expenses, sales, general and
administrative expense in the Americas and Atlantic
regions, including:
•
•
•
The removal of ten planes from the fleet, nine of which
were dedicated to providing lift capacity in BAX
Global’s commercial cargo system.
The closure of nine operating stations and realignment
of domestic operations.
The reduction of employee-related costs through the
elimination of approximately 300 full-time positions
including aircraft crew and station operating, sales and
business unit overhead positions.
In addition, certain Atlantic region operations were
streamlined in order to reduce overhead costs and
improve overall performance in that region. The Atlantic
region planned restructuring efforts involved severance
costs and station closing costs in the UK, Denmark, Italy
and South Africa. Approximately 50 positions were
eliminated, most of which were positions at or above
manager level.
The following is a summary of the 2000 restructuring
charges:
(In millions)
Region
Region BAX Global
Americas Atlantic
Total
Fleet related charges
$ 49.7
Severance costs
Station and other closure costs
1.1
3.8
Total restructuring charge
$ 54.6
-
1.2
1.7
2.9
49.7
2.3
5.5
57.5
2001 ANNUAL REPORT
Approximately $45.2 million of the restructuring charge was
noncash and approximately $0.3 million of the charge was
paid in 2000. The following analyzes the changes in the
remaining liabilities for such costs:
Fleet
Station
and
(In millions)
Charges Severance Other
Total
December 31, 2000
$ 6.6
Adjustments
Payments
0.6
(5.1)
December 31, 2001
$ 2.1
2.0
(0.4)
(1.5)
0.1
3.4
(0.4)
(0.9)
2.1
12.0
(0.2)
(7.5)
4.3
Substantially all severance costs have been paid out. The
remaining accrual primarily includes contractual
commitments for aircraft and facilities. The majority of the
remaining accrual for fleet charges is expected to be paid
out by the end of 2002. Approximately $0.5 million of the
remaining accrual for station and other costs is expected to
be paid by the end of 2002, with the balance expected to be
paid through the end of 2007.
The Company decreased its accrual for restructuring in
2001 by a net $0.2 million as a result of changes in the
estimate of certain liabilities.
Note 18
Note 18
Note 18
Note 18
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS
In December 1999, the Company announced its intention
to exit the coal business through the sale of the Company’s
coal mining operations and reserves. The Company
formalized its plan in December 2000 to dispose of those
operations. Accordingly, Coal Operations were reported as
discontinued operations of the Company as of December
31, 2000. No interest expense has been allocated to
discontinued operations.
The Company’s plan of disposal includes the sale of all of
its active and idle coal mining operations (including 24
company or contractor operated mines and 5 active plants)
and reserves, primarily in West Virginia, Virginia and
55
Kentucky as well as other assets which support those
operations. The Company is also planning to dispose of its
partnership interest in Dominion Terminal Associates
(“DTA”), a coal port facility in Newport News, Virginia (see
Note 19).
The Company originally anticipated disposing of these
properties and support operations by December 31, 2001.
Although the Company has been actively engaged in the
implementation of its plan of disposal, due to various
factors, the first sale of a portion of its coal properties was
not completed until early 2002. At that time, the Company
concluded a portion of the plan through the sale of certain
properties in West Virginia. The Company currently
expects to complete the sale or shutdown of operations
during 2002.
The assets to be disposed of primarily include inventory,
the Company’s partnership interest in DTA and property,
plant and equipment, and it is expected that certain
liabilities, primarily reclamation costs related to active
properties will be assumed by the purchasers. Total
proceeds from the sale of Coal Operations, which include
cash, the present value of future minimum royalties to be
received and liabilities to be transferred, are expected to
exceed $100 million.
Based on developments in the fourth quarter of 2001 and
the annual reevaluation of certain benefit plans, the
Company revised its estimates of operating performance
from the measurement date to the expected date of
disposal, inactive employee liability charges, the value of
certain benefit plans, and changes in assets and liabilities,
and as a result, increased its expected pretax loss on the
disposal by $54.3 million ($29.2 million after-tax), as detailed
below.
