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[X] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2005 |
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
Delaware |
06-0495050 |
|||||
(State or other
jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|||||
1 Elmcroft
Road Stamford, Connecticut (Address of principal executive offices) |
06926-0700 (Zip Code) |
|||||
(203) 356-5000 (Registrants telephone number, including area code) |
Title of each class |
Name of each exchange on which
registered |
|||||
---|---|---|---|---|---|---|
Common Stock, $1
par value per share $2.12 Convertible Cumulative Preference Stock (no par value) |
New
York Stock Exchange New York Stock Exchange |
PART
I |
||||||||||
Item
1. |
Business |
3 | ||||||||
Item
1A. |
Risk factors |
5 | ||||||||
Item
1B. |
Unresolved staff comments |
7 | ||||||||
Item
2. |
Properties |
7 | ||||||||
Item
3. |
Legal proceedings |
7 | ||||||||
Item
4. |
Submission of matters to a vote of security holders |
8 | ||||||||
PART
II |
||||||||||
Item
5. |
Market for the registrants common equity, related stockholder matters and issuer purchases of equity securities |
9 | ||||||||
Item
6. |
Selected financial data |
11 | ||||||||
Item
7. |
Managements discussion and analysis of financial condition and results of operations |
12 | ||||||||
Item
7A. |
Quantitative and qualitative disclosures about market risk |
34 | ||||||||
Item
8. |
Financial statements and supplementary data |
35 | ||||||||
Item
9. |
Changes in and disagreements with accountants on accounting and financial disclosure |
75 | ||||||||
Item
9A. |
Controls and procedures |
75 | ||||||||
Item
9B. |
Other information |
75 | ||||||||
PART
III |
||||||||||
Item
10. |
Directors and executive officers of the registrant |
76 | ||||||||
Item
11. |
Executive compensation |
76 | ||||||||
Item
12. |
Security ownership of certain beneficial owners and management |
76 | ||||||||
Item
13. |
Certain relationships and related transactions |
76 | ||||||||
Item
14. |
Principal accountant fees and services |
76 | ||||||||
PART
IV |
||||||||||
Item
15. |
Exhibits and financial statement schedules |
77 | ||||||||
Signatures |
79 |
|
contractual rights under vendor, insurance or other contracts |
|
intellectual property or patent rights |
|
equipment, service, payment or other disputes with customers |
|
disputes with employees |
Name |
Age |
Title |
Executive Officer Since |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Michael J.
Critelli |
57 |
Chairman and Chief Executive Officer |
1988 |
|||||||||||
Gregory E.
Buoncontri |
58 |
Senior Vice President and Chief Information Officer |
2000 |
|||||||||||
Luis A.
Jimenez |
61 |
Senior Vice President and Chief Strategy Officer |
1999 |
|||||||||||
Murray D.
Martin |
58 |
President and Chief Operating Officer |
1998 |
|||||||||||
Michele Coleman
Mayes |
56 |
Senior Vice President and General Counsel |
2003 |
|||||||||||
Bruce P.
Nolop |
55 |
Executive Vice President and Chief Financial Officer |
2000 |
|||||||||||
Johnna G.
Torsone |
55 |
Senior Vice President and Chief Human Resources Officer |
1993 |
|||||||||||
Leslie R.
Abi-Karam |
47 |
Executive Vice President and President, Document Messaging Technologies |
2005 |
|||||||||||
Elise R.
DeBois |
50 |
Executive Vice President and President, Global Financial Services |
2005 |
|||||||||||
Vincent R. De
Palma |
48 |
Executive Vice President and President, Pitney Bowes Management Services |
2005 |
|||||||||||
Patrick J.
Keddy |
51 |
Executive Vice President and President, Mailstream International |
2005 |
|||||||||||
Neil
Metviner |
47 |
Executive Vice President and President, Global Small Business and Supplies |
2005 |
|||||||||||
Michael
Monahan |
45 |
Executive Vice President and President, Mailing Solutions and Services |
2005 |
|||||||||||
Kevin
Weiss |
52 |
Executive Vice President and President, Mailstream, The Americas |
2005 |
ITEM 5 |
MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Quarter |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
First |
$ | 0.310 | $ | 0.305 | ||||||
Second |
0.310 | 0.305 | ||||||||
Third |
0.310 | 0.305 | ||||||||
Fourth |
0.310 | 0.305 | ||||||||
Total |
$ | 1.240 | $ | 1.220 |
2005 |
2004 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Quarter |
High |
Low |
High |
Low |
|||||||||||||||
First |
$ | 47.50 | $ | 42.80 | $ | 43.78 | $ | 38.88 | |||||||||||
Second |
$ | 46.09 | $ | 41.62 | $ | 45.21 | $ | 42.20 | |||||||||||
Third |
$ | 45.13 | $ | 41.07 | $ | 44.62 | $ | 40.62 | |||||||||||
Fourth |
$ | 42.77 | $ | 40.34 | $ | 46.97 | $ | 41.44 |
Period |
Total number of shares purchased |
Average price paid per share |
Total number of shares purchased as part of publicly announced plans |
Approximate dollar value of shares that may yet be purchased under the plans (in thousands) |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 2004
Program |
||||||||||||||||||
January
2005 |
- | - | - | $ | 200,002 | |||||||||||||
February
2005 |
663,400 | $ | 46.50 | 663,400 | $ | 169,153 | ||||||||||||
March
2005 |
718,800 | $ | 45.74 | 718,800 | $ | 136,277 | ||||||||||||
April
2005 |
- | - | - | $ | 136,277 | |||||||||||||
May
2005 |
504,250 | $ | 45.05 | 504,250 | $ | 113,559 | ||||||||||||
June
2005 |
1,447,500 | $ | 43.11 | 1,447,500 | $ | 51,154 | ||||||||||||
July
2005 |
34,100 | $ | 44.71 | 34,100 | $ | 49,630 | ||||||||||||
August
2005 |
383,081 | $ | 43.76 | 383,081 | $ | 32,865 | ||||||||||||
September
2005 |
539,732 | $ | 42.27 | 539,732 | $ | 10,050 | ||||||||||||
October
2005 |
162,569 | $ | 41.70 | 162,569 | $ | 3,271 | ||||||||||||
November
2005 |
79,509 | $ | 41.14 | 79,509 | - | |||||||||||||
4,532,941 | 4,532,941 | |||||||||||||||||
September
2005 Program |
||||||||||||||||||
November
2005 |
615,791 | $ | 41.14 | 615,791 | $ | 274,669 | ||||||||||||
December
2005 |
797,046 | $ | 41.99 | 797,046 | $ | 241,199 | ||||||||||||
1,412,837 | 1,412,837 | |||||||||||||||||
Total |
5,945,778 | 5,945,778 |
Years ended December 31 |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2003 |
2002 |
2001 |
|||||||||||||||||||
Total
revenue |
$ | 5,492,183 | $ | 4,957,440 | $ | 4,576,853 | $ | 4,409,758 | $ | 4,122,474 | |||||||||||||
Total costs
and expenses |
4,625,059 | 4,257,992 | 3,855,762 | 3,790,313 | 3,356,090 | ||||||||||||||||||
Income from
continuing operations before income taxes |
867,124 | 699,448 | 721,091 | 619,445 | 766,384 | ||||||||||||||||||
Provision for
income taxes |
340,546 | 218,922 | 226,244 | 181,739 | 252,064 | ||||||||||||||||||
Income from
continuing operations |
526,578 | 480,526 | 494,847 | 437,706 | 514,320 | ||||||||||||||||||
Discontinued
operations |
- | - | 3,270 | 38,044 | (25,977 | ) | |||||||||||||||||
Net
income |
$ | 526,578 | $ | 480,526 | $ | 498,117 | $ | 475,750 | $ | 488,343 | |||||||||||||
Basic
earnings per share: |
|||||||||||||||||||||||
Continuing
operations |
$ | 2.30 | $ | 2.08 | $ | 2.12 | $ | 1.83 | $ | 2.09 | |||||||||||||
Discontinued
operations |
- | - | 0.01 | 0.16 | (0.11 | ) | |||||||||||||||||
Net
income |
$ | 2.30 | $ | 2.08 | $ | 2.13 | $ | 1.99 | $ | 1.99 | |||||||||||||
Diluted
earnings per share: |
|||||||||||||||||||||||
Continuing
operations |
$ | 2.27 | $ | 2.05 | $ | 2.10 | $ | 1.81 | $ | 2.08 | |||||||||||||
Discontinued
operations |
- | - | 0.01 | 0.16 | (0.10 | ) | |||||||||||||||||
Net
income |
$ | 2.27 | $ | 2.05 | $ | 2.11 | $ | 1.97 | $ | 1.97 | |||||||||||||
Total cash
dividends on common, preference and preferred stock |
$ | 284,348 | $ | 282,265 | $ | 280,870 | $ | 282,225 | $ | 285,164 | |||||||||||||
Cash
dividends per share of common stock |
$ | 1.24 | $ | 1.22 | $ | 1.20 | $ | 1.18 | $ | 1.16 | |||||||||||||
Average
common and potential common shares outstanding |
231,771,812 | 234,133,211 | 236,165,024 | 241,483,539 | 247,615,560 | ||||||||||||||||||
Cash provided
by operating activities |
$ | 539,593 | $ | 944,639 | $ | 851,261 | $ | 502,559 | $ | 1,035,887 | |||||||||||||
Depreciation
and amortization |
$ | 331,963 | $ | 306,750 | $ | 288,808 | $ | 264,250 | $ | 317,449 | |||||||||||||
Capital
expenditures |
$ | 291,550 | $ | 316,982 | $ | 285,681 | $ | 224,834 | $ | 256,204 | |||||||||||||
Balance
sheet at December 31 |
|||||||||||||||||||||||
Total
assets |
$ | 10,621,382 | $ | 10,211,626 | $ | 8,891,388 | $ | 8,732,314 | $ | 8,318,471 | |||||||||||||
Long-term
debt |
$ | 3,849,623 | $ | 3,164,688 | $ | 2,840,943 | $ | 2,316,844 | $ | 2,419,150 | |||||||||||||
Total
debt |
$ | 4,710,019 | $ | 4,380,010 | $ | 3,573,784 | $ | 3,968,551 | $ | 3,494,310 | |||||||||||||
Long-term
capital lease obligations |
$ | 2,654 | $ | 4,847 | $ | 4,183 | $ | 4,369 | $ | 3,103 | |||||||||||||
Preferred
stockholders equity in a subsidiary company |
$ | 310,000 | $ | 310,000 | $ | 310,000 | $ | 310,000 | $ | 310,000 | |||||||||||||
Stockholders equity |
$ | 1,301,941 | $ | 1,290,081 | $ | 1,087,362 | $ | 853,327 | $ | 891,355 | |||||||||||||
Book value
per common share |
$ | 5.74 | $ | 5.60 | $ | 4.68 | $ | 3.62 | $ | 3.68 | |||||||||||||
Other |
|||||||||||||||||||||||
Common
stockholders of record |
23,639 | 26,129 | 27,011 | 27,418 | 27,849 | ||||||||||||||||||
Total
employees |
34,165 | 35,183 | 32,474 | 33,130 | 32,724 |
Note: |
Certain 2004 amounts have been revised to conform with the
current year presentation. See Note 19 to the consolidated financial statements. |
The sum of the earnings per share amounts may not equal the totals due to rounding. |
ITEM 7 |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
2005 |
2004 |
% change |
% Contribution from Acquisitions |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inside the
U.S. Mailing |
$ | 2,273 | $ | 2,185 | 4 | % | - | |||||||||||
DMT |
430 | 350 | 23 | % | 19 | % | ||||||||||||
Outside the
U.S. |
1,173 | 1,011 | 16 | % | 8 | % | ||||||||||||
Global
Mailstream Solutions |
3,876 | 3,546 | 9 | % | 4 | % | ||||||||||||
Global
Management Services |
1,072 | 1,078 | - | 1 | % | |||||||||||||
Mail
Services |
405 | 192 | 110 | % | 56 | % | ||||||||||||
Global
Business Services |
1,477 | 1,270 | 16 | % | 9 | % | ||||||||||||
Capital
Services |
139 | 141 | (2 | %) | - | |||||||||||||
Total
revenue |
$ | 5,492 | $ | 4,957 | 11 | % | 5 | % |
2005 |
2004 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inside the
U.S. Mailing |
$ | 906 | $ | 864 | 5 | % | ||||||||
DMT |
62 | 38 | 62 | % | ||||||||||
Outside the
U.S. |
203 | 174 | 17 | % | ||||||||||
Global
Mailstream Solutions |
1,171 | 1,076 | 9 | % | ||||||||||
Global
Management Services |
72 | 56 | 28 | % | ||||||||||
Mail
Services |
26 | 10 | 160 | % | ||||||||||
Global
Business Services |
98 | 66 | 48 | % | ||||||||||
Capital
Services |
83 | 88 | (5 | %) | ||||||||||
Total
EBIT |
$ | 1,352 | $ | 1,230 | 10 | % |
2005 |
2004 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sales |
$ | 1,634 | $ | 1,463 | 12 | % | ||||||||
Rentals |
801 | 804 | - | |||||||||||
Financing |
650 | 598 | 9 | % | ||||||||||
Support
services |
791 | 681 | 16 | % | ||||||||||
Business
services |
1,477 | 1,270 | 16 | % | ||||||||||
Capital
services |
139 | 141 | (2 | %) | ||||||||||
Total
revenue |
$ | 5,492 | $ | 4,957 | 11 | % |
(Dollars in millions) |
Percentage of Revenue |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2005 |
2004 |
||||||||||||||||
Cost of
sales |
$ | 711 | $ | 664 | 43.6 | % | 45.4 | % | |||||||||||
Cost of
rentals |
$ | 166 | $ | 164 | 20.7 | % | 20.4 | % | |||||||||||
Cost of
support services |
$ | 407 | $ | 354 | 51.4 | % | 52.0 | % | |||||||||||
Cost of
business services |
$ | 1,195 | $ | 1,047 | 80.9 | % | 82.4 | % |
(Dollars in millions) |
Percentage of Revenue |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2005 |
2004 |
||||||||||||||||
$ | 1,685 | $ | 1,506 | 30.7 | % | 30.4 | % |
2005 |
2004 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ | 165 | $ | 160 | 3 | % |
2005 |
2004 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ | 208 | $ | 173 | 20 | % |
2005 |
2004 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
39.3 | % | 31.3 | % |
2004 |
2003 |
% change |
% Contribution from Acquisitions |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inside the
U.S. Mailing |
$ | 2,185 | $ | 2,184 | - | - | ||||||||||||
DMT |
350 | 274 | 28 | % | 19 | % | ||||||||||||
Outside the
U.S. |
1,011 | 846 | 20 | % | 2 | % | ||||||||||||
Global
Mailstream Solutions |
3,546 | 3,304 | 7 | % | 2 | % | ||||||||||||
Global
Management Services |
1,078 | 1,006 | 7 | % | 5 | % | ||||||||||||
Mail
Services |
192 | 113 | 70 | % | 33 | % | ||||||||||||
Global
Business Services |
1,270 | 1,119 | 13 | % | 8 | % | ||||||||||||
Capital
Services |
141 | 154 | (8 | %) | - | |||||||||||||
Total
revenue |
$ | 4,957 | $ | 4,577 | 8 | % | 3 | % |
2004 |
2003 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inside the
U.S. Mailing |
$ | 864 | $ | 847 | 2 | % | ||||||||
DMT |
38 | 29 | 32 | % | ||||||||||
Outside the
U.S. |
174 | 132 | 31 | % | ||||||||||
Global
Mailstream Solutions |
1,076 | 1,008 | 7 | % | ||||||||||
Global
Management Services |
56 | 52 | 8 | % | ||||||||||
Mail
Services |
10 | 11 | (9 | %) | ||||||||||
Global
Business Services |
66 | 63 | 5 | % | ||||||||||
Capital
Services |
88 | 104 | (15 | %) | ||||||||||
Total
EBIT |
$ | 1,230 | $ | 1,175 | 5 | % |
2004 |
2003 |
% change |
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sales |
$ | 1,463 | $ | 1,325 | 10 | % | ||||||||||||
Rentals |
804 | 785 | 2 | % | ||||||||||||||
Financing |
598 | 576 | 4 | % | ||||||||||||||
Support
services |
681 | 618 | 10 | % | ||||||||||||||
Business
services |
1,270 | 1,119 | 13 | % | ||||||||||||||
Capital
services |
141 | 154 | (8 | %) | ||||||||||||||
Total
revenue |
$ | 4,957 | $ | 4,577 | 8 | % |
Percentage of Revenue |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 |
2003 |
2004 |
2003 |
||||||||||||||||
Cost of
sales |
$ | 664 | $612 | 45.4 | % | 46.1 | % | ||||||||||||
Cost of
rentals |
$ | 164 | $ | 171 | 20.4 | % | 21.7 | % | |||||||||||
Cost of
support services |
$ | 354 | $ | 323 | 52.0 | % | 52.3 | % | |||||||||||
Cost of
business services |
$ | 1,047 | $ | 921 | 82.4 | % | 82.3 | % |
Percentage of Revenue |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 |
2003 |
2004 |
2003 |
||||||||||||||||
$ | 1,506 | $ | 1,397 | 30.4 | % | 30.5 | % |
2004 |
2003 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ | 160 | $ | 147 | 9 | % |
2004 |
2003 |
% change |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ | 173 | $ | 169 | 3 | % |
2004 |
2003 |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
31.3 | % | 31.4 | % |
(Dollars in millions) |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Leveraged
leases |
$ | 1,470 | $ | 1,478 | ||||||
Finance
receivables |
520 | 587 | ||||||||
Rental property
and equipment, net |
585 | 625 | ||||||||
Total |
$ | 2,575 | $ | 2,690 |
(Dollars in millions) |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Rental
receivables |
$ | 6,711 | $ | 7,243 | ||||||
Residual
value |
305 | 312 | ||||||||
Principal and
interest on non-recourse loans |
(4,985 | ) | (5,477 | ) | ||||||
Unearned
income |
(561 | ) | (600 | ) | ||||||
Investment in
leveraged leases |
1,470 | 1,478 | ||||||||
Less: Deferred
taxes related to leveraged leases |
(1,151 | ) | (1,126 | ) | ||||||
Net investment
in leveraged leases |
$ | 319 | $ | 352 |
|
Rental receivables represent total lease payments from our customers over the remaining term of the leveraged leases. |
|
Residual value represents the value of the property anticipated at the end of the leveraged lease terms and is based on appraisals or other sources of estimated value. We review the recorded residual value for impairments deemed to be other than temporary at least once annually and record adjustments as appropriate. |
|
Principal and interest on non-recourse loans represent amounts due to unrelated third parties from our customers over the remaining term of the leveraged leases. The non-recourse loans are secured by the lessees rental obligations and the leased property. If a lessee defaults and if the amounts realized from the sale of these assets are insufficient, we have no obligation to make any payments due on these non-recourse loans to the unrelated third parties. Accordingly, we are required by accounting principles generally accepted in the United States of America (GAAP) to subtract the principal and interest over the remaining term of the non-recourse loans from our rental receivables and residual value. At December 31, 2005 and 2004, the principal balances on the non-recourse loans totaled $2.8 billion and $3.2 billion, respectively, and the related interest payments over the remaining terms of the leases totaled $2.2 billion and $2.3 billion, respectively. |
|
Unearned income represents our future financing income that will be earned over the remaining term of the leases. |
|
Investment in leveraged leases represents the amount that is recorded in our Consolidated Balance Sheets. |
December 31 (Dollars in millions) |
2005 |
2004 |
Original Lease Term (in years) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Locomotives
and rail cars |
$ | 399 | $ | 382 | 20 40 | |||||||||
Postal
equipment |
365 | 358 | 15 24 | |||||||||||
Commercial
aircraft |
230 | 268 | 22 25 | |||||||||||
Commercial
real estate |
142 | 140 | 17 25 | |||||||||||
Telecommunications |
141 | 141 | 14 16 | |||||||||||
Rail and
bus |
133 | 133 | 27 37 | |||||||||||
Shipping and
handling |
60 | 56 | 24 | |||||||||||
Investment in
leveraged leases |
$ | 1,470 | $ | 1,478 |
December 31 (Dollars in millions) |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Large ticket
single investor leases |
$ | 267 | $ | 327 | ||||||
Imagistics lease
portfolio |
253 | 260 | ||||||||
Total finance
receivables |
$ | 520 | $ | 587 |
December 31 (Dollars in millions) |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Commercial real
estate |
$ | 393 | $ | 396 | ||||||
Imagistics lease
portfolio |
17 | 23 | ||||||||
Rail and
other |
175 | 206 | ||||||||
Total rental
property and equipment, net |
$ | 585 | $ | 625 |
(Dollars in millions) |
Restructuring charges |
Non-cash charges |
Cash payments |
Balance December 31 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 |
||||||||||||||||||
Severance and
benefit costs |
$ | 81 | $ | - | $ | (54 | ) | $ | 27 | |||||||||
Asset
impairments |
27 | (27 | ) | - | - | |||||||||||||
Other exit
costs |
9 | - | (4 | ) | 5 | |||||||||||||
$ | 117 | $ | (27 | ) | $ | (58 | ) | $ | 32 | |||||||||
2004 |
||||||||||||||||||
Severance and
benefit costs |
$ | 76 | $ | - | $ | (55 | ) | $ | 48 | |||||||||
Asset
impairments |
73 | (73 | ) | - | - | |||||||||||||
Other exit
costs |
9 | - | (11 | ) | 3 | |||||||||||||
$ | 158 | $ | (73 | ) | $ | (66 | ) | $ | 51 | |||||||||
2005 |
||||||||||||||||||
Severance and
benefit costs |
$ | 71 | $ | - | $ | (74 | ) | $ | 45 | |||||||||
Asset
impairments |
7 | (7 | ) | - | - | |||||||||||||
Other exit
costs |
6 | - | (4 | ) | 5 | |||||||||||||
Gain on sale
of main plant |
(30 | ) | - | 30 | - | |||||||||||||
$ | 54 | $ | (7 | ) | $ | (48 | ) | $ | 50 |
(Dollars in millions) |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Cash flows from
operating activities: |
||||||||||
Net
income |
$ | 527 | $ | 481 | ||||||
Restructuring
and other charges, net |
42 | 113 | ||||||||
Restructuring
and other payments |
(89 | ) | (66 | ) | ||||||
Bond posted
with Internal Revenue Service |
(200 | ) | - | |||||||
Depreciation
and amortization |
332 | 307 | ||||||||
Increase in
deferred taxes on income and income taxes payable |
204 | 211 | ||||||||
Pension plan
contributions |
(77 | ) | - | |||||||
Net
investment in internal finance receivables |
(105 | ) | (74 | ) | ||||||
Other
operating assets and liabilities |
(95 | ) | (27 | ) | ||||||
Net cash
provided by operating activities |
539 | 945 | ||||||||
Net cash used in
investing activities |
(472 | ) | (772 | ) | ||||||
Net cash used in
financing activities |
(137 | ) | (194 | ) | ||||||
Effect of
exchange rate changes on cash |
(3 | ) | 7 | |||||||
Decrease in cash
and cash equivalents |
$ | (73 | ) | $ | (14 | ) |
Payments due by period |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
Total |
Less than 1 year |
13 years |
35 years |
More than 5 years |
||||||||||||||||||
Commercial
paper borrowings |
$ | 519 | $ | 519 | $ | - | $ | - | $ | - | |||||||||||||
Long-term
debt and current portion of long-term debt |
4,187 | 337 | 719 | 392 | 2,739 | ||||||||||||||||||
Non-cancelable capital lease obligations |
4 | 2 | 2 | - | - | ||||||||||||||||||
Non-cancelable operating lease obligations |
242 | 70 | 90 | 39 | 43 | ||||||||||||||||||
Purchase
obligations (1) |
174 | 166 | 8 | - | - | ||||||||||||||||||
Other
non-current liabilities (2) |
327 | - | 162 | 54 | 111 | ||||||||||||||||||
Total |
$ | 5,453 | $ | 1,094 | $ | 981 | $ | 485 | $ | 2,893 |
(1) |
Purchase obligations include unrecorded agreements to purchase goods or services that are enforceable and legally binding upon us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. |
(2) |
Other non-current liabilities relate primarily to our non-pension postretirement benefits. See Note 11 to the consolidated financial statements. |
|
Changes in postal regulations governing the types of meters allowable for use. However, regulations were issued in November 2001, and therefore we do not expect new regulations for the foreseeable future. |
|
New technological developments that provide significantly enhanced benefits over current digital technology. |
|
Significant negative economic or industry trends. |
|
Changes in our business strategy that alters the expected usage of the related assets. |
|
Significant increase or decrease in our cost of capital. |
|
Future economic results that are below our expectations used in the current assessments. |
|
Discount rate a 0.25% increase in the discount rate would decrease annual pension expense by approximately $2 million. |
|
Rate of compensation increase a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $2 million. |
|
Expected return on plan assets a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $4 million. |
|
changes in international or national political conditions, including any terrorist attacks |
|
negative developments in economic conditions, including adverse impacts on customer demand |
|
changes in postal regulations |
|
timely development and acceptance of new products |
|
success in gaining product approval in new markets where regulatory approval is required |
|
successful entry into new markets |
|
mailers utilization of alternative means of communication or competitors products |
|
the Companys success at managing customer credit risk, including risks associated with commercial passenger and cargo aircraft leasing transactions |
|
the Companys success at managing costs associated with its strategy of outsourcing functions and operations not central to its business |
|
changes in interest rates |
|
foreign currency fluctuations |
|
cost, timing and execution of the restructuring plan including any potential asset impairments |
|
