-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MMFEA4NcQ2YKODtFi7d5Cnlc6x3Suk1USft0dCr3a3uhI0FA6owIXbcz9ZkWlO99 lQYXEcWFEZw7E3z0/iOJ3Q== 0000078814-97-000007.txt : 19970815 0000078814-97-000007.hdr.sgml : 19970815 ACCESSION NUMBER: 0000078814-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PITNEY BOWES INC /DE/ CENTRAL INDEX KEY: 0000078814 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE MACHINES, NEC [3579] IRS NUMBER: 060495050 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03579 FILM NUMBER: 97663480 BUSINESS ADDRESS: STREET 1: WORLD HEADQUARTERS 61-11 STREET 2: ONE ELMCROFT ROAD CITY: STAMFORD STATE: CT ZIP: 06926 BUSINESS PHONE: 2033565000 10-Q 1 JUNE 30, 1997 10-Q FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 F O R M 1 0 - Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - - ACT OF 1934 For the quarterly period ended June 30, 1997 OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-3579 PITNEY BOWES INC. State of Incorporation IRS Employer Identification No. Delaware 06-0495050 World Headquarters Stamford, Connecticut 06926-0700 Telephone Number: (203) 356-5000 The Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of common stock, $2 par value, outstanding as of July 31, 1997 is 144,281,005. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 2 of 19 Pitney Bowes Inc. Index Page Number Part I - Financial Information: Consolidated Statement of Income - Three and Six Months Ended June 30, 1997 and 1996 .......................... 3 Consolidated Balance Sheet - June 30, 1997 and December 31, 1996 ........................................ 4 Consolidated Statement of Cash Flows - Six Months Ended June 30, 1997 and 1996 ...................... 5 Notes to Consolidated Financial Statements ........................ 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations ................ 8-13 Part II - Other Information: Item 1: Legal Proceedings ........................................ 14 Item 4: Submission of Matters to a Vote of Security Holders ...... 14-15 Item 6: Exhibits and Reports on Form 8-K ......................... 15 Signatures .............................................................. 16 Exhibit (i) - Computation of Earnings per Share ......................... 17 Exhibit (ii) - Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends .................. 18 Exhibit (iii) - Financial Data Schedule ................................. 19 Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 3 of 19 Part I - Financial Information Pitney Bowes Inc. Consolidated Statement of Income (Unaudited)
(Dollars in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, ------------------------------- ------------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenue from: Sales ............................................. $ 449,757 $ 410,649 $ 867,579 $ 794,653 Rentals and financing ............................. 436,141 415,266 860,703 824,344 Support services .................................. 120,213 117,022 239,199 230,205 ------------ ------------ ------------ ------------ Total revenue ................................. 1,006,111 942,937 1,967,481 1,849,202 ------------ ------------ ------------ ------------ Costs and expenses: Cost of sales ..................................... 269,490 258,039 523,298 496,803 Cost of rentals and financing ..................... 128,041 114,575 255,715 240,327 Selling, service and administrative ............... 335,682 320,091 661,791 631,107 Research and development .......................... 21,835 20,637 42,483 39,347 Interest, net ..................................... 50,953 47,399 100,449 95,983 ------------ ------------ ------------ ------------ Total costs and expenses ...................... 806,001 760,741 1,583,736 1,503,567 ------------ ------------ ------------ ------------ Income before income taxes ............................. 200,110 182,196 383,745 345,635 Provision for income taxes ............................. 69,039 63,663 132,729 120,593 ------------ ------------ ------------ ------------ Net income ............................................. $ 131,071 $ 118,533 $ 251,016 $ 225,042 ============ ============ ============ ============ Net income common and common equivalent share ..... $ .89 $ .79 $ 1.70 $ 1.49 ============ ============ ============ ============ Average common and common equivalent shares outstanding ....................................... 146,935,086 150,945,114 148,030,688 151,171,536 ============ ============ ============ ============ Dividends declared per share of common stock ........... $ .40 $ .345 $ .80 $ .69 ============ ============ ============ ============ Ratio of earnings to combined fixed charges and preferred stock dividends ..................... 3.89 3.83 3.83 3.66 ============ ============ ============ ============ Ratio of earnings to fixed charges excluding minority interest ....................... 4.13 3.99 4.02 3.82 ============ ============ ============ ============
Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 4 of 19 Pitney Bowes Inc. Consolidated Balance Sheet (Unaudited)
