SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
F O R M 10 - Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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: 0-13497
PITNEY BOWES CREDIT CORPORATION
State of Incorporation IRS Employer Identification No.
Delaware 06-0946476
201 Merritt Seven
Norwalk, Connecticut 06856-5151
Telephone Number: (203) 846-5600
The Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of July 31, 1995, 460 shares of common stock, no par value with
a stated value of $100,000 per share, were outstanding, all of
which were owned by Pitney Bowes Inc., the parent of the
Registrant.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H(1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM
WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 2 of 18
Pitney Bowes Credit Corporation
Index
-------------------------------
Page Number
-----------
Part I - Financial Information:
Item 1. Financial Statements
Consolidated Statement of Income -
Three and Six Months Ended
June 30, 1995 and 1994. . . . . . . . . 3
Consolidated Balance Sheet -
June 30, 1995 and
December 31, 1994 . . . . . . . . . . . 4
Consolidated Statement of Cash Flows -
Six Months Ended
June 30, 1995 and 1994. . . . . . . . . 5 - 6
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . . . 7 - 9
Item 2. Management's Narrative Analysis of
the Results of Operations . . . . . . . 10 - 14
Part II - Other Information:
Item 1. Legal Proceedings. . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . 16
Exhibit (i) - Computation of Ratio of Earnings
to Fixed Charges. . . . . . . . . . . . . . . . 17
Exhibit (ii) - Financial Data Schedule . . . . . 18
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 3 of 18
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Pitney Bowes Credit Corporation
Consolidated Statement of Income
(Unaudited)
--------------------------------
<CAPTION>
(Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Finance income . . . . . . . . . . . $159,735 $135,080 $311,905 $265,266
Equipment sales. . . . . . . . . . . - 26,961 - 26,961
------- ------- ------- -------
Total revenue. . . . . . . . . . . 159,735 162,041 311,905 292,227
------- ------- ------- -------
Expenses:
Selling, general and administrative. 33,313 26,635 65,331 53,000
Depreciation and amortization. . . . 6,956 6,533 13,826 12,396
Cost of equipment sales. . . . . . . - 25,217 - 25,217
Provision for credit losses. . . . . 13,050 13,877 25,318 27,974
Interest . . . . . . . . . . . . . . 50,918 36,806 99,467 70,130
------- ------- ------- -------
Total expenses . . . . . . . . . . 104,237 109,068 203,942 188,717
------- ------- ------- -------
Income before income taxes . . . . . . 55,498 52,973 107,963 103,510
Provision for income taxes . . . . . . 17,684 17,958 34,180 34,870
------- ------- ------- -------
Income before effect of a change in
accounting for postemployment
benefits . . . . . . . . . . . . . . 37,814 35,015 73,783 68,640
Effect of a change in accounting for
postemployment benefits . . . . . . - - - (2,820)
------- ------- ------- -------
Net income . . . . . . . . . . . . . . $ 37,814 $ 35,015 $ 73,783 $ 65,820
======= ======= ======= =======
Ratio of earnings to fixed charges . . 2.08X 2.43X 2.08X 2.46X
======= ======= ======= =======
</TABLE>
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 4 of 18
Pitney Bowes Credit Corporation
Consolidated Balance Sheet
(Unaudited)
-------------------------------
(Dollars in thousands) June 30, December 31,
------------ ------------
1995 1994
------------ ------------
Assets
- ------
Cash . . . . . . . . . . . . . . . . . . . . . . $ 5,386 $ 11,250
---------- ----------
Investments:
Finance assets (Note 2). . . . . . . . . . . . 3,896,763 3,732,790
Investment in leveraged leases . . . . . . . . 508,222 478,650
Assets transferred from affiliate. . . . . . . 48,862 30,033
Investment in operating leases, net of
depreciation . . . . . . . . . . . . . . . . 91,852 95,684
Allowance for credit losses. . . . . . . . . . (97,993) (95,271)
---------- ----------
Net investments. . . . . . . . . . . . . . . 4,447,706 4,241,886
---------- ----------
Other assets . . . . . . . . . . . . . . . . . . 201,893 198,701
---------- ----------
Total assets . . . . . . . . . . . . . . . . $ 4,654,985 $ 4,451,837
========== ==========
Liabilities
- -----------
Senior notes payable within one year (Note 3). . $ 2,026,090 $ 2,075,591
Accounts payable to affiliates . . . . . . . . . 127,147 153,360
Accounts payable and accrued liabilities . . . . 147,971 228,279
