UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-9148
THE PITTSTON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 54-1317776
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
P.O. BOX 18100,
1801 BAYBERRY COURT
RICHMOND, VIRGINIA 23226-8100
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (804) 289-9600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
PITTSTON BRINK'S GROUP COMMON STOCK, PAR VALUE $1 NEW YORK STOCK EXCHANGE
RIGHTS TO PURCHASE SERIES A PARTICIPATING NEW YORK STOCK EXCHANGE
CUMULATIVE PREFERRED STOCK
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
Yes X No
As of March 1, 2003, there were issued and outstanding 54,253,423
shares of common stock. The aggregate market value of shares of common stock
held by nonaffiliates, as of June 28, 2002, was $1,237,810,008.
Documents incorporated by reference: Part I, Part II and Part IV
incorporate information by reference from the Annual Report of the Company for
the year ended December 31, 2002. Part III incorporates information by reference
from portions of the Registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
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THE PITTSTON COMPANY
The Pittston Company, a Virginia corporation incorporated in 1930, has three
primary 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 Company also has significant assets and
liabilities associated with its former coal operations and expects to have
significant ongoing expenses and cash outflows related to former coal operations
in the future.
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."
Financial information related to the Company's operating segments is included in
Note 2 to the Consolidated Financial Statements in the Company's 2002 Annual
Report, which Note is herein incorporated by reference.
The Company has approximately 50,000 employees in its Business and Security
Services operations, including approximately 37,500 at Brink's, 2,500 at BHS and
10,000 at BAX Global.
A significant portion of the Company's business is conducted outside the United
States. Because the financial results of the Company are reported in U.S.
dollars, they are affected by changes in the value of the various foreign
currencies in relation to the U.S. dollar. The Company, from time to time, uses
foreign currency forward contracts to hedge certain transactional risks
associated with foreign currencies. 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 of such risks on the
Company cannot be predicted.
The Pittston Company's internet address is www.pittston.com. The Company makes
available, free of charge, through its website, its Annual Report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after the Company electronically
files such information with or furnishes it to the Securities and Exchange
Commission.
BUSINESS AND SECURITY SERVICES
BRINK'S, INCORPORATED ("BRINK'S")
GENERAL
The major services offered by Brink's include armored car transportation,
automated teller machine ("ATM") servicing, currency and deposit processing,
coin sorting and wrapping, arranging the secure air transportation of valuables
("Global Services") and the deploying and servicing of safes and safe control
devices, including its patented CompuSafe(R) service. Brink's serves customers
through 154 branches in the U.S. and 41 branches in Canada. Service is also
provided through subsidiaries, equity affiliates and associated companies in 48
countries outside the U.S. and Canada. Brink's ownership interest in
subsidiaries and affiliated companies ranges from 20% to 100%. In some instances
local laws limit the extent of Brink's ownership interest.
Brink's customers include banks; industrial, retail and other commercial
businesses; investment banking and brokerage firms; and government agencies,
such as a country's central bank. Brink's provides individualized services under
separate contracts designed to meet the distinct transportation, security and
logistics requirements of its customers. These contracts are usually for an
initial term of one year or less, but continue in effect thereafter until
canceled by either party.
Brink's armored car transportation services generally include secure
transportation of:
o Cash from businesses to banks for deposit.
o Cash, securities and other negotiable items and valuables between commercial
banks, central banks (such as the U.S. Federal Reserve Banks and their
branches and correspondents) and brokerage firms.
o New currency, coins and precious metals for a number of central banks
throughout the world.
o Canceled checks between banks or between a clearing house and its member banks
in certain geographic areas.
In late 2001 and early 2002, Brink's participated in the initial distribution of
the euro in Europe.
The trend by banks, retail businesses and others to outsource vaulting and cash
room operations continued in 2002. Brink's provides coin and currency processing
("cash logistics") services primarily to banks and retail customers. Retail
customers use Brink's cash logistics services to count and reconcile coins and
currency in Brink's secure environment, to prepare bank deposit information and
to replenish retail locations' coins and currency in proper denominations.
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Through its proprietary cash processing and information systems, Brink's offers
customers the ability to integrate a full range of cash vault, ATM,
transportation, storage, processing, inventory management and reporting
services. Brink's believes that its cash processing and information systems
differentiate its cash logistics services from its competitors.
For transporting money and other valuables over long distances, Brink's Global
Services offers a combined armored car and secure air transportation service
between many cities around the world. Brink's uses regularly scheduled or
chartered aircraft in connection with its air courier services. Included in
Global Services is a worldwide specialized diamond and jewelry secure
transportation operation, with offices in the major diamond and jewelry centers
of the world.
Brink's CompuSafe(R) services provide retail customers with a proprietary
integrated system of safeguarding and managing cash. Brink's markets its
CompuSafe(R) services to a variety of cash-intensive retail customers, such as
convenience stores, gas stations and restaurants. The service includes
installing a specialized safe in the retail establishment that holds safeguarded
canisters. The customer's employees deposit currency into the canister. The
canister can only be removed by Brink's armored car personnel.
Brink's International operations accounted for approximately 56% of its revenues
and 46% of its operating profits in 2002. Brink's has International operations
in three regions: Europe, South America and Asia/Pacific.
COMPETITION
Brink's is the oldest and largest armored car service company in the U.S. as
well as a market leader in many of the countries in which it operates.
Worldwide, Brink's competes with a number of large multinational companies and
with many smaller companies.
Primary factors in attracting and retaining customers are security, the quality
of services provided and the price charged for services rendered. Brink's
believes its competitive advantages include:
o Recognizable name
o Reputation for a high level of service and security
o Proprietary cash processing and information systems
o High-quality insurance coverage
o Ability to serve multiple markets for the same customer in many of the
countries in which Brink's has operations
Brink's believes its cost structure is generally competitive, although Brink's
believes certain competitors may have lower costs as a result of lower wage and
benefit levels for employees or as a result of different security standards.
To reduce costs, financial institutions frequently use consultants and
purchasing and procurement professionals to negotiate price and frequency of
services with armored car companies. Brink's growth in sales to retail
businesses is partially dependent on the growth in the economy. Recent slow
economic growth has resulted in an increasing focus on the cost of armored car
services by retail customers. Because of Brink's high level of service and
security, and quality insurance coverage, Brink's resists competing on price
alone.
The availability of quality and reliable insurance coverage is an important
factor in the ability of Brink's to obtain and retain customers and to manage
the risks of its business. Brink's purchases "all risk" insurance coverage for
losses in excess of what it considers prudent deductibles and/or retentions. For
losses below deductible or retention levels, Brink's is self-insured. Brink's
insurance policies cover losses from most causes, with the exception of war,
nuclear risk and certain other exclusions typical for such policies. Brink's
generally does not offer its customers protection from losses arising from such
excluded causes.
Insurance is provided by different groups of underwriters at negotiated rates
and terms. Insurance is available to Brink's in major markets although the
premiums charged are subject to fluctuations depending on market conditions. The
loss experience of Brink's and, to a limited extent, other armored carriers
affects premium rates charged to Brink's.
SERVICE MARK, PATENTS AND COPYRIGHTS
BRINKS is a registered service mark in the U.S. and certain foreign countries.
The BRINKS mark, name and related marks are of material significance to Brink's
business. Brink's owns patents with respect to certain coin sorting and counting
machines, which expire in 2007 and 2008, respectively. Brink's has patents
associated with its integrated service, CompuSafe(R), that expire in 2015
through 2018. The patents for CompuSafe(R) and sorting and counting machines
provide important advantages to Brink's in their respective areas of business.
However, Brink's operations are not dependent on the existence of the
aforementioned patents.