June 30, December 31, (Dollars in thousands) 1997 1996 ------------- ---------------- Assets Current assets: Cash and cash equivalents............................................. $ 130,743 $ 135,271 Short-term investments, at cost which approximates market............. 1,474 1,500 Accounts receivable, less allowances: 6/97, $17,423; 12/96, $16,160.. 322,679 340,730 Finance receivables, less allowances: 6/97, $43,514; 12/96, $40,176.. 1,423,859 1,339,286 Inventories (Note 2).................................................. 255,791 281,942 Other current assets and prepayments.................................. 131,776 123,337 ------------- ---------------- Total current assets.............................................. 2,266,322 2,222,066 Property, plant and equipment, net (Note 3)................................ 484,882 486,029 Rental equipment and related inventories, net (Note 3)..................... 821,851 815,306 Property leased under capital leases, net (Note 3)......................... 4,751 5,848 Long-term finance receivables, less allowances: 6/97, $76,527; 12/96, $73,561......................................... 3,442,412 3,450,231 Investment in leveraged leases............................................. 661,036 633,682 Goodwill, net of amortization: 6/97, $37,629; 12/96, $34,372.............. 202,092 205,802 Other assets ............................................................. 405,151 336,758 ------------- ---------------- Total assets ............................................................ $ 8,288,497 $ 8,155,722 ============= ================ Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities.............................. $ 827,394 $ 849,789 Income taxes payable.................................................. 162,378 212,155 Notes payable and current portion of long-term obligations............ 2,173,450 1,911,481 Advance billings...................................................... 351,059 331,864 ------------- ---------------- Total current liabilities......................................... 3,514,281 3,305,289 Deferred taxes on income................................................... 831,480 720,840 Long-term debt............................................................. 1,172,053 1,300,434 Other noncurrent liabilities............................................... 381,852 390,113 ------------- ---------------- Total liabilities................................................. 5,899,666 5,716,676 ------------- ---------------- Preferred stockholders' equity in a subsidiary company ................... 300,000 200,000 Stockholders' equity: Cumulative preferred stock, $50 par value, 4% convertible............. 46 46 Cumulative preference stock, no par value, $2.12 convertible.......... 2,291 2,369 Common stock, $2 par value............................................ 323,338 323,338 Capital in excess of par value........................................ 27,852 30,260 Retained earnings..................................................... 2,583,936 2,450,294 Cumulative translation adjustments.................................... (52,477) (31,297) Treasury stock, at cost............................................... (796,155) (535,964) ------------- ---------------- Total stockholders' equity........................................ 2,088,831 2,239,046 ------------- ---------------- Total liabilities and stockholders' equity ................................ $ 8,288,497 $ 8,155,722 ============= ================
Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 5 of 19 Pitney Bowes Inc. Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands) Six Months Ended June 30, ---------------------------- 1997 1996* --------- --------- Cash flows from operating activities: Net income ............................................... $ 251,016 $ 225,042 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................... 146,426 135,337 Net change in the strategic focus initiative .... -- (9,871) Increase in deferred taxes on income ............ 111,193 41,748 Change in assets and liabilities: Accounts receivable ......................... 17,115 29,588 Sales-type lease receivables ................ (55,575) (23,534) Inventories ................................. 25,219 21,449 Other current assets and prepayments ........ (8,213) 3,487 Accounts payable and accrued liabilities .... (21,847) (66,059) Income taxes payable ........................ (49,523) 3,548 Advance billings ............................ 19,783 13,336 Other, net ...................................... (53,490) (34,820) --------- --------- Net cash provided by operating activities ... 382,104 339,251 --------- --------- Cash flows from investing activities: Short-term investments ................................... 26 2,161 Net investment in fixed assets ........................... (133,373) (134,749) Net investment in direct-finance lease receivables ....... (25,848) (13,163) Investment in leveraged leases ........................... (28,786) (22,391) Investment in mortgage servicing rights .................. (64,125) (22,847) Other investing activities ............................... 12,892 13,266 --------- --------- Net cash used in investing activities ....... (239,214) (177,723) --------- --------- Cash flows from financing activities: Increase in notes payable ................................ 385,374 12,117 Principal payments on long-term obligations .............. (252,794) (8,114) Proceeds from issuance of stock .......................... 22,460 21,251 Stock repurchases ........................................ (285,465) (75,339) Proceeds from preferred stock issued by a subsidiary ..... 100,000 -- Dividends paid ........................................... (117,374) (103,510) --------- --------- Net cash used in financing activities ....... (147,799) (153,595) --------- --------- Effect of exchange rate changes on cash ....................... 381 (498) --------- --------- (Decrease) increase in cash and cash equivalents .............. (4,528) 7,435 Cash and cash equivalents at beginning of period .............. 135,271 85,352 --------- --------- Cash and cash equivalents at end of period .................... $ 130,743 $ 92,787 ========= ========= Interest paid ................................................. $ 116,527 $ 103,700 ========= ========= Income taxes paid ............................................. $ 73,688 $ 77,075 ========= ========= *Certain prior year amounts have been reclassified to conform to the 1997 presentation.
Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 6 of 19 Pitney Bowes Inc. Notes to Consolidated Financial Statements Note 1: - ------- The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Pitney Bowes Inc. ("the company"), all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the company as of June 30, 1997 and the results of its operations and cash flows for the six months ended June 30, 1997 and 1996 have been included. Operating results for the six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. These statements should be read in conjunction with the financial statements and notes thereto included in the company's Annual Report to Stockholders and Form 10-K Annual Report for the year ended December 31, 1996. Note 2: - ------- Inventories are comprised of the following: (Dollars in thousands) June 30, December 31, 1997 1996 ---------- ------------ Raw materials and work in process ................ $ 54,284 $ 58,536 Supplies and service parts ....................... 101,291 103,182 Finished products ................................ 100,216 120,224 ---------- ------------ Total ............................................ $ 255,791 $ 281,942 ========== ============ Note 3: - ------- Fixed assets are comprised of the following: (Dollars in thousands) June 30, December 31, 1997 1996 ----------- ----------- Property, plant and equipment .................... $ 1,093,043 $ 1,093,501 Accumulated depreciation ......................... (608,161) (607,472) ----------- ----------- Property, plant and equipment, net ............... $ 484,882 $ 486,029 =========== =========== Rental equipment and related inventories ......... $ 1,642,727 $ 1,634,111 Accumulated depreciation ......................... (820,876) (818,805) ----------- ----------- Rental equipment and related inventories, net .... $ 821,851 $ 815,306 =========== =========== Property leased under capital leases ............. $ 20,419 $ 24,124 Accumulated amortization ......................... (15,668) (18,276) ----------- ----------- Property leased under capital leases, net ........ $ 4,751 $ 5,848 =========== =========== Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 7 of 19 Note 4: - ------- Revenue and operating profit by business segment for the three and six months ended June 30, 1997 and 1996 were as follows:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- ------------------------------- (Dollars in thousands) 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenue: Business equipment ....................... $ 779,364 $ 728,489 $ 1,524,484 $ 1,429,426 Business services ........................ 137,461 120,534 266,451 232,424 Commercial and industrial financing Large-ticket external .................. 50,074 48,654 99,625 103,077 Small-ticket external .................. 39,212 45,260 76,921 84,275 ------------ ------------ ------------ ------------ Total .................................. 89,286 93,914 176,546 187,352 ------------ ------------ ------------ ------------ Total revenue ............................... $ 1,006,111 $ 942,937 $ 1,967,481 $ 1,849,202 ============ ============ ============ ============ Operating Profit: (1) Business equipment ....................... $ 186,617 $ 162,413 $ 356,028 $ 313,099 Business services ........................ 11,791 9,728 22,279 18,567 Commercial and industrial financing ...... 18,723 21,786 35,234 40,113 ------------ ------------ ------------ ------------ Total operating profit ...................... $ 217,131 $ 193,927 $ 413,541 $ 371,779 ============ ============ ============ ============ (1)Operating profit excludes general corporate expenses, income taxes, and net interest other than that related to the financial services businesses.