2001 ANNUAL REPORT
Losses included in discontinued operations in the
Company’s Consolidated Statements of Operation were as
follows:
(In millions)
Years Ended December 31
2001
2001
2001
2001
2000
1999
Pretax loss from the operations of the
discontinued segment
$$$$
Income tax benefit
Loss from the operations of the
discontinued segment, after-tax
----
----
----
(32.4)
(122.0)
(14.2)
(48.7)
(18.2)
(73.3)
Estimated operating losses during the
disposal period
(22.2)
(22.2)
(22.2)
(22.2)
(45.0)
Health Benefit Act liabilities and
curtailment of benefit plans
(see Note 13)
Estimated loss on the disposal
(8.0)
(8.0)
(8.0)
(8.0)
(163.3)
(24.1)
(24.1)
(24.1)
(24.1)
(85.9)
Estimated pretax loss on the disposal of
the discontinued segment
Income tax benefit
(54.3)
(54.3)
(54.3)
(54.3)
(294.2)
(25.1)
(25.1)
(25.1)
(25.1)
(105.1)
Estimated loss on the disposal of the
discontinued segment, after-tax
(29.2)
(29.2)
(29.2)
(29.2)
(189.1)
Loss from discontinued
-
-
-
-
-
-
operations
$$$$
(29.2)
(29.2)
(29.2)
(29.2)
(207.3)
(73.3)
Pretax losses from discontinued operations for 1999
amounting to $122.0 million included a charge of $82.3
million related to the impairment of long-lived assets and a
joint venture interest as well as other mine closure costs,
substantially all of which were noncash. Income tax
benefits attributable to the losses from discontinued
operations include the benefits of percentage depletion
generated from the active operations.
During the fourth quarter of 2001, the Company recorded
$22.2 million of estimated operating losses that are
expected to be incurred through the expected end of the
disposal period. This charge reflects projected operating
performance of the discontinued operations during the
extension of the expected period of disposal, including an
estimated $41.8 million of 2002 inactive employee costs,
56
2001 ANNUAL REPORT
and is net of adjustments to the estimated operating losses
for 2001 of $45.0 million which were recorded in the prior
year. Such adjustments included a refund of $23.4 million
(including interest) of Federal Black Lung Excise Tax
(“FBLET”) received during the fourth quarter of 2001 and an
accrual of $9.5 million for litigation settlements that are
expected to be paid during early 2002.
competitive factors in the coal industry, the impact of
delays in the issuance or the nonissuance of mining
permits, the timing of and consideration received for the
sale of the coal assets, costs associated with shutting down
those operations that are not sold, funding and benefit
level of the multi-employer pension plans, geological
conditions and variations in the spot prices of coal.
In 2000, the Company recorded a $161.7 million obligation
under the Health Benefit Act, which represents the
actuarially determined undiscounted liability for such
obligations (discussed in detail below). During 2001, the
Company recorded an additional charge of $8.0 million to
reflect the current actuarially determined undiscounted
liability for obligations under the Health Benefit Act.
During 2000, the Company also recorded a net curtailment
loss of $1.6 million, comprising a $6.0 million net
curtailment loss on the Company’s medical benefit plans
and a $4.4 million net curtailment gain on the Company’s
pension plans.
A charge of $24.1 million was recorded in the fourth
quarter of 2001 to record a revaluation of the estimated loss
on the disposition of the Coal Operations. This additional
net expense reflects changes in the expected proceeds to
be received and changes in the expected values of assets
and liabilities through the anticipated dates of sale or
shutdown. It also includes the recording of a multi-
employer pension plan withdrawal liability of $8.2 million
associated with its planned exit from the coal business. The
estimate is based on the most recent actuarial estimate of
liability for a withdrawal occurring in the plan year ending
June 30, 2002. The ultimate withdrawal liability, if any, is
subject to several factors, including funding and benefit
levels of the plans and the ultimate timing and form of the
sale transactions. Accordingly, the actual amount of this
liability could change materially.
Estimates regarding losses on the sale of Coal Operations
and losses during the sale period are subject to known and
unknown risks, uncertainties and contingencies which
could cause actual results 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, demand and
On February 10, 1999, the U.S. District Court of the Eastern
District of Virginia entered a final judgment in favor of
certain of the Company’s subsidiaries, ruling that the FBLET
is unconstitutional as applied to export coal sales. A total of
$0.8 million (including interest) was refunded in 1999 for
the FBLET that those companies paid for the first quarter of
1997. The Company sought refunds of the FBLET it paid on
export coal sales for all open statutory periods and
received refunds of $23.4 million (including interest) during
the fourth quarter of 2001. The Company continues to
pursue the refund of other FBLET payments. Due to
uncertainty as to the ultimate additional future amounts to
be received, if any, which could amount to as much as $20
million (before interest and applicable income taxes), as
well as the timing of any additional FBLET refunds, the
Company has not currently recorded receivables for such
additional FBLET refunds in its estimate of operating losses
to be incurred during the disposal period.