Deferred taxes . . . . . . . . . . . . . . . . . 384,161 342,034
Senior notes payable after one year (Note 3) . . 1,020,500 745,500
Subordinated notes payable (Note 3) . . . . . . 132,995 133,735
---------- ----------
Total liabilities. . . . . . . . . . . . . . 3,838,864 3,678,499
---------- ----------
Stockholder's Equity
- --------------------
Common stock . . . . . . . . . . . . . . . . . . 46,000 46,000
Capital surplus. . . . . . . . . . . . . . . . . 41,725 41,725
Retained earnings. . . . . . . . . . . . . . . . 728,396 685,613
---------- ----------
Total stockholder's equity . . . . . . . . . 816,121 773,338
---------- ----------
Total liabilities and
stockholder's equity . . . . . . . . . . . . $ 4,654,985 $ 4,451,837
========== ==========
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 5 of 18
Pitney Bowes Credit Corporation
Consolidated Statement of Cash Flows
(Unaudited)
------------------------------------
(Dollars in thousands) Six Months Ended June 30,
-------------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . $ 73,783 $ 65,820
Effect of a change in accounting for
postemployment benefits. . . . . . . . . . . - 2,820
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses . . . . . . . . 25,318 27,974
Cost of equipment sales . . . . . . . . . . - 25,217
Depreciation and amortization . . . . . . . 13,826 12,396
Decrease in accounts payable to
affiliates . . . . . . . . . . . . . . . . (26,213) (40,012)
Decrease in accounts payable and accrued
liabilities. . . . . . . . . . . . . . . . (80,308) (24,995)
Increase in deferred taxes. . . . . . . . . 42,127 45,366
Increase in assets transferred from
affiliate. . . . . . . . . . . . . . . . . (24,266) (33,263)
Other, net. . . . . . . . . . . . . . . . . (9,525) 8,187
--------- ---------
Net cash provided by operating
activities . . . . . . . . . . . . . . . . 14,742 89,510
--------- ---------
Cash flows from investing activities:
Investment in finance assets . . . . . . . (667,009) (498,968)
Investment in operating leases. . . . . . . (1,100) (33,571)
Cash receipts collected under financing
contracts, net of finance income
recognized . . . . . . . . . . . . . . . . 455,833 494,482
Investment in mortgage servicing rights . . (36,562) (17,622)
Loans and advances to affiliated companies,
net. . . . . . . . . . . . . . . . . . . . 38,243 (4,897)
Additions to equipment and leasehold
improvements . . . . . . . . . . . . . . . (3,770) (2,372)
--------- ---------
Net cash used in investing activities . . . (214,365) (62,948)
--------- ---------
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 6 of 18
Pitney Bowes Credit Corporation
Consolidated Statement of Cash Flows
(Unaudited)
------------------------------------
(Dollars in thousands) Six Months Ended June 30,
-------------------------
1995 1994
---------- ----------
Cash flows from financing activities:
Decrease in short-term debt . . . . . . . . (20,001) (103,348)
Proceeds from the issuance of senior notes
payable after one year . . . . . . . . . . 275,000 200,000
Settlement of long-term debt. . . . . . . . (29,500) (100,702)
Payments to settle subordinated debt. . . . (740) -
Dividends paid to Pitney Bowes Inc. . . . . (31,000) (21,000)
--------- ---------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . 193,759 (25,050)
--------- ---------
(Decrease) increase in cash . . . . . . . . . (5,864) 1,512
Cash at beginning of period . . . . . . . . . 11,250 6,237
--------- ---------
Cash at end of period . . . . . . . . . . . . $ 5,386 $ 7,749
========= =========
Interest paid . . . . . . . . . . . . . . . . $ 108,704 $ 71,095
========= =========
Income taxes refunded . . . . . . . . . . . . $ (24,915) $ (9,193)
========= =========
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 7 of 18
Pitney Bowes Credit Corporation
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 the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of Pitney Bowes
Credit Corporation (the Company or PBCC), all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial
position of the Company as of June 30, 1995 and the results of its operations
and cash flows for the six months ended June 30, 1995 and 1994 have been
included. Operating results for the six months ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1995. These statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
Note 2:
- ------
The composition of the Company's finance assets is as follows:
(Dollars in thousands) June 30, December 31,
------------ ------------