Note 5: - ------- In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share" was issued. It specifies the computation, presentation and disclosure requirements for earnings per share and is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. On a pro-forma basis, basic and diluted earnings per share would have been as follows: 1997 1996 -------------------- -------------------- Basic Diluted Basic Diluted -------- -------- -------- -------- Quarter ended March 31 ..... $ .81 $ .81 $ .71 $ .70 Quarter ended June 30 ...... .90 .89 .79 .79 -------- -------- -------- -------- Year to date June 30 ....... $ 1.71 $ 1.70 $ 1.50 $ 1.49 ======== ======== ======== ======== In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" was issued. It will require the company to disclose, in financial statement format, all non-owner changes in equity. This statement is effective for fiscal years beginning after December 15, 1997 and requires presentation of prior period financial statements for comparability purposes. The company expects to adopt this statement beginning with its 1998 consolidated financial statements. Also in June 1997, Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" was issued. It establishes standards for reporting information about operating segments in annual financial statements and interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The company is currently evaluating its options for disclosure and will adopt the statement for the fiscal year commencing January 1, 1998. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 8 of 19 Pitney Bowes Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - second quarter of 1997 vs. second quarter of 1996 - ------------------------------------------------------------------------- Revenue increased seven percent to $1,006.1 million compared to $942.9 million in the second quarter of 1996. Net income increased 11 percent to $131.1 million from $118.5 million in the same period in 1996. Per share earnings grew to 89 cents, a 13.6 percent increase from second quarter 1996. Revenue growth was eight percent, excluding revenue from large-ticket external financing as well as prior-year revenue from businesses in Australia from which, as previously announced, the company exited in 1996. Second quarter 1997 revenue included $449.8 million from sales, up 10 percent from $410.6 million in the second quarter of 1996; $436.1 million from rentals and financing, up five percent from $415.3 million; and $120.2 million for support services, up three percent from $117.0 million. In the Business Equipment segment, which includes mailing, facsimile and copying systems and related financing, revenue grew seven percent and operating profit increased 15 percent during the second quarter. Mailing Systems' six percent revenue increase during the quarter was driven by strong equipment sales in the U.S. Mailing and Production Mail businesses. The conversion of U.S. Mailing Systems' customers to more advanced technology continued during the quarter, with electronic and digital meters comprising 67 percent of the installed base up from 60 percent in December 1996 and 52 percent in June 1996. See Regulatory Matters Update below. Growth in Mailing Systems' revenue for the quarter has been partially offset by last year's strategic decision to exit non-profitable businesses in Australia, currency translation impacts in Japan and lower equipment placements in Germany. Revenue from Facsimile Systems grew 11 percent in second quarter 1997 driven by steady increases in the installed base of rental machines and supply sales. Copier Systems revenue increased eight percent in the second quarter driven by solid equipment sales. Rental revenue was also strong, resulting from new product introductions and geographic expansion. In the Business Services segment second-quarter revenue grew 14 percent and operating profit grew 21 percent. The segment includes Pitney Bowes Management Services (PBMS) and Atlantic Mortgage and Investment Corporation (AMIC). Revenue for PBMS grew due to continued expansion of its commercial contract base and its increased presence in the U.K. AMIC achieved excellent growth through aggressive expansion of its fee-based revenue. These service businesses have maintained profitable double-digit revenue growth by bringing Pitney Bowes innovation and expertise to key market segments. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 9 of 19 In accordance with management's previously announced strategy to concentrate on fee-based rather than asset-based income, the company is actively pursuing a strategy to reduce the level of external large-ticket investment and related debt. In line with such strategy, the Commercial and Industrial Financing segment's revenue and operating profit declined five percent and 14 percent, respectively. This segment includes large-ticket and small-ticket external financing. The comparison to second quarter 1996 also reflects the effect of past asset sales in both the large and small ticket external portfolios, including the sale of the Custom Vendor Financing portfolio in June 1996. The ratio of cost of sales to sales revenue decreased from 62.8 percent in the second quarter 1996 to 59.9 percent in 1997. The improvement was due to the product mix at U.S. Mailing towards higher-margin products, favorable purchase and maintenance variances and higher margin supply sales in the Facsimile business. The improvement was offset, in part, by the continued growth of the facilities management business which includes most of its expenses in cost of sales. The ratio of cost of rentals and financing to rentals and financing revenue increased to 29.4 percent in the second quarter 1997 from 27.6 percent in the same prior year period. The company had ceased placing mechanical meters in 1996 as a result of the meter migration requirements, resulting in lower related costs in that period. Since then, the increased new placements of electronic and digital meters has led to additional depreciation expense, impacting this ratio. The 1996 ratio was also favorably impacted by the sale of the Custom Vendor Financing portfolio mentioned above. Selling, service and administrative expenses as a percentage of revenue improved to 33.4 percent in the second quarter 1997 from 33.9 percent in the same period in 1996. The improvement in this ratio is primarily due to the continued emphasis on controlling operating expenditures and reduced expense levels in Australia as a result of exiting certain businesses in 1996. Research and development expenses increased six percent to $21.8 million in the second quarter of 1997 compared to the second quarter of the previous year. The increase reflects the company's continued commitment to developing new technologies for its digital meters and other mailing and software products. Net interest expense increased to $51.0 million in the second quarter of 1997 from $47.4 million in the second quarter of 1996. The increase is due to higher average borrowings in 1997 to fund the previously approved stock repurchase program coupled with higher interest rates. The second quarter effective tax rate was 34.5 percent in 1997 compared to 34.9 percent in the second quarter of 1996. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 10 of 19 Results of Operations - six months of 1997 vs. six months of 1996 - ----------------------------------------------------------------- For the first six months of 1997 compared with the same period of 1996, revenue increased six percent to $1,967.5 million while net income increased 12 percent to $251.0 million. The factors that affected revenue and earnings performance included those cited for the second quarter of 1997 versus 1996. Liquidity and Capital Resources - ------------------------------- The current ratio decreased to .64 to 1 as of June 30, 1997 from .67 to 1 as of December 31, 1996. The decrease is primarily due to the reclassification of $125 million of notes due in June 1998 to current portion of long term debt plus increased borrowing at the company's financial services subsidiaries. In April 1997, Pitney Bowes International Holdings, Inc., a subsidiary of the company, issued an additional $100 million of variable term voting preferred stock to institutional investors in a private placement transaction. The preferred stock, $.01 par value, is entitled to cumulative dividends at rates set at auction, generally at 49 day intervals. The proceeds of the issuance were used to repay short-term borrowings. The Consolidated Statement of Income reflects the dividends as a minority interest in selling, service and administrative expense. As part of the company's non-financial services shelf registrations, a medium-term note facility exists permitting issuance of up to $100 million in debt securities with maturities ranging from more than one year up to 30 years of which $32 million remain available at June 30, 1997. The company also has an additional $300 million remaining on its non-financial services shelf registrations filed with the Securities and Exchange Commission (SEC). Amounts available under credit agreements, shelf registrations and commercial paper and medium-term note programs, in addition to cash generated internally are expected to be sufficient to provide for financing needs in the next several years. Pitney Bowes Credit Corporation (PBCC) has $250 million of unissued debt securities available from a shelf registration statement filed with the SEC in September 1995. Up to $250 million of medium-term notes may be offered under this registration statement. The $250 million available under this shelf registration statement should meet PBCC's financing needs for the next two years. PBCC also had unused lines of credit and revolving credit facilities totaling $1.5 billion at June 30, 1997, largely supporting its commercial paper borrowings. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 11 of 19 The ratio of total debt to total debt and stockholders' equity, including the preferred stockholders' equity in a subsidiary company in total debt, was 63.6 percent at June 30, 1997 compared to 60.5 percent at December 31, 1996. This ratio was affected by the repurchase of 4,351,600 shares of common stock for $285.5 million in the first half of 1997. Book value was $14.47 per common share at June 30, 1997 compared to $15.11 at year-end 1996 principally as a result of the stock repurchase. The company enters into interest rate swap agreements principally through its financial services businesses. It has been the practice and objective of the company to use a balanced mix of debt maturities, variable- and fixed-rate debt and interest rate swap agreements to control the company's sensitivity to interest rate volatility. The company utilizes interest rate swap agreements when it considers the economic benefits to be favorable. Swap agreements have been principally utilized to fix interest rates on commercial paper and/or obtain a lower cost on debt than would otherwise be available absent the swap. Capital Investments - ------------------- In the first half of 1997, net investments in fixed assets included $42.2 million in net additions to property, plant and equipment and $90.4 million in net additions to rental equipment and related inventories compared with $40.8 million and $93.5 million, respectively, in the same period in 1996. In the case of rental equipment, the additions included