Certain assets and liabilities are expected to be retained by
the Company, including net working capital and other
assets (excluding inventory), certain parcels of land,
income and non-income tax assets and liabilities, certain
inactive employee liabilities primarily for postretirement
medical benefits, workers’ compensation and black lung
obligations and reclamation related liabilities associated
with certain closed coal mining sites in Virginia, West
Virginia and Kentucky. In addition, the Company expects to
continue to be liable for other contingencies, including its
unconditional guarantee of the payment of the principal
and premium, if any, on coal terminal revenue refunding
bonds (principal amount of $43.2 million) (see Note 19).
The Company participates in the United Mine Workers of
America (“UMWA”) 1950 and 1974 pension plans at defined
contribution rates. Under these plans, expense included in
discontinued operations in each of 2001, 2000 and 1999 was
less than $0.1 million.
57
The following is a summary as of December 31, 2001 of the
carrying value of assets and liabilities that the Company
expects to retain:
(In millions)
Assets:
December 31, 2001
Net working capital and other assets
$$$$
Property and equipment, net
Net deferred tax assets (Note 15)
Liabilities:
Inactive workers’ compensation
Black lung obligations (Note 13)
Company-sponsored retiree medical (Note 13)
Health Benefit Act (Note 13)
Reclamation liabilities for inactive properties
DTA
Other liabilities
20.520.520.520.5
5.65.65.65.6
244.4
244.4
244.4
244.4
33.533.533.533.5
45.445.445.445.4
266.6
266.6
266.6
266.6
159.9
159.9
159.9
159.9
24.724.724.724.7
43.243.243.243.2
17.917.917.917.9
As of December 31, 2001, aggregate future minimum
operating lease payments for discontinued operations
were: 2002 - $11.2 million, 2003 - $4.5 million and 2004 - $1.1
million. The Company expects the majority of its operating
lease commitments related to discontinued operations to
be assumed by purchasers of the various operations.
Inasmuch as estimated operating losses since the
measurement date for the discontinued operations are
recorded as part of the estimated loss on the disposal of
the discontinued segment, actual operating results of
operations during the disposal period are not included in
Consolidated Statements of Operations. The following
table shows selected financial information for Coal
Operations during 2001, as compared to amounts
recognized as part of the loss from discontinued
operations in 2000 and amounts reported within
Consolidated Statements of Operations in 1999.
(In millions)
Sales
Operating loss before
inactive employee costs
Inactive employee costs
Operating loss
Loss before income taxes
2001 ANNUAL REPORT
Years Ended December 31
2001
2001
2001
2001
2000
1999
$$$$
384.0
384.0
384.0
384.0
401.0
436.7
(3.0)
(3.0)
(3.0)
(3.0)
(7.0)
(28.7)
(28.7)
(28.7)
(28.7)
(30.0)
(89.0)
(35.0)
(31.7)
(31.7)
(31.7)
(31.7)
(29.5)
(29.5)
(29.5)
(29.5)
(37.0)
(124.0)
(32.4)
(122.0)
Unaudited quarterly financial information for the
discontinued coal operations operating results shown
above is as follows:
(In millions)
2001 Quarters:
2001 Quarters:
2001 Quarters:
2001 Quarters:
Sales
1st
2nd
3rd
4th
$
98.2
101.9
99.3
84.6
Operating profit (loss) before
inactive employee costs
Inactive employee costs
Operating loss
Loss before income taxes
(4.9)
(6.5)
(11.4)
(10.8)
(2.5)
(6.4)
(8.9)
(8.3)
(1.1)
(6.7)
(7.8)
(7.3)
5.5
(9.1)
(3.6)
(3.1)
2000 Quarters:
2000 Quarters:
2000 Quarters:
2000 Quarters:
Sales
$
98.2
92.8
106.3
103.7
Operating profit (loss) before
inactive employee costs
Inactive employee costs
Operating loss
Loss before income taxes
(3.0)
(8.2)
(11.2)
(8.5)
(3.5)
(7.3)
(10.8)
(10.2)
0.2
(7.3)
(7.1)
(6.4)
(0.7)
(7.2)
(7.9)
(7.3)
Note 1
Note 19999
Note 1
Note 1
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
The Company owns a 32.5% interest in Dominion Terminal
Associates (“DTA”), a partnership with three other coal
companies, that operates a leased coal port terminal in
Newport News, Virginia (the “Terminal”). The Company
plans to sell its ownership interest in DTA as part of its
disposition of Coal Operations.
The Terminal has an annual throughput capacity of 22.0
million tons of coal, with a ground storage capacity of
approximately 2.0 million tons. The Company has the right
to use 32.5% of the throughput and storage capacity of the
Terminal. The Company pays its share of throughput and
58
storage charges based on allocations determined by DTA.
Most of DTA’s operating costs are fixed in nature and the
Company will continue to be obligated to pay its share of
interest and operating costs in the future until it sells its
interest in DTA.