Finance Assets 1995 1994
------------ ------------
Gross finance receivables . . . . . . . . . . $ 4,562,906 $ 4,393,826
Unguaranteed residual valuation . . . . . . . 601,150 573,892
Initial direct cost deferred. . . . . . . . . 84,130 76,322
Unearned income . . . . . . . . . . . . . . . (1,351,423) (1,311,250)
---------- ----------
Total finance assets. . . . . . . . . . . . $ 3,896,763 $ 3,732,790
========== ==========
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 8 of 18
Note 3:
- ------
The composition of the Company's notes payable is as follows:
(Dollars in thousands) June 30, December 31,
------------ ------------
Senior Notes Payable 1995 1994
------------ ------------
Commercial paper at a weighted average
interest rate of 6.03% (5.84% in 1994). . . $1,840,600 $1,865,110
Notes payable against bank lines of
credit and others at a weighted average
interest rate of 3.32% (3.63% in 1994). . . 185,490 180,981
Current installment of long-term debt
due within one year at interest rates of
6.56% to 6.66%. . . . . . . . . . . . . . . - 29,500
--------- ---------
Total senior notes payable within one year. . 2,026,090 2,075,591
Senior notes payable after one year at
interest rates of 5.625% to 9.25%
through 2009. . . . . . . . . . . . . . . . 1,020,500 745,500
--------- ---------
Total senior notes payable. . . . . . . . . . $3,046,590 $2,821,091
========= =========
In May 1995, the Company issued $100 million of 6.250 percent notes due in
June 1998 and $100 million of 6.625 percent notes due in June 2002. In June
1995, the Company also issued $25 million of medium-term notes due in June
1998 and $50 million due in June 2000 with a weighted average coupon rate of
6.014 percent.
June 30, December 31,
------------ ------------
Subordinated Notes Payable 1995 1994
------------ ------------
Non-interest bearing notes due
Pitney Bowes Inc. . . . . . . . . . . . . . $ 132,995 $ 132,995
12.75% note payable in 1995 . . . . . . . . . - 740
--------- ---------
Total subordinated notes payable. . . . . . . $ 132,995 $ 133,735
========= =========
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 9 of 18
Note 4:
- ------
The Company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (FAS 112), as of January
1, 1994. FAS 112 requires that postemployment benefits be recognized on the
accrual basis of accounting. Postemployment benefits include primarily
Company provided medical benefits to disabled employees and Company provided
life insurance as well as other disability- and death-related benefits to
former and inactive employees, their beneficiaries and covered dependents.
The one-time effect of adopting FAS 112 in the first quarter of 1994 was a
non-cash, after-tax charge of $2.8 million (net of approximately $1.9 million
of income taxes).
In October 1994, an amendment of FAS 114, Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures" was issued. FAS 114 as amended, was adopted
effective January 1, 1995 with no material effect to the Company.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 10 of 18
Item 2. Management's Narrative Analysis of the Results of Operations
------------------------------------------------------------
Results of Operations - second quarter of 1995 compared to second quarter
of 1994
- -------------------------------------------------------------------------
Income for the second quarter of 1995 was $37.8 million compared to $35.0
million for the same period of 1994, an increase of 8.0 percent. The
increase is principally due to a higher amount of finance income
resulting from higher net investment levels in addition to higher levels
of fee income partially offset by higher borrowing costs and higher
selling, general and administrative (SG&A) expenses.
Finance income in the second quarter of 1995 increased 18.3 percent to
$159.7 million. Finance income for Internal small-ticket financing
programs increased 13.3 percent to $75.2 million and External large-
ticket financing programs increased 19.9 percent to $47.0 million
primarily due to higher investment levels and higher fee based programs
partly offset by lower lease rates on new business. Finance income
related to External small-ticket financing programs increased 19.3
percent to $28.2 million primarily due to higher investment levels and
higher lease rates in 1995. Revenue generated from mortgage servicing
increased to $9.3 million in the second quarter of 1995 compared to $5.8
million in the second quarter of 1994 due to a larger mortgage servicing
portfolio.