the production of postage meters and the purchase of facsimile equipment for both new placements and upgrade programs. As of June 30, 1997, commitments for the acquisition of property, plant and equipment included plant and manufacturing equipment improvements as well as rental equipment for new and replacement programs. Regulatory Matters Update - ------------------------- In May 1996 the United States Postal Service (U.S.P.S.) issued a proposed schedule for the phase-out of mechanical meters in the U.S. marketplace. In accordance with the schedule, the company voluntarily halted new placements of mechanical meters in the U.S. as of June 1, 1996. The company is also actively pursuing removal from the market of all mechanical meters used by persons or firms who process mail for a fee. Further, the company agreed, in March 1997, to use its best efforts to remove from the market mechanical systems meters (meters that interface with mail machines or processors) by a revised target date of December 31, 1998. The company continues to make satisfactory progress in meeting the proposed withdrawal date of March 31, 1999 for stand-alone mechanical meters. As of June 30, 1997, electronic and digital meters represented 67 percent of the company's U.S. installed base, up from 60 percent in December 1996. Based on the announced U.S.P.S. mechanical meter migration schedule and agreements reached to date with the U.S.P.S., the company believes that the plan will not cause a material adverse financial impact on the company. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 12 of 19 In 1996 the U.S.P.S. announced proposed changes in future metering technology that would include the use of a digital, information-based indicia standard. Initial specifications for the information-based indicia standard were proposed in July 1996. Since then, the U.S.P.S. has invited public comment on the proposal, which remains under discussion and has not been finalized. At some undetermined date in the future, the U.S.P.S. believes that digital metering will eventually replace electronic metering in the U.S. The company supports a digital product migration strategy, and the company anticipates working with the U.S.P.S. to achieve a timely and effective substitution plan. However, until the U.S.P.S. finalizes standards for a digital information-based indicia (and clarifies transition to the new standard), the impact of this proposal, if any, on the company cannot be determined. The company has taken the lead in deploying digital meters in the marketplace. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 13 of 19 Forward-looking Statements - -------------------------- The company cautions readers that any forward-looking statements (those which discuss the company's or management's current expectations as to the future) in this Form 10-Q or made by company management involve risks and uncertainties which may change based on various important factors. Some of the factors which could cause future financial performance to differ materially from the expectations as expressed in any forward-looking statement made by or on behalf of the company include: - 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 company's success at managing customer credit risk. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 14 of 19 Part II - Other Information - --------------------------- Item 1: Legal Proceedings In the course of normal business, the company is occasionally party to lawsuits. These may involve litigation by or against the company relating to, among other things: - contractual rights under vendor, insurance or other contracts - intellectual property or patent rights - equipment, service or payment disputes with customers - disputes with employees. The company is currently a defendant in a number of lawsuits, none of which should have, in the opinion of management and legal counsel, a material adverse effect on the company's financial position or results of operations. Item 4: Submission of Matters to a Vote of Security Holders. Below are the final results of the voting at the annual meeting of shareholders held on May 12, 1997: Proposal 1 - Election of Directors Nominee For Withheld - ----------------- ----------- -------- William E. Butler 122,494,177 718,322 Colin G. Campbell 122,494,738 717,761 David T. Kimball 122,515,529 696,970 Proposal 2 - Appointment of Price Waterhouse LLP as Independent Accountants For Against Abstain ----------- ------- -------- 122,721,020 178,531 312,948 Proposal 3 - Stockholder Proposal Relating to Coalition for Environmentally Responsible Economies Principles* For Against Abstain --------- ---------- --------- 9,202,174 95,771,073 9,469,668 *This proposal had 8,769,584 Broker No Votes. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 15 of 19 The following other directors continued their term of office after the Annual Meeting: Linda G. Alvarado Charles E. Hugel Marc C. Breslawsky Michael I. Roth Michael J. Critelli Phyllis Shapiro Sewell Item 6: Exhibits and Reports on Form 8-K. (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) Reg. S-K Status or Incorporation Exhibits Description by Reference -------- ----------- ------------- (11) Computation of earnings See Exhibit (i) per share. (12) Computation of ratio of See Exhibit (ii) earnings to combined fixed charges and preferred stock dividends. (27) Financial data schedule. See Exhibit (iii) (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 1997. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 16 of 19 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PITNEY BOWES INC. August 14, 1997 /s/ M. L. Reichenstein ---------------------------------------- M. L. Reichenstein Vice President - Chief Financial Officer (Principal Financial Officer) /s/ A. F. Henock ---------------------------------------- A. F. Henock Vice President - Controller and Chief Tax Counsel (Principal Accounting Officer) EX-11 2 COMPUTATION OF EARNINGS PER SHARE Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 17 of 19 Exhibit (i) Pitney Bowes Inc. Computation of Earnings per Share ---------------------------------