regulatory approvals and satisfaction of other conditions to consummation of any acquisitions and integration of recent acquisitions |
|
interrupted use of key information systems |
|
changes in privacy laws |
|
intellectual property infringement claims |
|
impact on mail volume resulting from current concerns over the use of the mail for transmitting harmful biological agents |
|
third-party suppliers ability to provide product components |
|
negative income tax adjustments for prior audit years and changes in tax laws or regulations |
|
terms and timing of actions to reduce exposures and disposal of assets in our Capital Services segment, including the spin-off or other disposition of the majority of the assets in this segment |
|
changes in pension and retiree medical costs |
|
acts of nature |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2003 |
|||||||||||||
Revenue
from: |
|||||||||||||||
Sales |
$ | 1,633,348 | $ | 1,462,967 | $ | 1,325,490 | |||||||||
Rentals |
801,285 | 804,351 | 785,130 | ||||||||||||
Financing |
650,226 | 597,792 | 575,574 | ||||||||||||
Support
services |
791,360 | 680,702 | 617,800 | ||||||||||||
Business
services |
1,477,459 | 1,270,113 | 1,119,146 | ||||||||||||
Capital
Services |
138,505 | 141,515 | 153,713 | ||||||||||||
Total
revenue |
5,492,183 | 4,957,440 | 4,576,853 | ||||||||||||
Costs and
expenses: |
|||||||||||||||
Cost of
sales |
711,373 | 663,584 | 611,620 | ||||||||||||
Cost of
rentals |
165,963 | 164,074 | 170,557 | ||||||||||||
Cost of
support services |
407,044 | 353,658 | 323,279 | ||||||||||||
Cost of
business services |
1,194,649 | 1,046,747 | 921,027 | ||||||||||||
Cost of
Capital Services |
- | 13,017 | - | ||||||||||||
Selling,
general and administrative |
1,685,419 | 1,506,308 | 1,396,848 | ||||||||||||
Research and
development |
164,806 | 159,835 | 147,262 | ||||||||||||
Restructuring
charges |
53,650 | 157,634 | 116,713 | ||||||||||||
Other expense
(income) |
33,897 | 19,666 | (117 | ) | |||||||||||
Interest
expense |
213,556 | 177,126 | 171,281 | ||||||||||||
Interest
income |
(5,298 | ) | (3,657 | ) | (2,708 | ) | |||||||||
Total costs
and expenses |
4,625,059 | 4,257,992 | 3,855,762 | ||||||||||||
Income from
continuing operations before income taxes |
867,124 | 699,448 | 721,091 | ||||||||||||
Provision for
income taxes |
340,546 | 218,922 | 226,244 | ||||||||||||
Income from
continuing operations |
526,578 | 480,526 | 494,847 | ||||||||||||
Gain on
disposal of discontinued operations, net of income tax |
- | - | 3,270 | ||||||||||||
Net
income |
$ | 526,578 | $ | 480,526 | $ | 498,117 | |||||||||
Basic
earnings per share: |
|||||||||||||||
Income from
continuing operations |
$ | 2.30 | $ | 2.08 | $ | 2.12 | |||||||||
Discontinued
operations |
- | - | 0.01 | ||||||||||||
Net
income |
$ | 2.30 | $ | 2.08 | $ | 2.13 | |||||||||
Diluted
earnings per share: |
|||||||||||||||
Income from
continuing operations |
$ | 2.27 | $ | 2.05 | $ | 2.10 | |||||||||
Discontinued
operations |
- | - | 0.01 | ||||||||||||
Net
income |
$ | 2.27 | $ | 2.05 | $ | 2.11 |
December 31 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
||||||||||
Assets |
|||||||||||
Current
assets: |
|||||||||||
Cash and cash
equivalents |
$ | 243,509 | $ | 316,217 | |||||||
Short-term
investments |
56,193 | 3,933 | |||||||||
Accounts
receivable, less allowances: 2005, $46,261; 2004, $50,254 |
658,198 | 567,772 | |||||||||
Finance
receivables, less allowances: 2005, $52,622; 2004, $70,958 |
1,342,446 | 1,396,269 | |||||||||
Inventories |
220,918 | 206,697 | |||||||||
Other current
assets and prepayments |
221,051 | 197,874 | |||||||||
Total current
assets |
2,742,315 | 2,688,762 | |||||||||
Property, plant
and equipment, net |
621,954 | 644,495 | |||||||||
Rental property
and equipment, net |
1,022,031 | 1,046,336 | |||||||||
Property leased
under capital leases, net |
2,611 | 3,081 | |||||||||
Long-term
finance receivables, less allowances: 2005, $76,240; 2004, $102,074 |
1,841,673 | 1,779,805 | |||||||||
Investment in
leveraged leases |
1,470,025 | 1,477,755 | |||||||||
Goodwill |
1,611,786 | 1,411,381 | |||||||||
Intangible
assets, net |
347,414 | 323,737 | |||||||||
Other
assets |
961,573 | 836,274 | |||||||||
Total
assets |
$ | 10,621,382 | $ | 10,211,626 | |||||||
Liabilities
and stockholders equity |
|||||||||||
Current
liabilities: |
|||||||||||
Accounts
payable and accrued liabilities |
$ | 1,538,860 | $ | 1,487,239 | |||||||
Income taxes
payable |
55,903 | 218,605 | |||||||||
Notes payable
and current portion of long-term obligations |
857,742 | 1,210,475 | |||||||||
Advance
billings |
458,392 | 421,819 | |||||||||
Total current
liabilities |
2,910,897 | 3,338,138 | |||||||||
Deferred taxes
on income |
1,922,258 | 1,765,113 | |||||||||
Long-term
debt |
3,849,623 | 3,164,688 | |||||||||
Other
non-current liabilities |
326,663 | 343,606 | |||||||||
Total
liabilities |
9,009,441 | 8,611,545 | |||||||||
Preferred
stockholders equity in a subsidiary company |
310,000 | 310,000 | |||||||||
Stockholders equity: |
|||||||||||
Cumulative
preferred stock, $50 par value, 4% convertible |
17 | 19 | |||||||||
Cumulative
preference stock, no par value, $2.12 convertible |
1,158 | 1,252 | |||||||||
Common stock,
$1 par value (480,000,000 shares authorized; 323,337,912 shares issued) |
323,338 | 323,338 | |||||||||
Retained
earnings |
4,485,051 | 4,243,404 | |||||||||
Accumulated
other comprehensive income |
76,917 | 135,526 | |||||||||
Treasury
stock, at cost (shares: 2005, 96,630,706; 2004, 93,019,539) |
(3,584,540 | ) | (3,413,458 | ) | |||||||
Total
stockholders equity |
1,301,941 | 1,290,081 | |||||||||
Total
liabilities and stockholders equity |
$ | 10,621,382 | $ | 10,211,626 |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2003 |
|||||||||||||
Cash flows
from operating activities: |
|||||||||||||||
Net
income |
$ | 526,578 | $ | 480,526 | $ | 498,117 | |||||||||
Restructuring
and other charges, net |
42,248 | 113,473 | 71,354 | ||||||||||||
Restructuring
and other payments |
(88,544 | ) | (66,055 | ) | (72,751 | ) | |||||||||
Bond posted
with the Internal Revenue Service |
(200,000 | ) | - | - | |||||||||||
Adjustments
to reconcile net income to net cash provided by operating activities: |
|||||||||||||||
Depreciation
and amortization |
331,963 | 306,750 | 288,808 | ||||||||||||
Pension plan
contributions |
(76,508 | ) | - | (50,000 | ) | ||||||||||
Change in
assets and liabilities, net of effects of acquisitions: |
|||||||||||||||
Accounts
receivable |
(87,646 | ) | (51,085 | ) | (21,557 | ) | |||||||||
Net
investment in internal finance receivables |
(105,358 | ) | (73,726 | ) | (60,197 | ) | |||||||||
Inventories |
(7,835 | ) | 17,079 | 19,021 | |||||||||||
Other current
assets and prepayments |
(12,114 | ) | 6,272 | (2,223 | ) | ||||||||||
Accounts
payable and accrued liabilities |
3,324 | 15,385 | (4,870 | ) | |||||||||||
Deferred
taxes on income and income taxes payable |
204,036 | 210,687 | 194,519 | ||||||||||||
Advance
billings |
19,508 | (4,636 | ) | (1,790 | ) | ||||||||||
Other,
net |
(10,059 | ) | (10,031 | ) | (7,170 | ) | |||||||||
Net cash
provided by operating activities |
539,593 | 944,639 | 851,261 | ||||||||||||
Cash flows
from investing activities: |
|||||||||||||||
Capital
expenditures |
(291,550 | ) | (316,982 | ) | (285,681 | ) | |||||||||
Investments |
(44,099 | ) | (1,740 | ) | 3,631 | ||||||||||
Net proceeds
from sale of main plant |
30,238 | - | - | ||||||||||||
Net
investment in Capital Services |
117,595 | 17,465 | 304,204 | ||||||||||||
Acquisitions,
net of cash acquired |
(294,176 | ) | (498,712 | ) | (106,547 | ) | |||||||||
Reserve
account deposits |
9,800 | 27,782 | 50,389 | ||||||||||||
Net cash used
in investing activities |
(472,192 | ) | (772,187 | ) | (34,004 | ) | |||||||||
Cash flows
from financing activities: |
|||||||||||||||
(Decrease)
increase in notes payable, net |
(31,150 | ) | 256,360 | (581,991 | ) | ||||||||||
Proceeds from
long-term obligations |
1,050,000 | 450,897 | 1,026,738 | ||||||||||||
Principal
payments on long-term obligations |
(695,724 | ) | (491,904 | ) | (866,872 | ) | |||||||||
Proceeds from
issuance of stock |
83,012 | 73,316 | 52,341 | ||||||||||||
Stock
repurchases |
(258,803 | ) | (199,998 | ) | (200,000 | ) | |||||||||
Dividends
paid |
(284,348 | ) | (282,265 | ) | (280,870 | ) | |||||||||
Net cash used
in financing activities |
(137,013 | ) | (193,594 | ) | (850,654 | ) | |||||||||
Effect of
exchange rate changes on cash |
(3,096 | ) | 6,927 | 12,053 | |||||||||||
(Decrease) in
cash and cash equivalents |
(72,708 | ) | (14,215 | ) | (21,344 | ) | |||||||||
Cash from
consolidation of PBG Capital Partners LLC |
- | 36,620 | - | ||||||||||||
Cash and cash
equivalents at beginning of year |
316,217 | 293,812 | 315,156 | ||||||||||||
Cash and cash
equivalents at end of year |
$ | 243,509 | $ | 316,217 | $ | 293,812 | |||||||||
Interest
paid |
$ | 196,964 | $ | 167,761 | $ | 182,986 | |||||||||
Income taxes
paid, net |
$ | 164,068 | $ | 75,958 | $ | 59,045 |
Preferred stock |
Preference stock |
Common stock |
Capital in excess of par value |
Comprehensive income |
Retained earnings |
Accumulated other comprehensive income |
Treasury stock at cost |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance,
January 1, 2003 |
$ | 24 | $ | 1,432 | $ | 323,338 | $ | - | $ | 3,848,562 | $ | (121,615 | ) | $ | (3,198,414 | ) | ||||||||||||||||||
Net
income |
$ | 498,117 | 498,117 | |||||||||||||||||||||||||||||||
Other
comprehensive income: |
||||||||||||||||||||||||||||||||||
Translation
adjustments |
143,158 | 143,158 | ||||||||||||||||||||||||||||||||
Net
unrealized gain on derivative instruments |
384 | 384 | ||||||||||||||||||||||||||||||||
Minimum
pension liability |
(3,864 | ) | (3,864 | ) | ||||||||||||||||||||||||||||||
Comprehensive
income |
$ | 637,795 | ||||||||||||||||||||||||||||||||
Cash
dividends: |
||||||||||||||||||||||||||||||||||
Preferred
($2.00 per share) |
(1 | ) | ||||||||||||||||||||||||||||||||
Preference
($2.12 per share) |
(107 | ) | ||||||||||||||||||||||||||||||||
Common ($1.20
per share) |
(280,762 | ) | ||||||||||||||||||||||||||||||||
Issuances of
common stock |
(9,448 | ) | 82,796 | |||||||||||||||||||||||||||||||
Conversions to
common stock |
(5 | ) | (117 | ) | (2,469 | ) | 2,591 | |||||||||||||||||||||||||||
Repurchase of
common stock |
(200,000 | ) | ||||||||||||||||||||||||||||||||
Tax credits
relating to stock options |
3,762 | |||||||||||||||||||||||||||||||||
Balance,
December 31, 2003 |
19 | 1,315 | 323,338 | - | 4,057,654 | 18,063 | (3,313,027 | ) | ||||||||||||||||||||||||||
Net
income |
$ | 480,526 | 480,526 | |||||||||||||||||||||||||||||||
Other
comprehensive income: |
||||||||||||||||||||||||||||||||||
Translation
adjustments |
115,111 | 115,111 | ||||||||||||||||||||||||||||||||
Net
unrealized gain on derivative instruments |
1,777 | 1,777 | ||||||||||||||||||||||||||||||||
Minimum
pension liability |
575 | 575 | ||||||||||||||||||||||||||||||||
Comprehensive
income |
$ | 597,989 | ||||||||||||||||||||||||||||||||
Cash
dividends: |
||||||||||||||||||||||||||||||||||
Preferred
($2.00 per share) |
(1 | ) | ||||||||||||||||||||||||||||||||
Preference
($2.12 per share) |
(100 | ) | ||||||||||||||||||||||||||||||||
Common ($1.22
per share) |
(282,164 | ) | ||||||||||||||||||||||||||||||||
Issuances of
common stock |
(18,658 | ) | 98,162 | |||||||||||||||||||||||||||||||
Conversions to
common stock |
(63 | ) | (1,342 | ) | 1,405 | |||||||||||||||||||||||||||||
Repurchase of
common stock |
(199,998 | ) | ||||||||||||||||||||||||||||||||
Tax credits
relating to stock options |
7,489 | |||||||||||||||||||||||||||||||||
Balance,
December 31, 2004 |
19 | 1,252 | 323,338 | - | 4,243,404 | 135,526 | (3,413,458 | ) | ||||||||||||||||||||||||||
Net
income |
$ | 526,578 | 526,578 | |||||||||||||||||||||||||||||||
Other
comprehensive income: |
||||||||||||||||||||||||||||||||||
Translation
adjustments |
(54,499 | ) | (54,499 | ) | ||||||||||||||||||||||||||||||
Net
unrealized gain on derivative instruments |
1,605 | 1,605 | ||||||||||||||||||||||||||||||||
Minimum
pension liability |
(5,715 | ) | (5,715 | ) | ||||||||||||||||||||||||||||||
Comprehensive
income |
$ | 467,969 | ||||||||||||||||||||||||||||||||
Cash
dividends: |
||||||||||||||||||||||||||||||||||
Preferred
($2.00 per share) |
(1 | ) | ||||||||||||||||||||||||||||||||
Preference
($2.12 per share) |
(93 | ) | ||||||||||||||||||||||||||||||||
Common ($1.24
per share) |
(284,254 | ) | ||||||||||||||||||||||||||||||||
Issuances of
common stock |
(9,051 | ) | 85,569 | |||||||||||||||||||||||||||||||
Conversions to
common stock |
(2 | ) | (94 | ) | (2,056 | ) | 2,152 | |||||||||||||||||||||||||||
Repurchase of
common stock |
(258,803 | ) | ||||||||||||||||||||||||||||||||
Tax credits
relating to stock options |
10,524 | |||||||||||||||||||||||||||||||||
Balance,
December 31, 2005 |
$ | 17 | $ | 1,158 | $ | 323,338 | $ | - | $ | 4,485,051 | $ | 76,917 | $ | (3,584,540 | ) |
|
sales |
|
rentals |
|
financing |
|
support services |
|
business services; and |
|
capital services |
2005 |
2004 |
2003 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net
Income |
||||||||||||||
As
reported |
$ | 526,578 | $ | 480,526 | $ | 498,117 | ||||||||
Deduct:
Stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects |
(17,967 | ) | (18,531 | ) | (21,305 | ) | ||||||||
Pro
forma |
$ | 508,611 | $ | 461,995 | $ | 476,812 | ||||||||
Basic
earnings per share |
||||||||||||||
As
reported |
$ | 2.30 | $ | 2.08 | $ | 2.13 | ||||||||
Pro
forma |
$ | 2.22 | $ | 2.00 | $ | 2.04 | ||||||||
Diluted
earnings per share |
||||||||||||||
As
reported |
$ | 2.27 | $ | 2.05 | $ | 2.11 | ||||||||
Pro
forma |
$ | 2.19 | $ | 1.97 | $ | 2.02 |
2005 |
2004 |
2003 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Expected
dividend yield |
2.8 | % | 3.1 | % | 3.2 | % | ||||||||
Expected
stock price volatility |
18.5 | % | 25.0 | % | 28.0 | % | ||||||||
Risk-free
interest rate |
3.5 | % | 3.0 | % | 3.0 | % | ||||||||
Expected life
(years) |
5 | 5 | 5 |
December 31 |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Raw materials
and work in process |
$ | 96,669 | $ | 75,508 | ||||||
Supplies and
service parts |
63,441 | 67,666 | ||||||||
Finished
products |
60,808 | 63,523 | ||||||||
Total |
$ | 220,918 | $ | 206,697 |
December 31 |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Land |
$ | 32,926 | $ | 36,681 | ||||||
Buildings |
382,895 | 440,480 | ||||||||
Machinery and
equipment |
1,322,087 | 1,279,319 | ||||||||
1,737,908 | 1,756,480 | |||||||||
Accumulated
depreciation |
(1,115,954 | ) | (1,111,985 | ) | ||||||
Property, plant
and equipment, net |
$ | 621,954 | $ | 644,495 | ||||||
Rental property
and equipment |
$ | 1,840,221 | $ | 1,721,362 | ||||||
Accumulated
depreciation |
(818,190 | ) | (675,026 | ) | ||||||
Rental property
and equipment, net |
$ | 1,022,031 | $ | 1,046,336 | ||||||
Property leased
under capital leases |
$ | 8,662 | $ | 8,662 | ||||||
Accumulated
amortization |
(6,051 | ) | (5,581 | ) | ||||||
Property leased
under capital leases, net |
$ | 2,611 | $ | 3,081 |
December 31 |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Accounts
payable-trade |
$ | 306,721 | $ | 295,610 | ||||||
Reserve account
deposits |
430,747 | 420,944 | ||||||||
Accrued
salaries, wages and commissions |
228,577 | 206,110 | ||||||||
Accrued
restructuring charges |
49,870 | 51,463 | ||||||||
Accrued
nonpension postretirement benefits |
30,747 | 35,758 | ||||||||
Accrued
postemployment benefits |
5,100 | 3,650 | ||||||||
Miscellaneous
accounts payable and accrued liabilities |
487,098 | 473,704 | ||||||||
Accounts payable
and accrued liabilities |
$ | 1,538,860 | $ | 1,487,239 | ||||||
Notes
payable |
$ | 519,663 | $ | 538,138 | ||||||
Current portion
of long-term debt |
337,199 | 670,827 | ||||||||
Current portion
of capital lease obligations |
880 | 1,510 | ||||||||
Notes payable
and current portion of long-term obligations |
$ | 857,742 | $ | 1,210,475 |
December 31 |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Recourse
debt |
||||||||||
5.88% notes due
2006 |
$ | - | $ | 300,000 | ||||||
5.75% notes due
2008 (1) |
350,000 | 350,000 | ||||||||
8.63% notes due
2008 (1) |
100,000 | 100,000 | ||||||||
9.25% notes due
2008 (1) |
100,000 | 100,000 | ||||||||
8.55% notes due
2009 (1) |
150,000 | 150,000 | ||||||||
4.65% notes due
2010 |
150,000 | - | ||||||||
4.63% notes due
2012 |
400,000 | 400,000 | ||||||||
7.51% notes due
2006 through 2012 |
28,109 | 31,149 | ||||||||
3.88% notes due
2013 |
375,000 | 375,000 | ||||||||
4.88% notes due
2014 |
450,000 | 450,000 | ||||||||
5.00% notes due
2015 |
400,000 | - | ||||||||
4.75% notes due
2016 |
500,000 | - | ||||||||
0.93% to 3.02%
notes due 2018 |
350,000 | 350,000 | ||||||||
Non-recourse
debt |
||||||||||
6.27% to 6.41%
notes due 2008 (2) |
17,161 | 29,692 | ||||||||
6.85% notes due
2006 through 2010 (2) |
60,001 | 85,861 | ||||||||
6.77% notes due
2006 through 2011 (2) |
10,138 | 15,687 | ||||||||
7.95% notes due
2006 through 2013 |
12,019 | - | ||||||||
9.78% notes due
2006 through 2007 (3) |
13,500 | 14,258 |
December 31 |
2005 |
2004 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-recourse
debt (continued) |
||||||||||
3.50% notes due
2006 through 2008 (3) |
14,203 | 14,227 | ||||||||
7.25% notes due
2006 through 2011 (3) |
22,817 | 24,239 | ||||||||
8.66% notes due
2006 through 2012 (3) |
69,339 | 77,004 | ||||||||
6.79% notes due
2006 through 2013 (3) |
25,938 | 28,304 | ||||||||
4.56% notes due
2006 through 2013 (3) |
11,001 | 11,769 | ||||||||
4.56% notes due
2006 through 2014 (3) |
11,154 | 11,887 | ||||||||
6.52% notes due
2006 through 2016 (3) |
14,313 | 15,020 | ||||||||
7.25% notes due
2006 through 2016 (3) |
56,401 | 57,651 | ||||||||
2.75% to 4.13%
notes due 2019 (3) |
15,521 | 29,335 | ||||||||
8.67% notes due
2006 through 2020 (3) |
82,100 | 82,100 | ||||||||
Fair value
hedges basis adjustment |
49,328 | 63,819 | ||||||||
Other
(4) |
11,580 | (2,314 | ) | |||||||
Total
long-term debt |
$ | 3,849,623 | $ | 3,164,688 |
(1) |
In 2002, the Company received $95 million in cash from the termination of four swap agreements associated with these notes. This amount will be reflected as a reduction of interest expense over the remaining term of these notes. As a result of this transaction, the weighted average effective rate on these notes is 4.77%. |
(2) |
On March 31, 2004, the Company adopted the provisions of FIN No. 46 and consolidated the assets and liabilities of PBG. The non-recourse debt reflects the consolidated non-recourse debt of PBG. See Note 1 to the consolidated financial statements for further details on the impact of adopting FIN No. 46. |
(3) |
In 2005, the Company revised its accounting for certain lease transactions. The non-recourse debt reflects the debt associated with these leases. See Note 19 to the consolidated financial statements. |
(4) |
Other consists primarily of debt discounts and premiums. |
Shares |
Per share weighted average exercise price |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Options
outstanding at January 1, 2003 |
18,919,399 | $ | 39 | |||||||
Granted |
3,512,850 | $ | 32 | |||||||
Exercised |
(932,663 | ) | $ | 26 | ||||||
Canceled |
(877,976 | ) | $ | 42 | ||||||
Options
outstanding at December 31, 2003 |
20,621,610 | $ | 39 | |||||||
Granted |
3,253,168 | $ | 40 | |||||||
Exercised |
(2,117,654 | ) | $ | 28 | ||||||
Canceled |
(617,836 | ) | $ | 46 | ||||||
Options
outstanding at December 31, 2004 |
21,139,288 | $ | 40 | |||||||
Granted |
3,334,345 | $ | 47 | |||||||
Exercised |
(1,785,643 | ) | $ | 32 | ||||||
Canceled |
(650,182 | ) | $ | 43 | ||||||
Options
outstanding at December 31, 2005 |
22,037,808 | $ | 41 | |||||||
Options
exercisable at December 31, 2003 |
13,187,133 | $ | 42 | |||||||
Options
exercisable at December 31, 2004 |
14,513,301 | $ | 41 | |||||||
Options
exercisable at December 31, 2005 |
15,833,333 | $ | 41 |
Options Outstanding |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of per share exercise prices |
Number |
Weighted average remaining contractual life |
Per share weighted average exercise price |
||||||||||||
$23.73 $35.00 |
7,344,356 | 6.0 | years | $ | 30 | ||||||||||
$36.00 $45.99 |
6,643,311 | 6.8 | years | $ | 42 | ||||||||||
$46.00 $56.99 |
5,721,879 | 7.7 | years | $ | 47 | ||||||||||
$57.00 $65.72 |
2,328,262 | 4.0 | years | $ | 64 | ||||||||||
22,037,808 | 6.5 | years |
Options Exercisable |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of per share exercise prices |
Number |
Per share weighted average exercise price |
|||||||||||||
$23.73 $35.00 |
6,365,949 | $ | 30 | ||||||||||||
$36.00 $45.99 |
4,576,283 | $ | 42 | ||||||||||||
$46.00 $56.99 |
2,562,839 | $ | 47 | ||||||||||||
$57.00 $65.72 |
2,328,262 | $ | 64 | ||||||||||||
15,833,333 |
2005 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income |
Shares |
Per Share |
|||||||||||||
Income from
continuing operations |
$ | 526,578 | |||||||||||||
Less: |
|||||||||||||||
Preferred
stock dividends |
(1 | ) | |||||||||||||
Preference
stock dividends |
(93 | ) | |||||||||||||
Basic
earnings per share |
526,484 | 229,037,051 | $ | 2.30 | |||||||||||
Effect of
dilutive securities: |
|||||||||||||||
Preferred
stock |
1 | 8,307 | |||||||||||||
Preference
stock |
93 | 732,276 | |||||||||||||
Stock
options |
1,894,783 | ||||||||||||||
Other |
99,395 | ||||||||||||||
Diluted
earnings per share |
$ | 526,578 | 231,771,812 | $ | 2.27 |
2004 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income |
Shares |
Per Share |
|||||||||||||
Income from
continuing operations |
$ | 480,526 | |||||||||||||
Less: |
|||||||||||||||
Preferred
stock dividends |
(1 | ) | |||||||||||||
Preference
stock dividends |
(100 | ) | |||||||||||||
Basic
earnings per share |
480,425 | 231,105,572 | $ | 2.08 | |||||||||||
Effect of
dilutive securities: |
|||||||||||||||
Preferred
stock |
1 | 9,333 | |||||||||||||
Preference
stock |
100 | 780,249 | |||||||||||||
Stock
options |
2,096,545 | ||||||||||||||
Other |
141,512 | ||||||||||||||
Diluted
earnings per share |
$ | 480,526 | 234,133,211 | $ | 2.05 |
2003 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income |
Shares |
Per Share |
|||||||||||||
Income from
continuing operations |
$ | 494,847 | |||||||||||||
Less: Preferred stock dividends |
(1 | ) | |||||||||||||
Preference
stock dividends |
(107 | ) | |||||||||||||
Basic
earnings per share |
494,739 | 233,826,741 | $ | 2.12 | |||||||||||
Effect of
dilutive securities: |
|||||||||||||||
Preferred
stock |
1 | 10,474 | |||||||||||||
Preference
stock |
107 | 839,743 | |||||||||||||
Stock
options |
1,421,076 | ||||||||||||||
Other |
66,990 | ||||||||||||||
Diluted
earnings per share |
$ | 494,847 | 236,165,024 | $ | 2.10 |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2003 |
|||||||||||||
Income from
continuing operations before income taxes: |
|||||||||||||||
U.S. |
$ | 678,985 | $ | 571,742 | $ | 600,375 | |||||||||
Outside the
U.S. |
188,139 | 127,706 | 120,716 | ||||||||||||
Total |
$ | 867,124 | $ | 699,448 | $ | 721,091 | |||||||||
Provision for
income taxes: |
|||||||||||||||
U.S.