The Company has entered into certain agreements to license the Brink's or the
Brink's Home Security name. Examples include licenses to distributors of
security products (padlocks, home safes, door and window hardware, etc.) offered
for sale to consumers through major retail chains.
GOVERNMENT REGULATION
The operations of Brink's are subject to regulation by the U.S. Department of
Transportation with respect to safety of operations and equipment and financial
responsibility. Intrastate operations in the U.S. and intraprovince operations
in Canada are subject to regulation by state and by Canadian and provincial
regulatory authorities, respectively. Brink's International operations are
regulated to varying degrees by the countries in which they operate.
EMPLOYEE RELATIONS
At December 31, 2002, Brink's and its subsidiaries had approximately 37,500
employees, including11,400 employees in North America, (of whom 2,000 were
classified as part-time employees) and 26,100 employees outside North America.
At
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December 31, 2002, Brink's was a party to 14 collective bargaining agreements
in North America with various local unions covering approximately 1,500
employees, almost all of whom are employees in Canada and members of unions
affiliated with the International Brotherhood of Teamsters. Negotiations are
continuing on one agreement that has expired and three agreements expiring in
2003. The remaining agreements will expire after 2003. Outside of North America,
the branch workforce are members of labor or employee organizations in the
majority of the countries of operation. Brink's believes that its employee
relations are satisfactory.
PROPERTIES
In North America, Brink's owns 29 branch offices and leases an additional 166
branch offices, located in 39 states, the District of Columbia and nine Canadian
provinces. Such branches generally include office space and garage or vehicle
terminals. Of the leased branches, 121 facilities are held under long-term
leases. The remaining 45 branches are held under short-term leases or
month-to-month tenancies. Brink's corporate headquarters facility in Darien,
Connecticut, is held under a lease expiring in 2005.
In North America, Brink's owns or leases approximately 2,400 armored vehicles,
300 panel trucks and 200 other vehicles that are primarily service vehicles.
Brink's armored vehicles are of bullet-resistant construction and are specially
designed and equipped to afford security for crew and cargo.
Brink's subsidiaries and affiliated and associated companies located outside
North America operate from approximately 500 branches, the majority of which are
leased, with approximately 4,600 owned or leased armored vehicles.
Approximately 4,000 Brink's-owned CompuSafe(R) devices are located on customers'
premises in North America.
BRINK'S HOME SECURITY ("BHS")
GENERAL
BHS believes that it is the second largest provider of monitored security
services to single family residences in North America. BHS is primarily engaged
in the business of marketing, selling, installing, monitoring and servicing
electronic security systems in owner-occupied, single-family residences. At
December 31, 2002, BHS had approximately 767,000 systems under monitoring
contracts, including approximately 106,000 new subscribers added during the
year. BHS provides services to subscribers located in more than 250 metropolitan
areas in 43 states, the District of Columbia and two western provinces in
Canada.
BHS' typical security system installation consists of sensors and other devices
which are installed at a customer's home. The equipment can be configured to
signal intrusion, fire, medical and other alerts. When an alarm is triggered, a
signal is sent by telephone line to BHS' central monitoring station in Irving,
Texas. The monitoring station holds an Underwriters' Laboratories, Inc. ("UL")
listing. UL specifications for service centers include building integrity,
back-up computer and power systems, staffing and standard operating procedures.
In the event of an emergency, such as fire, tornado, major interruption in
telephone or computer service, or any other event affecting the Irving facility,
monitoring operations can be transferred to a backup facility located in
Carrollton, Texas.
BHS markets its alarm systems primarily through TV and direct mail advertising,
yellow page advertising, alliances with other service companies, inbound
telemarketing and field sales employees. BHS employees install and service most
of the systems; however, subcontractors are utilized on occasion in some service
areas. BHS does not manufacture the equipment used in its security systems.
Equipment is purchased from a limited number of suppliers and no interruptions
in supply are expected. Equipment inventories are maintained at each branch
office.
BHS has an authorized dealer program to expand its geographic coverage and
leverage its national advertising. The dealer program accounted for less than 9%
of new installations during 2002 and, as of December 31, 2002, less than 3% of
BHS' total subscriber base. Approximately 67 dealers were authorized to
participate in the program as of December 31, 2002. BHS requires that its
dealers install the same type of equipment as is installed by its own branches,
and adhere to the same installation quality standards.
In addition to initiating subscriber relationships through its branch and dealer
networks, BHS obtains new residential subscribers through its Brink's Home
Technologies division. Brink's Home Technologies markets residential security
systems, as well as a variety of low-voltage security, home networking,
communications and entertainment options, directly to major home builders.
BHS also provides monitored security to residents of apartment and condominium
complexes; however, such customers currently represent less than 2% of
subscribers.
Although its core business is focused on the monitoring of residential security
systems, BHS installs and monitors commercial security systems on a limited
basis. Such customers represent approximately 4% of subscribers.
GOVERNMENT REGULATION
BHS and its employees are subject to various federal, state and local consumer
protection, licensing and other laws and regulations. BHS' business relies upon
the use of telephone lines to communicate signals, and telephone companies are
currently regulated by both the Federal and state governments. Regulation of the
installation and monitoring of fire detection devices has also increased in
several local markets. BHS' wholly owned Canadian subsidiary, Brink's Home
Security Canada Limited, is subject to the laws of Canada, British Columbia and
Alberta.
The alarm service industry experiences a high incidence of false alarms. BHS
believes its false alarm rate compares favorably to other companies' rates. The
high incidence of false alarms in the industry has caused some local governments
to impose
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assessments, fines and penalties on either subscribers or the alarm
companies. A few municipalities are considering ordinances under which both
permit and alarm dispatch fees would be charged directly to the alarm companies.
BHS alarm service contracts allow BHS to pass these charges on to customers.
Police departments in two major western U.S. cities do not respond to calls from
alarm companies unless an emergency has been visually verified. If more police
departments in the future refuse to respond to calls from alarm companies
without visual verification, this could have an adverse effect on future results
of operations for BHS.
COMPETITION
BHS competes in most major metropolitan markets in the U.S. and several markets
in western Canada through branch operations or its authorized dealer program.
The home security market has a large number of competitors, including many local
and regional companies. Several of BHS' large competitors have placed a heavy
reliance on dealers and acquisitions to increase their subscriber bases, whereas
BHS has gained almost all of its subscribers through internal sales efforts. BHS
believes that it is now the second largest provider of monitored security
services to single-family residences in North America.
Competition is based on a variety of factors including, but not limited to,
price, product quality, company reputation and service quality. There has been
substantial competitive pressure on installation fees in recent years. Several
significant competitors offer installation prices which match or are less than
BHS' prices; however, many of the small local competitors in BHS' markets
continue to charge significantly more for installation. Competitive pressure on
monitoring rates, while less intense than on installation fees, is still
substantial. BHS believes that the monitoring rates it offers are generally
comparable to the rates offered by other major security companies.
BHS believes its customer retention rate is the highest among the major home
security service companies. BHS attributes its relatively high customer
retention rate to the high credit standards for new customers which reduces the
number of subsequent cancellations of service related to nonpayment. BHS also
believes it is more effective than the other major home security services
companies in the area of customer service, which tends to reduce customer
disconnects over time.
EMPLOYEES
BHS has approximately 2,500 employees, none of whom is covered by a collective
bargaining agreement. BHS believes that its employee relations are satisfactory.
PROPERTIES
BHS has approximately 55 leased offices and warehouse facilities located
throughout the U.S. and one leased office in Canada. The central monitoring
station in Irving, Texas is leased for a seven-year term ending in 2005,
including renewal options. This facility also serves as BHS' headquarters and
houses most administrative, technical and marketing services personnel. The
lease for the backup monitoring center in Carrollton, Texas, expires in 2005.