SG&A expenses were $33.3 million in the second quarter of 1995 compared
to $26.6 million for the same period of 1994. SG&A expenses for Internal
small-ticket financing programs increased .9 percent to $13.4 million due
to higher personnel costs offset by lower amortization of deferred
initial direct costs. SG&A expenses for External large-ticket financing
programs increased 10.7 percent to $3.9 million primarily due to higher
personnel related costs partly offset by lower amortization of deferred
initial direct costs. SG&A expenses for External small-ticket financing
programs increased $5.0 million to $12.5 million principally due to
higher costs related to managing the Company's assets transferred from
its German affiliate and a higher level of marketing fees paid to brokers
on higher levels of new business. SG&A expenses related to mortgage
servicing increased $1.1 million in the second quarter of 1995 to $3.5
million due to higher operating costs associated with the larger mortgage
servicing portfolio.
Depreciation on operating leases was $2.5 million in the second quarter
of 1995 compared to $2.9 million for the same period of 1994.
Amortization of purchased mortgage servicing rights increased to $3.9
million in the second quarter of 1995 compared to $2.7 million in the
second quarter of 1994 due to the larger mortgage servicing portfolio.
Amortization of deferred costs associated with the Company's
participation in a partnership transaction completed in the fourth
quarter of 1993, totalled $.6 million for the second quarter of 1995
compared to $.9 million for the second quarter of 1994.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 11 of 18
The provision for credit losses for the second quarter of 1995 was $13.1
million compared to $13.9 million in the second quarter of 1994. The
provision for Internal small-ticket financing programs increased 1.7
percent to $8.5 million primarily due to higher investment levels. The
provision for External large-ticket financing programs resulted in a
credit of $.6 million, which was $.9 million favorable to prior year
reflecting adjustments for management's current evaluation of expected
losses. The provision for the External small-ticket financing programs
of $5.2 million was even with the second quarter of 1994.
The Company's allowance for credit losses as a percentage of net lease
receivables (net investments before allowance for credit losses and
deferred investment tax credits plus the uncollected principal balance of
receivables sold) was 2.11 percent at June 30, 1995 and 2.12 percent at
December 31, 1994.
Interest expense was $50.9 million in the second quarter of 1995 compared
to $36.8 million for the same period of 1994. The increase primarily
reflects higher short-term interest rates as well as higher average
borrowings in the second quarter of 1995. The effective interest rate on
short-term average borrowings was 5.84 percent for the second quarter of
1995 compared to 3.77 percent for the same period of 1994. The Company
does not match fund its financing investments and does not apply
different interest rates to its various financing portfolios.
The effective tax rate for the second quarter of 1995 was 31.9 percent
compared to 34.0 percent for the same period of 1994. The decrease is
principally due to the impact of the residual portfolio purchase
completed in the fourth quarter of 1994 and a higher level of tax-exempt
income.
The Company's ratio of earnings to fixed charges was 2.08 times for the
second quarter of 1995 compared to 2.43 times for the same period of
1994. The decrease reflects a significantly higher effective interest
rate in 1995.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 12 of 18
Results of Operations - first six months of 1995 compared to first six
months of 1994
- ----------------------------------------------------------------------
For the first six months of 1995 compared to the same period of 1994,
finance income increased 17.6 percent, while income before the one-time
effect of a change in accounting for postemployment benefits was $73.8
million compared to $68.6 million for the same period of 1994, an
increase of 7.5 percent. The prior year period reflects the impact of
adopting Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (FAS 112) as of January 1, 1994.
FAS 112 requires that postemployment benefit costs be recognized on the
accrual basis of accounting for fiscal years beginning after December 15,
1993. Postemployment benefits include primarily Company provided medical
benefits to disabled employees and Company provided life insurance as
well as other disability- and death-related benefits to former or
inactive employees, their beneficiaries and covered dependents. The one-
time effect of adopting FAS 112 was a non-cash, after-tax charge in 1994
of $2.8 million.
The factors that affected the change in finance income and income before
the effect of a change in accounting for postemployment benefits were
essentially the same as those affecting the second quarter of 1995 versus
1994.
Liquidity and Capital Resources
- -------------------------------
The Company's principal sources of funds are from operations and
borrowings. It has been PBCC's practice to use a balanced mix of
maturities, variable- and fixed-rate debt and interest rate swap
agreements to control its sensitivity to interest rate volatility.