Three Months Ended June 30, Six Months Ended June 30, ------------------------------- ------------------------------- (Dollars in thousands, except per share data) 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Primary - ------- Net income applicable to common stock (1) .............. $ 131,071 $ 118,533 $ 251,015 $ 225,042 ============ ============ ============ ============ Weighted average number of common shares outstanding ... 145,195,125 149,444,335 146,326,746 149,655,627 Preference stock, $2.12 cumulative convertible ......... 682,324 731,416 688,408 738,887 Stock option and purchase plans ........................ 1,057,637 769,363 1,015,534 777,022 ------------ ------------ ------------ ------------ Total common and common equivalent shares outstanding .. 146,935,086 150,945,114 148,030,688 151,171,536 ============ ============ ============ ============ Income per common and common equivalent share - primary: Net income ........................................ $ .89 $ .79 $ 1.70 $ 1.49 ============ ============ ============ ============ Fully Diluted - ------------- Net income ............................................. $ 131,071 $ 118,533 $ 251,016 $ 225,042 ============ ============ ============ ============ Weighted average number of common shares outstanding ... 145,195,125 149,444,335 146,326,746 149,655,627 Preference stock, $2.12 cumulative convertible ......... 682,324 731,416 688,408 738,887 Stock option and purchase plans ........................ 1,122,023 803,981 1,071,351 846,838 Preferred stock, 4% cumulative convertible ............. 11,187 11,490 11,187 11,490 ------------ ------------ ------------ ------------ Total common and common equivalent shares outstanding .. 147,010,659 150,991,222 148,097,692 151,252,842 ============ ============ ============ ============ Income per common and common equivalent share- fully diluted: Net income ........................................ $ .89 $ .79 $ 1.69 $ 1.49 ============ ============ ============ ============ (1) Net income applicable to common stock was adjusted for preferred dividends.
EX-12 3 COMPUTATION OF EARNINGS TO FIXED CHARGES Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 18 of 19 Exhibit (ii) Pitney Bowes Inc. Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (1)
(Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, --------------------------- --------------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Income before income taxes ..................... $200,110 $182,196 $383,745 $345,635 Add: Interest expense .......................... 52,692 48,971 104,597 98,883 Portion of rents representative of the interest factor ....................... 11,385 11,250 22,514 22,311 Amortization of capitalized interest .............................. 244 229 487 457 Minority interest in the income of subsidiary with fixed charges ......... 3,065 1,991 5,031 4,110 -------- -------- -------- -------- Income as adjusted ............................. $267,496 $244,637 $516,374 $471,396 ======== ======== ======== ======== Fixed charges: Interest expense .......................... $ 52,692 $ 48,971 $104,597 $ 98,883 Capitalized interest ...................... -- 599 -- 1,201 Portion of rents representative of the interest factor ....................... 11,385 11,250 22,514 22,311 Minority interest excluding taxes, in the income of subsidiary with fixed charges ......... 4,715 3,087 7,800 6,372 -------- -------- -------- -------- $ 68,792 $ 63,907 $134,911 $128,767 ======== ======== ======== ======== Ratio of earnings to combined fixed charges and preferred stock dividends ........................... 3.89 3.83 3.83 3.66 ======== ======== ======== ======== Ratio of earnings to fixed charges excluding minority interest .................................. 4.13 3.99 4.02 3.82 ======== ======== ======== ======== (1) The computation of the ratio of earnings to combined fixed charges and preferred stock dividends has been computed by dividing income as adjusted by fixed charges and preferred stock dividends. Included in fixed charges is one-third of rental expense as the representative portion of interest.
EX-27 4 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. Pitney Bowes Inc. - Form 10-Q Six Months Ended June 30, 1997 Page 19 of 19
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM PITNEY BOWES INC. CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME, CORRESPONDING FOOTNOTE #3 FIXED ASSETS AND STATEMENT RE COMPUTATION OF PER SHARE EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 130,743 1,474 1,807,475 60,937 255,791 2,266,322 2,735,770 1,429,037 8,288,497 3,514,281 1,172,053 323,338 300,000 2,337 1,763,156 8,288,497 867,579 1,967,481 523,298 779,013 42,483 0 104,597 383,745 132,729 251,016 0 0 0 251,016 1.70 1.69 Receivables are comprised of trade receivables of $340,102 and short-term finance receivables of $1,467,373. Allowances are comprised of allowances for trade receivables of $17,423 and for short-term finance receivables of $43,514. Property, plant and equipment are comprised of fixed assets of $1,093,043 and rental equipment and related inventories of $1,642,727. Depreciation is comprised of depreciation on fixed assets of $608,161 and on rental equipment and related inventories of $820,876.
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