BHS leases approximately 1,300 vehicles which are used in the process of
installing and servicing its security systems.
BHS retains ownership of most of the approximately 767,000 systems currently
under contract. When a customer cancels monitoring services, BHS typically
disables the system. In a limited number of cases, BHS removes the equipment.
When a customer cancels monitoring services because of a move, the retention of
the BHS system in the residence facilitates the marketing of monitoring services
to the new homeowner.
BAX GLOBAL
GENERAL
BAX Global provides transportation and supply chain management services on a
global basis. BAX Global specializes in the heavy freight market for business to
business shipping.
BAX Global's transportation services are provided within North America using a
dedicated fleet of 20 planes with a national sorting hub in Toledo, Ohio. BAX
Global's North American operation also has a ground network that provides
transportation on a regional basis.
Outside North America, BAX Global provides transportation services using
available space on commercial carriers, and on occasion using chartered
aircraft. BAX Global's primary markets outside North America are shipping from
Asia to North America and Europe, and between North America and Europe.
BAX Global continues to expand its ocean shipping business primarily by
marketing its ocean products to its current air freight and supply chain
management customer base.
Air Transport International, LLC ("ATI"), a wholly owned subsidiary of BAX
Global, provides transportation services in North America to BAX Global and also
provides charter transportation services to other customers.
BAX Global provides certain transportation customers with supply chain
management services and operates more than 40 logistics warehouse and
distribution facilities in key world markets. BAX Global specializes in
developing supply chain management programs for companies entering new global
markets or consolidating regional activity.
TRANSPORTATION
BAX Global offers its North American (U.S., Canada and Mexico) transportation
customers a variety of products and pricing options, such as guaranteed and
standard overnight and second-day delivery as well as deferred delivery
(delivery generally within one to three business days). A variety of value-added
ancillary services, such as shipment tracking, inventory control and management
reports are also offered.
Outside North America, BAX Global offers a variety of services including
standard and expedited freight services, ocean forwarding, and door-to-door
delivery.
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BAX Global also frequently acts as customs broker, facilitating the clearance of
goods through customs at international points of entry. BAX Global has the
ability to link its international network with the North American transportation
infrastructure and customs brokerage capabilities to provide seamless
door-to-door delivery and distribution from global markets to virtually any city
in North America.
BAX Global sells its services primarily through its direct sales force. BAX
Global uses various marketing methods, including print media advertising and
direct marketing campaigns.
BAX Global generally picks up or receives freight shipments from its customers,
consolidates the freight of various customers into shipments for common
destinations and arranges for the transportation of the consolidated freight.
BAX Global uses either commercial carriers or, in the case of most of its North
American shipments, its own transportation fleet and regional and national hub
sorting facilities. BAX Global distributes the shipments at the package's
destination. While shipments move long distances on either common carrier or BAX
Global's fleet, the local pickup and delivery of freight are accomplished
principally by independent contractors using trucks dedicated to the BAX Global
network. BAX Global's independent contractors are required to display BAX
Global's logo and colors.
BAX Global has the ability to provide freight service to all North American
business communities as well as to virtually all countries through its network
of 500 company-operated stations and agent locations in 123 countries. BAX
Global's network is composed primarily of controlled subsidiaries and, to a
lesser extent, agents and sales representatives in many non-U.S. locations
typically under short-term contracts.
BAX Global's freight business is tied to the cycles of international trade, with
higher volumes of shipments from August through December than during the other
months of the year. The lowest volume of shipments generally occurs in January
and February.
Including U.S. export and import revenue, BAX Global's international shipments
and logistics services accounted for approximately 76% of its revenues in 2002.
Intra-U.S. shipments accounted for approximately 24% of total revenues in 2002.
BAX Global's network has a worldwide communications and information system which
provides global tracking and tracing of shipments and logistics data for
management information reports, enabling customers to improve efficiency and
control costs. BAX Global's customers are increasingly turning to its online
services offering information management available via its web site,
www.baxglobal.com.
SUPPLY CHAIN MANAGEMENT
BAX Global provides supply chain management services to a growing list of
customers. BAX Global's supply chain management business specializes in
developing solutions that include the design, implementation and management of
inventory, distribution and information processes to improve a customer's
efficiency and productivity.
BAX Global operates value-added logistics warehouse and distribution facilities
in key world markets. Companies in the healthcare, retail, automotive, aerospace
and high technology industries have been targeted as businesses with significant
supply chain management needs.
AIRCRAFT OPERATIONS
BAX Global has a fleet of leased and contracted aircraft providing regularly
scheduled next-day service throughout North America. BAX Global's wholly owned
subsidiary, ATI, is a U.S.-based freight and passenger airline that operates a
certificated fleet of DC-8 aircraft. BAX Global operates Boeing 727s under
contracts that provide the aircraft, crew, maintenance and insurance ("ACMI").
ATI also provides domestic and international service for the U.S. Government Air
Mobility Command and other charter customers.
The following is a summary of BAX Global's fleet as of December 31, 2002.
BAX Global's
Transportation Charter
Network Customers Grounded Total
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DC-8:
Cargo:
Leased 10 3 - 13
Owned - - 4 4
Combi-Configured (a):
Leased - 3 - 3
Owned - 2 - 2
727-CARGO-ACMI 10 - - 10
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Total Planes 20 8 4 32
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(a) Aircraft configured to accommodate both passengers and cargo.
Of the 20 planes in BAX Global's transportation network, 17 are assigned to
regularly scheduled routes. Generally, three planes are held for use as backups
or are in maintenance.
BAX Global's nightly scheduled lift capacity for planes in operation at December
31, 2002 was approximately 1.0 million pounds, based on an average freight
density of 7.5 pounds per cubic foot. BAX Global's nightly lift capacity varies
depending upon the number and type of planes operated by BAX Global at any
particular time. Including trucking capacity available to BAX Global, the
aggregate daily cargo capacity at December 31, 2002, was approximately 1.9
million pounds.
For aircraft held under long-term lease, BAX Global is generally responsible for
all the normal costs of operating and maintaining the aircraft. In addition, BAX
Global is generally responsible for all or a portion of any special maintenance
or modifications which may be required by Federal Aviation Administration
("FAA") regulations or orders (see "Government Regulation" below). BAX Global's
ultimate liability for FAA matters is generally subject to dollar limits,
specific exclusions and sharing arrangements with
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the lessors. Over the last three years, BAX Global spent approximately $97
million on routine heavy maintenance of its aircraft fleet. BAX Global is
generally responsible for fuel costs and other incidental costs such as landing
fees for aircraft operated under ACMI contracts.
See Notes 14 and 21 to the Consolidated Financial Statements in the Company's
2002 Annual Report for information regarding future minimum lease payments and
other purchase commitments related to the Company's aircraft. BAX Global's 16
leased aircraft have various expiration dates extending through 2005, and its 10
planes under ACMI contracts have various expiration dates through 2004. Based on
the current state of the aircraft leasing market, BAX Global believes that it
should be able to renew these leases or enter into new leases on terms
reasonably comparable to those currently in effect.
The average airframe age of the fleet operated by ATI is in excess of 30 years;
however, the condition of a particular aircraft and its fair market value is
dependent on its maintenance history. Factors other than age, such as cycles
(essentially the number of flights) can have a significant impact on an
aircraft's serviceability. Generally, cargo aircraft tend to have fewer cycles
than passenger aircraft over comparable time periods because they are used for
fewer flights per day and longer flight segments.