The Peninsula Ports Authority of Virginia (the “Authority”)
owns the Terminal and has leased it to DTA until 2020. To
finance the facilities, the Authority issued bonds bearing a
fixed annual interest rate of 7.375%, of which $43.2 million
have been guaranteed by the Company. The bonds may be
redeemed at 102% of fair value beginning June 2002. DTA
may purchase the Terminal for one dollar at the end of the
lease term. The obligations of the partners are several, and
not joint.
Company payments for operating and interest costs
aggregated $6.1 million in 2001 and $5.7 million in each of
2000 and 1999, which amounts are included in discontinued
operations. The Company has accrued for its $43.2 million
commitment to DTA, which amount is included in other
noncurrent liabilities.
Environmental Remediation
Environmental Remediation
Environmental Remediation
Environmental Remediation
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 facility was sold in 1983. Under the settlement
agreement, the Company is obligated to pay 80% of the
hydrocarbon remediation costs. The Company is in the
process of remediating the site under an approved plan.
The Company estimates its portion of the actual remaining
clean-up and operational and maintenance costs, on an
undiscounted basis, to be between $3.8 and $8.1 million.
Management is unable to determine that any amount
within that range is a better estimate due to a variety of
uncertainties which include unforeseen circumstances
existing at the site, changes in the regulatory standards
under which the clean-up is being conducted, and
additional costs due to inflation. The estimate of costs and
the timing of payments could change significantly based
upon any one of the uncertainties described immediately
above.
Taking into account the proceeds from a previous
settlement with its insurers of claims relating to this matter,
it is the Company’s belief that the ultimate amount for
which it will be liable resulting from the remediation of the
Tankport site will not have a material adverse impact on the
Company’s financial position.
2001 ANNUAL REPORT
Note 20
Note 20
Note 20
Note 20
1999 EXCHANGE OF TRACKING STOCK FOR
1999 EXCHANGE OF TRACKING STOCK FOR
1999 EXCHANGE OF TRACKING STOCK FOR
1999 EXCHANGE OF TRACKING STOCK FOR
COMMON STOCK
COMMON STOCK
COMMON STOCK
COMMON STOCK
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:
(Per share prices)
Brink’s
Stock
BAX
Stock
Minerals
Stock
Ten day average price (a)
$ 18.92
Exchange factor
1.00
$ 7.98
1.15
$ 1.34
1.15
Fair Market Value, as
defined (a)
Exchange ratio
Closing prices:
$ 18.92
$ 9.17
$
1.54
N/A
0.4848
0.0817
December 3, 1999
$
18.375
$ 10.0625
$
1.125
December 6, 1999
21.500
10.1250
1.625
(a) 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
ended 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 10.9 million shares of Pittston Common
Stock, which consists of 9.5 million shares of Pittston
59
Common Stock equal to 100% of the Fair Market Value, as
defined, of all BAX Stock and Minerals Stock and 1.4 million
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 10.9 million shares issued, 10.2 million shares were
issued to holders of BAX Stock and Minerals Stock and 0.7
million shares were issued to The Pittston Company
Employee Benefits Trust.
Shares issued to holders of BAX Stock and Minerals Stock
(excluding those shares issued to the Trust) were
distributed as follows:
2001 ANNUAL REPORT
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 49.5 million issued and outstanding shares of
Pittston Common Stock for use in the calculation of net
income per common share.
Holders of
BAX Stock Minerals Stock
Holders of
Note 21
Note 21
Note 21
Note 21
SELECTED QUARTERLY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
(UNAUDITED)
(UNAUDITED)
(UNAUDITED)
19,475
9,273
Tabulated below are certain data for each quarter of 2001
and 2000.
(In thousands except
per share prices)
Shares outstanding on
January 13, 2000
Brink’s Stock issued pursuant
to the Exchange:
Based on 100% of Fair Market Value
8,207
Based on 15% of Fair Market Value
1,233
Total shares issued on January 14, 2000
9,440
Brink’s Stock closing price per share –
657
99
756
(In millions, except
per share amounts)
2001 Quarters:
2001 Quarters:
2001 Quarters:
2001 Quarters:
Revenues
Operating profit
1st
2nd
3rd
4th
$
908.3
884.5
884.3 947.1
25.4
16.5
20.5
48.2
December 3, 1999
$
18.375
18.375
Income from continuing
Value as of December 3, 1999
of Brink’s Stock issued
pursuant to the Exchange
$ 173,460
13,892
operations
Loss from discontinued
operations (a)
Net income (loss)
$
8.7
3.8
9.2
24.1
-
8.7
-
3.8
-
(29.2)
9.2
(5.1)
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
Net income (loss) per common share:
Basic:
Continuing operations
Discontinued operations
Basic
Diluted:
Continuing operations
Discontinued operations
Diluted
Dividends declared per
$
$
$
$
0.17
0.07
0.17
0.46
-
-
-
(0.56)
0.17
0.07
0.17
(0.10)
0.17
0.07
0.17
0.46
-
-
-
(0.56)
0.17
0.07
0.17
(0.10)
common share
$ 0.025
0.025
0.025
0.025
Stock prices:
High
Low
$
22.44
17.86
25.31
19.35
23.15
15.75
22.90
17.20
60
2001 ANNUAL REPORT
Pittston Brink’s Group Common Stock is the only
outstanding class of common stock of the Company and
trades on the New York Stock Exchange as “PZB.” As of
March 1, 2002, there were approximately 4,000 shareholders
of record of Pittston Common Stock.