federal: |
|||||||||||||||
Current |
$ | 166,590 | $ | (6,717 | ) | $ | (40,809 | ) | |||||||
Deferred |
89,110 | 166,102 | 207,505 | ||||||||||||
255,700 | 159,385 | 166,696 | |||||||||||||
U.S. state
and local: |
|||||||||||||||
Current |
18,867 | (7,192 | ) | (2,042 | ) | ||||||||||
Deferred |
11,568 | 30,226 | 27,667 | ||||||||||||
30,435 | 23,034 | 25,625 | |||||||||||||
Outside the
U.S.: |
|||||||||||||||
Current |
36,552 | 22,038 | (7,932 | ) | |||||||||||
Deferred |
17,859 | 14,465 | 41,855 | ||||||||||||
54,411 | 36,503 | 33,923 | |||||||||||||
Total
current |
222,009 | 8,129 | (50,783 | ) | |||||||||||
Total
deferred |
118,537 | 210,793 | 277,027 | ||||||||||||
Total |
$ | 340,546 | $ | 218,922 | $ | 226,244 |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2003 |
|||||||||||||
U.S.
federal |
$ | 255,700 | $ | 159,385 | $ | 164,871 | |||||||||
U.S. state
and local |
30,435 | 23,034 | 25,270 | ||||||||||||
Outside the
U.S. |
54,411 | 36,503 | 33,923 | ||||||||||||
Total |
$ | 340,546 | $ | 218,922 | $ | 224,064 |
2005 |
2004 |
2003 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
U.S. federal
statutory rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||||
Life
insurance tax reserve, federal and state |
6.5 | - | - | |||||||||||
State and
local income taxes |
2.3 | 2.1 | 2.3 | |||||||||||
Foreign tax
differential |
(1.3 | ) | (1.2 | ) | (1.2 | ) | ||||||||
Partnership
leasing transactions |
(1.2 | ) | (1.2 | ) | (2.0 | ) | ||||||||
Tax exempt
income |
(0.6 | ) | (1.2 | ) | (0.6 | ) | ||||||||
Federal
income tax credits |
(0.4 | ) | (1.6 | ) | (0.9 | ) | ||||||||
Other,
net |
(1.0 | ) | (0.6 | ) | (1.2 | ) | ||||||||
Effective
income tax rate |
39.3 | % | 31.3 | % | 31.4 | % |
December 31 |
2005 |
2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax
liabilities: |
||||||||||
Depreciation |
$ | 96,274 | $ | 153,007 | ||||||
Deferred profit
(for tax purposes) on sales to finance subsidiaries |
394,716 | 329,772 | ||||||||
Lease revenue
and related depreciation |
1,353,189 | 1,504,837 | ||||||||
Pension |
217,588 | 196,214 | ||||||||
Other |
305,604 | 229,158 | ||||||||
Deferred tax
liabilities |
2,367,371 | 2,412,988 | ||||||||
Deferred tax
assets: |
||||||||||
Nonpension
postretirement benefits |
(31,463 | ) | (60,709 | ) | ||||||
Inventory and
equipment capitalization |
(21,925 | ) | (17,698 | ) | ||||||
Meter transition
and restructuring charges |
(13,652 | ) | (41,959 | ) | ||||||
Net operating
loss carry forwards |
(67,282 | ) | (56,586 | ) | ||||||
Other |
(196,336 | ) | (164,701 | ) | ||||||
Valuation
allowance |
21,777 | 18,427 | ||||||||
Deferred tax
assets |
(308,881 | ) | (323,226 | ) | ||||||
Net deferred
taxes |
2,058,490 | 2,089,762 | ||||||||
Less: Current
net deferred taxes (1) |
136,232 | 324,649 | ||||||||
Deferred taxes
on income (2) |
$ | 1,922,258 | $ | 1,765,113 |
(1) |
The table of deferred tax liabilities and (assets) above includes $136.2 million and $324.6 million for 2005 and 2004, respectively, of current net deferred taxes, which are included in income taxes payable in the Consolidated Balance Sheets. |
(2) |
The table of deferred tax liabilities and (assets) above includes $145.1 million and $166.9 million for 2005 and 2004, respectively, of non-deferred tax liabilities, which are included as a component of deferred tax liabilities in the Consolidated Balance Sheets. |
Pension Benefits |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
United States |
Foreign |
||||||||||||||||||
December 31 |
2005 |
2004 |
2005 |
2004 |
|||||||||||||||
Change in
benefit obligation: |
|||||||||||||||||||
Benefit
obligation at beginning of year |
$ | 1,542,750 | $ | 1,472,410 | $ | 392,006 | $ | 328,507 | |||||||||||
Service
cost |
29,241 | 30,055 | 8,881 | 9,094 | |||||||||||||||
Interest
cost |
90,993 | 88,401 | 20,899 | 20,116 | |||||||||||||||
Plan
participants contributions |
- | - | 1,856 | 1,968 | |||||||||||||||
Plan
amendments |
8,551 | - | 719 | - | |||||||||||||||
Actuarial
loss |
67,865 | 57,940 | 68,029 | 17,762 | |||||||||||||||
Foreign
currency changes |
- | - | (4,255 | ) | 28,550 | ||||||||||||||
Curtailment |
- | - | (1,052 | ) | 352 | ||||||||||||||
Benefits
paid |
(101,148 | ) | (106,056 | ) | (15,663 | ) | (14,343 | ) | |||||||||||
Benefit
obligation at end of year |
$ | 1,638,252 | $ | 1,542,750 | $ | 471,420 | $ | 392,006 |
Pension Benefits |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
United States |
Foreign |
||||||||||||||||||
December 31 |
2005 |
2004 |
2005 |
2004 | |||||||||||||||
Change in
plan assets: |
|||||||||||||||||||
Fair value of
plan assets at beginning of year |
$ | 1,456,050 | $ | 1,411,197 | $ | 340,271 | $ | 289,096 | |||||||||||
Actual return
on plan assets |
115,189 | 147,008 | 57,938 | 32,383 | |||||||||||||||
Company
contributions |
58,826 | 3,901 | 29,761 | 5,949 | |||||||||||||||
Plan
participants contributions |
- | - | 1,856 | 1,968 | |||||||||||||||
Foreign
currency changes |
- | - | (2,645 | ) | 25,218 | ||||||||||||||
Benefits
paid |
(101,148 | ) | (106,056 | ) | (15,663 | ) | (14,343 | ) | |||||||||||
Fair value of
plan assets at end of year |
$ | 1,528,917 | $ | 1,456,050 | $ | 411,518 | $ | 340,271 | |||||||||||
Funded
status |
$ | (109,335 | ) | $ | (86,700 | ) | $ | (59,901 | ) | $ | (51,735 | ) | |||||||
Unrecognized
actuarial loss |
558,394 | 509,244 | 127,156 | 99,805 | |||||||||||||||
Unrecognized
prior service (benefit) cost |
(7,479 | ) | (18,157 | ) | 3,129 | 2,653 | |||||||||||||
Unrecognized
transition cost |
- | - | (1,123 | ) | (1,590 | ) | |||||||||||||
Prepaid
benefit cost |
$ | 441,580 | $ | 404,387 | $ | 69,261 | $ | 49,133 | |||||||||||
Information for pension plans, that are included above, with an accumulated benefit obligation in excess of plan assets is as
follows: |
|||||||||||||||||||
2005 |
2004 |
2005 |
2004 |
||||||||||||||||
Projected
benefit obligation |
$ | 93,778 | $ | 81,627 | $ | 33,882 | $ | 30,293 | |||||||||||
Accumulated
benefit obligation |
$ | 81,204 | $ | 65,524 | $ | 32,669 | $ | 28,614 | |||||||||||
Fair value of
plan assets |
$ | 1,711 | $ | 2,128 | $ | 8,866 | $ | 7,416 | |||||||||||
The accumulated benefit obligation for all U.S. defined benefit plans at December 31, 2005 and 2004 were $1.5 billion and $1.4 billion
respectively. The accumulated benefit obligation for all foreign defined benefit plans at December 31, 2005 and 2004 were $433 million and $357 million
respectively. |
|||||||||||||||||||
United States |
Foreign |
||||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Amounts
recognized in the Consolidated Balance Sheets consist of: |
|||||||||||||||||||
Prepaid
benefit cost |
$ | 500,024 | $ | 456,246 | $ | 86,387 | $ | 65,895 | |||||||||||
Accrued
benefit liability |
(58,444 | ) | (51,859 | ) | (17,126 | ) | (16,762 | ) | |||||||||||
Additional
minimum liability |
(21,493 | ) | (11,850 | ) | (9,230 | ) | (6,237 | ) | |||||||||||
Intangible
asset |
2,620 | 2,930 | 1,601 | 1,614 | |||||||||||||||
Accumulated
other comprehensive income |
18,873 | 8,920 | 7,629 | 4,623 | |||||||||||||||
Prepaid
benefit cost |
$ | 441,580 | $ | 404,387 | $ | 69,261 | $ | 49,133 | |||||||||||
Weighted
average assumptions used to determine end of year benefit obligations: |
|||||||||||||||||||
Discount
rate |
5.60 | % | 5.75 | % | 2.25% 5.00% |
2.25% 5.75% |
|||||||||||||
Rate of
compensation increase |
4.50 | % | 4.75 | % | 1.75% 4.10% |
1.75% 4.00 | % |
Pension Benefits |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
United States |
Foreign |
||||||||||||||||||||||||||
2005 |
2004 |
2003 |
2005 |
2004 |
2003 |
||||||||||||||||||||||
Service
cost |
$ | 29,241 | $ | 30,055 | $ | 26,232 | $ | 8,881 | $ | 9,094 | $ | 7,934 | |||||||||||||||
Interest
cost |
90,993 | 88,401 | 89,205 | 20,899 | 20,116 | 17,180 | |||||||||||||||||||||
Expected
return on plan assets |
(123,498 | ) | (128,804 | ) | (125,518 | ) | (26,180 | ) | (24,161 | ) | (21,574 | ) | |||||||||||||||
Amortization
of transition cost |
- | - | - | (624 | ) | (575 | ) | (531 | ) | ||||||||||||||||||
Amortization
of prior service cost |
(2,123 | ) | (2,762 | ) | (2,758 | ) | 899 | 540 | 538 | ||||||||||||||||||
Recognized
net actuarial loss |
27,021 | 14,537 | 1,833 | 6,038 | 6,123 | 3,865 | |||||||||||||||||||||
Curtailment |
- | - | - | 430 | 352 | 1,162 | |||||||||||||||||||||
Net periodic
benefit cost (income) |
$ | 21,634 | $ | 1,427 | $ | (11,006 | ) | $ | 10,343 | $ | 11,489 | $ | 8,574 |
Pension Benefits |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
United States |
Foreign |
||||||||||||||||||||||||||
2005 |
2004 |
2003 |
2005 |
2004 |
2003 |
||||||||||||||||||||||
Discount
rate |
5.75 | % | 6.00 | % | 6.75 | % | 2.25% 5.75 | % | 2.25% 6.00 | % | 2.50% 6.50 | % | |||||||||||||||
Expected
return on plan assets |
8.50 | % | 8.50 | % | 8.50 | % | 3.50% 8.25 | % | 4.00% 8.25 | % | 4.00% 8.25 | % | |||||||||||||||
Rate of
compensation increase |
4.75 | % | 4.75 | % | 4.75 | % | 1.75% 4.00 | % | 1.75% 4.00 | % | 2.00% 4.50 | % |
Target Allocation |
Percentage of Plan Assets at December 31 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Asset category |
2006 |
2005 |
2004 |
||||||||||||
U.S.
equities |
50 | % | 48 | % | 49 | % | |||||||||
Non-U.S.
equities |
20 | % | 22 | % | 22 | % | |||||||||
Fixed
income |
25 | % | 25 | % | 24 | % | |||||||||
Real
estate |
5 | % | 5 | % | 5 | % | |||||||||
Total |
100 | % | 100 | % | 100 | % |
Target Allocation |
Percentage of Plan Assets at December 31 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Asset category |
2006 |
2005 |
2004 |
||||||||||||
U.K.
equities |
35 | % | 33 | % | 38 | % | |||||||||
Non-U.K.
equities |
35 | % | 35 | % | 34 | % | |||||||||
Fixed
income |
30 | % | 24 | % | 27 | % | |||||||||
Cash |
| 8 | % | 1 | % | ||||||||||
Total |
100 | % | 100 | % | 100 | % |
Nonpension Postretirement Benefits |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31 |
2005 |
2004 |
||||||||||||
Change in
benefit obligation: |
||||||||||||||
Benefit
obligations at beginning of year |
$ | 311,915 | $ | 339,576 | ||||||||||
Service
cost |
3,154 | 3,387 | ||||||||||||
Interest
cost |
14,716 | 17,638 | ||||||||||||
Plan
participants contributions |
5,987 | 5,535 | ||||||||||||
Plan
amendments |
246 | - | ||||||||||||
Actuarial
(gain) |
(22,310 | ) | (18,674 | ) | ||||||||||
Foreign currency
changes |
686 | 607 | ||||||||||||
Benefits
paid |
(41,712 | ) | (36,154 | ) | ||||||||||
Benefit
obligations at end of year |
$ | 272,682 | $ | 311,915 | ||||||||||
Change in
plan assets: |
||||||||||||||
Fair value of
plan assets at beginning of year |
$ | - | $ | - | ||||||||||
Company
contribution |
35,725 | 30,619 | ||||||||||||
Plan
participants contributions |
5,987 | 5,535 | ||||||||||||
Benefits
paid |
(41,712 | ) | (36,154 | ) | ||||||||||
Fair value of
plan assets at end of year |
$ | - | $ | - | ||||||||||
Funded
status |
$ | (272,682 | ) | $ | (311,915 | ) | ||||||||
Unrecognized
actuarial loss |
44,557 | 68,482 | ||||||||||||
Unrecognized
prior service benefit |
(12,839 | ) | (15,208 | ) | ||||||||||
Accrued benefit
cost |
$ | (240,964 | ) | $ | (258,641 | ) | ||||||||
The
assumed weighted average discount rate used in determining the accumulated nonpension postretirement benefit obligations was 5.60% in 2005 and 5.75% in
2004. In 2003, the Company amended the retiree medical program to award retiree medical benefits based on each year of service after age 45. The components of the net periodic benefit cost for nonpension postretirement benefit plans are as follows: |
||||||||||||||
Nonpension Postretirement Benefits |
||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
Service
cost |
$ | 3,154 | $ | 3,387 | $ | 3,590 | ||||||||
Interest
cost |
14,716 | 17,638 | 19,670 | |||||||||||
Amortization of
prior service benefit |
(2,122 | ) | (8,139 | ) | (8,581 | ) | ||||||||
Recognized net
actuarial loss |
1,871 | 4,684 | 4,182 | |||||||||||
Net periodic
benefit cost |
$ | 17,619 | $ | 17,570 | $ | 18,861 | ||||||||
Weighted
average assumptions used to determine |
Nonpension Postretirement Benefits |
|||||||||||||
net periodic
costs during the years: |
2005 |
2004 |
2003 |
|||||||||||
Discount
rate |
5.75% |
6.00% |
6.75% |
1-Percentage- Point Increase |
1-Percentage- Point Decrease |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Effect on total
of service and interest cost components |
$ | 634 | $ | 537 | ||||||
Effect on
postretirement benefit obligations |
$ | 9,516 | $ | 8,480 |
Pension Benefits |
Nonpension Postretirement Benefits |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
For the year
ending 12/31/06 |
$ | 104,424 | $ | 30,747 | ||||||
For the year
ending 12/31/07 |
108,995 | 30,204 | ||||||||
For the year
ending 12/31/08 |
113,179 | 28,544 | ||||||||
For the year
ending 12/31/09 |
118,682 | 27,327 | ||||||||
For the year
ending 12/31/10 |
126,652 | 26,222 | ||||||||
For the years
ending 12/31/1112/31/15 |
727,322 | 110,877 | ||||||||
$ | 1,299,254 | $ | 253,921 |
(Dollars in millions) |
Restructuring charges |
Non-cash charges |
Cash payments |
Balance December 31 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 |
||||||||||||||||||
Severance and
benefit costs |
$ | 81 | $ | - | $ | (54 | ) | $ | 27 | |||||||||
Asset
impairments |
27 | (27 | ) | - | - | |||||||||||||
Other exit
costs |
9 | - | (4 | ) | 5 | |||||||||||||
$ | 117 | $ | (27 | ) | $ | (58 | ) | $ | 32 | |||||||||
2004 |
||||||||||||||||||
Severance and
benefit costs |
$ | 76 | $ | - | $ | (55 | ) | $ | 48 | |||||||||
Asset
impairments |
73 | (73 | ) | - | - | |||||||||||||
Other exit
costs |
9 | - | (11 | ) | 3 | |||||||||||||
$ | 158 | $ | (73 | ) | $ | (66 | ) | $ | 51 | |||||||||
2005 |
||||||||||||||||||
Severance and
benefit costs |
$ | 71 | $ | - | $ | (74 | ) | $ | 45 | |||||||||
Asset
impairments |
7 | (7 | ) | - | - | |||||||||||||
Other exit
costs |
6 | - | (4 | ) | 5 | |||||||||||||
Gain on sale
of main plant |
(30 | ) | - | 30 | - | |||||||||||||
$ | 54 | $ | (7 | ) | $ | (48 | ) | $ | 50 |
(Dollars in thousands) |
Danka |
Imagitas |
Compulit |
Groupe MAG |
Ancora |
Group 1 |
IMEX |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Purchase
price allocation |
||||||||||||||||||||||||||||||
Current
assets |
$ | 12,502 | $ | 40,577 | $ | 4,462 | $ | 31,427 | $ | 2,711 | $ | 34,575 | $ | 7,991 | ||||||||||||||||
Other
non-current assets |
5,627 | 3,267 | 656 | 832 | 13,834 | 5,827 | 310 | |||||||||||||||||||||||
Intangible
assets |
4,203 | 59,600 | 2,797 | 12,179 | 13,923 | 82,067 | 9,600 | |||||||||||||||||||||||
Goodwill |
8,358 | 195,234 | 17,541 | 25,304 | 20,791 | 293,593 | 20,180 | |||||||||||||||||||||||
Current
liabilities |
(16,690 | ) | (42,600 | ) | (1,130 | ) | (22,867 | ) | (14,297 | ) | (78,424 | ) | (7,954 | ) | ||||||||||||||||
Non-current
liabilities |
- | (25,216 | ) | - | (3,617 | ) | - | (8,517 | ) | - | ||||||||||||||||||||
Purchase
price |
$ | 14,000 | $ | 230,862 | $ | 24,326 | $ | 43,258 | $ | 36,962 | $ | 329,121 | $ | 30,127 | ||||||||||||||||
Intangible
assets |
||||||||||||||||||||||||||||||
Customer
relationships |
$ | 3,327 | $ | 18,300 | $ | 2,366 | $ | 10,356 | $ | 13,923 | $ | 32,267 | $ | 8,100 | ||||||||||||||||
Supplier
relationships |
- | 33,300 | - | - | - | - | - | |||||||||||||||||||||||
Mailing
software and technology |
- | 4,000 | - | - | - | 43,600 | 900 | |||||||||||||||||||||||
Trademarks
and trade names |
876 | 4,000 | 431 | 1,823 | - | 6,200 | 600 | |||||||||||||||||||||||
Total
intangible assets |
$ | 4,203 | $ | 59,600 | $ | 2,797 | $ | 12,179 | $ | 13,923 | $ | 82,067 | $ | 9,600 | ||||||||||||||||
Intangible
assets amortization period |
||||||||||||||||||||||||||||||
Customer
relationships |
15 years | 5 years | 4 years | 15 years | 15 years | 15 years | 15 years | |||||||||||||||||||||||
Supplier
relationships |
- | 9 years | - | - | - | - | - | |||||||||||||||||||||||
Mailing
software and technology |
- | 5 years | - | - | - | 9 years | 5 years | |||||||||||||||||||||||
Trademarks
and trade names |
4 years | 5 years | 5 years | 5 years | - | 9 years | 2 years | |||||||||||||||||||||||
Total
weighted average |
13 years | 8 years | 4 years | 14 years | 15 years | 11 years | 13 years |
Years ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
||||||||||
Total
revenue |
$ | 5,550,483 | $ | 5,272,240 |
2005 |
2004 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31 |
Gross Carrying Amount |
Accumulated Amortization |
Gross Carrying Amount |
Accumulated Amortization |
|||||||||||||||
Customer
relationships |
$ | 273,674 | $ | 53,966 | $ | 255,512 | $ | 33,168 | |||||||||||
Supplier
relationships |
33,300 | 2,194 | - | - | |||||||||||||||
Mailing
software and technology |
113,475 | 30,525 | 111,876 | 20,730 | |||||||||||||||
Trademarks
and trade names |
21,841 | 9,702 | 15,897 | 6,685 | |||||||||||||||
Non-compete
agreements |
5,122 | 3,611 | 3,922 | 2,887 | |||||||||||||||
$ | 447,412 | $ | 99,998 | $ | 387,207 | $ | 63,470 |
For the year
ending 12/31/06 |
$ | 42,700 | ||||
For the year
ending 12/31/07 |
$ | 40,100 | ||||
For the year
ending 12/31/08 |
$ | 40,000 | ||||
For the year
ending 12/31/09 |
$ | 38,000 | ||||
For the year
ending 12/31/10 |
$ | 32,300 |
Weighted Average Amortization Period |
Acquisition Cost |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Customer
relationships |
7 | years | $ | 27,124 | ||||||
Supplier
relationships |
9 | years | 33,300 | |||||||
Mailing software
and technology |
5 | years | 4,750 | |||||||
Trademarks and
trade names |
5 | years | 5,307 | |||||||
Non-compete
agreements |
5 | years | 87 | |||||||
Weighted
average |
8 | years | $ | 70,568 |
Balance at January 1, 2004 |
Acquired |
Other |
Balance at December 31, 2004 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inside the
U.S. Mailing |
$ | 49,193 | $ | 15,605 | $ | (835 | ) | $ | 63,963 | |||||||||
DMT |
42,734 | 292,236 | (405 | ) | 334,565 | |||||||||||||
Outside the
U.S. |
308,771 | 38,366 | 32,816 | 379,953 | ||||||||||||||
Global
Mailstream Solutions |
400,698 | 346,207 | 31,576 | 778,481 | ||||||||||||||
Global
Management Services |
420,149 | - | 7,425 | 427,574 | ||||||||||||||
Mail
Services |
135,437 | 68,187 | 1,702 | 205,326 | ||||||||||||||
Global
Business Services |
555,586 | 68,187 | 9,127 | 632,900 | ||||||||||||||
Total |
$ | 956,284 | $ | 414,394 | $ | 40,703 | $ | 1,411,381 |
Balance at January 1, 2005 |
Acquired |
Other |
Balance at December 31, 2005 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Inside the
U.S. Mailing |
$ | 63,963 | $ | 5,399 | $ | (3,140 | ) | $ | 66,222 | |||||||||
DMT |
334,565 | - | 1,835 | 336,400 | ||||||||||||||
Outside the
U.S. |
379,953 | 11,618 | (29,786 | ) | 361,785 | |||||||||||||
Global
Mailstream Solutions |
778,481 | 17,017 | (31,091 | ) | 764,407 | |||||||||||||
Global
Management Services |
427,574 | 18,287 | (10,555 | ) | 435,306 | |||||||||||||
Mail
Services |
205,326 | 202,899 | 3,848 | 412,073 | ||||||||||||||
Global
Business Services |
632,900 | 221,186 | (6,707 | ) | 847,379 | |||||||||||||
Total |
$ | 1,411,381 | $ | 238,203 | $ | (37,798 | ) | $ | 1,611,786 |
Years ending December 31 |
Capital leases |
Operating leases |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
2006 |
$ | 1,814 | $ | 69,778 | ||||||
2007 |
1,126 | 51,749 | ||||||||
2008 |
666 | 38,279 | ||||||||
2009 |
200 | 24,112 | ||||||||
2010 |
4 | 14,901 | ||||||||
Thereafter |
| 42,715 | ||||||||
Total minimum
lease payments |
3,810 | $ | 241,534 | |||||||
Less: Amount
representing interest |
(276 | ) | ||||||||
Present value of
net minimum lease payments |
$ | 3,534 |
December 31 |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
2004 |
|||||||||||||
Finance
receivables |
$ | (4 | ) | |||||||||||
Rental
property and equipment, net |
570 | |||||||||||||
Long-term
finance receivables |
(41 | ) | ||||||||||||
Investment in
leveraged leases |
(107 | ) | ||||||||||||
Other
assets |
(27 | ) | ||||||||||||
Total
assets |
$ | 391 | ||||||||||||
Accounts
payable |
$ | 12 | ||||||||||||
Notes payable
and current portion of long-term debt |
32 | |||||||||||||
Deferred
taxes on income |
(7 | ) | ||||||||||||
Long-term
debt |
366 | |||||||||||||
Other
non-current liabilities |
(12 | ) | ||||||||||||
Retained
earnings |
| |||||||||||||
Total
liabilities & stockholders equity |
$ | 391 | ||||||||||||
Capital
Services portfolio |
||||||||||||||
The Companys investment in Capital Services lease related assets included in its Consolidated Balance Sheets was composed of the
following: |
||||||||||||||
December
31 |
||||||||||||||
(Dollars in
millions) |
2005 | 2004 | ||||||||||||
Leveraged
leases |
$ | 1,470 | $ | 1,478 | ||||||||||
Finance
receivables |
520 | 587 | ||||||||||||
Rental
property and equipment, net |
585 | 625 | ||||||||||||
Total |
$ | 2,575 | $ | 2,690 | ||||||||||
Leveraged
Leases |
||||||||||||||
The Companys investment in leveraged lease assets consists of the following: |
||||||||||||||
December
31 |
||||||||||||||
(Dollars in
millions) |
2005 | 2004 | ||||||||||||
Rental
receivables |
$ | 6,711 | $ | 7,243 | ||||||||||
Residual
value |
305 | 312 | ||||||||||||
Principal and
interest on non-recourse loans |
(4,985 | ) | (5,477 | ) | ||||||||||
Unearned
income |
(561 | ) | (600 | ) | ||||||||||
Investment in
leveraged leases |
1,470 | 1,478 | ||||||||||||
Less:
Deferred taxes related to leveraged leases |
(1,151 | ) | (1,126 | ) | ||||||||||
Net
investment in leveraged leases |
$ | 319 | $ | 352 | ||||||||||
Following is a summary of the components of income from leveraged leases: |
||||||||||||||
December
31 |
||||||||||||||
(Dollars in
millions) |
2005 | 2004 | 2003 | |||||||||||
Pre-tax
leveraged lease income |
$ | 38.3 | $ | 52.6 | $ | 73.8 | ||||||||
Income tax
effect |
9.5 | 17.7 | 21.6 | |||||||||||
Income from