Fuel costs are a significant element of the total costs of operating BAX
Global's aircraft fleet. Fuel prices are subject to worldwide and local market
conditions. In order to protect against price increases in jet fuel, from time
to time BAX Global enters into hedging agreements, including swap contracts,
options and collars. BAX Global charges a fuel surcharge in the U.S. to its
customers when fuel costs are higher.
CUSTOMERS
BAX Global's customers include thousands of large and small industrial and
commercial businesses. Worldwide, BAX Global's top 10 customers accounted for
less than 16% of total BAX Global revenue in 2002. The Company targets customers
in the automotive, aerospace, healthcare, high technology, retail and other
industries where rapid delivery of high-value products is required.
COMPETITION
The transportation and supply chain management industries have been and are
expected to remain highly competitive. The principal competitive factors in the
transportation industry are price, the ability to provide consistently fast and
reliable delivery of shipments and the ability to provide premium services such
as shipment tracking. The principal competitive factors in the supply chain
industry are price, access to a reliable transportation network, warehousing and
distribution capabilities, and sophisticated information systems.
There is aggressive price competition in the heavy-freight market, particularly
for the business of high volume shippers. BAX Global competes with various types
of transportation companies, including other integrated transportation companies
that operate their own fleets, as well as with freight forwarders, premium
less-than-truckload (or "LTL") carriers, express delivery services, and
passenger airlines.
Domestically, BAX Global also competes with package delivery services provided
by ground transportation companies, including trucking firms and surface freight
forwarders that offer specialized time-specific services within limited
geographical areas. As an international freight forwarder, BAX Global competes
with government-owned or subsidized passenger airlines, postal services and
ocean shipping companies.
BAX Global believes its hub-and-spoke network of aircraft and trucks that serves
the North American market allows it to move freight more reliably than if it
solely used third-party services. The hub, which is located in Toledo, Ohio,
consists of various facilities, including a technologically advanced material
handling system, which is capable of sorting approximately one million pounds of
freight per hour. BAX Global believes its hub-and-spoke system feeds much of its
North American import and export business and believes it provides a competitive
advantage by offering superior, reliable service to its customers, shipping to,
from or within North America.
In supply chain management services, BAX Global competes with many third-party
logistics providers.
EMPLOYEE RELATIONS
BAX Global and its subsidiaries have approximately 10,000 employees worldwide,
of whom about 1,200 are classified as part-time.
As of December 31, 2002, approximately 200 flight crewmembers (captains, first
officers and flight engineers), were represented for purposes of collective
bargaining by the International Brotherhood of Teamsters. Another 100 employees
in the U.S. (principally customer service, clerical and/or dock workers) were
represented by labor unions that in most cases are also affiliated with the
International Brotherhood of Teamsters. BAX Global did not experience any
significant strike or work stoppage in 2002 and believes that its employee
relations are satisfactory.
GOVERNMENT REGULATION
The air transportation industry, including BAX Global, is subject to regulation
by the FAA under the Federal Aviation Act of 1958, as amended, and the
Transportation Security Administration ("TSA") under the Aviation and
Transportation Security Act of 2001. The FAA and TSA are agencies of the
Department of Transportation ("DOT").
BAX Global is subject to various other requirements and regulations in
connection with its operations, including certain safety and security
regulations of the DOT and other federal and state agencies. BAX Global's
international operations are regulated by varying degrees by the countries in
which they operate.
-6-
PROPERTIES
BAX Global has approximately 260 company-operated stations (100 domestic and 160
international) and has agency agreements with approximately 240 stations (50
domestic and 190 international). BAX Global's stations are usually located at or
near airports or other transportation corridors. BAX Global operates domestic
stations, which generally include office space and warehousing facilities
located in 39 states, the District of Columbia and Puerto Rico. BAX Global
operates international facilities in 30 countries. Nearly all company-operated
stations are leased.
BAX Global operates its main distribution facility at Toledo Express Airport in
Ohio, which facilitates a fleet of aircraft and a freight-sorting operation and
related facilities (the "Hub"). The BAX Global Hub has a lease expiring in 2013
with the Toledo-Lucas County Port Authority. The lease provides BAX Global with
rights of renewal for three five-year periods. Other facilities in the U.S. are
held under leases having terms of one to ten years.
BAX Global provides certain transportation customers with supply chain
management services and operates more than 40 leased logistics warehouse and
distribution facilities in key world markets.
During 2002, BAX Global leased a new 116,000 square foot corporate office
facility through 2012 located in Irvine, California.
See "Aircraft Operations" above for information about contracted, leased and
owned aircraft.
OTHER OPERATIONS
The Company's Other Operations include its gold, timber and natural gas
businesses. At the end of 2002, the Company's Other Operations had approximately
60 employees. The Company does not consider its businesses within its Other
Operations to be core businesses. The Company expects to exit these activities
to focus resources on its core Business and Security Services segments.
Each of the gold, timber and natural gas businesses operate in cyclical
commodity business environments where prices are determined based partly on the
local and worldwide economy. The results of operations of each of these
businesses are highly dependent on the price of their respective products.
The Company's Other Operations own properties and interests including land,
hardwood forests, natural gas reserves and a gold mine and reserves.
GOLD
The Company's gold business is directed at locating and acquiring mineral
assets, developing advanced stage projects and operating mines.
At December 31, 2002, the Company had a 45.1% interest in MPI Mines Ltd. ("MPI")
and through its ownership of MPI and a 50% direct interest, the Company had a
72.5% interest in a gold mine in Stawell, Victoria, Australia ("Stawell"). At
December 31, 2002, through its ownership of MPI and a 25% direct interest, the
Company had a 36.3% interest in a gold mine and gold mill tolling operation in
Coolgardie, Western Australia.
In the fourth quarter 2002, the Company entered into an agreement to negotiate
the transfer of its direct interests in its Stawell and Coolgardie gold mining
joint ventures to MPI in exchange for additional shares of MPI and royalties on
future production. The transfer is contingent upon various factors.
In January 2003, MPI registered its shares on the Australian Stock Exchange and
issued additional shares of stock. After the new shares were issued, the Company
owns 30.4% of MPI.
Stawell's and Coolgardie's 2002 production and estimates of proved and probable
gold reserves as of December 31, 2002 were as follows:
2002
(Ounces of gold) Production Reserves
- --------------------------------------------------------------------------------
Stawell 101,000 222,000
Coolgardie 3,000 181,000
TIMBER
The Company's timber business has a sawmill facility that produces products
primarily for the hardwood flooring industry. The timber business also sells
hardwood chips to the paper industry and logs to other sawmill customers that
are used in the high-grade furniture and veneer markets. The Company owns
approximately 140 thousand acres of surface and timberlands in southwest
Virginia.
NATURAL GAS
The Company invests in and receives royalty income from gas development and
operations. Net proved developed natural gas reserves located in Virginia and
West Virginia approximated 57 billion cubic feet including royalty interests and
a small interest purchased in the first quarter of 2003.
FORMER OPERATIONS
During December 2002, the Company concluded its plan to sell or shut down its
remaining coal mining operations and is no longer operating as an active coal
producer.
The Company intends to continue to market its residual coal assets to interested
parties. The Company has retained certain coal-related liabilities and related
expenses. Retained liabilities include obligations related to postretirement
benefits for Company-sponsored plans, black lung benefits, reclamation and other
costs related to idle (shut-down) mines which have been retained, Health Benefit
Act, workers' compensation claims and costs of withdrawal from multi-employer
pension plans. Expenses related to these liabilities have been reflected in the
loss from discontinued operations through the disposal date. Subsequent to
-7-
the completion of the disposal process (for the period beginning
January 1, 2003), adjustments to coal-related contingent liabilities will be
reflected in discontinued operations, and expenses related to Company-sponsored
pension and postretirement benefit obligations and black lung obligations will
be reflected in continuing operations. In addition, subsequent to the disposal
date, the Company expects to have certain ongoing costs related to the
administration of the retained liabilities and will report those costs in
continuing operations. A portion of the obligations are expected to be assumed
by parties that purchase the Company's residual coal assets. The Company has not
recorded these obligations as liabilities on the balance sheet. The obligations
could be recorded as liabilities on the balance sheet in the future (with an
additional charge to earnings) if the Company no longer believes these
obligations will be assumed by other parties. See Notes 5 and 21 to the
Consolidated Financial Statements, which Notes are herein incorporated by
reference.
At December 31, 2002, the Company had approximately 110 employees related to its
former coal operations. These employees perform various duties including
reclaiming and maintaining residual assets and managing other retained
liabilities related to the former coal operations.
ENVIRONMENTAL MATTERS
The Surface Mining Control and Reclamation Act of 1977 and the regulations
promulgated thereunder ("SMCRA") by the Federal Office of Surface Mining
Reclamation and Enforcement ("OSM") establish mining and reclamation standards
for all aspects of surface mining as well as many aspects of deep mining. OSM
and its state counterparts monitor compliance with SMCRA. The Company's policy
is to correct violations that are the subject of OSM notices or to contest those
believed to be without merit.
The Company is also subject to other federal environmental laws, including the
Resource Conservation and Recovery Act; the Occupational Safety and Health Act;
the Toxic Substances Control Act; the Comprehensive Environmental Resource,
Compensation and Liability Act; the Clean Water Act; the Clean Air Act and the
Safe Drinking Water Act, as well as state laws of similar scope. The Company
believes it is in compliance with all applicable environmental laws.
The Company has agreed to pay 80% of the remediation costs arising from
hydrocarbon contamination at a formerly owned petroleum terminal facility
("Tankport") in Jersey City, New Jersey, which was sold in 1983. 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 $2.2 million and $4.3
million. The Company is in discussions with another potentially responsible
party to recover a portion of the amount paid and to be paid by the Company
related to this matter.
HEALTH AND SAFETY LAWS
Health and safety standards in the U.S. coal industry, including reclamation and
maintenance activities on the Company's residual coal assets, are legislated by
the Federal Coal Mine Health and Safety Act of 1969 and the Federal Mine Safety
and Health Act of 1977. The Company believes it is in compliance with all
applicable health and safety laws.
PROPERTIES
The residual properties of the Company's former coal operations are (i) unmined
or partially mined coal reserves, (ii) closed or idled coal mines, (iii) an
idled coal preparation plant, (iv) a corporate office in Lebanon, VA, and (v)
various other properties. The Company is attempting to sell coal reserves it
owns or leases primarily in West Virginia. Leases of land or coal mining rights
generally are either for a long-term period or until exhaustion of the reserves.
FORWARD-LOOKING INFORMATION
Certain of the matters discussed herein, including statements regarding
significant ongoing expenses and cash outflows related to former coal operations
in the future (including costs related to the administration of retained
liabilities), the uninterrupted supply of equipment to BHS, the impact that the
refusal of police departments to respond to calls from alarm companies without
visual verification would have on BHS' results of operations, the expected
seasonal impact on the volumes shipped by BAX Global, the ability of BAX Global
to renew certain aircraft leases or enter into new leases on reasonably
comparable terms, the highly competitive nature of the transportation and supply
chain management industries, the Company's plan to exit its gold, timber and
natural gas businesses, the consummation of the transfer of the Company's direct
interests in the Stawell and Coolgardie joint ventures to MPI, the amount of
proved and probable gold reserves, the amount of proved developed atural gas
reserves, the ability to sell residual coal assets and transfer various related
obligations, the possibility that various obligations associated with the
Company's former coal business may be recorded as liabilities on the balance
sheet in the future (with an additional charge to earnings), estimates of
clean-up, operational and maintenance costs relating to the Tankport matter and
possibility that the Company will be able to recover a portion of amounts paid
or to be paid from another potentially responsible party, 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, actual retirement
experience of the former coal operation's employees, black lung claims
incidence, the number of dependents covered under benefit obligations, coal
industry turnover rates, actual medical and legal costs relating to the
benefits, changes in inflation rates (including the continued volatility of
medical
-8-
inflation), the performance of BHS' equipment suppliers, the incidence
of false alarms, the willingness of BHS' customers to pay for private response
personnel or other alternatives to police responses to alarms, the market for
airplanes, the ability to obtain appropriate value for the gold, timber, and
natural gas businesses and the remaining coal assets. The negotiation of
definitive agreements for such businesses and assets, as well as for the Stawell
and Coolgardie joint ventures, and the satisfaction of any conditions to closing
contained therein, including the receipt of various consents and other
approvals, changes in the Company's strategies regarding the sale of gold,
timber and natural gas businesses, the actual amount of gold reserves and
natural gas reserves held by the Company's Other Operations, the accuracy of the
testing done and the validity of the assumptions used in estimating gold and
natural gas reserves,the completion and processing of permit replacement
documentation and the ability of purchasers of coal assets to post the required
bonds, changes in the Company's belief that various obligations associated with
the former coal business will be assumed by other parties, changes in the scope
or method of remediation or monitoring of the Tankport property, the negotiation
of a mutually acceptable agreement with the potentially responsible party in the
Tankport matter, overall economic and business conditions, foreign currency
exchange rates, the demand for the Company's products and services, the ability
of the Company and its operations to obtain appropriate insurance coverage at
reasonable prices, pricing and other competitive industry factors, fuel prices,
new government regulations and legislative initiatives, issuance of permits,
judicial decisions, variations in costs or expenses including interest rates,
and the ability of counterparties to perform.
-9-
ITEM 3. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------------------------
Not applicable.
-10-
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list as of March 15, 2003, of the names and ages of the
executive and other officers of Pittston and the names and ages of certain
officers of its subsidiaries, indicating the principal positions and offices
held by each. There is no family relationship between any of the officers named.
Name Age Positions and Offices Held Held Since
- ----------------------------- -------- --- ---------------------------------------------------------------- --------------------
EXECUTIVE OFFICERS:
Michael T. Dan 52 President, Chief Executive Officer and Chairman of the Board 1998
James B. Hartough 55 Vice President-Corporate Finance and Treasurer 1988
Frank T. Lennon 61 Vice President-Human Resources and Administration 1985
Austin F. Reed 51 Vice President, General Counsel and Secretary 1994
Robert T. Ritter 51 Vice President and Chief Financial Officer 1998
OTHER OFFICERS:
Matthew A.P. Schumacher 44 Controller 2001
Arthur E. Wheatley 60 Vice President and Director-Risk Management 1988
SUBSIDIARY OFFICERS:
Joseph L. Carnes 45 President of BAX Global Inc. 2000
Robert B. Allen 49 President of Brink's Home Security, Inc. 2001
- ----------------------------- -------- --- ---------------------------------------------------------------- --------------------
Executive and other officers of Pittston are elected annually and serve at the
pleasure of its Board of Directors.
Mr. Dan was elected President, Chief Executive Officer and Director of The
Pittston Company on February 6, 1998 and was elected Chairman of the Board
effective January 1, 1999. He also serves as Chief Executive Officer of Brink's,
Incorporated, a position he has held since July 1993 and as President and Chief
Executive Officer of Brink's Holding Company, a position he has held since
December 31, 1995. He assumed the position of President of Brink's, Incorporated
in December 2002. He also serves as Chairman of the Board of BAX Global Inc., a
position he has held since February 1998. He also serves as Chairman of the
Board of Pittston Mineral Ventures, a position he has held since August 31, 1998
and as Chairman of the Board of Pittston Coal Company, a position he has held
since September 1, 1998. From August 1992 to July 1993 he served as President of
North American operations of Brink's, Incorporated and as Executive Vice
President of Brink's, Incorporated from 1985 to 1992.