PBCC's debt mix was 64 percent short-term and 36 percent long-term at
June 30, 1995 and 70 percent short-term and 30 percent long-term at
December 31, 1994. PBCC's swap adjusted variable-rate versus fixed-rate
debt mix was 52 percent variable-rate and 48 percent fixed-rate at June
30, 1995 and 56 percent variable-rate and 44 percent fixed-rate at
December 31, 1994. The Company may borrow through the sale of commercial
paper, under its confirmed bank lines of credit, and by private and
public offerings of intermediate- or long-term debt securities.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 13 of 18
In May 1995, the Company issued $100 million of 6.250 percent notes due
in June 1998 and $100 million of 6.625 percent notes due in June 2002.
In June 1995, the Company also issued $25 million of medium-term notes
due in June 1998 and $50 million due in June 2000 with a weighted average
coupon rate of 6.014 percent.
The Company has $125 million available from a $500 million shelf
registration statement filed with the Securities and Exchange Commission
in October 1992. The Company also had unused lines of credit and
revolving credit facilities totaling $1.59 billion at June 30, 1995,
largely supporting its commercial paper borrowings.
The Company continues to develop strategies in support of ongoing debt
level management. Emphasis on fee-based transactions and consideration
of the sale of certain financing transactions are expected to continue to
control the growth of External large-ticket investments and debt levels.
Additional financing will be arranged as deemed necessary. The Company's
borrowing requirements will be primarily dependent upon the level of
equipment purchases from Pitney Bowes Inc., the level of External large-
and small-ticket financing activity and the refinancing of maturing debt.
The Company's utilization of derivative instruments is currently limited
to interest rate swap agreements (interest rate swaps) and foreign
currency exchange forward contracts (foreign currency contracts). The
Company periodically enters into interest rate swaps as a means of
managing interest rate exposure. The interest rate differential to be
paid or received is recognized over the life of the agreements as an
adjustment to interest expense. The Company is exposed to credit loss in
the event of non-performance by the counterparties to the interest rate
swaps to the extent of the differential between fixed- and variable-
rates; such exposure is considered minimal. The Company has entered into
foreign currency contracts for the purpose of minimizing its risk of loss
from fluctuations in exchange rates in connection with certain
intercompany loans and certain transfers to the Company by foreign
affiliates of foreign currency denominated lease receivables. The
Company is exposed to credit loss in the event of non-performance by the
counterparties to the foreign currency contracts to the extent of the
difference between the spot rate at the date of the contract delivery and
the contracted rate; such exposure is also considered minimal.
Since the Company normally enters into derivative transactions only with
members of its banking group, the credit risk of these transactions is
monitored as part of the normal credit review of the banking group. The
Company monitors the market risk of derivative instruments through
periodic review of fair market values.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 14 of 18
Gross finance assets (gross finance receivables plus unguaranteed
residual valuation) at the end of the second quarter of 1995 increased
4.0 percent from December 31, 1994. The increase is principally due to
higher levels of new volume in all financing programs. Gross finance
assets at June 30, 1995 were 11.4 percent, or $528.6 million higher than
June 30, 1994. Overall levels of lease receivables are in line with
management's expectations.
The Company's liquidity ratio (finance contracts receivable, including
residuals, expected to be realized in cash over the next 12 months to
current maturities of debt over the same period) was .64 times at June
30, 1995 and .61 times at December 31, 1994.
The Company will continue to use cash to invest in finance assets with
emphasis on Internal and External small-ticket leasing transactions and
controlled investment in External large-ticket financing programs. The
Company believes that cash generated from operations and collections on
existing lease contracts will provide the majority of cash needed for
such investment activities. Additional cash, to the extent needed, is
expected to be provided from commercial paper and intermediate- or long-
term debt securities. While the Company expects that market acceptance
of its short- and long-term debt will continue to be strong, additional
liquidity is available, if needed, under revolving credit facilities and
credit lines.
In December 1992, as part of the restructuring and reincorporation of its
German affiliate, Adrema Leasing Corporation (Adrema), the Company
purchased certain finance receivables and other assets from Adrema. In
connection with these assets, Pitney Bowes Inc. and the Company
(Companies) have completed their inquiry and evaluation, begun in 1993,
of the assets and liabilities of the German leasing business. At this
time, the Companies believe that sufficient reserves for credit losses
are in place to provide for currently expected losses. As part of the
orderly liquidation of assets from leasing non-Pitney Bowes products in
Germany, Adrema continues to bill and collect accounts and repossess and
remarket collateral where possible. These activities are expected to
continue for the remainder of the lease terms.