leveraged leases |
$ | 28.8 | $ | 34.9 | $ | 52.2 |
|
Rental receivables represent total lease payments from the Companys customers over the remaining term of the leveraged leases. |
|
Residual value represents the value of the property anticipated at the end of the leveraged lease terms and is based on appraisals or other sources of estimated value. The Company reviews the recorded residual value for impairments deemed to be other than temporary at least once annually and records adjustments as appropriate. |
|
Principal and interest on non-recourse loans represent amounts due to unrelated third parties from the Companys customers over the remaining term of the leveraged leases. The non-recourse loans are secured by the lessees rental obligations and the leased property. If a lessee defaults and if the amounts realized from the sale of these assets are insufficient to pay the non-recourse debt, the Company has no obligation to make any payments due on these non-recourse loans to the unrelated third parties. Accordingly, the Company is required by GAAP to subtract the principal and interest over the remaining term of the non-recourse loans from its rental receivables and residual value. At December 31, 2005 and 2004, the principal balances on the non-recourse loans totaled $2.8 billion and $3.2 billion, respectively, and the related interest payments over the remaining terms of the leases totaled $2.2 billion and $2.3 billion, respectively. |
|
Unearned income represents the Companys future financing income that will be earned over the remaining term of the leases. |
|
Investment in leveraged leases represent the amount that is recorded in the Companys Consolidated Balance Sheets. |
December 31 (Dollars in millions) |
2005 |
2004 |
Original Lease Term (in years) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Locomotives
and rail cars |
$ | 399 | $ | 382 | 20 40 | |||||||||
Postal
equipment |
365 | 358 | 15 24 | |||||||||||
Commercial
aircraft |
230 | 268 | 22 25 | |||||||||||
Commercial
real estate |
142 | 140 | 17 25 | |||||||||||
Telecommunications |
141 | 141 | 14 16 | |||||||||||
Rail and
bus |
133 | 133 | 27 37 | |||||||||||
Shipping and
handling |
60 | 56 | 24 | |||||||||||
Total
leveraged leases |
$ | 1,470 | $ | 1,478 | ||||||||||
At
December 31, 2005 approximately 57% of the Companys total leveraged lease portfolio is further secured by equity defeasance accounts or other
third-party credit arrangements. In addition, at December 31, 2005, approximately 9% of the remaining leveraged lease portfolio represents leases to
highly rated government related organizations that have guarantees or supplemental credit enhancements upon the occurrence of certain
events. |
||||||||||||||
Finance
receivables |
||||||||||||||
Capital Services finance receivables are composed of the following: |
||||||||||||||
December
31 (Dollars in millions) |
2005 | 2004 | ||||||||||||
Large ticket
single investor leases |
$ | 267 | $ | 327 | ||||||||||
Imagistics
lease portfolio |
253 | 260 | ||||||||||||
Total finance
receivables |
$ | 520 | $ | 587 | ||||||||||
Rental
property and equipment, net |
||||||||||||||
Rental property and equipment, net are composed of the following: |
||||||||||||||
December
31 (Dollars in millions) |
2005 | 2004 | ||||||||||||
Commercial
real estate |
$ | 393 | $ | 396 | ||||||||||
Imagistics
lease portfolio |
17 | 23 | ||||||||||||
Rail and
other |
175 | 206 | ||||||||||||
Total rental
property and equipment, net |
$ | 585 | $ | 625 |
December 31 |
2005 |
2004 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross finance
receivables |
$ | 3,784,531 | $ | 3,826,009 | ||||||||||
Residual
valuation |
364,327 | 363,745 | ||||||||||||
Initial
direct cost deferred |
10,888 | 12,158 | ||||||||||||
Allowance for
credit losses |
(128,862 | ) | (173,032 | ) | ||||||||||
Unearned
income |
(846,765 | ) | (852,806 | ) | ||||||||||
Net finance
receivables |
$ | 3,184,119 | $ | 3,176,074 | ||||||||||
Maturities of gross finance receivables for the finance operations are as follows: |
||||||||||||||
Years
ending December 31 |
Internal financing |
Capital Services |
Total |
|||||||||||
2006 |
$ | 1,559,768 | $ | 183,068 | $ | 1,742,836 | ||||||||
2007 |
751,494 | 155,451 | 906,945 | |||||||||||
2008 |
530,490 | 65,873 | 596,363 | |||||||||||
2009 |
274,198 | 39,033 | 313,231 | |||||||||||
2010 |
82,130 | 18,218 | 100,348 | |||||||||||
Thereafter |
11,015 | 113,793 | 124,808 | |||||||||||
Total |
$ | 3,209,095 | $ | 575,436 | $ | 3,784,531 |
Years ended December 31 |
2005 |
2004 |
2003 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning
balance |
$ | 173,032 | $ | 141,184 | $ | 154,008 | ||||||||
Additions
charged to continuing operations |
51,566 | 86,368 | 51,910 | |||||||||||
Amounts
written-off, net of recoveries: |
||||||||||||||
Internal
financing |
(55,479 | ) | (45,108 | ) | (48,732 | ) | ||||||||
Capital
Services |
(40,257 | ) | (9,412 | ) | (16,002 | ) | ||||||||
Total
write-offs, net of recoveries |
(95,736 | ) | (54,520 | ) | (64,734 | ) | ||||||||
Ending
balance |
$ | 128,862 | $ | 173,032 | $ | 141,184 |
Revenue |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
2005 |
2004 |
2003 |
||||||||||||
Business
segments: |
|||||||||||||||
Inside the
U.S. Mailing |
$ | 2,273 | $ | 2,185 | $ | 2,184 | |||||||||
DMT |
430 | 350 | 274 | ||||||||||||
Outside the
U.S. |
1,173 | 1,011 | 846 | ||||||||||||
Global
Mailstream Solutions |
3,876 | 3,546 | 3,304 | ||||||||||||
Global
Management Services |
1,072 | 1,078 | 1,006 | ||||||||||||
Mail
Services |
405 | 192 | 113 | ||||||||||||
Global
Business Services |
1,477 | 1,270 | 1,119 | ||||||||||||
Capital
Services |
139 | 141 | 154 | ||||||||||||
Total |
$ | 5,492 | $ | 4,957 | $ | 4,577 | |||||||||
Geographic
areas: |
|||||||||||||||
United
States |
$ | 4,091 | $ | 3,703 | $ | 3,507 | |||||||||
Outside the
United States |
1,401 | 1,254 | 1,070 | ||||||||||||
Total |
$ | 5,492 | $ | 4,957 | $ | 4,577 |
EBIT |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
2005 |
2004 |
2003 |
||||||||||||
Business
segments: |
|||||||||||||||
Inside the
U.S. Mailing |
$ | 906 | $ | 864 | $ | 847 | |||||||||
DMT |
62 | 38 | 29 | ||||||||||||
Outside the
U.S. |
203 | 174 | 132 | ||||||||||||
Global
Mailstream Solutions |
1,171 | 1,076 | 1,008 | ||||||||||||
Global
Management Services |
72 | 56 | 52 | ||||||||||||
Mail
Services |
26 | 10 | 11 | ||||||||||||
Global
Business Services |
98 | 66 | 63 | ||||||||||||
Capital
Services |
83 | 88 | 104 | ||||||||||||
Total |
$ | 1,352 | $ | 1,230 | $ | 1,175 | |||||||||
Geographic
areas: |
|||||||||||||||
United
States |
$ | 1,121 | $ | 1,023 | $ | 1,004 | |||||||||
Outside the
United States |
231 | 207 | 171 | ||||||||||||
Total |
$ | 1,352 | $ | 1,230 | $ | 1,175 |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
2005 |
2004 |
2003 |
||||||||||||
Depreciation
and amortization: |
|||||||||||||||
Inside the
U.S. Mailing |
$ | 112 | $ | 114 | $ | 122 | |||||||||
DMT |
36 | 36 | 30 | ||||||||||||
Outside the
U.S. |
61 | 52 | 43 | ||||||||||||
Global
Mailstream Solutions |
209 | 202 | 195 | ||||||||||||
Global
Management Services |
59 | 64 | 58 | ||||||||||||
Mail
Services |
27 | 22 | 15 | ||||||||||||
Global
Business Services |
86 | 86 | 73 | ||||||||||||
Capital
Services |
8 | 5 | 9 | ||||||||||||
Total |
$ | 303 | $ | 293 | $ | 277 |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
2005 |
2004 |
2003 | ||||||||||||
Capital
expenditures: |
|||||||||||||||
Inside the
U.S. Mailing |
$ | 142 | $ | 150 | $ | 133 | |||||||||
DMT |
3 | 6 | 5 | ||||||||||||
Outside the
U.S. |
71 | 76 | 57 | ||||||||||||
Global
Mailstream Solutions |
216 | 232 | 195 | ||||||||||||
Global
Management Services |
48 | 58 | 60 | ||||||||||||
Mail
Services |
21 | 19 | 21 | ||||||||||||
Global
Business Services |
69 | 77 | 81 | ||||||||||||
Capital
Services |
- | - | - | ||||||||||||
Total |
$ | 285 | $ | 309 | $ | 276 | |||||||||
Revenue by
products and services: |
|||||||||||||||
Equipment
sales and rentals |
$ | 1,954 | $ | 1,873 | $ | 1,793 | |||||||||
Equipment
financing |
482 | 439 | 433 | ||||||||||||
Equipment
support services |
663 | 591 | 564 | ||||||||||||
Supplies |
361 | 321 | 284 | ||||||||||||
Software |
248 | 163 | 87 | ||||||||||||
Payment
solutions |
168 | 159 | 143 | ||||||||||||
Management
services |
1,072 | 1,078 | 1,006 | ||||||||||||
Mail
services |
405 | 192 | 113 | ||||||||||||
Capital
services |
139 | 141 | 154 | ||||||||||||
Total |
$ | 5,492 | $ | 4,957 | $ | 4,577 | |||||||||
Years ended December 31 |
|||||||||||||||
(Dollars in
millions) |
2005 | 2004 | |||||||||||||
Identifiable
assets: |
|||||||||||||||
Inside the
U.S. Mailing |
$ | 3,392 | $ | 3,136 | |||||||||||
DMT |
714 | 705 | |||||||||||||
Outside the
U.S. |
1,718 | 1,732 | |||||||||||||
Global
Mailstream Solutions |
5,824 | 5,573 | |||||||||||||
Global
Management Services |
789 | 797 | |||||||||||||
Mail
Services |
712 | 419 | |||||||||||||
Global
Business Services |
1,501 | 1,216 | |||||||||||||
Capital
Services |
2,580 | 2,676 | |||||||||||||
Total |
$ | 9,905 | $ | 9,465 | |||||||||||
Identifiable
long-lived assets by geographic areas: |
|||||||||||||||
United
States |
$ | 3,303 | $ | 2,971 | |||||||||||
Outside the
United States |
862 | 885 | |||||||||||||
Total |
$ | 4,165 | $ | 3,856 |
Years ended December 31 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Dollars in millions) |
2005 |
2004 |
2003 |
||||||||||||
EBIT: |
|||||||||||||||
Total EBIT
for reportable segments |
$ | 1,352 | $ | 1,230 | $ | 1,175 | |||||||||
Unallocated
amounts: |
|||||||||||||||
Interest,
net |
(208 | ) | (173 | ) | (168 | ) | |||||||||
Corporate
expense |
(189 | ) | (180 | ) | (169 | ) | |||||||||
Restructuring
charges |
(54 | ) | (158 | ) | (117 | ) | |||||||||
Other income
(expense) |
(34 | ) | (20 | ) | - | ||||||||||
Income from
continuing operations before income taxes |
$ | 867 | $ | 699 | $ | 721 | |||||||||
Depreciation
and amortization: |
|||||||||||||||
Total
depreciation and amortization for reportable segments |
$ | 303 | $ | 293 | $ | 277 | |||||||||
Corporate
depreciation |
29 | 14 | 12 | ||||||||||||
Consolidated
depreciation and amortization |
$ | 332 | $ | 307 | $ | 289 | |||||||||
Capital
expenditures: |
|||||||||||||||
Total
additions for reportable segments |
$ | 285 | $ | 309 | $ | 276 | |||||||||
Unallocated
amounts |
7 | 8 | 10 | ||||||||||||
Consolidated
capital expenditures |
$ | 292 | $ | 317 | $ | 286 | |||||||||
December 31 |
|||||||||||||||
(Dollars in
millions) |
2005 |
2004 |
|||||||||||||
Total
assets: |
|||||||||||||||
Total
identifiable assets by reportable segments |
$ | 9,905 | $ | 9,465 | |||||||||||
Cash and cash
equivalents and short-term investments |
300 | 320 | |||||||||||||
General
corporate assets |
416 | 427 | |||||||||||||
Consolidated
assets |
$ | 10,621 | $ | 10,212 |
2005 |
2004 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31 |
Carrying value (1) |
Fair value |
Carrying value (1) |
Fair value |
|||||||||||||||
Investment
securities |
$ | 122,644 | $ | 122,644 | $ | 39,257 | $ | 39,257 | |||||||||||
Loans
receivable |
$ | 371,140 | $ | 371,140 | $ | 410,699 | $ | 410,699 | |||||||||||
Long-term
debt |
$ | (3,893,329 | ) | $ | (3,854,295 | ) | $ | (3,192,979 | ) | $ | (3,270,580 | ) | |||||||
Interest rate
swaps |
$ | (766 | ) | $ | (766 | ) | $ | (2,255 | ) | $ | (2,255 | ) | |||||||
Foreign
currency exchange contracts |
$ | (4,374 | ) | $ | (4,374 | ) | $ | (6,247 | ) | $ | (6,247 | ) | |||||||
Transfer of
receivables with recourse |
- | - | $ | (354 | ) | $ | (354 | ) |
(1) |
Carrying value includes accrued interest and deferred fee income, where applicable. |
Three Months Ended |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
Mar. 31 |
June 30 |
Sept. 30 |
Dec. 31 |
2005 Year |
|||||||||||||||||
Total
revenue |
$ | 1,318 | $ | 1,360 | $ | 1,356 | $ | 1,458 | $ | 5,492 | ||||||||||||
Gross profit
(1) |
719 | 743 | 746 | 805 | 3,013 | |||||||||||||||||
Restructuring
charges |
(16 | ) | 26 | 13 | 30 | 54 | ||||||||||||||||
Other income
(expense) |
(10 | ) | - | - | (24 | ) | (34 | ) | ||||||||||||||
Income from
continuing operations |
150 | 139 | 144 | 94 | 527 | |||||||||||||||||
Net
income |
$ | 150 | $ | 139 | $ | 144 | $ | 94 | $ | 527 | ||||||||||||
Basic
earnings per share |
$ | 0.65 | $ | 0.61 | $ | 0.63 | $ | 0.41 | $ | 2.30 | ||||||||||||
Net
income |
$ | 0.65 | $ | 0.61 | $ | 0.63 | $ | 0.41 | $ | 2.30 | ||||||||||||
Diluted
earnings per share |
$ | 0.64 | $ | 0.60 | $ | 0.62 | $ | 0.41 | $ | 2.27 | ||||||||||||
Net
income |
$ | 0.64 | $ | 0.60 | $ | 0.62 | $ | 0.41 | $ | 2.27 |
Three Months Ended |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 |
Mar. 31 |
June 30 |
Sept. 30 |
Dec. 31 |
Year 2004 |
|||||||||||||||||
Total
revenue |
$ | 1,172 | $ | 1,206 | $ | 1,218 | $ | 1,362 | $4,957 |
|||||||||||||
Gross profit
(1) |
639 | 660 | 673 | 744 | 2,716 |
|||||||||||||||||
Restructuring
charges |
15 | 16 | 16 | 111 | 158 |
|||||||||||||||||
Other income
(expense) |
- | - | - | 20 | 20 |
|||||||||||||||||
Income from
continuing operations |
127 | 135 | 137 | 83 | 481 |
|||||||||||||||||
Net
income |
$ | 127 | $ | 135 | $ | 137 | $ | 83 | $481 |
|||||||||||||
Basic
earnings per share |
$ | 0.55 | $ | 0.58 | $ | 0.59 | $ | 0.36 | $2.08 |
|||||||||||||
Net
income |
$ | 0.55 | $ | 0.58 | $ | 0.59 | $ | 0.36 | $2.08 |
|||||||||||||
Diluted
earnings per share |
$ | 0.54 | $ | 0.58 | $ | 0.58 | $ | 0.35 | $2.05 |
|||||||||||||
Net
income |
$ | 0.54 | $ | 0.58 | $ | 0.58 | $ | 0.35 | $2.05 |
(1) |
Gross profit is defined as total revenue less cost of sales, cost of rentals, cost of business services, cost of support services and cost of capital services. |
ITEM 9 |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Plan Category |
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights |
(b) Weighted-average exercise price of outstanding options, warrants and rights |
(c) Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity
compensation plans approved by security holders |
22,437,808 | $ | 41.21 | 17,762,322 | ||||||||||
Equity
compensation plans not approved by security holders |
158,410 | $ | 36.18 | 1,323,939 | ||||||||||
Total |
22,596,218 | $ | 41.16 | 19,086,261 |
(a) |
1. Financial statements see Item 8 on page 35 and Index to Financial Schedules on page 81. |
Reg. S-K exhibits |
Description |
Status or incorporation by reference |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
(3)(a) |
Restated Certificate of Incorporation, as amended |
Incorporated by reference to Exhibit (3a) to Form 10-K as filed with the Commission on March 30, 1993. (Commission file number 1-3579) |
||||||||
(a.1) |
Certificate of Amendment to the Restated Certificate of Incorporation (as amended May 29, 1996) |
Incorporated by reference to Exhibit (a.1) to Form 10-K as filed with the Commission on March 27, 1998. (Commission file number 1-3579) |
||||||||
(b) |
By-laws, as amended |
Incorporated by reference to Exhibit (3)(ii) to Form 10-Q as filed with the Commission on November 16, 1998. (Commission file number 1-3579) |
||||||||
(4)(a) |
Preference Share Purchase Rights Agreement dated December 11, 1995 between the Company and Chemical Mellon Shareholder Services, LLC., as
Rights Agent, as amended |
Incorporated by reference to Exhibit (4) to Form 8-K as filed with the Commission on March 13, 1996. (Commission file number 1-3579) |
||||||||
(a.1) |
Certificate of amendment to the Preference Share Purchase Rights Agreement dated December 11, 1995 between the Company and Chemical Mellon
Shareholder Services, LLC., as Rights Agent, as amended December 8, 1998 |
Incorporated by reference to Exhibit (4.4) to Form 8-A/A as filed with the Commission on December 19, 2003. (Commission file number
1-3579) |
||||||||
(b) |
Form
of Indenture between the Company and SunTrust Bank, as Trustee |
Incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-3 (No. 333-72304) as filed with the Commission on October 26,
2001. |
||||||||
(c) |
Supplemental Indenture No. 1 dated April 23, 2004 between the Company and SunTrust Bank, as Trustee |
Incorporated by reference to Exhibit 4.1 to Form 8-K as filed with the Commission on August 18, 2004. |
||||||||
(d) |
Form
of Indenture between the Company and Citibank, N.A., as Trustee |
Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-3 (No. 333-120525) as filed with the Commission on November 16,
2004. |
(10)(a) |
Retirement Plan for Directors of Pitney Bowes Inc. |
Incorporated by reference to Exhibit (10a) to Form 10-K as filed with the Commission on March 30, 1993. (Commission file number 1-3579) |
||||||||
(b) |
Pitney Bowes Inc. Directors Stock Plan (as amended and restated 1999) |
Incorporated by reference to Exhibit (i) to Form 10-K as filed with the Commission on March 30, 2000. (Commission file number 1-3579) |
||||||||
(b.1) |
Pitney Bowes Inc. Directors Stock Plan (Amendment Number 1, effective as of May 12, 2003) |
Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on August 11, 2003. (Commission file number
1-3579) |
||||||||
(c) |
Pitney Bowes 1991 Stock Plan (as amended and restated) |
Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on May 14, 1998. (Commission file number
1-3579) |
(c.1) |
Pitney Bowes 1998 Stock Plan (as amended and restated) |
Incorporated by reference to Exhibit (ii) to Form 10-K as filed with the Commission on March 30, 2000. (Commission file number
1-3579) |
||||||||
(c.2) |
Pitney Bowes Stock Plan (as amended and restated as of January 1, 2002) |
Incorporated by reference to Annex 1 to the proxy statement for the 2002 annual meeting of stockholders. (Commission file number
1-3579) |
||||||||
(d) |
Pitney Bowes Inc. Key Employees Incentive Plan (as amended and restated) |
Incorporated by reference to Exhibit (i) to Form 10-K as filed with the Commission on March 26, 2001. (Commission file number
1-3579) |
||||||||
(e) |
Pitney Bowes Severance Plan (as amended, and restated effective January 1, 1999) |
Exhibit (iv) |
||||||||
(f) |
Pitney Bowes Senior Executive Severance Policy (amended and restated as of January 1, 2000) |
Exhibit (v) |
||||||||
(g) |
Pitney Bowes Inc. Deferred Incentive Savings Plan for the Board of Directors |
Incorporated by reference to Exhibit (i) to Form 10-Q as filed with the Commission on May 15, 1997. (Commission file number
1-3579) |
||||||||
(g.1) |
Pitney Bowes Inc. Deferred Incentive Savings Plan for the Board of Directors (as amended and restated 1999) |
Incorporated by reference to Exhibit (iii) to Form 10-K as filed with the Commission on March 30, 2000. (Commission file number
1-3579) |
||||||||
(h) |
Pitney Bowes Inc. Deferred Incentive Savings Plan (amended and restated January 1, 2003) |
Exhibit (vi) |
||||||||
(i) |
Pitney Bowes U.K. Stock Option Plan (as amended and restated 1999) |
Incorporated by reference to Exhibit (iv) to Form 10-K as filed with the Commission on March 30, 2000. (Commission file number
1-3579) |
||||||||
(j) |
Pitney Bowes Separation Agreement with Karen M. Garrison dated December 5, 2003 |
Incorporated by reference to Exhibit (iv) to Form 10-K as filed with the Commission on March 9, 2004. (Commission file number
1-3579) |
||||||||
(k) |
Pitney Bowes Separation Agreement with Matthew S. Kissner dated December 16, 2004 |
Incorporated by reference to Exhibit (10.1) to Form 8-K as filed with the Commission on December 22, 2004. (Commission file number
1-3579) |
||||||||
(l) |
Pitney Bowes Terms of Employment Arrangements for the Named Executive Officers for 2005 dated February 14, 2005 |
Incorporated by reference to Exhibit (10.1) to Form 8-K as filed with the Commission on February 18, 2005. (Commission file number
1-3579) |
||||||||
Other: |
||||||||||
(m) |
Subscription Agreement between Pitney Bowes Credit Corporation and JCC Management LLC dated as of March 31, 2005 |
Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on May 6, 2005. (Commission file number
1-3579) |
||||||||
(12) |
Computation of ratio of earnings to fixed charges |
Exhibit (i) |
||||||||
(21) |
Subsidiaries of the registrant |
Exhibit (ii) |
||||||||
(23) |
Consent of experts and counsel |
Exhibit (iii) |
||||||||
(31.1) |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
See
page 86 |
||||||||
(31.2) |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
See
page 87 |
||||||||
(32.1) |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 |
See
page 88 |
||||||||
(32.2) |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
See
page 89 |
By: |
/s/ Michael J. Critelli (Michael J. Critelli) Chairman and Chief Executive Officer Date: March 13, 2006 |
Signature |
Title |
Date |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Michael J.
Critelli Michael J. Critelli |
Chairman and Chief Executive Officer Director |
March 13,
2006 |
||||||||
/s/ Bruce P.
Nolop Bruce P. Nolop |
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
March 13,
2006 |
||||||||
/s/ Steven J.
Green Steven J. Green |
Vice
President Finance and Chief Accounting Officer (Principal Accounting Officer) |
March 13,
2006 |
||||||||
/s/ Linda G.
Alvarado Linda G. Alvarado |
Director |
March 13,
2006 |
||||||||
/s/ Colin G.
Campbell Colin G. Campbell |
Director |
March 13,
2006 |
||||||||
/s/ Anne S.
Fuchs Anne S. Fuchs |
Director |
March 13,
2006 |
||||||||
/s/ Ernie
Green Ernie Green |
Director |
March 13,
2006 |
||||||||
/s/ James H.
Keyes James H. Keyes |
Director |
March 13,
2006 |
||||||||
/s/ John S.
McFarlane John S. McFarlane |
Director |
March 13,
2006 |
||||||||
/s/ Eduardo R.
Menascé Eduardo R. Menascé |
Director |
March 13,
2006 |
||||||||
/s/ Michael I.
Roth Michael I. Roth |
Director |
March 13,
2006 |
||||||||
/s/ David L.
Shedlarz David L. Shedlarz |
Director |
March 13,
2006 |
||||||||
/s/ Robert E.