Mr. Ritter joined The Pittston Company as Vice President and Chief Financial
Officer in August 1998. From June 1996 to July 1998, he served as Chief
Financial Officer of WLR Foods, Inc. He was a private investor and financial
consultant from April 1995 to May 1996 and was Treasurer at American Cyanamid
Company from March 1991 to January 1994 and Controller from February 1994 to
March 1995.
Messrs. Hartough, Lennon, Reed and Wheatley have served in their present
positions for more than the past five years.
Mr. Schumacher was elected to his current position on July 13, 2001 after
joining the Company in July 2001. For the five years prior to July 2001, he was
employed by NL Industries, Inc. as the Manager of Financial Reporting in 1996
and as the Assistant Controller in 1997 through July 2001.
Mr. Carnes was elected President of BAX Global Inc. in May 2000. He joined BAX
Global Inc. as President - U.S. and Canada in September 1999. Prior to joining
BAX Global Inc., he served as Executive Vice President, North America for Fritz
Companies Inc. where he was employed from 1987 to 1999.
Mr. Allen joined Brink's Home Security, Inc. in August 1999 as Executive Vice
President and Chief Operating Officer. He was promoted to President of Brink's
Home Security, Inc. in March 2001. From January 1997 to August 1999, he held
various positions at Aegis Communications Group (formerly ATC Communications)
including Executive Vice President of Sales and Marketing and Chief Operating
Officer. From 1980 through 1996, he held various domestic and international
positions at Frito-Lay including Vice President of Field Marketing and Country
Manager in Greece and Turkey.
-11-
PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- --------------------------------------------------------------------------------
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").
On January 14, 2000, the 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.
Brink's Stock is now the only outstanding class of common stock of the Company
and continues to trade on the New York Stock Exchange under the symbol "PZB."
Reference is made to page 77 of the Company's 2002 Annual Report which is herein
incorporated by reference, for other information required by this item.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Reference is made to pages 78 and 79 of the Company's 2002 Annual Report which
is herein incorporated by reference, for information required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- --------------------------------------------------------------------------------
Reference is made to pages 2 through 36 of the Company's 2002 Annual Report
which is herein incorporated by reference, for information required by this
item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
The information regarding quantitative and qualitative disclosures about market
risk is included in this report under Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Reference is made to pages 37 through 77 of the Company's 2002 Annual Report
which is herein incorporated by reference, for information required by this
item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
Not applicable.
-12-
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The information required by this Item regarding directors is herein incorporated
by reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after December 31, 2002. The information
regarding executive officers is included in this report following Item 4, under
the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
Equity Compensation Plan Information
- --------------------------------------------------------------------------------------------------------------------------------
Number of securities remaining
Plan Category Number of securities to be issued Weighted average excercise available for future issuance under
upon exercise of outstanding price of outstanding options, equity compensation plans (excluding
(Shares in millions) options warrants and rights warrants and rights securities reflected in column (a))
- --------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)(1)
Equity compensation
plans approved by
security holders 4,123,973 $ 23.18 1,591,479
Equity compensation
plans not approved
by security holders - - -
- -----------------------------------------------------------------------------------------------------------------------------
Total 4,123,973 $ 23.18 1,591,479
- -----------------------------------------------------------------------------------------------------------------------------
(1)The Key Employees' Deferred Compensation Program of The Pittston Company, as
approved by shareholders, has no limit as to the number of securities available
for issuance. The Pittston Company Director's Stock Accumulation Plan, as
approved by shareholders, has 17,006 shares available for issuance.
Other information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The information required by Item 13 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2002.
ITEM 14. CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------
Within the 90 days prior to the filing date of this report, the Company
performed an evaluation under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the
Company's management, including the Chief Executive Officer and Chief Financial
Officer, concluded that the Company's disclosure controls and procedures were
effective in ensuring that material information relating to the Company was made
known to them, particularly with respect to the period covered by this report.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
date of the evaluation.
-13-
PART IV
- --------------------------------------------------------------------------------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) 1. All financial statements - see index to financial statements and
schedules.
2. Financial statement schedules - see index to financial statements and
schedules.
3. Exhibits - see exhibit index.
(b) A report on Form 8-K was filed on December 30, 2002. Under Items 2 and
7 the Company reported the sale of its coal operations in Virginia to
subsidiaries of Alpha Natural Resources, LLC and provided the required
pro forma financial information. No other reports on Form 8-K were
filed during the fourth quarter of 2002 and through the date of this
report.
UNDERTAKING
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos. 2-64258,
33-2039, 33-21393, 33-23333, 33-69040, 33-53565, 333-02219, 333-78631,
333-78633, 333-70758, 333-70772, 333-70766 and 333-70762. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
-14-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 26, 2003.
The Pittston Company
-----------------------------
(Registrant)
By /s/ M. T. Dan
-----------------------------------
(M. T. Dan,
Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated, on March 26, 2003.
Signatures Title
----------------- -----------
R. G. Ackerman* Director
B. C. Alewine* Director
J. R. Barker* Director
M. C. Breslawsky* Director
J. L. Broadhead* Director
W. F. Craig* Director
/s/ M. T. Dan
------------------------------------------
(M. T. Dan) Chairman, President and
Chief Executive Officer
(principal executive officer)
M.L. Grimes* Director
G. Grinstein* Director
R. M. Gross* Director
/s/ R. T. Ritter
----------------------------------------------
(R. T. Ritter) Vice President and
and Chief Financial Officer
(principal financial officer and
principal accounting officer)
C. S. Sloane* Director
R. L. Turner* Director
*By /s/ M. T. Dan
-------------------------------------
(M. T. Dan, Attorney-in-Fact)
-15-
CERTIFICATIONS
I, Michael T. Dan, certify that:
1. I have reviewed this annual report on Form 10-K of The
Pittston Company;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this annual report whether there were significant changes
in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 26, 2003 /s/ Michael T. Dan
---------------------------
Michael T. Dan
Chief Executive Officer
-16-
CERTIFICATIONS (CONTINUED)
I, Robert T. Ritter, certify that:
1. I have reviewed this annual report on Form 10-K of The
Pittston Company;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this annual report whether there were significant changes
in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 26, 2003 /s/ Robert T. Ritter
-----------------------------------
Robert T. Ritter
Vice President and Chief Financial Officer
-17-
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS:
The Consolidated Financial Statements of The Pittston Company, listed in the
index below which are included in the Company's 2002 Annual Report for the year
ended December 31, 2002, are herein incorporated by reference. With the
exception of the pages listed in the index below and the information
incorporated by reference included in Parts I, II and IV, the 2002 Annual Report
of the Shareholders is not deemed filed as part of this report.
THE PITTSTON COMPANY ANNUAL REPORT
Page Numbers in
2002 Annual Report
--------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition......2-36
Independent Auditors' Report............................38
Consolidated Balance Sheets.............................39
Consolidated Statements of Operations................40-41
Consolidated Statements of Comprehensive Loss...........42
Consolidated Statements of Shareholders' Equity.........43
Consolidated Statements of Cash Flows...................44
Notes to Consolidated Financial Statements...........45-77
Selected Financial Data .............................78-79
FINANCIAL STATEMENT SCHEDULES:
Page Numbers
in Form 10-K
--------------
Independent Auditors' Report
on Financial Statement Schedule......................19
Schedule II - Valuation and qualifying accounts.........20
-18-
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT
SCHEDULE
The Board of Directors
The Pittston Company
Under date of February 10, 2003, we reported on the consolidated balance sheets
of The Pittston Company and subsidiaries (the "Company") as of December 31, 2002
and 2001, and the related consolidated statements of operations, comprehensive
loss, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 2002, as contained in the 2002 annual
report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule as included herein. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material aspects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Also as
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."
/s/ KPMG LLP
Richmond, Virginia
February 10, 2003
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The Pittston Company
Schedule II - Valuation and Qualifying Accounts
For the Years Ending December 31, 2002, 2001 and 2000
(in millions)
Balance at Charged to Currency Balance at
Beginning of Costs and Translation End of
Period Expenses (a) Deductions (b) Adjustment Period
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Allowance for Doubtful Accounts
Year Ended December 31, 2000 $ 36.2 22.8 (17.8) (1.4) 39.8
Year Ended December 31, 2001 39.8 12.3 (8.9) (1.4) 41.8
Year Ended December 31, 2002 41.8 4.6 (11.8) 0.9 35.5
Valuation Allowance
Year Ended December 31, 2000 7.2 1.8 - - 9.0
Year Ended December 31, 2001 9.0 1.3 - - 10.3
Year Ended December 31, 2002 $ 10.3 1.5 - (2.0) 9.8
(a) Includes amounts charged to loss from discontinued operations.
(b) Amounts written off, less recoveries
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EXHIBIT INDEX
Each Exhibit listed previously filed document is hereby incorporated by
reference to such document.
EXHIBIT
NUMBER DESCRIPTION
2(i) Membership Interest Acquisition Agreement
Among Air Transport International LLC and BAX
Global Inc., dated February 3, 1998. Exhibit
2 to the Registrant's Current Report on Form
8-K filed May 14, 1998.
2(ii) Share Purchase Agreement, dated as of January 27, 1998, between
Brink's Security International, Inc., acting as Purchaser, and
Generale de Transport et D'Industrie, acting as Seller. Exhibit 10(v)
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "1998 Form 10-K").
2(iii) Shareholders' Agreement, dated as of January
10, 1997, between Brink's Security
International, Inc., and Valores Tamanaco,
C.A. Exhibit 10(w) to the 1998 Form 10-K.
3(i) The Registrant's Articles of Correction to
its Articles of Incorporation. Exhibit 3(i)
to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998.
3(ii) The Registrant's Bylaws, as amended through September 12, 2003.
Exhibit 3(b) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002 (the "Third Quarter 2002 Form 10-Q").
4(a) (i) Amended and Restated Rights
Agreement dated as of January 14,
2000 (the "Rights Agreement"),
between the Registrant and Bank
Boston, N.A., as Rights Agent.
Exhibit 4(a) (i) to the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 2000 (the "2000 Form
10-K").
(ii) Form of Right Certificate for
Rights. Exhibit 4(a)(ii) to the
2000 Form 10-K. Instruments
defining the rights of holders of
long-term debt of the Registrant
and its consolidated subsidiaries
have been omitted because the
amount of debt under any such
instrument does not exceed 10% of
the total assets of the
Registrant and its consolidated
subsidiaries. The Registrant
agrees to furnish a copy of any
such instrument to the Commission
upon request. Exhibit 4(a) to the
Registrant's Annual Report on
Form 10-K for the year ended
December 31, 1999 (the "1999 Form
10-K").
(iii) Amendment, effective November 30,
2001, by and among The Pittston
Company, Fleet National Bank (f/k/a
BankBoston, N.A.) and EquiServe
Trust Company, N.A., to the Amended
and Restated Rights Agreement dated
as of January 14, 2000 between The
Pittston Company and BankBoston,
N.A., as Rights Agent. Exhibit 1 to
the Registrant's Amendment No. 3 to
Form 8-A/A (filed on January 14,
2002).
10(a)* The Key Employees' Incentive Plan, as
amended. Exhibit 10(a) to the 1998 Form
10-K.
10(b)* The Key Employees' Deferred Compensation Program, as amended and
restated as of January 14, 2000. Exhibit 10(b) to the 1999 Form
10-K.
10(c)* (i) The Registrant's Pension Equalization Plan as amended.
Exhibit 10(e)(I) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997 (the "1997 Form
10-K").
(ii) Amended and Restated Trust Agreement, dated December 1,
1997, between the Registrant and Chase Manhattan Bank, as
Trustee (the "Trust Agreement"). Exhibit 10(e)(ii) to the
1997 Form 10-K.
(iii) Amendment No. 1 to Trust Agreement,
dated as of August 18, 1999. Exhibit 10(c)(iii) to the
1999 Form 10-K.
(iv) Amendment No. 2 to Trust Agreement,
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dated as of July 26, 2001.
(v) Amendment No. 3 to Trust Agreement,
dated as of September 18, 2002.
(vi) Trust Agreement under the Pension
Equalization Plan, Retirement Plan
for Non-Employee Directors and
Certain Contractual Arrangements of
The Pittston Company made as of
September 16, 1994, by and between
the Registrant and Chase Manhattan
Bank (National Association), as
Trustee. Exhibit 10(i) to the
Registrant's Quarterly Report on
Form 10-Q for the quarter ended
September 30, 1994 (filed November
14, 1994 - File No. 1-9148) (the
"Third Quarter 1994 Form 10-Q").
(vii) Form of letter agreement dated as of September 16, 1994,
between the Registrant and one of its officers. Exhibit
10(e) to the Third Quarter 1994 Form 10-Q.
(viii) Form of letter agreement dated as of September 16, 1994,
between the Registrant and Participants pursuant to the
Pension Equalization Plan. Exhibit 10(f) to the Third
Quarter 1994 Form 10-Q.
10(d)* The Registrant's Executive Salary
Continuation Plan. Exhibit 10(e) to the
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991
(filed March 26, 1991 - File No. 1-9148)
(the "1991 Form 10-K").
10(e)* The Registrant's Non-Employee Directors' Stock Option Plan, as
amended and restated as of January 14, 2000. Exhibit 10(e) to the
1999 Form 10-K.
10(f)* The Registrant's 1988 Stock Option Plan, as amended and restated as
of January 14, 2000. Exhibit 10(f) to the 1999 Form 10-K.
10(g)* The Pittston Company Management
Performance Improvement Plan. Exhibit
10(g) to the 1999 Form 10-K.
10(h)* Form of change in control agreement
replacing all prior change in control
agreements and amendments and
modifications thereto, between the
Registrant (or a subsidiary) and various
officers of the Registrant. Exhibit
10(l)(ii) to the 1997 Form 10-K.
10(i)* Form of Indemnification Agreement entered
into by the Registrant with its directors
and officers. Exhibit 10(l) to the 1991
Form 10-K.
10(j)* (i) Registrant's Retirement Plan for
Non-Employee Directors, as amended. Exhibit 10(g) to the
Third Quarter 1994 Form 10-Q.
(ii) Form of letter agreement dated as of September 16, 1994,
between the Registrant and its Non-Employee Directors
pursuant to Retirement Plan for Non-Employee Directors.
Exhibit 10(h) to the Third Quarter 1994 Form 10-Q.
10(k)* (i) Form of severance agreement between
the Registrant (or a subsidiary) and
various of the Registrant's officers.
Exhibit 10(o)(ii) to the 1997 Form
10-K.
10(l)* Registrant's Directors' Stock Accumulation
Plan, as amended and restated as of January
14, 2000. Exhibit 10(l) to the 1999 Form
10-K.
10(m)* Registrant's Amended and Restated Plan for
Deferral of Directors' Fees. Exhibit 10(o)
to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1989
(filed March 24, 1990 - File No. 1-9148).
10(n) (i) Lease dated as of April 1, 1989,
between Toledo-Lucas County Port
Authority (the "Authority"), as
Lessor, and Burlington, as Lessee.
Exhibit 10(i) to the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 (filed
August 11, 1989 - File No. 1-9148)
(the "Second Quarter 1989 Form 10-Q").
(ii) Lease Guaranty Agreement dated as of
April 1, 1989, between Burlington
(formerly Burlington Air Express
Management Inc.), as Guarantor, and
the Authority. Exhibit 10(ii) to the
Second Quarter 1989 Form 10-Q.
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(iii) Trust Indenture dated as of April 1, 1989 between the
Authority and Society Bank & Trust (formerly, Trustcorp.
Bank, Ohio) (the "Trustee"), as Trustee. Exhibit 10(iii) to
the Second Quarter 1989 Form 10-Q.
(iv) Assignment of Basic Rent and Rights Under a Lease and Lease
Guaranty dated as of April 1, 1989 from the Authority to the
Trustee. Exhibit 10(iv) to the Second Quarter 1989 Form
10-Q.
(v) Open-End First Leasehold Mortgage and Security Agreement
dated as of April 1, 1989 from the Authority to the Trustee.
Exhibit 10(v) to the Second Quarter 1989 Form 10-Q.
(vi) First Supplement to Lease dated as
of January 1, 1990, between the
Authority and Burlington, as Lessee.
Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990
(filed May 15, 1990 - File No.
1-9148).
(vii) Revised and Amended Second Supplement to Lease dated as of
September 1, 1990, between the Authority and Burlington.
Exhibit 10(i) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1990 (filed
November 13, 1990 - File No. 1-9148) (the "Third Quarter
1990 Form 10-Q").
(viii) Amendment Agreement dated as of September 1, 1990, among
City of Toledo, Ohio, the Authority, Burlington and the
Trustee. Exhibit 10(ii) to the Third Quarter 1990 Form 10-Q.
(ix) Assumption and Non-Merger Agreement dated as of September 1,
1990, among Burlington, the Authority and the Trustee.
Exhibit 10(iii) to the Third Quarter 1990 Form 10-Q.
(x) First Supplemental Indenture between
Toledo-Lucas County Port Authority,
and Society National Bank, as
Trustee, dated as of March 1, 1994.
Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994
(filed May 12, 1994 - File No.
1-9148) (the "First Quarter 1994
Form 10-Q").
(xi) Third Supplement to Lease between
Toledo-Lucas County Port Authority,
as Lessor, and Burlington Air
Express Inc., as Lessee, dated as of
March 1, 1994. Exhibit 10.2 to the
First Quarter 1994 Form 10-Q.
(xii) Fourth Supplement to Lease between
Toledo-Lucas County Port Authority,
as Lessor, and Burlington Air
Express Inc., as Lessee, dated as of
June 1, 1991. Exhibit 10.3 to the
First Quarter 1994 Form 10-Q.
(xiii) Fifth Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as
Lessee, dated as of December 1, 1996. Exhibit 10(r)(xiii) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996.
10(o) Credit Agreement, dated as of September 6, 2002, among The
Pittston Company, as Borrower, Certain of Its Subsidiaries,
as Guarantors, Various Lenders, Fleet National Bank, as
Co-Arranger and Documentation Agent, Wachovia Bank, National
Association, and the Bank of Nova Scotia, as Co-Arrangers
and Syndication Agents, JPMorgan Chase Bank, as
Administrative Agent, and J.P. Morgan Securities Inc., as
Sole Advisor, Lead Arranger and Bookrunner. Exhibit 10 to
the Registrant's Third Quarter 2002 Form 10-Q.
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10(p) (i) Credit Agreement, dated as of
November 12, 2002, among BAX Global
Inc., Brink's, Incorporated, and
certain of their subsidiaries, as
Borrowers, the Registrant as
Guarantor and Bayerische Hypo-Und
Vereinsbank AG.
(ii) Guaranty, dated as of November 12, 2002, between the
Registrant, as Guarantor, and Bayerische Hypo-Und
Vereinsbank AG.
10(q) (i) Credit Agreement, dated as of December 20, 2002, among
BAX Global Inc., Brink's, Incorporated and the Registrant,
as Borrowers and Guarantors, and ABN AMRO Bank, N.V.
(ii) Guaranty between BAX Global, as Guarantor, and ABN AMRO
Bank, N.V.
(iii) Guaranty between Brink's, Incorporated, as Guarantor, and
ABN AMRO Bank, N.V.
(iv) Guaranty between the Registrant, as
Guarantor, and ABN AMRO Bank, N.V.
10(r)* (i) Employment Agreement dated as
of May 4, 1998, between the
Registrant and M. T. Dan. Exhibit
10(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1998 (the
"Third Quarter 1998 Form 10-Q").
(ii) Amendment No. 1 to Employment
Agreement between the Registrant
and Michael T. Dan. Exhibit 10 to
the Registrant's Quarterly Report
on Form 10-Q for the quarter ended
June 30, 2002.
10(s)* Executive Agreement dated as of May 4,
1998, between the Registrant and M. T. Dan.
Exhibit 10(b) to the Third Quarter 1998
Form 10-Q.
10(t)* Executive Agreement dated as of August 7,
1998, between the Registrant and R. T.
Ritter. Exhibit 10(c) to the Third Quarter
1998 Form 10-Q.
10(u)* Severance Agreement dated as of August 7,
1998, between the Registrant and R. T.
Ritter. Exhibit 10(d) to the Third Quarter
1998 Form 10-Q.
10(v) Trust Agreement for The Pittston Company
Employee Welfare Benefit Trust. Exhibit
10(t) to the 1999 Form 10-K.
10(w) (i) Note Purchase Agreement dated as of January 18, 2001,
between the Registrant and the Purchasers listed on Schedule
A thereto. Exhibit 10(u)(i) to the 2000 Form 10-K.
(ii) Form of Series A Promissory Note.
Exhibit 10(u)(ii) to the 2000 Form
10-K.
(iii) Form of Series B Promissory Note.
Exhibit 10(u)(iii) to the 2000 Form
10-K.
10(x) (i) Receivables Purchase Agreement dated
as of December 15, 2000, among BAX
Funding Corporation, BAX Global Inc.,
Liberty Street Funding Corp. and the
Bank of Nova Scotia. Exhibit 10(v)(i)
to the 2000 Form 10-K.
(ii) Purchase and Sale Agreement dated as of December 15, 2000,
among the Originators named therein, BAX Funding Corporation
and BAX Global Inc. Exhibit 10(v)(ii) to the 2000 Form 10-K.
10(y) (i) Note Purchase Agreement dated as
of April 11, 2002 between the
Registrant and the Purchasers set
forth on the signature page.
Exhibit 10(a)(i) to the Registrant's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002
(the "First Quarter 2002 Form 10-Q).
(ii) Form of Promissory Note.
Exhibit 10(a)(ii) to the First
Quarter 2002 Form 10-Q.
13 Parts of the 2002 Annual Report of the
Registrant.
21 Subsidiaries of the Registrant.
23 Consent of independent auditors.
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24 Powers of attorney.
99(a)* Amendment to Registrant's Pension-Retirement Plan relating to
preservation of assets of the Pension-Retirement Plan upon a
change in control. Exhibit 99 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992 (filed March
20, 1993 - File No. 1-9148).
99(b) Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
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*Management contract or compensatory plan or arrangement.
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