2000 Quarters:
Revenues
1st
2nd
3rd
4th
$
929.8 948.2
960.9 995.2
Operating profit (loss)
32.3
18.2
30.0
(32.8)
Income (loss) from continuing
operations before cumulative
change in accounting
principle (b)
Loss from discontinued
operations (a)
Cumulative effect of change
14.5
4.8
10.7
(27.3)
(4.5)
(6.4)
(3.3) (193.1)
in accounting principle (c)
(52.0)
-
-
-
Net income (loss) (a), (b), (c)
$
(42.0)
(1.6)
7.4 (220.4)
Net income (loss) per common share (a), (b), (c):
Basic:
Continuing operations
$
0.29
0.09
0.24
(0.55)
Discontinued operations
(0.09)
(0.13)
(0.06) (3.83)
Cumulative effect of change
in accounting principle
(1.05)
-
-
-
Basic
Diluted:
$
(0.85)
(0.04)
0.18
(4.38)
Continuing operations
$
0.29
0.09
0.21
(0.55)
Discontinued operations
(0.09)
(0.13)
(0.06) (3.83)
Cumulative effect of change
in accounting principle
(1.05)
-
-
-
Diluted
$
(0.85)
(0.04)
0.15
(4.38)
Dividends declared per
common share
Stock prices (d):
High
Low
$
$
0.025 0.025
0.025 0.025
22.00 17.13
17.50 21.00
15.00 13.44
10.69 13.75
(a) In the fourth quarter of 2001, the Company revised its estimate and
increased its expected after-tax loss on the disposal of its Coal Operations by
$29.2 million ($0.56 per diluted share). The loss from discontinued operations
for the fourth quarter of 2000 included an estimated after-tax loss of $189.1
million ($3.75 per diluted share). (Note 18)
(b) The fourth quarter of 2000 includes a restructuring charge of $57.5 million
($35.7 million after-tax or $0.71 per diluted share) to record the writedown of
assets and accrual of costs associated with a restructuring plan at BAX Global
(Note 17).
(c) The first quarter of 2000 includes an after-tax charge of $52.0 million
($1.05 per diluted share) to record the cumulative effect on years prior to 2000
of implementing SAB No. 101 and a related interpretation at BHS.
(d) High and low market price in the first quarter of 2000 represents the
high and low of Pittston Stock which began trading on January 14, 2000.
61
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
Five Years in Review
Five Years in Review
Five Years in Review
Five Years in Review
(In millions, except per share amounts)
Revenues and Income (a):
Revenues and Income (a):
Revenues and Income (a):
Revenues and Income (a):
Revenues
Income from continuing operations before
cumulative effect of change in accounting principle (b)
Income (loss) from discontinued operations (i)
Cumulative effect of change in accounting principle (b)
Net income (loss)
Financial Position (a), (h):
Financial Position (a), (h):
Financial Position (a), (h):
Financial Position (a), (h):
Net property and equipment
Total assets
Long-term debt, less current maturities
Shareholders’ equity
Per Pittston Common Share (a), (c), (f), (g), (k):
Per Pittston Common Share (a), (c), (f), (g), (k):
Per Pittston Common Share (a), (c), (f), (g), (k):
Per Pittston Common Share (a), (c), (f), (g), (k):
Basic, net income (loss):
Continuing operations
Discontinued operations
Cumulative effect of change in accounting principle (b)
Total basic
Diluted, net income (loss):
Continuing operations
Discontinued operations
Cumulative effect of change in accounting principle (b)
Total diluted
Cash dividends
Book value (a), (d)
Pro Forma Per Common Share (j):
Pro Forma Per Common Share (j):
Pro Forma Per Common Share (j):
Pro Forma Per Common Share (j):
Basic, net income (loss):
Continuing operations
Discontinued operations
Total basic, pro forma
Diluted, net income (loss):
Continuing operations
Discontinued operations
Total diluted, pro forma
Weighted Average Common Shares Outstanding (c), (f), (k):
Weighted Average Common Shares Outstanding (c), (f), (k):
Weighted Average Common Shares Outstanding (c), (f), (k):
Weighted Average Common Shares Outstanding (c), (f), (k):
Pittston basic (g)
Pittston diluted (g)
Pittston Brink’s Group basic
Pittston Brink’s Group diluted
Pittston BAX Group basic
Pittston BAX Group diluted
Pittston Minerals Group basic
Pittston Minerals Group diluted
Common Shares Outstanding (c)
, (f), (k):
Common Shares Outstanding (c), (f), (k):
, (f), (k):
, (f), (k):
Common Shares Outstanding (c)
Common Shares Outstanding (c)
Pittston Common
Pittston Brink’s Group
Pittston BAX Group
Pittston Minerals Group
Per Pittston Brink’s Group Common Share (c), (j), (k):
Per Pittston Brink’s Group Common Share (c), (j), (k):
Per Pittston Brink’s Group Common Share (c), (j), (k):
Per Pittston Brink’s Group Common Share (c), (j), (k):
Basic net income
Diluted net income
Pro forma basic
Pro forma diluted
Cash dividends
Book value (d)
2001 ANNUAL REPORT
2001
2001
2001
2001
2000
1999
1998
1997
$$$$
3,624.2
3,624.2
3,624.2
3,624.2
3,834.1
3,709.7
3,251.6
2,790.3
2.7
(207.3)
(52.0)
(256.6)
925.8
2,478.7
313.6
475.8
108.0
(73.3)
-
34.7
930.4
2,459.7
395.1
749.6
61.2
4.9
-
66.1
849.9
2,331.1
323.3
736.0
$
0.07
(4.14)
(1.04)
(5.11)
0.05
(4.13)
(1.04)
(5.12)
0.10
9.22
0.07
(4.14)
(4.07)
0.05
(4.13)
(4.08)
50.1
50.1
N/A
N/A
N/A
N/A
N/A
N/A
51.8
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2.55
(1.49)
-
1.06
2.19
(1.49)
-
0.70
N/A
14.86
2.46
(1.49)
0.97
2.09
(1.49)
0.60
49.1
49.3
39.1
39.2
19.2
19.3
8.9
9.6
N/A
40.9
20.8
10.1
2.16
2.15
2.03
2.03
0.10
13.66
$
1.18
0.10
-
1.28
1.17
0.10
-
1.27
N/A
13.98
1.04
0.10
1.14
1.03
0.10
1.13
48.8
49.3
38.7
39.2
19.3
19.3
8.3
8.3
N/A
40.9
20.8
9.2
2.04
2.02
1.87
1.85
0.10
11.87
$$$$
$$$$
$$$$
$$$$
$$$$
45.845.845.845.8
(29.2)
(29.2)
(29.2)
(29.2)
----
16.616.616.616.6
915.5
915.5
915.5
915.5
2,394.0
2,394.0
2,394.0
2,394.0
257.4
257.4
257.4
257.4
476.1
476.1
476.1
476.1
0.880.880.880.88
(0.57)
(0.57)
(0.57)
(0.57)
----
0.310.310.310.31
0.880.880.880.88
(0.57)
(0.57)
(0.57)
(0.57)
-
0.310.310.310.31
0.100.100.100.10
9.239.239.239.23
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
51.251.251.251.2
51.451.451.451.4
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
54.354.354.354.3
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
62
99.1
11.1
-
110.2
647.6
1,995.9
191.8
685.6
1.98
0.23
-
2.21
1.94
0.23
-
2.17
N/A
13.01
1.76
0.23
1.99
1.73
0.23
1.96
48.4
49.1
38.3
38.8
19.4
20.0
8.1
8.1
N/A
41.1
20.4
8.4
1.92
1.90
1.65
1.63
0.10
9.91
A (CONTINUED)
SELECTED FINANCIAL DATA (CONTINUED)
SELECTED FINANCIAL DAT
A (CONTINUED)
A (CONTINUED)
SELECTED FINANCIAL DAT
SELECTED FINANCIAL DAT
Five Years in Review
Five Years in Review
Five Years in Review
Five Years in Review
(In millions, except per share amounts)
Per Pittston BAX Group Common Share (c), (k):
Per Pittston BAX Group Common Share (c), (k):
Per Pittston BAX Group Common Share (c), (k):
Per Pittston BAX Group Common Share (c), (k):
Basic net income (loss)
Diluted net income (loss)
Cash dividends
Book value (d)
Per Pittston Minerals Group Common Share (c), (g), (k):
Per Pittston Minerals Group Common Share (c), (g), (k):
Per Pittston Minerals Group Common Share (c), (g), (k):
Per Pittston Minerals Group Common Share (c), (g), (k):
Basic net income (loss):
Continuing operations
Discontinued operations
Total basic
Diluted net income (loss):
Continuing operations
Discontinued operations
Total diluted
Cash dividends (e)
Book value (d)
2001
2001
2001
2001
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
N/AN/AN/AN/A
2000
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1999
1.73
1.72
0.24
17.38
0.93
(8.26)
(7.33)
(0.98)
(7.63)
$
$
$
(8.61)
$ 0.025
(15.06)
$
2001 ANNUAL REPORT
1998
1997
(0.68)
(0.68)
0.24
15.83
(1.01)
0.59
(0.42)
(1.01)
0.59
(0.42)
0.24
(9.50)
1.66
1.62
0.24
16.59
(1.28)
1.37
0.09
(1.28)
1.37
0.09
0.65
(8.94)
(a) See Management’s Discussion and Analysis for a discussion of discontinued operations and a 2000 discussion of BHS’ accounting change and BAX Global’s
restructuring charges.
(b) The Company’s results for 2000 include a noncash after-tax charge of $52.0 million or $1.04 per diluted share to reflect the cumulative effect of a change in
accounting principle pursuant to guidance issued in Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” by the Securities and
Exchange Commission in December 1999 and a related interpretation issued in October 2000. The change decreased revenue and operating profit for 2000 by $6.4
million and $2.3 million, respectively (Note 1).
(c) Shares outstanding at the end of the period include shares outstanding under the Company’s Employee Benefits Trust. For the Pittston Common stock, such
shares totaled 2.7 million and 1.3 million shares in 2001 and 2000, respectively and pro forma shares of 2.3 million, 3.0 million and 3.2 million at December 31, 1999,
1998 and 1997, respectively. For the Pittston Brink’s Group, such shares totaled 1.6 million shares, 2.1 million shares and 2.7 million shares at December 31, 1999,
1998 and 1997, respectively. For the Pittston BAX Group, such shares totaled 1.4 million shares, 1.9 million shares and 0.9 million shares at December 31, 1999, 1998
and 1997, respectively. For the Pittston Minerals Group, such shares totaled 0.8 million shares, 0.8 million shares and 0.2 million shares at December 31, 1999, 1998
and 1997, respectively. Weighted average shares outstanding do not include these shares.
(d) Calculated based on shareholders’ equity, excluding amounts attributable to preferred stock, and on the number of shares outstanding at the end of the
period excluding shares outstanding under the Company’s Employee Benefits Trust.
(e) Cash dividends per share for 1999 reflect a per share dividend of $0.025 declared in the first quarter (based on an annual rate of $0.10 per share) and no
dividends declared in each of the following quarters.
(f) See Notes 1, 3 and 4 to the Consolidated Financial Statements for a discussion of the calculation of pro forma share and earnings per share amounts for years
1997 through 1999, which reflect the elimination of the Company’s tracking stock capital structure in January 2000.
(g) See Note 4 to the Consolidated Financial Statements for the 1999 impact of the repurchase of the Company’s Series C Cumulative Preferred Stock on
Minerals Group and Pittston pro forma share and net income (loss) per share calculations.
(h) Includes discontinued operations (Note 18).
(i) The year ended December 31, 2000 includes an estimated after-tax loss on disposal of $189.1 million ($294.2 million pretax). For the year ended December 31,
2001, the Company revised its estimate and increased its expected after-tax loss by $29.2 million ($54.3 million pretax). The year ended December 31, 1999 includes
an impairment charge of $53.5 million ($82.3 million pretax). See Note 18.
(j) The pro forma net income per share amounts prior to 2000 have been adjusted to show the effect of the change in accounting for nonrefundable installation
revenue and related direct subscriber acquisition costs at BHS. The accounting change was made pursuant to Staff Accounting Bulletin No. 101, issued by the
Securities and Exchange Commission in December 1999, and a related interpretation issued in October 2000 (Note 1). It was effective as of January 1, 2000.
(k) Prior to January 14, 2000, the Company was comprised of three separate groups – Pittston Brink’s Group, Pittston BAX Group, and Pittston Minerals Group.
The Pittston Brink’s Group included the Brink’s and BHS operations of the Company. The Pittston BAX Group included the BAX Global operations of the
Company. The Pittston Minerals Group included the Pittston Coal Company (“Pittston Coal”) and Mineral Ventures operations of the Company. Also, 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 separate 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”) 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”).
63
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
2001 ANNUAL REPORT
The Board of Directors, as elected by the shareholders, is
divided into three classes, with the term of office of one of
the three classes of directors expiring each year, and with
each class being elected for a three-year term. Presently,
there are ten members of the Board of Directors, nine of
whom are outside directors with broad experience in
business, finance and public affairs.
Roger G. Ackerman1, 3, 4, 5
Retired Chairman and Chief Executive Officer - Corning
Incorporated (specialty glass, ceramics and communications)
Betty C. Alewine1, 2, 4, 5
Retired President and Chief Executive Officer - COMSAT
Corporation (provider of global satellite services and digital
networking services and technology)
James R. Barker1, 3, 4, 5
Chairman - The Interlake Steamship Company (vessel owners and
operators of self unloaders); Vice Chairman - Mormac Marine
Group, Inc. (vessel owners of oil product carriers); and Vice
Chairman - Moran Towing Corporation (tug and barge owners
and operators)
Marc C. Breslawsky1, 2, 5, 6
President and Chief Executive Officer - Imagistics International
Inc. (direct sales, service and marketing of enterprise office
imaging and document solutions)
James L. Broadhead1, 4, 5, 6
Carl S. Sloane1, 2, 3, 6
Ernest L. Arbuckle Professor of Business Administration, Emeritus
Harvard University Graduate School of Business Administration
1 Executive Committee
2 Audit and Ethics Committee
3 Compensation and Benefits Committee
4 Corporate Governance and Nominating Committee
5 Finance Committee
6 Pension Committee
THE PITTSTON COMPANY
THE PITTSTON COMPANY
THE PITTSTON COMPANY
THE PITTSTON COMPANY
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
Michael T. Dan
Chairman, President and Chief Executive Officer
James B. Hartough
Vice President - Corporate Finance and Treasurer
Frank T. Lennon
Vice President - Human Resources
and Administration
Austin F. Reed
Vice President, General Counsel
and Secretary
Robert T. Ritter
Vice President and Chief Financial Officer
Retired Chairman and Chief Executive Officer - FPL Group, Inc.
(public utility holding company)
SUBSIDIARY OFFICERS
SUBSIDIARY OFFICERS
SUBSIDIARY OFFICERS
SUBSIDIARY OFFICERS
William F. Craig1, 2, 4, 6
Private Investor and Retired Chairman - New Dartmouth Bank
Joseph L. Carnes
President
BAX Global Inc.
Michael T. Dan1
Chairman, President and Chief Executive Officer - The Pittston
Company
Thomas W. Garges, Jr.
President and Chief Executive Officer
Pittston Coal Company and
Pittston Mineral Ventures
Gerald Grinstein1, 2, 3, 6
Non-Executive Chairman - Agilent Technologies (a diversified
technology company); and Principal - Madrona Investment Group
LLC (private investment company)
Richard R.N. Hickson
President
Brink’s, Incorporated
Ronald M. Gross1, 2, 4, 6
Chairman Emeritus, Former Chairman and Chief Executive
Officer - Rayonier, Inc. (a global supplier of specialty pulps,
timber and wood products)
Robert B. Allen
President and Chief Operating Officer
Brink’s Home Security, Inc.
64
Corporate Headquarters
The Pittston Company
1801 Bayberry Court, P.O. Box 18100
Richmond, VA 23226-8100
Telephone: (804) 289-9600
Facsimile: (804) 289-9770
Annual Meeting
The Annual Meeting of the shareholders of the Company
is scheduled to be held at 1:00 pm (EST), May 3, 2002,
at The Grand Hyatt New York Hotel, Park Avenue at Grand
Central Station, New York, New York 10017.
Inquiries
Communications concerning stock transfer requirements,
lost certificates, dividends, or change of address should
be addressed to the Company’s transfer agent, EquiServe
Trust Company, N.A., at the address listed below, or by
calling (800) 730-6001.
Auditors
KPMG LLP
Richmond, VA
Common Stock Transfer Agent and Registrar
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
Investor Relations Number 800-730-6001
Internet Address: www.EquiServe.com
Investor Information
Copies of the 2001 Annual Report for the Company; press releases
announcing quarterly results; the 2001 Form 10-K filed with the
Securities and Exchange Commission; and any other information
are available on the world wide web at www.pittston.com or by
calling, toll free (877) 275-7488 or by writing to the Investor
Relations Department at Pittston Corporate Headquarters.
The Pittston Company and its Subsidiaries are Equal
Opportunity Employers
The Pittston Company
1801 Bayberry Court
P.O. Box 18100
Richmond, VA 23226-8100
Telephone (804) 289-9600
Fax (804) 289-9770
www.pittston.com