Weissman Robert E. Weissman |
Director |
March 13,
2006 |
Page |
||||||
---|---|---|---|---|---|---|
Pitney Bowes
Inc.: |
||||||
Financial statement schedule for the years ended December 31, 2005, 2004 and 2003: |
||||||
Report of
independent registered public accounting firm on financial statement schedule |
74 | |||||
Valuation and
qualifying accounts and reserves (Schedule II) |
81 |
Description |
Balance at beginning of year |
Additions |
Deductions |
Balance at end of year |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance
for doubtful accounts |
||||||||||||||||||
2005 |
$ | 50,254 | $ | 8,707 | (1) | $ | 12,700 | (2) | $ | 46,261 | ||||||||
2004 |
$ | 39,778 | $ | 23,692 | (1) | $ | 13,216 | (2) | $ | 50,254 | ||||||||
2003 |
$ | 35,139 | $ | 15,810 | (1) | $ | 11,171 | (2) | $ | 39,778 | ||||||||
Allowance for credit losses on finance receivables |
||||||||||||||||||
2005 |
$ | 173,032 | $ | 51,566 | $ | 95,736 | (2) | $ | 128,862 | |||||||||
2004 |
$ | 141,184 | $ | 86,368 | (3) | $ | 54,520 | (2) | $ | 173,032 | ||||||||
2003 |
$ | 154,008 | $ | 51,910 | $ | 64,734 | (2) | $ | 141,184 | |||||||||
Valuation allowance for deferred tax asset (4) |
||||||||||||||||||
2005 |
$ | 18,427 | $ | 7,641 | $ | 4,291 | $ | 21,777 | ||||||||||
2004 |
$ | 4,517 | $ | 15,208 | $ | 1,298 | $ | 18,427 | ||||||||||
2003 |
$ | 13,398 | $ | 2,459 | $ | 11,340 | $ | 4,517 |
(1) |
Includes additions charged to expenses, additions from acquisitions and impact of foreign exchange translation. |
(2) |
Principally uncollectible accounts written off. |
(3) |
Includes $30 million of additions related to the consolidation of PBG Capital Partners LLC. |
(4) |
Included in Consolidated Balance Sheets as a liability. |
Years ended December 31 |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
2003 |
2002 |
2001 (2) |
|||||||||||||||||||
Income from
continuing operations before income taxes |
$ | 867,124 | $ | 699,448 | $ | 721,091 | $ | 619,445 | $ | 766,384 | |||||||||||||
Add: |
|||||||||||||||||||||||
Interest
expense |
213,556 | 177,126 | 171,281 | 190,652 | 202,174 | ||||||||||||||||||
Portion of
rents representative of the interest factor |
52,823 | 51,445 | 45,978 | 43,032 | 36,032 | ||||||||||||||||||
Amortization
of capitalized interest |
986 | 1,473 | 1,473 | 1,348 | 973 | ||||||||||||||||||
Minority
interest in the income of subsidiary with fixed charges |
8,917 | 4,791 | 3,924 | 5,415 | 9,995 | ||||||||||||||||||
Income as
adjusted |
$ | 1,143,406 | $ | 934,283 | $ | 943,747 | $ | 859,892 | $ | 1,015,558 | |||||||||||||
Fixed
charges: |
|||||||||||||||||||||||
Interest
expense |
$ | 213,556 | $ | 177,126 | $ | 171,281 | $ | 190,652 | $ | 202,174 | |||||||||||||
Portions of
rents representative of the interest factor |
52,823 | 51,445 | 45,978 | 43,032 | 36,032 | ||||||||||||||||||
Minority
interest, excluding taxes, in the income of subsidiary with fixed charges |
14,683 | 6,974 | 5,718 | 7,663 | 14,893 | ||||||||||||||||||
Total fixed
charges |
$ | 281,062 | $ | 235,545 | $ | 222,977 | $ | 241,347 | $ | 253,099 | |||||||||||||
Ratio of
earnings to fixed charges |
4.07 | 3.97 | 4.23 | 3.56 | 4.01 |
(1) |
The computation of the ratio of earnings to fixed charges has been computed by dividing income from continuing operations before income taxes as adjusted by fixed charges. Included in fixed charges is one-third of rental expense as the representative portion of interest. |
(2) |
Amounts reclassified to reflect IGI, CPLC and AMIC as
discontinued operations. Interest expense and the portion of rents representative of the interest factor of these discontinued operations have been
excluded from fixed charges in the computation. Including these amounts in fixed charges, the ratio of earnings to fixed charges would be 3.87 for the year ended December 31, 2001. |
Company name |
Country or state of incorporation |
|||||
---|---|---|---|---|---|---|
Addressing
Systems International Holdings Limited |
England |
|||||
Adrema Leasing
Corporation |
Delaware |
|||||
Adrema
Maschinen und Auto Leasing GmbH |
Germany |
|||||
Adrema
Maschinenbau Inc. |
Delaware |
|||||
Andeen
Enterprises, Inc. |
Panama |
|||||
Archiver
Limited f/k/a Micromedia Limited |
England |
|||||
Artec
International Corporation |
California |
|||||
Bell &
Howell France Holding SAS |
France |
|||||
B. Williams
Funding Corp. |
Delaware |
|||||
B. Williams
Holding Corp. |
Delaware |
|||||
Burmas voorheen
Buroservice NV |
Belgium |
|||||
Canadian Office
Services (Toronto) Limited |
Canada |
|||||
Cascade
Microfilm Systems, Inc. |
California |
|||||
CPLC
Inc. |
Delaware |
|||||
Danka Canada,
Inc. |
Canada |
|||||
Document
Process S.A. |
France |
|||||
ECL Finance
Company, NV |
Netherlands |
|||||
Elmcroft Road
Realty Corporation |
Connecticut |
|||||
FSL Holdings
Inc. |
Connecticut |
|||||
FSL Risk
Managers Inc. |
New
York |
|||||
Group 1
Software China Ltd. |
Hong
Kong |
|||||
Group 1
Software Korea Ltd. |
Korea |
|||||
Group 1
Software Asia Pacific Pte Ltd. |
Singapore |
|||||
Group 1
Software Beijing Ltd. |
China |
|||||
Group 1
Software Europe Ltd. (U.K.) |
UK |
|||||
Group 1
Software France SA |
France |
|||||
Group 1
Software Germany GmbH |
Germany |
|||||
Group 1
Software Japan KK |
Japan |
|||||
Group 1
Software Inc. |
Delaware |
|||||
Harlow Aircraft
Inc. |
Delaware |
|||||
Imagitas,
Inc. |
Delaware |
|||||
Imagitas
Security Corporation |
Massachusetts |
|||||
Informatech
Inc. |
California |
|||||
International
Asset Residual Management Ltd. |
Bermuda |
|||||
International
Imaging Limited |
England |
|||||
La Agricultora
Ecuatoriana S.A. |
Ecuador |
|||||
Logestim
Logiciels et Systèmes, Texte et Image SAS |
France |
|||||
Mag Expansion
SA |
France |
|||||
Mag
Systèmes SAS |
France |
|||||
Mag Graphic
SAS |
France |
|||||
MailCode
Holdings, Inc. |
Indiana |
|||||
MailCode,
Inc. |
Delaware |
|||||
Norlin
Australia Investments Pty. Limited |
Australia |
|||||
Oy Adrema
Helsinki |
Finland |
|||||
PB Air
Inc. |
Nevada |
|||||
PB Aircraft
Finance Inc. |
Delaware |
|||||
PB Australia
Funding Pty. Limited |
Australia |
|||||
PB Canada
Funding Ltd. |
Canada |
|||||
PB CFSC I
Inc. |
Virgin
Islands |
|||||
PB Equipment
Management Inc. |
Delaware |
|||||
PB Forms,
Inc. |
Nebraska |
|||||
PB Funding
Corporation |
Delaware |
|||||
PB Global
Financial Services Inc. |
Delaware |
|||||
PB Global
Holdings Inc. |
Connecticut |
|||||
PB Global
Holdings II Inc. |
Connecticut |
|||||
PB Global
Holdings III Inc. |
Connecticut |
|||||
PB Global
Holdings IV Inc. |
Connecticut |
|||||
PB Lease
Holdings Inc. |
Nevada |
|||||
PB Leasing
Corporation |
Delaware |
|||||
PB Leasing
Services Inc. |
Nevada |
|||||
PB Miles
Inc. |
Delaware |
|||||
PB Municipal
Funding Inc. |
Nevada |
|||||
PB Nihon FSC
Ltd. |
Bermuda |
|||||
PB Nikko FSC
Ltd. |
Bermuda |
|||||
PB Nova Scotia
II ULC |
Canada |
|||||
PB Partnership
Financing Inc. |
Delaware |
|||||
PB Production
International Corp. |
Delaware |
|||||
PB Professional
Services Inc. |
Delaware |
|||||
PB Public
Finance Inc. |
Delaware |
|||||
PB Texas
LP |
Delaware |
|||||
PB World Trade
Corp. |
Delaware |
|||||
PBA Foreign
Sales Corporation |
Barbados |
|||||
PBG Holdings
Inc. |
Delaware |
|||||
PCAN Mailing
Solutions, Inc./Solutions DAffranchissement PCAN Inc. |
Canada |
|||||
Pitney Bowes
Australia FAS Pty. Limited |
Australia |
|||||
Pitney Bowes
Australia Pty. |
Australia |
|||||
Pitney Bowes
Austria Ges.m.b.H |
Austria |
|||||
Pitney Bowes
Belgium NV |
Belgium |
|||||
Pitney Bowes of
Canada Ltd.Pitney Bowes du Canada Ltee |
Canada |
|||||
Pitney Bowes
Canada Holdings Limited |
Canada |
|||||
Pitney Bowes
China Inc. |
Delaware |
|||||
Pitney Bowes
Credit Australia Limited |
Australia |
|||||
Pitney Bowes
Credit Corporation |
Delaware |
|||||
Pitney Bowes
Cross Border Services, Inc |
Delaware |
|||||
Pitney Bowes
Danmark A/S (formerly Haro Systemer AS) |
Denmark |
|||||
Pitney Bowes
Data Systems, Ltd. |
Delaware |
|||||
Pitney Bowes de
Mexico, S.A. de C.V. |
Mexico |
|||||
Pitney Bowes
Deutschland GmbH |
Germany |
|||||
Pitney Bowes
Document Messaging Technologies Limited (formerly Bell & Howell Limited) |
England |
|||||
Pitney Bowes
Espana, S.A. |
Spain |
|||||
Pitney Bowes
Finans Norge AS |
Norway |
|||||
Pitney Bowes
Finance plc (formerly PB Leasing Ltd.) |
England |
|||||
Pitney Bowes
Finance Ireland Limited |
Ireland |
|||||
Pitney Bowes
France S.A. |
France |
|||||
Pitney Bowes
Global Limited |
England |
|||||
Pitney Bowes
Government Solutions, Inc. |
Delaware |
|||||
Pitney Bowes
Holding SNC |
France |
|||||
Pitney Bowes
Holdings B.V. |
Netherlands |
|||||
Pitney Bowes
Holdings Denmark ApS |
Denmark |
|||||
Pitney Bowes
Holdings Limited |
England |
|||||
Pitney Bowes
Hong Kong Inc. |
Delaware |
|||||
Pitney Bowes
Hong Kong Limited |
Hong
Kong |
|||||
Pitney Bowes
India Inc. |
Delaware |
|||||
Pitney Bowes
India Private Limited |
India |
|||||
Pitney Bowes
Insurance Agency, Inc. |
Connecticut |
|||||
Pitney Bowes
International |
Ireland |
|||||
Pitney Bowes
International Funding |
Ireland |
|||||
Pitney Bowes
International Holdings, Inc. |
Delaware |
|||||
Pitney Bowes
Italia S.r.l. |
Italy |
|||||
Pitney Bowes
Japan KK |
Japan |
|||||
Pitney Bowes
Korea Ltd. |
Korea |
Company name |
Country or state of incorporation |
|||||
---|---|---|---|---|---|---|
Pitney Bowes
(Ireland) Limited |
Ireland |
|||||
Pitney Bowes
Limited |
England |
|||||
Pitney Bowes
Luxembourg SARL |
Luxembourg |
|||||
Pitney Bowes
(Macau) Limited |
Macau |
|||||
Pitney Bowes
Mail and Messaging Systems (Shanghai) Co., Ltd. |
Shanghai |
|||||
Pitney Bowes
Management Services Belgium, NV |
Belgium |
|||||
Pitney Bowes
Management Services Canada, Inc. Services de Gestion Pitney Bowes Canada, Inc. |
Canada |
|||||
Pitney Bowes
Management Services Denmark, A/S |
Denmark |
|||||
Pitney Bowes
Management Services Deutschland GmbH |
Germany |
|||||
Pitney Bowes
Management Services France S.A.S. |
France |
|||||
Pitney Bowes
Management Services Italia S.r.l. |
Italy |
|||||
Pitney Bowes
Management Services Limited |
England |
|||||
Pitney Bowes
Management Services Netherlands, B.V. |
Netherlands |
|||||
Pitney Bowes
Management Services Norway A.S. |
Norway |
|||||
Pitney Bowes
Management Services Sweden AB |
Sweden |
|||||
Pitney Bowes
Management Services, Inc. |
Delaware |
|||||
Pitney Bowes
Netherlands B.V. |
Netherlands |
|||||
Pitney Bowes
New Zealand Limited |
New
Zealand |
|||||
Pitney Bowes
Oy |
Finland |
|||||
Pitney Bowes
Norge AS |
Norway |
|||||
Pitney Bowes
Portugal Sociedade Unipessoal, Lda. |
Portugal |
|||||
Pitney Bowes
Nova Scotia ULC |
Canada |
|||||
Pitney Bowes
Properties Inc. |
Connecticut |
|||||
Pitney Bowes
Real Estate Financing Corporation |
Delaware |
|||||
Pitney Bowes SA
(Pty) Ltd. |
South
Africa |
|||||
Pitney Bowes
Semco Equipamentos E Servicos Ltda |
Brazil |
|||||
Pitney Bowes
Service Solutions, Inc. |
Delaware |
|||||
Pitney Bowes
Servicios, S.A. de C.V. |
Mexico |
|||||
Pitney Bowes
Shelton Realty Inc. |
Connecticut |
|||||
Pitney Bowes
(Singapore) Pte Ltd. |
Singapore |
|||||
Pitney Bowes
Svenska Aktiebolag |
Sweden |
|||||
Pitney Bowes
(Switzerland) AG |
Switzerland |
|||||
Pitney Bowes
(Thailand) Limited |
Thailand |
|||||
Pitney
Structured Funding I Inc. |
Delaware |
|||||
Pitney B2B
Capital.com Connecticut Inc. |
Delaware |
|||||
PitneyWorks.com
Inc. |
Delaware |
|||||
PREFCO Dover
Inc. |
Delaware |
|||||
PREFCO Onze
Inc. |
Delaware |
|||||
PREFCO I LP
Inc. |
Delaware |
|||||
PREFCO II SPE
Inc. |
Delaware |
|||||
PREFCO II
Inc. |
Delaware |
|||||
PREFCO III LP
Inc. |
Delaware |
|||||
PREFCO IV LP
Inc. |
Delaware |
|||||
PREFCO V LP
Inc. |
Delaware |
|||||
PREFCO VI
Inc. |
Delaware |
|||||
PREFCO VI LP
Inc. |
Delaware |
|||||
PREFCO VII
Inc. |
Delaware |
|||||
PREFCO VII LP
Inc. |
Delaware |
|||||
PREFCO VIII LP
Inc. |
Delaware |
|||||
PREFCO IX LP
Inc. |
Delaware |
|||||
PREFCO XI LP
Inc. |
Delaware |
|||||
PREFCO XII LP
Inc. |
Delaware |
|||||
PREFCO XIII
Inc. |
Delaware |
|||||
PREFCO XIII LP
Inc. |
Delaware |
|||||
PREFCO XIV LP
Inc. |
Delaware |
|||||
PREFCO XV LP
Inc. |
Delaware |
|||||
PREFCO XVI
Inc. |
Delaware |
|||||
PREFCO XVI LP
Inc. |
Delaware |
|||||
PREFCO XVII
Inc. |
Delaware |
|||||
PREFCO XVII LP
Inc. |
Delaware |
|||||
PREFCO XVIII LP
Inc. |
Delaware |
|||||
PREFCO XIX LP
Inc. |
Delaware |
|||||
PREFCO XXI
Inc. |
Delaware |
|||||
PREFCO XXI LP
Inc. |
Delaware |
|||||
PREFCO XXII
Inc. |
Delaware |
|||||
PREFCO XXII LP
Inc. |
Delaware |
|||||
PREFCO XXIV
Inc. |
Delaware |
|||||
PREFCO XXV
Inc. |
Delaware |
|||||
PREFCO
Dayton Community Urban Redevelopment Corporation |
Ohio |
|||||
PREFCO Twelve
Holdings Inc. |
Delaware |
|||||
Printing and
Post Processing Company NV |
Belgium |
|||||
PRINTLINX
CORPORATION |
Canada |
|||||
PSI Group,
Inc. |
Delaware |
|||||
P. Technical
Services Limited |
England |
|||||
Remington
Customer Finance Pty. Limited |
Australia |
|||||
RMPB
Limited |
England |
|||||
ROM Holdings
Pty. Limited |
Australia |
|||||
ROM Securities
Pty. Limited |
Australia |
|||||
Sagent Inc.
(Taiwan) |
Taiwan |
|||||
Sagent UK,
Ltd. |
UK |
|||||
Sagent
(Indonesia) Pte Ltd. |
Singapore |
|||||
Sagent
(Malaysia) Sdn Bhd |
Malaysia |
|||||
Sagent
(Singapore) Pte Ltd. |
Singapore |
|||||
Sales and
Service Training Center Inc. |
Georgia |
|||||
SCI
François Gillet |
France |
|||||
SCI
Méditerranée |
France |
|||||
Secap (Groupe
Pitney Bowes) SAS |
France |
|||||
Secap
Technologies Limited |
England |
|||||
Technopli
SARL |
France |
|||||
The Pitney
Bowes Bank, Inc. |
Utah |
|||||
Time-Sensitive
Delivery Guide Inc. |
Delaware |
|||||
Tower FSC,
Ltd. |
Bermuda |
|||||
Universal
Postal Frankers Ltd. |
England |
|||||
Waterview
Resolution Corporation |
Massachusetts |
|||||
Wheeler
Insurance, Ltd. |
Vermont |
|||||
1136
Corporation |
Delaware |
Form |
Reference |
|||||
---|---|---|---|---|---|---|
Form
S-8 |
No.
33-5291 |
|||||
Form
S-8 |
No.
33-4549 |
|||||
Form
S-8 |
No.
33-22238 |
|||||
Form
S-8 |
No.
33-5765 |
|||||
Form
S-8 |
No.
33-41182 |
|||||
Form
S-8 |
No.
333-66735 |
|||||
Form
S-3 |
No.
33-5289 |
|||||
Form
S-3 |
No.
33-5290 |
|||||
Form
S-3 |
No.
33-18280 |
|||||
Form
S-3 |
No.
33-25730 |
|||||
Form
S-3 |
No.
33-21723 |
|||||
Form
S-3 |
No.
33-27244 |
|||||
Form
S-3 |
No.
33-33948 |
|||||
Form
S-3 |
No.
333-51281 |
|||||
Form
S-3 |
No.
333-72304 |
|||||
Form
S-3 |
No.
33-10966 |
|||||
Form
S-3 |
No.
333-120525 |
|||||
Form
S-3 |
No.
333-122481 |
EXHIBIT (iv)
Page 1 of 11
Pitney Bowes Severance Pay Plan
As Amended and Restated Effective January 1, 1999
FOR EBC APPROVAL JANUARY 2000
EXHIBIT (iv)
Page 2 of 11
Pitney Bowes Severance Pay Plan
(As Amended and Restated Effective as of January 1,1999)
I |
Purpose and Introduction |
The purpose of the Pitney Bowes Severance Pay Plan is to provide income to Employees who are involuntarily terminated by the Company for certain reasons. The provisions of this Plan generally do not apply in the case of an Employees voluntary termination. However, the Plan contains provisions providing certain benefits to Employees who resign under specified circumstances following a Change of Control. The Plan was originally effective June 1988. The Plan is hereby amended and restated effective as of January 1, 1999. Employees who terminated employment prior to January 1, 1999 shall have any rights in the Plan determined under the Plan document in effect prior to January
1, 1999.
II. |
Definitions |
A. |
Board means the board of directors of Pitney Bowes Inc. |
B. |
Cause means with respect to the Company, embezzlement, malfeasance, commission of a felony, the non-performance of ones job or duties as determined by the Company in its sole discretion and acts of moral turpitude. |
C. |
Change of Control means the following where: |
(i) there is an acquisition, in any one transaction or a series of transactions, other than from Pitney Bowes Inc., by any individual, entity or group (within the meaning of Section l3(d)(3) or l4(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act")), of beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of Pitney Bowes Inc. entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by Pitney Bowes Inc. or any of its subsidiaries, or any employee benefit plan (or related trust) of Pitney Bowes Inc. or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of Pitney Bowes Inc. entitled to vote generally in the election of directors, as the case may be; or
(ii) individuals who, as of January 1, 1999, constitute the Board (as of such date, the Incumbent Board) cease for any reason to constitute at least a majority of the Board, provided
EXHIBIT (iv)
Page 3 of 11
that any individual becoming a director subsequent to January 1, 1999, whose election, or nomination for election by Pitney Bowes shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Pitney Bowes Inc. (as such terms are used in Rule 14(a)(11) or Regulation 14A promulgated under the Exchange Act); or
(iii) there occurs either (A) the consummation of a reorganization, merger or consolidation, in each case, with respect to which the individuals and entities who were the respective beneficial owners of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or (B) an approval by the shareholders of Pitney B owes Inc. of a complete liquidation of dissolution of Pitney Bowes Inc. or of the sale or other disposition of all or substantially all of the assets of Pitney B owes Inc.
D. |
Committee means the Employee Benefits Committee established by the Company. |
E. |
Company means Pitney Bowes Inc. (and any successor entity) and the following related companies: Pitney Bowes Credit Corporation, Pitney Bowes Management Services, Inc. and Pitney Bowes Professional Services Inc. |
F. |
Contract Employee means an employee who is employed by the Company pursuant to a written agreement and who is employed only for the duration of a particular project. |
G. |
DSR Employees means employees who function at the district level and whose job responsibilities are primarily limited to inspection, maintenance, delivery and pickup of meters, collection of customer accounts payable, and maintenance of the metered mail system under statutory requirements. |
H. |
Employee means any Employee who is employed by the Company other than contract Employees, Leased Employees, DSR Employees, PB Credit Union Employees, Temporary Employees, Part-Time Employees and independent contractors. |
For purposes of determining an individuals eligibility to participate in the plan, an individual who is an independent contractor and is reclassified by the Company, and governmental agency or a court as an employee for any purpose, including for purposes of employment taxes and wage withholding for Federal income taxes, shall not be eligible for participation in the Plan for the period during which such individual was an independent contractor. Subsequent participation in the Plan by a reclassified employee shall be based on eligibility requirements under the Plan then applicable to the employee.
EXHIBIT (iv)
Page 4 of 11
I. |
ERISA means the Employee Retirement Income Security Act of 1974, as amended. |
J. |
Executive Leadership Committee means the Companys Executive Leadership Committee or a similar successor committee. |
K. |
Leased Employees means any individuals who meet the definition of leased employee in Section 414(n) of the Internal Revenue Code, as amended and related regulations. |
L. |
Part-Time Employees means employees who regularly work less than 30 hours per week. |
M. |
Participant means any Employee who is covered by the Plan. |
N. |
Pay means the base rate of pay (including merit rating and shift premium, where applicable) that is effective on the last working day of employment. For sales representatives, Pay will be the earnings paid to the Employee during the preceding 12 months. The following items will not be considered Pay: overtime, profit sharing, compensation in lieu of vacation, suggestion awards, special awards and prizes, adoption payments, severance payments, relocation payments, referral payments, year-end override bonus, performance-based compensation, cash incentive unit awards, bonuses, or any forms of deferred compensation, and sales representatives vacation pay, except in the case of Change of Control, in which event, profit sharing and bonuses other than performance-based compensation and cash incentive unit award shall be considered Pay for purposes of this Plan. |
O. |
PB Credit Union Employee means an employee of the Pitney Bowes Credit Union. |
P. |
PBC Employee means any Employee who is eligible for the Performance Based Compensation Program at the Company. |
Q. |
Pitney Bowes means Pitney Bowes Inc. |
R. |
Plan means the Pitney Bowes Severance Pay Plan effective as of January 1, 1999, as amended and restated from time to time. |
S. |
Temporary Employees means an employee whose employment with the Company is intended to be for a period not to exceed 12 months and whose work activity consists of short-term projects other than as a Contract Employee. |
T. |
Years of Service means completed years and months of service with Company based on the period of service beginning with the Employees employment date (the date he or she first performs an hour of service as an Employee) to his or her termination date. The Employee shall continue to accrue Years of Service during approved leaves of absence, military service absences, paid holidays, paid vacations, temporary absences due to illness or injury, disability, or any other reason, if service is customarily accrued for purposes of the Pitney Bowes. Pension Plan or the retirement plan of the Companys subsidiary for which the Employee works. In case of reemployment, subsequent termination pay |
EXHIBIT (iv)
Page 5 of 11
entitlement will be based upon credited service beginning on the date of rehire.
III. |
Eligibility |
A. |
Eligibility. Each Employee shall be entitled to severance pay under the Plan payable in accordance with the applicable severance benefit formula set forth in this Section III. A, provided his or her employment is terminated by the Company for the following reasons: |
1. |
The full or partial shutdown of a business or a facility or department. |
2. |
The sale of all or part of a business of the Company by means of a sale of assets or stock, or any form of merger and reorganization where the Employee is not reemployed by the Company or a subsidiary or division thereof or by the buyer of the business. |
3. |
The elimination of the Employees job or the consolidation or restructuring of his or her job functions on account of reorganization. |
4. |
Employment termination within two years after a Change of Control of the Company. |
5. |
In other circumstances deemed appropriate by the Company in its sole discretion from time to time, subject to Section III. C. hereof |
B. |
Exception. Notwithstanding any other provision hereunder, an Employee shall not be eligible for severance pay hereunder if |
1. |
Prior to or immediately after termination other than for reasons set forth in Section III.A.2. he or she is offered a comparable job with another subsidiary, division, or unit of the Company, except that an offer of continued employment or reemployment after a Change of Control shall be subject to the limitations set forth in Section IV. E. herein; |
2. |
Within 60 days of termination for reasons set forth in Section III. A.2., he or she is offered a comparable job with another subsidiary, division or unit of the Company, except that an offer of continued employment or reemployment after a Change of Control shall be subject to the limitations set forth in Section IV. E. herein; or |
3. |
The Employee is terminated for Cause. |
C. |
Release. Notwithstanding any other provision hereunder to the contrary, any additional discretionary payments made pursuant to Section III.A.5. and Section IVA. may at the Companys discretion be conditioned on the Employees signing a waiver or release of claims to the satisfaction of the company. |
IV. |
Payment Formula |
EXHIBIT (iv)
Page 6 of 11
A. |
Base Formula. Pursuant to Section III.A., the Company shall pay a minimum of one week of Pay for each completed full Year of Service (and prorated week of Pay for each completed partial Year of Service), with a minimum of two weeks of Pay (hereinafter, this is referred to as the Minimum Payment). In addition, subject to Section III.C., the Company reserves the right to pay additional amounts to Employees, but the Company may exercise its discretion to pay no additional amount at all. |
Notwithstanding the foregoing formula, the Company reserves the right to make discretionary severance payments as business conditions warrant in lieu of payments based on the normal severance benefit formula described herein.