The Companies are scrutinizing the circumstances surrounding the losses.
German authorities have undertaken criminal proceedings with respect to
the conduct of certain German lessees of non-Pitney Bowes products and,
at the request of the Companies, with respect to the disposition of the
Companies' German leasing business assets. These proceedings include the
former general manager of the Companies' German leasing business and
others involved in that business. The principals of one of the
Companies' large German leasing accounts have been convicted of fraud
against Adrema and others. The Companies are party to certain civil
litigation and are continuing their evaluation of additional actions they
can take against former management personnel of their German leasing
business and others.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 15 of 18
Part II - Other Information
---------------------------
Item 1. Legal proceedings
The Company is 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.
Pitney Bowes Inc. has been advised that the Antitrust Division of
the United States Department of Justice is conducting a civil
investigation of its postage equipment business (including
subsidiaries) to determine whether there is, has been, or may be
a violation of the surviving provisions of the 1959 consent decree
between Pitney Bowes Inc. and the U.S. Department of Justice, and
or the antitrust laws. The Company intends to cooperate with the
Department's investigation.
Item 6. Exhibits and Reports on Form 8-K
(a) 1. Financial Statements - see index on page 2
2. Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
Reg. S-K Incorporation
Exhibits Description by Reference
-------- -------------------------- ----------------
(12) Computation of Ratio of See Exhibit (i)
Earnings to Fixed Charges on page 17
(27) Financial Data Schedule See Exhibit (ii)
on page 18
There are no unregistered debt instruments in which the
total amount of securities authorized thereunder exceeds
10 percent of the total assets of the Company. Copies of
all instruments defining the rights of securities holders
are available upon request.
(b) The Company filed the following Form 8-K current reports
with the Securities and Exchange Commission:
1. On June 28, 1995, the Company filed an Amended and
Restated Finance Agreement dated June 12, 1995 with
Pitney Bowes Inc.
2. On July 11, 1995, the Company filed copies of its
6.250 percent Notes due June 1, 1998 and 6.625 percent
Notes due June 1, 2002. These notes were issued in
global form and have a fixed-rate of interest.
<PAGE>
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 16 of 18
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 CREDIT CORPORATION
Date: August 11, 1995 /s/ G. Kirk Hudson
-------------------- -----------------------------
G. Kirk Hudson
Vice President - Finance
(Principal Financial Officer)
/s/ Thomas P. Santora
------------------------------
Thomas P. Santora
Controller
(Principal Accounting Officer)
Pitney Bowes Credit Corporation - Form 10-Q
Six Months Ended June 30, 1995
Page 17 of 18
Exhibit (i)
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
1995 1994 1995 1994
------- ------- ------- -------
Income before income
taxes . . . . . . . . . . $ 55,498 $ 52,973 $107,963 $103,510
------- ------- ------- -------
Fixed charges:
Interest on debt . . . . 50,918 36,806 99,467 70,130
1/3 rental expense . . . 373 350 765 697
------- ------- ------- -------
Total fixed charges . . . 51,291 37,156 100,232 70,827
------- ------- ------- -------
Total . . . . . . . . . . $106,789 $ 90,129 $208,195 $174,337
======= ======= ======= =======
Ratio of earnings
to fixed charges (1) . . 2.08X 2.43X 2.08X 2.46X
======= ======= ======= =======
(1) The ratio of earnings to fixed charges is computed by dividing income
before income taxes and fixed charges by fixed charges. Fixed charges
consist of interest on debt and one-third rental expense as representative
of the interest portion of rentals.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
6/30/95 INCOME STATEMENT AND BALANCE SHEET AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,386
<SECURITIES> 0
<RECEIVABLES> 4,545,699
<ALLOWANCES> 97,993
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,654,985
<CURRENT-LIABILITIES> 2,301,208
<BONDS> 0
<COMMON> 46,000
0
0
<OTHER-SE> 770,121
<TOTAL-LIABILITY-AND-EQUITY> 4,654,985
<SALES> 0
<TOTAL-REVENUES> 311,905
<CGS> 0
<TOTAL-COSTS> 79,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 25,318
<INTEREST-EXPENSE> 99,467
<INCOME-PRETAX> 107,963
<INCOME-TAX> 34,180
<INCOME-CONTINUING> 73,783
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,783
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