B. |
Change of Control Exception. If any Employee employed by the Company as of the date of a Change of Control resigns for the reasons set forth in Section IV. E. hereof and is then not subject to termination of employment by the Company for Cause or, if any Employee is terminated by the Company for the reasons set forth in Section III. A. (and an exception under Section III.B. is not applicable) within two years after a Change of Control occurs whether or not such termination is in connection with such Change of Control (Change of Control Termination), such Employee shall be entitled to severance pay in accordance with the following: |
1. |
For non-exempt Employees, two weeks of Pay for each completed full or partial Year of Service, with a minimum of four weeks. |
2. |
For exempt Employees, three weeks of Pay for each completed full or partial Year of Service, with a minimum of three months. |
3. |
For PBC Employees or any other Employees whose job descriptions are rated at 1,000 or more job points under the Hay method of job evaluation, four weeks of Pay for each full or partial Year of Service, with a minimum of six months. |
4. |
For members of the Executive Leadership Committee, four weeks of Pay for each full or partial Year of Service, with a minimum of one year of Pay. |
C. |
Applicability of. Change of Control. Change of Control provisions only apply if Pitney Bowes Inc. incurs a Change of Control. Such provisions do not apply to employees of a Pitney Bowes subsidiary if that subsidiary or affiliated company undergoes a change of control. |
D. |
Maximum Severance Benefit. Notwithstanding anything to the contrary, the maximum severance pay benefit payable hereunder to any Employee shall be an amount equal to two years of Pay. |
E. |
Change of Control Termination. A Change of Control Termination shall include termination of the Employees employment by the Employee for the following reasons: |
1. |
The assignment to an Employee of any duties inconsistent in any respect with the Employees position, authority, duties or responsibilities as existed on the day immediately prior to the Change of Control, or any other action by the Company which results in a diminution in such |
EXHIBIT (iv)
Page 7 of 11
position, authority, duties, or responsibilities, excluding for this purpose an isolated, insubstantial, and inadvertent action taken in good faith and remedied by the Company or subsidiary, as applicable, promptly after receipt of notice thereof given by the Employee;
2. |
Any failure by the Company following a Change of Control to continue to provide the Employee with Pay, benefits, or other compensation equal to or greater than that to which such Employee was entitled immediately prior to the date of the Change of Control, other than an isolated, insubstantial, and inadvertent failure occurring in good faith and remedied by the Company promptly after receipt of notice thereof given by the Employee; |
3. |
The Companys requiring the Employee to be based at any office or location more than 35 miles farther from the Employees place of residence or the office or location at which the Employee is employed immediately prior to the date of the Change of Control; or |
4. |
Any failure by Pitney Bowes Inc. to require any successor company who acquires all or substantially all of the business and/or assets of Pitney Bowes Inc. (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform the Companys obligations under the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. |
For purposes of subparagraphs 1 through 4 of Section IV, any good faith determination made by an affected Employee shall be conclusive.
F. |
As a condition of receiving any severance pay hereunder in connection with a Change of Control Termination, any termination by the Employee shall be communicated by a Notice of Termination to the Company. Any Notice of Termination shall be by written instrument which (i) indicates the specific termination provision in paragraph E above relied upon, (ii) sets forth in reasonable detail the facts - and circumstances claimed to provide a basis for termination of the Employees employment under the provision so indicated, and (iii) if the date of termination is other than the date of receipt of such notice, specifies the termination date (which date shall not be more than 15 days after the giving of such notice). The failure by any Employee to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of entitlement to terminate under subparagraphs 1 through 4 of paragraph E above shall not waive any right of such Employee or preclude such Employee from asserting such fact or circumstance in enforcing his rights. |
G. |
Any severance pay benefits made hereunder shall be reduced by the amount of statutory severance benefits paid to an Employee if Pitney Bowes had contributed to the fund or statutory scheme under which benefits are paid. |
H. |
If severance payments under the Plan, plus payments or benefits under other severance types plans or arrangements designated by Pitney Bowes result in any excise or other special federal tax on any portion of the severance payments hereunder, the Company will reimburse any affected Employee an additional amount so that the affected Employee shall receive a net benefit that is approximately the amount he or she would have received as if no excise or other special tax had been payable. |
EXHIBIT (iv)
Page 8 of 11
V. |
Forms of Payment |
The Company may in its discretion make the payments provided for herein in a single lump sum payment or pursuant to a payment schedule, provided, however, that payments made as a result of termination occurring within two years after a Change of Control shall be made in a single lump sum payment. However, in no event shall the payment schedule extend over a period of more than two years. In the case of lump sum payout, payment shall be made as soon as practicable following the termination of employment date, which shall be determined in the sole discretion of the Company.
VI. |
Death |
If an Employee dies during a period of severance payment hereunder, any remaining severance pay that would otherwise be payable if the Employee had not died shall be paid to the Employees estate. No severance benefits not otherwise payable hereunder shall be payable under this Plan by reason of the Employees death.
VII. |
Claim Procedure |
A. |
Administrative Review. If an Employee makes a written request alleging a right to receive payments under this Plan or alleging a right to receive an adjustment in benefits being paid under this Plan, such actions shall be treated as a claim for benefits. All claims for benefits under this Plan shall be administered by the appropriate administrator at the Employees business unit. If the administrator determines that any individual who has claimed a right to receive benefits, or different benefits, under this Plan is not entitled to receive all or any part of the benefits claimed, the administrator shall inform the claimant in writing of such determination and the reasons therefor in terms calculated to be understood by the claimant. The notice shall be sent within 90 days of the claim unless the administrator determines that additional time, not exceeding 90 days, is needed. The notice shall make specific reference to the pertinent Plan provisions on which the denial is based, and shall describe any additional material or information that is necessary. Such notice shall, in addition, inform the claimant of the procedure that the claimant should follow to take advantage of the review procedure set forth below in the event the claimant desires to contest the denial of the claim. If the Employee is not notified within the 90 day period specified herein, he or she may assume the claim has been denied. |
B. |
Appeal to the Committee. The claimant may within 90 days thereafter submit in writing to the Committee a notice that the claimant contests the denial of his or her claims and desires a further review by the Committee. The Committee shall within 60 days thereafter review the claim. The Committee will render a final decision on behalf of the Company with specific reasons there for in writing and will transmit it to the claimant within 60 days of the written request for review, unless it is determined that additional time, not exceeding 60 days, is needed, and so notifies the Employee. If the Committee fails to respond to a claim filed in accordance with the foregoing within 60 days or any such extended period, the Company shall be deemed to have denied the claim. |
C. |
Reimbursement of Claimants Expenses. Upon and following the occurrence of a Change of Control, any decision rendered under the Plan may be contested by any claimant and the Company agrees to pay, to the full extent permitted by law, all legal -fees and expenses which a claimant may reasonably |
EXHIBIT (iv)
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incur as a result of any contest, provided the claimant substantially prevails in the outcome thereof.
VIII. |
Amendment and Termination |
A. |
This Plan is established by the Company on a voluntary basis and not on past consideration for services rendered, and the benefits herein are provided at the will of the Company. Neither the establishment of this Plan nor the payment of benefits by the Company shall be construed or interpreted as a condition of employment, nor shall this Plan modify or enlarge any rights of any person covered by it to be continued or to be retained in the employ of the Company. |
B. |
Prior to the time a Change of Control has occurred, the Company may, in its sole discretion, without notice, amend or modify, in whole or in part, all of the terms and conditions of this Plan; provided, however, that this Plan may not be so amended or modified in connection with an actual or threatened Change of Control in any manner which would adversely affect the interests of Employees. Such amendment or modification may be retroactive in application; provided, however, such retroactive application shall not require or provide for the return or repayment of any benefits paid prior to the date of the adoption of the amendment or modification. |
C. |
Prior to the time a Change of Control has occurred, the Company shall have the sole and absolute right to terminate this Plan without notice at any time; provided, however, that this Plan may not be so terminated in connection with an actual or threatened Change of Control. Such termination shall be effective as of the date specified by the Company and, if no date is specified, the date of the action of termination by the Company. Upon termination, the Company will continue to make payments according to the terms of any effective terminated pay agreements, which have not been fully paid. |
D. |
When a Change of Control, as defined herein, occurs, then all rights to severance payments contained herein shall vest in all covered Employees and shall be considered a contract right enforceable against the Company and any successors thereto. |
IX. |
Plan Administration |
A. |
The Committee shall be authorized to adopt administrative rules and procedures concerning the Plan or delegate to the business units such authority and any such rules and procedures shall be binding upon Participants. |
B. |
All expenses reasonably incurred in the administration of the Plan shall be paid by the Company, as the Company. |
C. |
The determination or action of the Committee with respect to any question arising out of or in connection with the administration of the Plan shall, to the extent not inconsistent with the provisions of the Plan, be final, conclusive, and binding upon all persons having an interest in the Plan. |
D. |
The Committee shall have the following powers and duties concerning the Plan: |
EXHIBIT (iv)
Page 10 of 11
1. |
to interpret and construe the terms and provisions of the Plan, to apply such terms and provisions as the Committee may exclusively determine, to determine questions of eligibility and of the status and rights of Participants; |
2. |
to make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan; |
3. |
to delegate to the business units at Pitney Bowes such powers and duties to enable them to administer the Plan. |
E. |
The Committee shall be the Plan Administrator of the Plan for purposes of ERISA. However, the Committee has delegated to the appropriate Human Resources professionals in the business units the day-to-day, on-going administrative responsibilities of the Plan. In addition, the Committee has delegated to the Human Resources professionals administrative responsibility regarding employee eligibility for the Plan. It is intended that Human Resources administrators in the business units shall have no discretion such that these individuals performing services in these business units with respect to the Plan would not be considered to be fiduciaries within the meaning of Section (3)(21) of ERISA. |
F. |
All fiduciaries shall discharge their duties with respect to the Plan solely in the interest of the Employees and for the exclusive purpose of providing benefits to Employees and of defraying reasonable expenses of administering the Plan, with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Company shall purchase and maintain liability insurance (which insurance shall not permit recourse against the insured parties), with scope of coverage and limits of liability sufficient to protect the fiduciaries from monetary liability for any breach of their responsibilities not resulting from their own gross negligence or willful misconduct. |
X |
Miscellaneous |
A. |
Benefits under the Plan are not in any way subject to the debts or other obligations of the persons entitled thereto and may not be voluntarily or involuntarily sold, transferred, hypothecated, pledged or assigned. When any person entitled to benefits under the Plan is under a legal disability or in the opinion of the Committee is in any way incapacitated so as to be unable to manage his or her affairs, the Committee may cause such persons benefits to be paid to or for the benefit of such person in any manner that the Committee may determine without responsibility of the Committee or the Company. Payments made pursuant to such power shall operate as a complete discharge of the obligation under the Plan to make such payments. Payments hereunder are, however, subject to all applicable withholding taxes. |
B. |
The headings of the section in this Plan are placed herein for convenience of reference and, in the |
EXHIBIT (iv)
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case of any conflict, the text of the Plan, rather than such headings, shall control.
C. |
The masculine or feminine pronoun used herein refers to both men and women and, used in singular, is intended to include the plural, whenever appropriate. |
D. |
To the extent not inconsistent with ERISA, the provisions of this Plan shall be construed in accordance with the laws of the State of Connecticut other than its choice of law rules. |
E. |
In the event a person receives a benefit payment under the Plan which is in excess of the benefit payment that should have been made, the Committee shall have the right to recover the amount of such excess from such person. The Committee may at its option, deduct the amount of such excess from any subsequent benefits payable under the Plan to, or for, the person. |
F. |
Any action required or permitted to be taken under the Plan by the Company may be taken by such individual, Committee or entity as the Company may designate from time to time. |
G. |
No payment may be made under this Plan that would cause it to be a pension plan as distinguished from a welfare plan under the Employees Retirement Income Security Act of 1974 and the Department of Labor Regulations 29 CFR 2510.3-2(b) and successor regulations. |
H. |
This Plan shall have no effect on the Employees eligibility for other benefits customarily provided after termination unless otherwise stated in a written agreement executed by an authorized representative of the Company or in the applicable employee benefit plan document. The payments of benefits under this Plan shall not be deemed to be a continuation of employment. |
I. |
This Plan is intended to be an unfunded plan. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. |
J. |
The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. |
EXHIBIT (v)
Page 1 of 16
PITNEY BOWES SENIOR EXECUTIVE SEVERANCE POLICY
(As Amended and Restated Effective as of January 1, 2000)
FOR BOARD APPROVAL JULY 2000
EXHIBIT (v)
Page 2 of 16
PITNEY BOWES
SENIOR EXECUTIVE SEVERANCE POLICY
INDEX
SECTION |
PAGE |
SECTION ONEIntroduction and Purpose
|
1.1 |
Introduction and Purpose |
3 |
SECTION TWODefinitions
|
2.1 |
Annual Incentive |
4 |
|
2.2 |
Annual Incentive Award |
4 |
|
2.3 |
Annual Salary |
4 |
|
2.4 |
Board |
4 |
|
2.5 |
Change of Control |
4 |
|
2.6 |
Code |
5 |
|
2.7 |
Company |
5 |
|
2.8 |
Date of the Change of Control |
5 |
|
2.9 |
Date of Termination |
5 |
|
2.10 |
Employee |
5 |
|
2.11 |
ERISA |
5 |
|
2.12 |
Participant |
5 |
|
2.13 |
Plan |
5 |
|
2.14 |
Restatement Effective Date |
5 |
|
2.15 |
Separation Period |
5 |
SECTION THREEParticipation |
6 |
SECTION FOURSeparation Benefits |
7 |
SECTION FIVETermination of Employment |
9 |
SECTION SIXAdministration and Claims |
11 |
SECTION SEVENAmendment and Termination |
12 |
SECTION EIGHTCertain Additional Payments |
13 |
SECTION NINEMiscellaneous
|
9.1 |
Non-Alienability |
16 | ||
|
9.2 |
Eligibility for Other Benefits |
16 | ||
|
9.3 |
Unfunded Plan Status |
16 | ||
|
9.4 |
Validity and Severability |
16 | ||
|
9.5 |
Governing Law |
16 | ||
|
9.6 |
Plan Records |
16 | ||
|
9.7 |
Legal Service |
16 | ||
EXHIBIT (v)
Page 3 of 16
SECTION ONE
INTRODUCTION AND PURPOSE
1.1 |
The Pitney Bowes Senior Executive Severance Policy was initially adopted in December 1995 and is hereby amended and restated effective as of January 1, 2000. The purpose of the Plan is to provide certain designated senior executive employees with continued compensation and benefits, subject to the specific terms and conditions set forth in the Plan, in the event there is a Change of Control and the covered executive incurs a Termination of Employment. In addition, the Plan is intended to provide an incentive to covered executives to continue to perform their job duties on behalf of the Company where the Company is faced with a Change of Control. No Change of Control occurred under the terms of the Plan as in effect prior to January 1, 2000. |
EXHIBIT (v)
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SECTION TWO
DEFINITIONS
For the purposes of the Plan, the following words and phrases shall have the following respective meanings unless the context clearly indicates otherwise.
2.1 |
Annual Incentive shall mean the annual Performance Based Compensation Incentive that a Participant is eligible to earn pursuant to the Pitney Bowes Key Employee Incentive Plan. |
2.2 |
Annual Incentive Award shall mean the highest Annual Incentive amount Participant received in any of the three consecutive twelve month periods prior to the Date of Termination. |
2.3 |
Annual Salary shall mean the Participants regular annual base salary in effect immediately prior to his or her Date of Termination, including cash compensation converted to other benefits under a flexible benefit arrangement maintained by the Company or deferred pursuant to a written plan or agreement with the Company, but excluding any type of allowances, reimbursements, premium pay, Cash Incentive Units, sign-on bonus, stock options and any actual gain thereon, prizes, awards, special bonuses and incentive payments other than the Annual Incentive Award. |
2.4 |
Board shall mean the Board of Directors of the Company. |
2.5 |
Change of Control For purposes of this Plan, a Change of Control shall be deemed to have occurred if: |
(i) there is an acquisition, in any one transaction or a series of transactions other than from Pitney Bowes Inc., by any individual, entity or group (within the meaning of Section l3(d)(3) or l4(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), of beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of common stock or the combined voting power of the then outstanding voting securities of Pitney Bowes Inc. entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by Pitney Bowes Inc. or any of its subsidiaries, or any employee benefit plan (or related trust) of Pitney Bowes Inc. or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of Common stock or the combined voting power of the then outstanding voting securities of Pitney Bowes Inc. entitled to vote generally in the election of directors, as the case may be; or
(ii) individuals who, as of January 1, 2000, constitute the Board (as of such date, the Incumbent Board) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a
EXHIBIT (v)
Page 5 of 16
director subsequent to January 1, 2000, whose election, or nomination for election by Pitney Bowes shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Pitney Bowes Inc. (as such terms are used in Rule 14(a)(l 1) or Regulation l4A promulgated under the Exchange Act); or
(iii) there occurs either (A) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, in each case, with respect to which the individuals and entities who were the respective beneficial owners of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or (B) an approval by the shareholders of Pitney Bowes Inc. of a complete liquidation of dissolution of Pitney Bowes Inc. or of the sale or other disposition of all or substantially all of the assets of Pitney Bowes Inc.
2.6 |
Code shall mean the Internal Revenue Code of 1986, as amended from time to time. |
2.7 |
Company shall mean Pitney Bowes Inc. and any successor thereto |
2.8 |
Date of the Change of Control shall mean the date on which a Change of Control is determined to first occur. |
2.9 |
Date of Termination shall mean the date on which a Participant incurs a Termination of Employment as defined in Section hereof. |
2.10 |
Employee shall mean any regular full-time employee of the Company or a subsidiary or affiliate of the Company, as determined by the Company. |
2.11 |
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations there under. |
2.12 |
Participant shall mean an Employee who is designated as a Participant pursuant to Section III hereof |
2.13 |
Plan shall mean the Pitney Bowes Senior Executive Severance Policy. |
2.14 |
Restatement Effective Date shall mean January 1, 2000. |
2.15 |
Separation Period shall mean (i) for Participants who are in Executive Bands A, B, C, or D, the period beginning on a Participants Date of Termination and ending on the third anniversary thereof (ii) for Participants who are in Executive Bands E, F or G or who are corporate officers of Pitney Bowes Inc. but do not participate in the Long Term Incentive Program, the period beginning on a Participants Date of Termination and ending on the second anniversary thereof. |
EXHIBIT (v)
Page 6 of 16
SECTION THREE
PARTICIPATION
3.1 |
Each Employee who falls within Executive Bands A, B, C, D, E, F or G, or who is a corporate officer of Pitney Bowes Inc. shall be a Participant in the Plan. |
3.2 |
Prior to the time a Change of Control has occurred, the Board may, in its sole discretion, without notice, amend, modify or terminate the eligibility of certain individual Employees or classes of Employees or Participants to participate in the Plan; provided, however, that such eligibility or participation may not be so amended, modified or terminated in connection with an actual, threatened, or proposed Change of Control in any manner which would result in an Employee or Participant otherwise becoming ineligible to participate in the Plan; and provided further that any amendment, modification or termination of an Employee is or Participants participation in the Plan occurring within one year prior to a Change of Control shall be deemed to be in connection with an actual, threatened, or proposed Change of Control and shall be void. |
In addition, when a Change of Control occurs, all rights of an Employee or Participant to eligibility and participation under the Plan shall vest and shall be considered a contract right enforceable against the Company and any successors thereto, subject to the terms and conditions hereof.
EXHIBIT (v)
Page 7 of 16
SECTION FOUR
SEPARATION BENEFITS
4.1 |
If any Participant incurs a Termination of Employment within two years after a Change of Control occurs (whether or not such termination is a result of such Change of Control) or a Participant is terminated before a Change of Control at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or otherwise in connection with or in anticipation of a Change of Control, and a Change of Control subsequently occurs, the Company shall pay such Participant, within ten days of the Date of Termination, a cash payment in one lump sum as determined in Section 4.2 hereof and the benefits as determined in Sections 4.3 and 4.4 hereof. For purposes of determining the benefits set forth in Sections 4.3 and 4.4, if the Participant incurs a Termination of Employment following a reduction of the Participants Annual Salary, opportunity to earn an Annual Incentive, or other compensation or employee benefits, such reduction shall be not be given effect. |
4.2 |
The cash payment in one lump sum described in Section 4.1 hereof shall be determined by aggregating amounts described in Sections 4.2(a) and (b). |
|
(a) |
For a Participant in Executive Bands A, B, C, or D, an amount equal to the product of (1) three times (2) the sum of (x) the Participants Annual Salary and (y) the Participants Annual Incentive Award. |
For a Participant in Executive Bands E, F, or G, or who is a corporate officer of Pitney Bowes Inc but does not participate in the Long Term Incentive Program, an amount equal to the product of (1) two times (2) the sum of (x) the Participants Annual Salary and (y) the Participants Annual Incentive Award.
|
(b) |
An amount equal to the difference between (1) the lump sum actuarial equivalent of the benefit under the Companys qualified defined benefit retirement plan (the Retirement Plan) and any excess or supplemental retirement plans in which the Participant participates (collectively, the SERP) which the Participant would receive if his or her employment continued during the Separation Period, assuming that the Participants compensation during the Separation Period would have been equal to his or her compensation as in effect immediately before the termination and assuming the Participant is fully vested in his or her benefit under the Retirement Plan as of the Date of Termination, and (2) the lump sum actuarial equivalent of the Participants actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination. The actuarial determination hereunder shall be made as of the Date of Termination and the actuarial assumptions used for purposes of determining actuarial equivalence shall be no less favorable to the Participant than the most favorable of those in effect under the Retirement Plan and the SERP on the Date of Termination and the Effective Date. |
4.3 |
During the Separation Period, the Participant and his or her Dependents shall continue to be provided with the medical, prescription drug, dental and life insurance and other health and welfare benefits in which the |
EXHIBIT (v)
Page 8 of 16
Participant has coverage under the plans or programs of the Company or its affiliates at the Date of Termination as if the Participants employment had not been terminated; provided, however, that if the Participant becomes reemployed with another employer and is eligible to receive a particular benefit described above under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Participant for retiree medical, dental and life insurance benefits under the Companys plans, practices, programs and policies, the Participant shall be considered to have remained employed during the Separation Period and to have retired or terminated employment on the last day of such period. The COBRA continuation period for a Participant shall commence following the last day of the Separation Period.
4.4 |
The Company shall, at its sole expense as incurred, provide the Participant with outplacement services the scope and provider of which shall be selected by the Company, but at a cost to the Company of not more than the lesser of (i) 12% of Annual Salary and (ii) fifty thousand dollars ($50,000.00). |
4.5 |
To the extent any benefits described in this Section 4.1 cannot be provided to the Participant pursuant to the appropriate plan or program maintained for Company employees in which a Participant participates, the Company shall provide such benefits outside such plan or program at no additional cost (including without limitation tax cost) to the Participant. |
4.6 |
The cash lump sum payment and continuation benefits set forth in Sections 4.1, 4.2, 4.3 and 4.4 shall be payable in addition to, and not in lieu of, all other accrued or vested or earned but deferred rights, options or other benefits which may be owed to a Participant upon or following termination, including but not limited to regular Annual Salary earned but unpaid as of the Date of Termination, Annual Incentives earned but unpaid as of the Date of Termination, accrued vacation or sick pay, amounts or benefits payable under any incentive (other than the Annual Incentive) or other compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar or successor plan, but excluding any severance pay or pay in lieu of notice required to be paid to such Participant under applicable law or any other severance plan, program or policy of the Company and it affiliates. |
EXHIBIT (v)
Page 9 of 16
SECTION FIVE
TERMINATION OF EMPLOYMENT
5.1 |
For purposes of the Plan, Termination of Employment shall mean (i) a termination of a Participants employment by the Company other than because of (x) the willful and continued failure of the Participant to perform substantially the Participants duties with the Company or any of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness) or (y) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, and (ii) a termination of employment by the Participant for any reason during the 30-day period. Immediately following the first anniversary of the Date of the Change of Control termination of employment by the Participant or for any of the following reasons: |
|
1. |
The assignment following a Change of Control to a Participant of any duties inconsistent in any respect with the Participants position, authority, duties and responsibilities as existed on the day immediately prior to the Change of Control, or any other action by the Company which results in a diminution in such position, authority, duties, or responsibilities, excluding for this purpose an isolated, insubstantial, and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; |
|
2. |
Any failure by the Company following a Change of Control to continue to provide the Participant with Annual Salary, employee benefits, or other compensation equal to or greater than that to which such Participant was entitled immediately prior to the Date of the Change of Control, other than an isolated, insubstantial, and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; |
|
3. |
Any failure by the Company following a Change of Control to continue. to provide the Participant with the opportunity to earn Annual Incentives (and long-term incentive compensation as applicable) on a basis at least equal to that provided to the Participant prior to the Date of the Change of Control, taking into account the level of compensation that can be earned and the relative difficulty of any associated performance goals; |
|
4. |
The Companys requiring the Participant to be based, after a Change of Control, at any office or location more than 35 miles farther from the Participants place of residence than the office or location at which the Participant is employed immediately prior to the Date of the Change of Control or the Companys requiring the Participant to travel on Company business to a substantially greater extent than required immediately before the Change of Control; |
|
5. |
Any failure by the Company, after a Change of Control, to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) who acquired all or substantially all of the business and/or assets of the Company to expressly assume and |
EXHIBIT (v)
Page 10 of 16
agree to perform the Companys obligations under the Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
Any good faith determination made by a Participant that an event described in subparagraphs 1 through 5 of this Section 5.1 has occurred shall be conclusive.
5.2 |
Any termination by the Company or by the Participant in accordance with Section 5.1 shall be communicated by a Notice of Termination to the other party. Any Notice of Termination shall be by written instrument which (i) indicates the specific termination provision in Section 5.1 above relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participants employment under the provision so indicated, and (iii) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination (which date shall not be more than 15 days after the giving of such notice). The failure by any Participant to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of entitlement to terminate under subparagraphs 1 through 5 of Section 5.1 above shall not be deemed to be a waiver of any right of such Participant or preclude such Participant from asserting such fact or circumstance in enforcing his rights. |
In case of death, any unpaid payment or benefits to which the Participant was entitled at the time of death shall be paid to the Participants survivors or estate.
EXHIBIT (v)
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SECTION SIX
ADMINISTRATION AND CLAIMS
6.1 |
The Plan Administrator shall be the Board or its delegate. If an Employee or former Employee makes a written request alleging a right to receive benefits under this Plan or alleging a right to receive an adjustment in benefits being paid under the Plan, the Board shall treat it as a claim for benefits. All claims for benefits under the Plan shall be sent to the Executive Director, Corporate Compensation of the Company, or equivalent position, and must be received within 90 days after Termination of Employment. If the Board determines that any individual who has claimed a right to receive benefits, or different benefits, under the Plan is not entitled to receive all or any part of the benefits claimed, it will inform the claimant in writing of its determination and the reasons therefor in terms calculated to be understood by the claimant. The notice will be sent within 90 days of the claim unless the Board determines additional time, not exceeding 90 days, is needed. The notice shall make specific reference to the pertinent Plan provisions on which the denial is based, and describe any additional material or information as necessary. Such notice shall, in addition, inform the claimant what procedure the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim. The claimant may within 90 days thereafter submit in writing to the Board a notice that the claimant contests the denial of his or her claim by the Board and desires a further review. The Board shall within 60 days thereafter review the claim and authorize the claimant and his or her personal representative to appear personally and review pertinent documents and submit issues and comments relating to the claim to the persons responsible for making the determination on behalf of the Board. The Board will render its final decision with specific reasons therefor in writing and will transmit it to the claimant within 60 days of the written request for review, unless the Board determines additional time, not exceeding 60 days, is needed, and so notifies the Participant. If the Company fails to respond to a claim filed in accordance with the foregoing within 60 days or any such extended period, the Company shall be deemed to have denied the claim. |
If, after a Change of Control, a Participant institutes any legal action seeking to obtain or enforce, or is required to defend in any legal action the validity or enforceability of, any right or benefit provided by this Plan, the Company will pay for all actual legal fees and expenses incurred (as incurred) by such Participant, regardless of the outcome of such action and whether such action is between the Company and the Participant or between either of them and any third party.
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SECTION SEVEN
AMENDMENT AND TERMINATION
7.1 |
This Plan is established by the Company on a voluntary basis and not as consideration for services rendered in the past, and the benefits herein are provided at the will of the Company. Neither the establishment of this Plan nor the payment of benefits by the Company shall be construed or interpreted as a condition of employment, nor shall this Plan modify or enlarge any rights of any person covered by it to be continued or to be retained in the employ of the Company. |
Prior to the time a Change of Control has occurred, the Board may, in its sole discretion, without notice, amend or modify, in whole or in part, all of the terms and conditions of this Plan; provided, however, that this Plan may not be so amended or modified in connection with an actual, threatened, or proposed Change of Control in any manner which would result in a reduction of benefits to any Participant; and provided further that any amendment or modification occurring within one year prior to a Change of Control shall be deemed to be in connection with an actual, threatened, or proposed Change of Control and shall be void unless the amended or modified Plan provides equivalent or greater benefits to every eligible Participant. Such amendment or modification may be retroactive in application; provided, however, such retroactive application shall not require or provide for the return or repayment of any benefits paid prior to the date of the adoption of the amendment or modification.
Prior to the time a Change of Control has occurred, the Board shall have the sole and absolute right to terminate this Plan without notice at any time; provided, however, that this Plan may not be so terminated in connection with an actual, threatened, or proposed Change of Control, unless a new severance plan is adopted which provides equivalent or greater benefits to every eligible Participant; and provided further that any termination occurring within one year prior to a Change of Control shall be deemed to be in connection with an actual, threatened, or proposed Change of Control, and shall be void unless a new severance plan is adopted which provides equivalent or greater benefits to every eligible Participant. Any valid termination shall be effective as of the date specified by the Board and, if no date is specified, the date of the action of termination by the Board. Upon termination, the Company will continue to make payments which have not been fully paid, in accordance with the terms of the Plan immediately prior to termination.
When a Change of Control, as defined herein, occurs, then all rights to severance payments contained herein shall vest in all covered Participants and shall be considered a contract right enforceable against the Company and any successors thereto, subject to the terms and conditions hereof.
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SECTION EIGHT
CERTAIN ADDITIONAL PAYMENTS
8.1 |
Anything in this Plan to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, the Participant shall be entitled to receive an additional payment (a Gross-Up Payment) in an amount such that after payment by the Participant of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 8.1, if it shall be determined that the Participant is entitled to a Gross-Up Payment, but that the Parachute Value of Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made to the Participant and the Plan Payments, in the aggregate, shall be reduced to (but not below zero) such that the Parachute Value of all Payments equals the Safe Harbor Amount, determined in such a manner as to maximize the Value of all Payments actually made to the Participant. |
8.2 |
Subject to the provisions of Section 8.3, all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such nationally recognized certified public accounting firm as may be designated by the Company (the Accounting Firm), which shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the receipt of notice from the Participant that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Subject to Section 8.5 below, any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Participant within five days of the receipt of the Accounting Firms determination. Any determination by the Accounting Firm shall be binding upon the Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (Underpayment), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8.3, and the Participant thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant. |
8.3 |
The Participant shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Participant is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the |
EXHIBIT (v)
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Participant in writing prior to the expiration of such period that it desires to contest such claim, the Participant shall:
|
(a) |
give the Company any information reasonably requested by the Company relating to such claim, |
|
(b) |
take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, cooperate with the Company in good faith in order effectively to contest such claim, and the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 8.3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Participant, on an interest-free basis and shall indemnify and hold the Participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Participant with respect to which such contested amount claimed to be due is limited solely to such contested amount. Furthermore, the Companys control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Participant shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. |
8.4 |
If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 8.3, the Participant becomes entitled to receive any refund with respect to such claim the Participant shall (subject to the Companys complying with the requirements of Section 8.3) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 8.3, a determination is made that the Participant shall not be entitled to any refund with respect to such claim and the Company does not notify the Participant in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. |
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8.5 |
Notwithstanding any other provision of this Section 8, the Company may withhold and pay over to the Internal Revenue Service for the benefit of the Participant all or any portion of the Gross-Up Payment that it determines in good faith that it is or may be in the future required to withhold, and the Participant hereby consents to such withholding |
8.6 |
Definitions. The following terms shall have the following meanings for purposes of this Section 8. |
(a) Excise Tax shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
(b) The Net After-Tax Amount of a Payment shall mean the Value of a payment net of all taxes imposed on the Participant with respect thereto under sections 1 and 4999 of the Code and applicable state and local law, determined by applying the highest marginal rates that are expected to apply to the Participants taxable income for the taxable year in which the Payment is made.
(c) Parachute Value of a Payment shall mean the present value as of the date of the event constituting the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a parachute payment under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
|
(d) |
A Payment shall mean any payment or distribution in the nature of compensation |
(within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of a Participant, whether paid or payable pursuant to this Plan or otherwise.
(e) A Plan Payment shall mean a Payment paid or payable pursuant to this Plan (disregarding this Section 8).
(f) The Safe Harbor Amount means the maximum Parachute Value of all Payments that the Participant can receive without any Payments being subject to the Excise Tax.
(g) Value of a Payment shall mean the economic present value of a Payment as of the date of the event constituting the change of control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.
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SECTION NINE
MISCELLANEOUS
9.1 |
Non-Alienability. No benefit or payments provided hereunder shall be subject to any forms of sale, assignment or transfer. Benefits provided by this Plan shall not be subject to attachment, garnishment or other legal or equitable proceedings by creditors or persons representing creditors. Such payments are, however, subject to all applicable taxes and appropriate withholdings. |
9.2 |
Eligibility for Other Benefits. This Plan shall have no effect on the Participants eligibility for other benefits customarily provided after termination unless otherwise stated in a written agreement executed by an authorized representative of the Company. The payments of benefits under this Plan shall not be deemed to be a continuation of employment, pay, or credited service for purposes of determining the availability, nature, or extent of the Companys benefit plans, programs or policies, except as expressly set forth herein. |
9.3 |
Unfunded Plan Status. This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Section 401 of ERISA. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of the Companys creditors, to assist it in accumulating funds to pay its obligations under the Plan. |
9.4 |
Validity and Severability. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. |
9.5 |
Governing Law. The validity, interpretation, construction and performance of the Plan shall in all respects be governed by the laws of the State of Connecticut without reference to principles of conflict of law, except to the extent pre-empted by federal law. |
9.6 |
Plan Records. The records for this Plan are kept on a plan year beginning on January 1 and ending on the following December 31. |
9.7 |
Legal Service. The person designated to receive legal papers or summons in connection with this Plan is the Corporate Secretary, Pitney Bowes Inc., World Headquarters, Stamford, CT 06926-0700. |
EXHIBIT (vi)
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PITNEY BOWES INC.
DEFERRED INCENTIVE SAVINGS PLAN
As Amended and Restated
Effective January 1, 2003
(Previously amended and Restated Effective January 1, 2000)
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933.
EXHIBIT (vi)
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DCPP12
PITNEY BOWES INC.
DEFERRED INCENTIVE SAVINGS PLAN
(As amended and restated effective as of January 1, 2003)
ARTICLE I
INTRODUCTION
The purpose of the Pitney Bowes Inc. Deferred Incentive Savings Plan (hereinafter referred to as the Plan) is to aid Pitney Bowes Inc. and its subsidiaries in retaining and attracting executive employees by providing them with savings and tax deferral opportunities. The Plan first became effective for deferral elections made hereunder on or after September 9, 1996. The Plan has been amended and restated from time to time. The Plan was amended and restated to incorporate previous amendments and to make additional changes, effective for deferral elections made hereunder on or after January 1, 2000. The Plan was further amended - and restated to incorporate amendments and clarifications effective for deferral elections made hereunder on or after November 1, 2002. Participants who made a deferral election and incurred a Termination of Employment or Disability, entered Retirement or died prior to the effective date of any amendments shall have their deferrals and distributions governed by the terms of the Plan in effect prior to the effective date of any amendments. Effective the effective date of any amendments, the term PBC will no longer be used to describe the annual incentive compensation deferred under the Plan. Instead, annual incentive compensation will be known as Pitney Bowes Incentive Program.
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ARTICLE LI
DEFINITIONS
For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:
Section 2.01; Account. Account means-the bookkeeping account(s) established on the books of the Company by the Administrative Committee on behalf of the Participant comprised of the Deferral Account and the Gain Share Account. Accounts and Sub-Accounts will be established when the Deferred Amount would otherwise have been paid.
Section 2.02 Administrative Committee. Administrative Committee means the committee comprised of the Senior Vice President and Chief Human Resources Officer, Vice President and Treasurer, Vice President Employee Brand and Total Rewards, Director Strategic Leadership Total Rewards.
Section 2.03 Annual Incentive Award. Annual Incentive Award means the annual cash incentive payable to a Participant.
Section 2.04 Base Salary. Base Salary means the base salary of a Participant described in Section 4.01 (ii) of the Plan in effect at the time of the deferral rather that in effect at the time of the election to defer.
Section 2.05 Beneficiary Beneficiary means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Article
VIII.
Section 2.06 Board. Board means the Board of Directors of Pitney Bowes Inc.
Section 2.07 CIU Award. CIU Award means any Cash Incentive Unit Award granted pursuant to the long-term incentive program under the Pitney Bowes Inc. Key Employees Incentive Plan (as amended and restated as of February 12, 2001).
Section 2.08 Change of Control. For purposes of this Plan, a Change of Control shall be deemed to have occurred if:
(i) there is an acquisition, in any one transaction or a series of transactions, other than from Pitney Bowes Inc., by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), of beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of Pitney Bowes Inc. entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by Pitney Bowes Inc. or any of its subsidiaries, or any employee benefit plan (or related trust) of Pitney Bowes Inc. or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners,
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respectively, of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of Pitney Bowes Inc. entitled to vote generally in the election of directors, as the case may be; or
(ii) individuals who, as of January 1, 2002, constitute the Board (as of such date, the Incumbent Board) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to January 1, 2002, whose election, or nomination for election by Pitney Bowes shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Pitney Bowes Inc. (as such terms are used in Rule 14(a)(11) or Regulation 14A promulgated under the Exchange Act); or
(iii) there occurs either (a) the consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, in each case, with respect to which the individuals and entities who were the respective beneficial owners of the common stock and voting securities of Pitney Bowes Inc. immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or (b) an approval by the shareholders of Pitney Bowes Inc. of a complete liquidation of dissolution of Pitney Bowes Inc. or of the sale or other disposition of all or substantially all of the assets of Pitney Bowes Inc.
Section 2.09 Common Stock. Common Stock means the common stock of Pitney Bowes Inc.
Section 2.10 Company. Company means Pitney Bowes Inc., its successors, any subsidiary or affiliated organizations authorized by the Board or the Executive Committee to participate in the Plan and any organization into which or with which Pitney Bowes Inc. may merge or consolidate or to which all or substantially all of its assets may be transferred.
Section 2.11 Consideration Shares. Consideration Shares means shares of Common Stock owned by the Participant for a period of at least six months prior to the Date of Exercise, and having a Fair Market Value equal to the exercise price for the number of Option Shares to be exercised.
Section 2.12 Date of Exercise. Date of Exercise means the date on which an Option is considered to be exercised.
Section 2.13 Deferral Account. Deferral Account means the total of all Sub-Accounts maintained on the books of the Company by the Administrative Committee for each Participant to reflect deferral of Eligible Compensation, adjusted for hypothetical gains, earnings, dividends, losses, distributions, withdrawals and other similar activity other than gains with respect to stock options granted pursuant to deferrals made under the Plan.
Section 2.14 Deferral Period. Deferral Period means the period beginning on the date the Eligible Compensation would otherwise have been paid or, in the case of Gain Shares, on the Date of Exercise, and
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ending on the earlier of (i) the Participants Retirement and (ii) the last day of the period during which the Participant elected to defer current enjoyment and distribution of the Eligible Compensation and Gain Shares
Section 2.15 Deferred Amount. Deferred Amount means the amount of Eligible Compensation for the Plan Year or performance period to which the Participation Agreement relates that is to be deferred under the Plan.
Section 2.16 Disability. Disability means eligibility for disability benefits under the terms of the Companys Long-Term Disability Plan as in effect from time to time.
Section 2.17 Eligible Compensation. Eligible Compensation means any cash award otherwise payable as annual incentive compensation or a CIU Award by the Company to a Participant with respect to a Plan Year or a performance period pursuant to the Pitney Bowes Inc. Key Employees Incentive Plan or, effective January 1, 2000, Base Salary otherwise payable to the Participant.
Section 2.18 ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Section 2.19 Executive Committee. Executive Committee means the Executive Compensation Committee of the Board.
Section 2.20 Fair Market Value. Fair Market Value of a share of Common Stock means the closing price of the Common Stock on the New York Stock Exchange on the most recent day on which the Common Stock was so traded that precedes the date as of which Fair Market Value is to be determined.
Section 2.21 Form of Payment. Form of Payment means, with respect to In-Service Distributions, payment in one lump sum or in 5 annual installments, and with respect to Retirement distributions, payments in a lump sum, a partial lump sum, and/or in annual installments of 5, 10 or 15 years.
Section 2.22 Gain Shares. Gain Shares means the shares of Common Stock resulting from the exercise of any option pursuant to Article V.
Section 2.23 Gain Share Account. Gain Share Account means the account maintained on the books of the Company by the Administrative Committee for the Participant to reflect the number of Phantom Share Units related to Gains Shares, adjusted for hypothetical gains, earnings, dividends, losses, distributions, withdrawals and other similar activity.
Section 2.24 In-Service Distribution. In-Service Distribution means a payment by the Company to the Participant following a date elected by the Participant (the In-Service Distribution Date) of the amount represented by the Account balance in the In-Service Fund Sub-Account or In-Service Option Sub-Account pertaining to that In-Service Distribution. In-Service Distributions shall be made in accordance with Participants In-Service Distribution Form of Payment election.
Section 2.25 In-Service Fund Sub-Account. In-Service Fund Sub-Account or Fund Sub-Account means an Account created to track Deferred Amounts allocated to hypothetical investments other than Options, and hypothetical - earnings thereon, which the Participant elects to receive as an In-Service Distribution.
Section 2.26 In-Service Option Sub-Account. In-Service Option Sub-Account or Option Sub-Account is
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an Account created to track Deferred Amounts allocated to Options.
Section 2.27 Option. Option means an option to acquire shares of Common Stock granted pursuant to the Pitney Bowes Stock Option Plan as amended and restated January, 2002 or any predecessor or successor thereto.
Section 2.28 Option Expiration Date. Option Expiration Date means the last day of the option term.
Section 2.29 Option Share. Option Share means a share of Common Stock acquired (or deferred hereunder) pursuant to the exercise of an Option.
Section 2.30 PBIP. PBIP means the Pitney Bowes Performance Based Compensation Incentive Program, or any successor thereto, and the PBIP-like compensation incentive program, or any successor thereto.
Section 2.31 Participant. Participant means any individual who is eligible to participate in this Plan and who elects to participate by filing a Participation Agreement or Stock Option Gain Agreement as provided in Article IV.
Section 2.32 Participation Agreement. Participation Agreement means an agreement filed by a Participant in accordance with Article IV.
Section 2.33 Phantom Share Fund. Phantom Share Fund means the hypothetical investment fund under the Plan which is comprised of Phantom Share Units and which is intended to mirror investment in Common Stock, including deemed reinvestment of dividends thereon.
Section 2.34 Phantom Share Unit. Phantom Share Unit means the accounting units established hereunder to track a Participants hypothetical interest in the Phantom Share Fund.
Section 2.35 Plan Year. Plan Year means a twelve-month period beginning January 1 and ending the following December 31; provided that the first Plan Year shall be the partial year beginning on September 9, 1996 and ending on December 31, 1996.
Section 2.36 Retirement. Retirement means retirement of a Participant from the Company after attaining age 65 or 55 with at least ten years of service (in accordance with the method of determining retirement under the Pitney Bowes Pension Plan).
Section 2.37 Retirement Sub-Account. Retirement Sub-Account means an Account created to track all Deferred Amounts, and hypothetical earnings thereon, that Participants elect to receive upon Retirement or are otherwise not credited to an In-Service Sub-Account or to an Option Sub-Account.
Section 2.38 Stock Option Gain Agreement. Stock Option Gain Agreement means an agreement filed by a Participant in accordance with Article V intended to defer taxation of the gain from the exercise of an Option.
Section 2.39 Sub-Account. Sub-Account means an Account that is a portion of the Deferral Account created and maintained for purposes of enabling different allocation elections (among hypothetical investment funds),
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different Form of Payment elections, and different distribution dates, or for other, reasons deemed necessary by the Administrative Committee to properly administer the Plan.
Section 2.40 Termination of Employment. Termination of Employment means the cessation of a Participants services as a full-time employee of the Company and its affiliates for any reason other than Retirement.
Section 2.41 Unforeseeable Emergency. Unforeseeable Emergency means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of the Participants property due
-7-
to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
Section 2.42 Valuation Date. Valuation Date means the last day of the calendar month immediately preceding a distribution triggering event (e.g. an In-Service Distribution Date, the end of an Option Sub-Account Deferral Period, Retirement, Termination of Employment, Death, or Disability) or such other date as the Administrative Committee in its sole discretion may determine.
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ARTICLE III
ADMINISTRATION
Section 3.01 Executive and Administrative Committees; Duties. The Executive Committee shall administer this Plan and shall be the named fiduciary of this Plan. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business. All resolutions or other action taken by the Executive Committee shall be by a vote of a majority of its members present at any meeting or, without a meeting, by an instrument in writing signed by all its members. Members of the Executive Committee may participate in a meeting of such committee by means of a conference telephone or similar communications equipment that enables all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
The Executive Committee shall be responsible for the administration of this Plan and shall have all powers necessary to administer this Plan, including discretionary authority to determine eligibility for benefits and to decide claims under the terms of this Plan, except to the extent that any such powers are vested in any other fiduciary of this Plan by the Executive Committee. The Executive Committee may from time to time establish rules for the administration of this Plan, and it shall have the exclusive right to interpret this Plan and to decide any matters arising in connection with the administration and operation of this Plan. All rules, interpretations and decisions of the Executive Committee shall be conclusive and binding on the Company, Participants and Beneficiaries.
The Executive Committee has delegated to the Administrative Committee responsibility for performing certain administrative and ministerial functions under this Plan. The Administrative Committee shall be responsible for determining in the first instance issues related to eligibility, deemed investment choices, determination and distribution of Account balances, crediting of hypothetical earnings and debiting of hypothetical losses, in-service withdrawals, deferral elections and any other duties concerning the day-to-day operation of the Plan. The Executive Committee shall have discretion to delegate to the Administrative Committee such additional duties as it may determine. The Administrative Committee may designate one of its members as a chairperson and may retain and supervise outside providers and professionals (including in-house professionals) to perform any or all of the duties delegated to it hereunder.
Neither the Executive Committee nor a member of the Board nor any member of the Administrative Committee shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or for anything done or omitted to be done in connection with this Plan. The Executive Committee and the Administrative Committee shall keep records of all of their respective proceedings and the Administrative Committee shall keep records of all payments made to Participants or Beneficiaries and payments made for expenses or otherwise.
The Company shall, to the fullest extent permitted by law, indemnify each director, officer or employee of the Company (including the heirs, executors, administrators and other personal representatives of such person) and each member of the Executive Committee and the Administrative Committee against expenses (including attorneys fees), judgments, fines, amounts paid in settlement, actually and reasonably incurred by such person in connection with any threatened, pending or actual suit, action or proceeding (whether civil, criminal, administrative or investigative in nature or otherwise) in which such person may be involved by reason of the fact that he or she is or was serving this Plan in any capacity at the request of the Company.
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Any expense incurred by the Company, the Executive Committee or the Administrative Committee relative to the administration of this Plan shall be paid by the Company.
Section 3.02 Claim Procedure. If a Participant or Beneficiary makes a written request alleging a right to receive payments under this Plan or alleging a right to receive an adjustment in benefits being paid under this Plan, such actions shall be treated as a claim for benefits. All claims for benefits under this Plan shall be sent to the Administrative Committee. If the Administrative Committee determines that any individual who has claimed a right to receive benefits, or different benefits, under this Plan is not entitled to receive all or any part of the benefits claimed, the Administrative Committee shall inform the claimant in writing of such determination and the reasons therefore in terms calculated to be understood by the claimant. The notice shall be sent within 90 days of the claim unless the Administrative Committee determines that additional time, not exceeding 90 days, is needed. The notice shall make specific reference to the pertinent Plan provisions on which the denial is based, and shall describe any additional material or information that is necessary. Such notice shall, in addition, inform the claimant of the procedure that the claimant should follow to take advantage of the review procedure set forth below in the event the claimant desires to contest the denial of the claim. Such notice shall further inform the claimant of his or her right to bring a civil action under -ERISA Section 502(a) following an adverse benefit determination on appeal. The claimant may within 90 days thereafter submit in writing to the Administrative Committee a notice that the claimant contests the denial of his or her claims and desires a further review by the Executive Committee. The Executive Committee shall within 60 days thereafter review the claim and authorize the claimant to review relevant documents and submit issues, comments, documents - and other information relating to the claim to the Executive Committee. The Executive Committee will render a final decision on behalf of the Company with specific reasons therefore in writing and will transmit it to the claimant within 60 days of the written request for review, unless the Chairperson of the Executive Committee determines that additional time, not exceeding 60 days, is needed, and so notifies the claimant. If the claim is denied, wholly or in part, the notice shall further include specific references to the pertinent Plan provisions on which the denial is based, shall include a statement that the claimant is entitled to receive or review, upon request, documents relevant to the claim, and a statement of the claimants right to bring a civil action under ERISA Section 502(a). If the Committee fails to respond to a claim filed in accordance with the foregoing within 60 days or any such extended period, the Company shall be deemed to have denied the claim.
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ARTICLE IV
PARTICIPATION AND DEFERRAL OF ELIGIBLE COMPENSATION
Section 4.01 |
Participation. Participation in the Plan shall be limited to executives who |
(a) |
meet such eligibility criteria as the Executive Committee shall establish from time to time, |
(b) |
in the case of deferral of Base Salary, are individuals whose compensation may be subject to the deductibility limitations of Section 162(m) of the Internal Revenue Code, as amended, and |
(c) |
elect to Participate in the Plan by filing a Participation Agreement or a Stock Option Gain Agreement with the Administrative Committee. A Participation Agreement must be filed |
(i) |
with respect to an Annual Incentive Award, prior to the December 1st immediately preceding the Plan Year with respect to which the award relates and |
(ii) |
with respect to a CIU Award, prior to the December 1st that occurs during the year prior to the last year of the performance period to which the award relates. |
Prior to January 1, 2001, the term PBC award was used to describe the annual incentive award that could be offered under the Plan. The Participation Agreement for deferral of awards and CIU Awards that would otherwise be payable in 1997 was required to be filed no later than December 1, 1996. The Administrative Committee shall have the discretion to establish special deadlines regarding the filing of Participation Agreements for specified groups of Participants.
Section 4.02 Contents of Participation Agreement. Each Participation Agreement shall set forth:
(i) the Deferred Amount, expressed as either a dollar amount or a percentage of the total Eligible Compensation for such Plan Year or performance period; provided, that the minimum Deferred Amount for any Plan Year or performance period shall not be less than $2,000;
(ii) the In-Service Distribution Date(s) and/or Deferral Period for portions, or all, of the Deferred Amount, which is not to be less than three years,
(iii) |
the Form of Payment for In-Service Distributions and Retirement distribution; |
(iv) investment selections made by the Participant in hypothetical investment funds under the Plan; and
(v) |
and any other item determined to be appropriate by the Administrative Committee. |
Section 4.03 In-Service Distributions. An In-Service Distribution election shall pertain to such portion of the Deferred Amount as elected by the Participant and shall cause a Fund Sub-Account or an Option Sub-Account, as the case may be, to be established (unless such Sub-Account already exists), to which such portion of Deferred Amount shall be credited. In the event an In-Service Sub-Account has already been established for the In-Service Distribution Date referred to in the deferral election, such portion of the Deferred Amount shall be credited to the existing In-Service Sub-Account.
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(a) A Participant may maintain up to four (4) Fund Sub-Accounts and an unlimited number of Option Sub-Accounts.
(b) |
The minimum Deferral Period for an In-Service Distribution is three years. |
(c) |
A Participant may change an In-Service Distribution Date or Form of Payment once only, as follows: |
(i) |
An In-Service Distribution Date extension may be requested by submitting a new Participation Agreement or such other form as may be provided for In-Service Distribution Date extensions by the Administrative Committee (or completing and electronically submitting the appropriate screen on the Participant website, when available) at any time, so long as the date that such form is submitted is at least twelve (12) months prior to the In-Service Distribution Date being extended; and |
(ii) |
The In-Service Distribution Date may be extended to a subsequent year (and must be extended by at least one year), but it may not be accelerated (made to occur sooner than the original date). An extension of an In-Service Distribution Date corresponding to an Option Sub-Account will not extend the Option term. |
(iii) |
In-Service Distribution Dates corresponding to Fund Sub-Accounts may be cancelled, even after an extension. A cancellation of such an In-Service Distribution Date shall cause the Fund Sub-Account associated with it to be combined with the Retirement Sub-Account. |
(iv) |
In-Service Distribution Dates corresponding to Option Sub-Accounts may not be cancelled. |
(v) |
Extending or canceling an In-Service Distribution Date in accordance with the Plan is specific to the In-Service Distribution to which it refers, and shall not affect other In-Service Distribution Dates or the ability of the Participant to make new In-Service Distribution elections with respect to new Deferred Amounts (except to the extent the maximum number of In-Service-Fund Sub-Accounts are already established). |
(vi) |
With the exception that Fund Sub-Account cancellations do not count as a change, only one change may be made for each In Service Sub-Account. More than one change (that is otherwise permitted under the Plan) may be made if made concurrently with other permissible changes (e.g. a Form of Payment change may be made in the same request as a request for a date extension). If made separately, any change (other than a cancellation of a Fund Sub-Account) constitutes a change to the In-Service Distribution and thereby extinguishes a Participants right to request any additional change at another time. |
(d) Any portion of a Deferred Amount not credited to a Fund Sub-Account or an Option Sub-Account will be credited to the Retirement Sub-Account.
(e) The Participation Agreement shall also indicate the Participants Form of Payment election for each In-Service Distribution Date. Permitted payment schedules for In-Service Distributions are a single lump sum or five (5) annual-installment-payments.
(f) In-Service-Distributions corresponding to Fund Sub-Accounts shall be accelerated in the event of Retirement or Termination of Employment. In the event Retirement occurs prior to an In-Service Distribution Date, or prior to the completion of payment of an In-Service Distribution (in the case of installment payments) with respect to a Fund Sub-Account, the remaining balances in the Fund Sub-Accounts shall be added to the Retirement Sub-Account.
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Payments shall thereafter be made by the Company in accordance with Plan provisions regarding Retirement or Termination of Employment, as the case may be.
(g) In-Service Distributions corresponding to In-Service Option Sub-Accounts shall not be accelerated in the event of Retirement, but shall be accelerated in the event of Termination of Employment, death, or Disability prior to Retirement.
Section 4.04 Options and Deferral Periods.
(a) A Participant may allocate a portion, or all, of a Deferred Amount to Options, if such hypothetical investment is made available by the Executive Committee (see Section 7.02(c)). When a Participant allocates Deferred Amounts to Options, the Participant must elect a Deferral Period, which must be at least three years but no more than ten years beginning on the date the Deferred Amount (or last installment of the Deferred Amount in the case of salary), is credited to the Deferral Account. The Deferral Period will also determine the term of the Option; however, if the minimum Deferral Period of three years is chosen, then the Option term will be four years.
(b) The allocation to Options and establishment of a corresponding Deferral Period creates an Option Sub-Account. There is no limit on the number of Option Sub-Accounts which a Participant may maintain.
(c) Option Sub-Accounts established prior to January 1, 2004 will be accelerated and combined with Retirement payments in progress (or, if none, then paid in accordance with the Participants Form of Payment election for the Option Sub-Account) in the event of exercise of the Option following Retirement. For Option Sub-Accounts established on or after January 1, 2004, Option Sub-Account distributions shall not be accelerated due to Retirement or exercise of the Option following Retirement.
Section 4.05 Changes to Participation Agreement. Provisions of a Participation Agreement pertaining to the amount and source (e.g. salary, specific award, etc.) of Deferred Amounts may not be amended or revoked after the beginning of the Plan Year to which they pertain. Changes to the In-Service Distribution Dates, and Form of Payment elections for In-Service Distributions and Retirement distributions may be made in accordance with provisions in applicable Sections of the Plan.
Section 4.06 Reduction in Deferred Amount for Tax Withholding. The foregoing provisions of this Article IV notwithstanding, in the event a Participants deferral election results in insufficient non-deferred compensation from which to withhold taxes in accordance with applicable law, the Deferred Amount shall be reduced as necessary to allow the Company to satisfy tax withholding requirements.
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ARTICLE V
STOCK OPTION GAIN DEFERRALS
Section 5.01 In General. Subject to provisions of this Article V, Participants may elect to defer receipt and distribution of the gain related to Gain Shares until the end of an elected Deferral Period by filing with the Administrative Committee a Stock Option Gain Agreement. The stock option gain deferral features of the Plan are effective for deferral elections made on or after September 14, 1998. The deferral of gain related to Gain Shares, as described in Article V and other related provisions of the Plan, shall be available only to Participants who are employees of the Company at the time the Participant files a Stock Option Gain Agreement.
Section 5.02 Timing of Filing Stock Option Gain Agreement. A Stock Option Gain Agreement must be filed at least six months prior to the Date of Exercise, prior to the calendar year in which occurs the Date of Exercise and no later than the day before the first day of the six month period ending on the Option Expiration Date.
Section 5.03 Contents of Stock Option Gain Agreement. Each Stock Option Gain Agreement shall set forth: (i) the number of Option Shares to be exercised in connection with the deferrals hereunder; (ii) the date of grant of the Option Shares; (iii) the Deferral Period, which is not to be less than three years; (iv) the Form of Payment; and (v) any other item determined to be appropriate by the Administrative Committee. A Participant may elect to defer gain on Option Shares in increments of 25%, 50%, 75% or 100% of the number of Option Shares awarded on a particular date of grant.
Section 5.04 Manner of Exercising Option Shares. A Participant who desires to exercise an Option and to defer current receipt and distribution of the gain related to Gain Shares must follow the procedures and requirements that are applicable to the Option under the Pitney Bowes Stock Plan as amended and restated, January 1, 2002, including the procedures and requirements relating to the exercise of an Option; provided, however, that in the case of a deferral of Gain Shares under this Plan, the Participant shall only be permitted to tender Consideration Shares to pay the entire exercise price for any exercised Option. Notwithstanding the foregoing, the Administrative Committee may in its discretion accept the Participants attestation that he or she owns the number of Consideration Shares necessary to effectuate the stock swap contemplated hereunder. The attestation method or any other procedure accepted by the Administrative Committee shall be consistent with applicable legal authority regarding the tax-free treatment of such a transaction.
Section 5.05 Determination of Gain Shares. Upon exercise of an Option, the gain of which the Participant has elected to defer hereunder, Gain Shares resulting from such exercise shall be determined as follows: (i) the aggregate exercise price for all exercised Option Shares shall be determined; (ii) the number of Consideration Shares needed to pay the exercise price for such Option Shares shall be determined; (iii) the difference between the number of exercised Option Shares and the number of Consideration Shares shall be the number of Gain Shares resulting from such exercise. Any fractional Gain Share that results from the computations hereunder shall be rounded up to the nearest whole number.
Section 5.06 Conversion of Gain Shares to Phantom Stock Units. As of the Date of Exercise, Gain Shares shall be converted to Phantom Share Units by dividing the amount of the aggregate Fair Market Value of the Gain Shares as of the Date of Exercise by the Fair Market Value of one share of Common Stock as of the Date of Exercise. The resulting number of Phantom Share Units shall be credited to the Participants Gain Share Account. Any fractional
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Phantom Share Unit that results from the- computations hereunder shall be rounded up to the nearest whole number.
Section 5.07 Changes to the Stock Option Gain Agreement. A Stock Option Gain Agreement may not be amended or revoked after the day on which it is filed with the Administrative Committee, except that the Deferral Period may be extended if an amended Stock Option Gain Agreement is filed with the Administrative Committee at least one full calendar year before the Deferral Period (as in effect before such amendment) ends; provided, that only one such amended Stock Option Deferral Agreement may be filed with respect to each Agreement.
Section 5.08 Failure to Properly Exercise. If a Participant who has. made a valid election under this Article V to defer the gain related to Gain Shares and if the Option expires without a proper exercise of the Option by the Participant or if the Participant fails to properly tender the Consideration Shares by the last day of the Option term, the Participant shall forfeit any opportunity to exercise the Option and the Option shall be cancelled as of the end of the last business day of the Option term.
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ARTICLE VI
DEFERRAL OF ELIGIBLE COMPENSATION AND GAIN SHARES
Section 6.01 Elective Deferred Incentive Compensation. The Deferred Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited by the Administrative Committee to the Participants Deferral Account or Sub-Account as and when such Deferred Amount would otherwise have been paid to the Participant. To the extent that the Company is required to withhold any taxes or other amounts from the Deferred Amount pursuant to any state, Federal or local law, such amounts shall be taken out of compensation to the Participant that is not deferred under this Plan. In the event a Participants deferral election results in insufficient non-deferred compensation from which to withhold taxes in accordance with applicable law, the Deferred Amount shall be reduced as necessary to allow the Company to satisfy tax withholding requirements.
Section 6.02 Vesting of Accounts. Except as provided in Section 8.06, a Participant shall be 100% vested in his/her Account at all times.
Section 6.03 Gain Shares. The gain from the exercise of the Option which the Participant elects to defer under the Plan as Phantom Share Units shall be credited by the Administrative Committee to the Participants Gain Share Account as of the Date of Exercise.
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ARTICLE VII
MAINTENANCE AND INVESTMENT OF ACCOUNTS
Section 7.01 Maintenance of Accounts. A Deferral Account and a Gain Share Account, shall be separately maintained for each Participant in accordance with their Participation Agreements and Stock Option Gain Agreements. A Participants interest in his/her Account, and all Sub-Accounts, shall be comprised of the deemed investments in the deemed investment funds offered under the Plan (including the Phantom Share Fund); provided, however, the Gain Share Account shall only reflect the Participants interest in the Phantom Share Fund. A Participants Account or Sub-Account shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan, and shall not constitute or be treated as a trust fund of any kind. Accounts and Sub-Accounts shall be valued daily and balances shall be available on the Participant web site and in quarterly statements sent to Participants. For purposes of distributions, the Administrative Committee shall determine the balance of each Account, and Sub-Account, as of each Valuation Date.
Section 7.02 Investment Choices.
(a) |
Subject to Section 7.02(d), the Executive Committee shall permit the Participant to elect to have his/her Deferred Amounts and Deferral Account deemed to be invested in one or more of the deemed investment funds offered under the Plan, selecting among the investment choices, as determined by the Executive Committee from time to time, and in accordance with such rules, regulations and procedures as the Executive Committee may establish from time to time. A Participant may elect different hypothetical investment funds for each Sub-Account. Notwithstanding anything to the contrary herein, earnings and losses based on a Participants investment elections shall begin to accrue as of the date such Participants Deferred Amounts are credited to his/her Deferral Account or Sub-Account(s); provided, however, that with respect to a Participant who is participating in the Plan as a PBIP-like employee whose incentive award is determined on other than an annual basis, Deferred Amounts shall not be considered to be invested until January 1 following the Plan Year to which the Deferred Amount relates. Upon the Termination of Employment of a Participant who is participating in the Plan as a PBC-like employee, amounts credited to his/her Deferral Account for which earnings or losses have not begun to accrue as provided herein at the time of such Termination of Employment shall be paid Deferred Amount in cash in one lump sum without regard to any earnings or losses. Notwithstanding anything to the contrary in this Plan, if a Change of Control occurs within three years of the initial crediting of such Deferred Amounts to the Deferral Account, the net cumulative earnings with respect to such Deferred Amounts shall be based on the greater of (i) rate of return based on the actual investment elections of the Participant and (ii) the rate of return corresponding to the MONY Money Market Fund Rate of Return or such other competitive money market fund rate designated by the Executive Committee, in its sole discretion. |
(b)
(i) |
Phantom Share Units shall be deemed to be invested in shares of Common Stock and shall comprise the Phantom Share Fund. Deferred Amounts that are deemed to be invested in the Phantom Share Fund and Gain Shares shall be converted into Phantom Share Units based upon the Fair Market Value of the Common Stock on the date(s) the Deferred Amounts or Gain Shares are to be credited to the Deferral Account or Gain Share Account, as the case may be. Gain Shares shall be converted into Phantom Stock Units in accordance with Section 5.06. Amounts allocated to the Gain Share Account shall remain hypothetically invested in the Phantom Share Fund at all times. |
(ii) |
The portion of any Deferral Account that is invested in the Phantom Share Fund and the entire portion of |
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the Gain Share Account shall be credited, as of each Valuation Date, with additional Phantom Share Units related to cash dividends paid on the Common Stock with record dates during the period beginning on the day after the most recent preceding Valuation Date and ending on such Valuation Date, as follows. The credit shall be for a number of Phantom Share Units equal to the amount of the aggregate deemed dividend payments on the Phantom Share Units as of the record date, divided by the Fair Market Value of one share of Common Stock determined as of the record date, rounded up to the next whole share.
(iii) |
In the event of a stock dividend, split-up or combination of the Common Stock, merger, consolidation, reorganization, recapitalization, or other change in the corporate structure or capitalization affecting the Common Stock, such that an adjustment is determined by the Executive Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Executive Committee may make appropriate adjustments to the number of Phantom Share Units credited to the Deferral Account and Gain Share Account. The determination of the Executive Committee as to such adjustments, if any, to be made shall be conclusive. |
(iv) |
Notwithstanding any other provision of this Plan, the Executive Committee shall adopt such procedures as it may determine are necessary to ensure that with respect to any Participant who is actually or potentially subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the crediting of deemed shares to his or her Deferral Account and Gain Share Account is not deemed to be a non-exempt purchase for purposes of such Section 16(b), including without limitation requiring that no shares of Common Stock or cash relating to such deemed shares may be distributed for six months after being credited to such Deferral Account or Gain Share Account, as the case may be. This Plan will conform in all relevant respects to the provisions of Sarbanes-Oxley Act of 2002. |
(c) |
The Executive Committee may authorize Options as an investment choice under the Plan. The terms and conditions under which Options may be made available as an investment choice shall be determined and communicated by the Executive Committee to Participants from time to time. Any Options issueable under the Plan will be made pursuant to the Pitney Bowes Stock Plan, as amended and restated, January 2002. For purposes of determining the value of Options at the time of grant, the Executive Committee shall use the method of fair market value used for other grants under the Pitney Bowes Stock Option Plan as amended and restated, January 2002. Options shall not be a permitted investment choice with respect to the deferral of Base Salary under the Plan. |
(d) |
Except with respect to retirees who exercise Options after retirement based on deferrals made before January 1, 2003, no deemed investment return under the Plan shall be allocated to Option Sub-Accounts, prior to the last day of the Deferral Period pertaining to the Option Sub-Account. Upon the expiration of the Deferral Period, the Participant shall receive a distribution equal to the original Deferred Amount allocated to the Option, unless he or she has exercised the right to extend the Distribution Date pursuant to Section 4.03(c) of the Plan, in which case he/she shall be entitled to elect to have his/her Deferred Amounts related to the granting of such Options deemed to be invested in one or more of the hypothetical investment funds offered under the Plan effective as soon as practicable following the end of the original Deferral Period. |
Section 7.03 Statement of Accounts. The Administrative Committee shall submit to each Participant quarterly statements of his/her Account, in such form as the Administrative Committee deems desirable, setting forth the balance to the credit of such Participant in his/her Deferral Account, including Sub-Accounts, and Gain Share Account as of the end of the most recently completed quarter.
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ARTICLE VIII
BENEFITS
Section 8.01 Time and Form of Payment for In-Service Distributions and Gain Share Account Distributions.
(a) |
At the end of the Deferral Period, the Company shall pay to the Participant the balance of the Fund Sub-Account, Option Sub-Account, or Gain Share Account, as the case may be, in accordance with the most current valid Form of Payment election pertaining to that Sub-Account or Gain Share Account on file with the Administration Committee or, if none, then as a single lump sum. If the Deferral Period was extended, then the Company shall pay to the Participant the balance of the Sub-Account as soon as administratively practicable following the end of the extended Deferral Period in accordance with the Form of Payment election made by the Participant or, if none, then in a single lump sum. Amounts allocated to the Gain Share Account shall only be paid in the form of actual shares of Common Stock in one lump sum or installments in accordance with the Participants Stock Option Gain Agreement and applicable provisions of the Plan |
(b) |
The most recent Participation Agreement or Stock Option Gain Agreement, as the case may be, making Form of Payment elections which is filed with the Administrative Committee at least twelve (12) months prior to an In-Service Distribution or Stock Option Gain distribution shall supersede all previous and subsequent Participation Agreements or Stock Option Gain Agreements, as the case may be, on file and the entire amount in the Participants Sub-Account shall be distributed in accordance with such Form of Payment elections; provided, however, that only a subsequent Stock Option Gain Agreement can supersede a prior Stock Option Gain Agreement and cannot supersede a prior Participation Agreement, and vice versa. |
Section 8.02 Time and Form of Payment for Retirement Distributions.
(a) |
In the event of Retirement, the Company shall distribute an amount equal to the balance in the Retirement Sub-Account together with remaining unpaid balances in all In-Service Sub-Accounts which do not correspond to Option Sub-Accounts (determined as of the applicable Valuation Date) to the Participant as soon as administratively practicable following the first day of the month following the date of Retirement in accordance with the most recent Form of Payment election made by the Participant which was filed at least twelve (12) months prior to the date of Retirement, or if none, then in five (5) annual installments. |
(b) |
Notwithstanding Section 8.02 (a) hereof, and in accordance with Section 4.04 (c) hereof, a Participant who meets the definition of Retirement who has been granted Options pursuant to Section 7.02 (c) hereof in connection with Deferred Amounts prior to January 1, 2004 shall have that portion of his/her Deferral Account that relates to the granting of such Options distributed at the earlier of (i) the Date of Exercise of such Options and (ii) the last day of the Option term. A Participant who meets the definition of Retirement who has been granted Options pursuant to Section 7.02 (c) hereof in connection with Deferred Amounts and who has established Option Sub-Accounts on or after January 1, 2004 shall have the balance of such Option Sub-Accounts distributed at the end of the Option term in accordance with distribution provisions in the Plan notwithstanding an earlier exercise of the Option. Such Deferred Amounts shall be distributed in accordance with the Form of Payment elected by the Participant in his/her Participation Agreement or with |
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applicable provisions of the Plan; provided, however, that if the Deferred Amounts are to be distributed in installments, the Deferred Amounts related to the granting of Options shall be entirely distributed over the remaining installment schedule for Retirement distributions commencing with the next following installment payment due under the installment schedule. Any lump sum payment shall be paid as soon as practicable following the Date of Exercise of the Options or the last day of the Option term, as the case may be.
Section 8.03 Time and Form of Payment for Distributions Upon Termination of Employment. In the event of a Termination of Employment, the Company shall pay the balance in the Retirement Sub-Account and the remaining balance in any In-Service Sub-Accounts, valued as of the applicable Valuation Date, to the Participant in a single lump sum as soon as administratively practicable following the date of Termination of Employment.
Section 8.04 Time and Form of Payment for distributions upon death or Disability. In the event of death or Disability prior to Retirement or Termination of Employment, the Company shall pay the entire Deferral Account balance, including all remaining Sub-Account balances in a single lump sum to the Participant (in the event of Disability) or to the Beneficiary (in the event of death). In the event of death or Disability after Retirement, the Company shall continue to pay benefits in the same amounts and at the same time(s) as if the Participant had not died or become disabled; except that, in the case of death, such payments shall be paid to the Beneficiary.
Section 8.05 Miscellaneous Distribution Provisions. The foregoing provisions of this Article VII not withstanding:
(a) |
if a Participant has elected to receive a distribution in the form of a full or partial lump sum, the Administrative Committee may in its discretion distribute all or a portion of the Deferred Amounts deemed to be invested in the Phantom Share Fund in the form of actual shares of Common Stock. Installment payments from the Deferral Account shall only be paid in cash. All full or partial lump sum distributions hereunder will be made as soon as practicable following the In-Service Distribution Date, end of the Deferral Period, date of Retirement, date of Termination of Employment, or Death as the case may be, based on the most recent Valuation Date as of the distribution triggering event. |
(b) |
If the Participant has elected to receive payments in installments, each payment shall consist of an amount equal to (i) the balance of the Deferral Account, as of the most recent Valuation Date preceding the payment date times (ii) a fraction, the numerator of which is one and the denominator of which is the number of remaining installments (including the installment being paid). The first such installment shall be paid as soon as practicable after the distribution triggering event (e.g. In-Service Distribution Date, end of the Deferral Period, Retirement, etc.) as the case may be, and each subsequent installment shall be paid on or about the anniversary of such first payment. In the case of the In-Service and Retirement Sub-Accounts, each such installment shall be deemed made on a pro rata basis from each of the different deemed investments of such Sub-Accounts (if there is more than one such deemed investment). |
(c) |
In the event the balance in the Deferral Account (including all Sub-Accounts) is less than $50,000 at the time of the initial valuation immediately prior to the beginning of a Retirement distribution, then the Administrative Committee, in its sole discretion, may ignore the Form of Payment election made by the Participant and pay the benefit in a single lump sum. |
Section 8.06 Hardship Withdrawals. Notwithstanding the provisions of Section 8.01 and any Participation
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Agreement or Stock Option Gain Agreement, as the case may be, a Participant shall be entitled to request early payment of all or part of the balance in his/her Deferral Account and Gain Share Account in the event of an Unforeseeable Emergency, in accordance with this Section 8.06. A distribution pursuant to this Section 8.06 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participants assets to the extent such liquidation would not itself cause severe financial hardship, or (iii) by cessation of participation in the Plan. An application for an early payment under this Section 8.06 shall be made to the Administrative Committee in such form and in accordance with such procedures as the Administrative Committee shall determine from time to time. The determination of whether and in what amount and form a distribution will be permitted pursuant to this Section 8.06 shall be made by the Administrative Committee. Distributions shall be made from In-Service and Option Sub-Accounts and Gain Share Accounts (beginning with the most distant) and then from the Retirement Sub-Account.
Section 8.07 Voluntary Early Withdrawal. Notwithstanding the provisions of Section 8.01 and any Participation Agreement or Stock Option Gain Agreement, a Participant shall be entitled to elect to withdraw all of the balances in his/her Deferral Account and Gain Share Account in accordance with this Section 8.07 by filing with the Administrative Committee such forms, in accordance with such procedures, as the Administrative Committee shall determine from time to time. As soon as practicable after receipt of such form by the Administrative Committee, the Company shall pay an amount equal to ninety percent of the balance in such Participants Deferral Account(s) and ninety percent of any Gain Shares allocated to the Gain Share Account (determined as of the most recent Valuation Date preceding the date such election is filed) to the electing Participant in a lump sum in cash, or actual shares ofCommon Stock in the case of the Gain Share Account, and the Participant shall forfeit the remainder of such Deferral Account or Gain Share Account, as the case may be. The most recent Participation Agreement or the Stock Option Gain Agreement previously filed by a Participant who elects to make a withdrawal under this Section 8.07 shall be null and void as a result of a voluntary early withdrawal hereunder (including without limitation a Participation Agreement or the Stock Option Gain Agreement, as the case may be, with respect to Plan Years or performance periods that have not yet been completed). A Participant who does not have a Participation Agreement or Stock Option Gain Agreement on file at the time of the voluntary early withdrawal request shall not be permitted to file an additional Participation Agreement or Stock Option Gain Agreement for one year following the last day of the deferral election period immediately following the voluntary early withdrawal request. Distributions shall be made from In-Service or Option Sub-Accounts and Gain Share Accounts (beginning with the most distant) and then from the Retirement Sub-Account.
Section 8.08 Payments in Connection with Change of Control. Notwithstanding anything contained in this Plan to the contrary, upon a Change of Control, the Company shall immediately pay to each Participant in a lump sum in cash the balance in his/her Deferral Account or in actual shares of Common Stock in the case of the Gain Share Account (determined as of the most recent Valuation Date preceding the Change of Control).
Section 8.09 Withholding of Taxes. Notwithstanding any other provision of this Plan, the Company shall withhold from payments made hereunder any amounts required to be so withheld by any applicable law or regulation.
Section 8.10 Modification of Payment Schedule. Notwithstanding anything herein to the contrary, the Committee may in its sole and exclusive discretion modify the method and timing of payment of Deferred Amounts as previously elected by the Participant based on circumstances it has identified as being in the best interests of the Company.
EXHIBIT (vi)
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ARTICLE IX
BENEFICIARY DESIGNATION
Section 9.01 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person, persons or entity as his Beneficiary or Beneficiaries to receive the balance of his or her Account upon the Participants death. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Administrative Committee, on such form and in accordance with such procedures as the Administrative Committee shall establish from time to time.
Section 9.02 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participants Beneficiary shall be deemed to be the Participants estate.
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ARTICLE X
AMENDMENT AND TERMINATION OF PLAN
Section 10.01 Amendment. The Board or the Executive Committee may at any time amend this Plan in whole or in part, provided, however, that no amendment shall be effective to decrease the balance in any Account as accrued at the time of such amendment, nor shall any amendment otherwise have a retroactive effect except if such retroactivity does not cause a materially adverse financial effect.
Section 10.02 Companys Right to Terminate. The Board or the Executive Committee may at any time terminate the Plan with respect to future Participation Agreements and Stock Option Gain Agreements. The Board or the Executive Committee may also terminate the Plan in its entirety or in part at any time for any reason, including without limitation if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of the Company, and upon any such termination, the Company shall immediately pay to each Participant in a lump sum the accrued balance in his Account (determined as of the most recent Valuation Date preceding the termination date).
EXHIBIT (vi)
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ARTICLE XI
MISCELLANEOUS
Section 11.01 Unfunded Plan. This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Section 401 of ERISA. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of the Companys creditors, to assist it in accumulating funds to pay its obligations under the Plan.
Section 11.02 Nonassignability. Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any; payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participants or any other persons bankruptcy or insolvency.
Section 11.03 Validity and Severability. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 11.04 Governing Law. The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Connecticut, without reference to principles of conflict of law, except to the extent pre-empted by federal law.
Section 11.05 Employment Status. This Plan does not constitute a contract of employment or impose on the Participant or the Company any obligation for the Participant to remain an employee of the Company or change the status of the Participants employment or the policies of the Company and its affiliates regarding termination of employment.
Section 11.06 Underlying Incentive Plans and Programs. Nothing in this Plan shall prevent the Company from modifying, amending or terminating the compensation or the incentive plans and programs, including the Pitney Bowes Inc. Key Employees Incentive Plan pursuant to which cash awards are earned and which are deferred under this Plan and the Pitney Bowes Stock Option Plan as amended and restated, January, 2002
Section 11.07 Severance. Notwithstanding anything to the contrary herein the Executive Committee may in its sole and exclusive discretion, determine that the Accounts of a Participant who has incurred, a Termination of Employment and who receives or will receive severance payments from the Company shall be paid in installments, at such intervals as the Executive Committee may decide.
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Section 11.08 Termination of Employment. Upon Termination of Employment, Disability or death, a Participant shall forfeit all rights and entitlements to actively participate in the Plan, including the . opportunity to make further . deferral elections of Eligible Compensation, gain on related Gain Shares, direction of deemed investment funds and any other activities offered to active Participants, unless the Administrative Committee in its sole discretion decides otherwise.
1. |
I have reviewed this Annual Report on Form 10-K of Pitney Bowes Inc.; |
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 registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
d. |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
1. |
I have reviewed this Annual Report on Form 10-K of Pitney Bowes Inc.; |
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 registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
d. |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |