SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
------------------
FORM 10-Q
------------------
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------
Commission file number 0-13497
PITNEY BOWES CREDIT CORPORATION
Incorporated pursuant to the Laws of the State of Delaware
------------------
Internal Revenue Service -- Employer Identification No. 06-0946476
27 Waterview Drive, Shelton, CT 06484-4361
(203) 922-4000
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o
As of October 31, 1997, 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>
Page 2 of 14
PITNEY BOWES CREDIT CORPORATION
Part I -- FINANCIAL INFORMATION
Item 1. -- FINANCIAL STATEMENTS
Consolidated Statements of Income:
Three and Nine Months Ended September 30, 1997 and 1996..................... 3
Consolidated Balance Sheets:
September 30, 1997 and December 31, 1996................................. 4
Consolidated Statements of Cash Flow:
Nine Months Ended September 30, 1997 and 1996............................ 5
Notes to Consolidated Financial Statements................................ 6-7
Item 2. -- MANAGEMENT'S NARRATIVE ANALYSIS OF
THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.................................................................. 8-10
Part II -- OTHER INFORMATION
Item 1.-- Legal Proceedings.................................................. 11
Item 6.-- Exhibits and Reports on Form 8-K................................... 11
Signatures................................................................... 12
Exhibit (i) -- Computation of Ratio of Earnings
to Fixed Charges............................................................. 13
Exhibit (ii)-- Financial Data Schedule....................................... 14
<PAGE>
Page 3 of 14
Part I -- FINANCIAL INFORMATION
Item 1. -- FINANCIAL STATEMENTS
PITNEY BOWES CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands of dollars)
<TABLE>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Finance income............................................... $ 189,445 $ 191,475 $ 555,998 $ 548,321
Equipment sales.............................................. - - - 421
------- ------- ------- -------
Total revenue.............................................. 189,445 191,475 555,998 548,742
------- ------- ------- -------
Selling, general and administrative.......................... 47,902 47,814 131,643 126,078
Depreciation and amortization................................ 11,556 10,563 31,893 29,676
Cost of equipment sales...................................... - - - 283
Provision for credit losses.................................. 13,386 17,547 44,352 48,117
Interest..................................................... 51,172 50,394 152,165 149,663
------- ------- ------- -------
Total expenses............................................. 124,016 126,318 360,053 353,817
------- ------- ------- -------
Income before income taxes..................................... 65,429 65,157 195,945 194,925
Provision for income taxes..................................... 17,940 21,081 58,432 64,206
------- ------- ------- -------
Net income..................................................... $ 47,489 $ 44,076 $ 137,513 $ 130,719
======= ======= ======= =======
Ratio of earnings to fixed charges............................. 2.27X 2.28X 2.28X 2.29X
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Page 4 of 14
PITNEY BOWES CREDIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands of dollars)
<TABLE>
September 30, December 31,
1997 1996
---- ----
Assets:
<S> <C> <C>
Cash....................................................................... $ 38,458 $ 20,937
--------- ---------
Investments:
Finance assets (Note 2).................................................. 4,082,219 4,241,359
Investment in leveraged leases........................................... 662,379 617,970
Assets transferred from affiliate........................................ 17,179 32,825
Investment in operating leases, net of accumulated depreciation.......... 76,120 86,634
Allowance for credit losses.............................................. (104,413) (98,721)
--------- ---------
Net investments........................................................ 4,733,484 4,880,067
--------- ---------
Mortgage servicing rights, net of accumulated amortization................. 190,788 138,146
Assets held for sale....................................................... 321,371 140,420
Other assets............................................................... 220,105 167,432
--------- ---------
Total assets.......................................................... $ 5,504,206 $ 5,347,002
========= =========
Liabilities:
Senior notes payable within one year (Note 4).............................. $ 2,169,102 $ 1,901,581
Short-term notes payable to affiliates (Note 4)............................ - 139,400
Accounts payable to affiliates............................................. 166,391 168,558
Accounts payable and accrued liabilities................................... 187,307 176,657
Deferred taxes............................................................. 503,878 478,624
Senior notes payable after one year (Note 4)............................... 1,150,000 1,275,000
Subordinated notes payable (Note 4)........................................ 270,487 229,154
--------- ---------
Total liabilities...................................................... 4,447,165 4,368,974
--------- ---------
Stockholder's Equity:
Common stock............................................................... 46,000 46,000
Capital surplus............................................................ 41,725 41,725
Retained earnings.......................................................... 969,316 890,303
--------- ---------
Total stockholder's equity.............................................. 1,057,041 978,028
--------- ---------
Total liabilities and stockholder's equity............................ $ 5,504,206 $ 5,347,002
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Page 5 of 14
PITNEY BOWES CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
(in thousands of dollars)
<TABLE>
Nine Months Ended
-------------------------------
September 30, September 30,
1997 1996
---- ----
Operating Activities
<S> <C> <C>
Net income................................................................. $ 137,513 $ 130,719
Adjustments to reconcile net income to cash provided by
operating activities:
Provision for credit losses.............................................. 44,352 48,117
Depreciation and amortization............................................ 31,893 29,676
Cost of equipment sales.................................................. - 283
(Decrease) increase in accounts payable to affiliates.................... (2,167) 1,372
Increase in deferred taxes............................................... 25,254 74,104
Increase (decrease) in accounts payable and accrued liabilities.......... 10,650 (7,169)
Increase in assets transferred from affiliates........................... (4,475) (4,559)
Other, net............................................................... (34,394) (29,336)
--------- ---------
Net cash provided by operating activities.................................. 208,626 243,207
--------- ---------
Investing Activities
Investment in net finance assets......................................... (1,491,563) (1,023,467)
Investment in operating leases........................................... (11,807) (9,027)
Investment in leveraged leases........................................... (23,934) -
Investment in assets held for sale....................................... (509,060) (237,971)
Cash receipts collected under lease contracts, net of finance
income recognized..................................................... 1,947,084 1,145,821
Investment in mortgage service rights.................................... (68,671) (34,759)
Loans and advances to affiliates, net.................................... (12,397) (3,534)
Additions to equipment and leasehold improvements........................ (6,711) (9,781)
--------- ---------
Net cash used in investing activities...................................... (177,059) (172,718)
--------- ---------
Financing Activities
Increase (decrease) in short-term debt, net.............................. 388,021 (426,119)
Settlement of long-term debt............................................. (245,500) -
Proceeds from senior notes............................................... - 500,000
Proceeds from subordinated debt.......................................... 41,333 -
Settlement of short-term loans from affiliates........................... (139,400) (79,309)
Dividends paid to Pitney Bowes Inc....................................... (58,500) (53,400)
--------- ---------
Net cash used in financing activities...................................... (14,046) (58,828)
--------- ---------
Increase in cash........................................................... 17,521 11,661
Cash at beginning of period................................................ 20,937 10,129
--------- ---------
Cash at end of period...................................................... $ 38,458 $ 21,790
========= =========
Interest paid.............................................................. $ 150,420 $ 153,334
========= =========
Income taxes refunded, net................................................. $ (18,155) $ (34,400)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Page 6 of 14
PITNEY BOWES CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1997
(Unaudited)
Note 1 -- General
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 accruals) necessary to present fairly the financial
position as of September 30, 1997 and the results of operations and cash flows
for the nine months ended September 30, 1997 and 1996 have been included.
Operating results for the nine months ending September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997.
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, 1996.
Note 2 --Finance Assets
The composition of the Company's finance assets is as follows:
<TABLE>
September 30, December 31,
(in thousands of dollars) 1997 1996
---- ----
<S> <C> <C>
Gross finance receivables....................................... $ 4,667,262 $ 4,826,361
Unguaranteed residual valuation................................. 668,521 700,776
Initial direct costs deferred................................... 96,767 91,588
Unearned income................................................. (1,350,331) (1,377,366)
--------- ---------
Total finance assets.......................................... $ 4,082,219 $ 4,241,359
========= =========
</TABLE>
Note 3 -- Mortgage Servicing Rights
Mortgage servicing rights ("MSR") are recorded at the lower of amortized cost
or the present value of estimated net servicing income, which does not exceed
fair market value and are amortized in proportion to, and over the period of,
estimated net servicing income. Fair value is estimated using a discounted cash
flow model which incorporates market discount and prepayment rates as well as
other assumptions that market participants would use in their estimates of
future servicing income and expense. The Company's policy for evaluating MSR for
impairment is to stratify the mortgage servicing rights based on the predominant
risk characteristics of the underlying loans. Upon evaluation, adjustments to
current period operations and the valuation allowance are made if any individual
portfolio stratum is deemed impaired. Based on an evaluation performed as of
September 30, 1997, no impairment was recognized in the Company's MSR portfolio.
<PAGE>
Page 7 of 14
PITNEY BOWES CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the Nine Months Ended September 30, 1997
(Unaudited)
Note 4 -- Notes Payable
The composition of the Company's notes payable is as follows:
<TABLE>
September 30, December 31,
(in thousands of dollars) 1997 1996
--------- ---------
Senior Notes Payable:
Commercial paper at the weighted average
<S> <C> <C>
interest rate of 5.68% (5.54% in 1996)........................ $ 1,668,102 $ 1,359,200
Notes payable against bank lines of credit and others at a
weighted average interest rate of 1.66% (2.11% in 1996)....... 376,000 296,881
Current installment of long-term debt due within one year at
interest rates of 5.84% to 6.25% (5.63% to 7.48% in 1996)..... 125,000 245,500
--------- ---------
Total senior notes payable due within one year.................. 2,169,102 1,901,581
Senior notes payable due after one year at interest rates of
6.06% to 9.25% (5.63% to 9.25% in 1996)....................... 1,150,000 1,275,000
--------- ---------
Total senior notes payable...................................... 3,319,102 3,176,581
--------- ---------
Short-term Notes Payable to Affiliates:
Notes payable to Pitney Bowes Inc. at a weighted
average interest rate of 5.40% in 1996........................ - 139,400
Subordinated Notes Payable:
Non-interest bearing notes due Pitney Bowes Inc................. 270,487 229,154
--------- ---------
Total notes payable............................................... $ 3,589,589 $ 3,545,135
========= =========
</TABLE>
Note 5 -- Other
On August 21, 1997, the Company announced that it had entered into an agreement
with GATX Capital Corporation ("GATX Capital"), a subsidiary of GATX
Corporation, that will reduce the Company's external large-ticket finance
portfolio by approximately $1.2 billion. This represents approximately 50
percent of PBCC's current external large-ticket portfolio. The agreement
reflects PBCC's ongoing strategy of focusing on fee- and service-based revenue
rather than asset-based income.
Under the terms of the agreement, the Company will transfer external
large-ticket finance assets through a sale to GATX Capital and a limited
liability company (the "Transfer"). PBCC expects to receive approximately $1
billion in cash through the end of the year and an initial equity interest of
$175 million in the limited liability company which will hold the beneficial
interest in the assets.
This transaction is subject to a number of conditions to closing, which include
certain regulatory approvals. As of September 30, 1997, the Company had received
$193 million as part of the transaction, and on November 6, 1997, received ad
additional $475 million in proceeds. The remainder of the transaction is
expected to close prior to the end of 1997. There is no assurance however, that
it will close in a timely manner, or at all.
<PAGE>
Page 8 of 14
PITNEY BOWES CREDIT CORPORATION
MANAGEMENT'S NARRATIVE ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Third Quarter of 1997 Compared to Third Quarter of 1996
Finance income in the third quarter of 1997 decreased 1.1 percent to $189.4
million compared to $191.5 million in 1996. Finance income for internal
small-ticket financing programs increased 6.1 percent to $81.3 million from
$76.6 million primarily due to higher income from fee- and service-based
programs and a higher earning asset base. Finance income for external
large-ticket financing programs decreased to $48.1 million from $49.1 million
primarily due to lower external large-ticket investment levels in accordance
with the Company's previously announced strategy to shift the foundation of the
external financing business from asset- to fee- and service- based revenues.
Finance income related to external small-ticket financing programs decreased to
$40.5 million from $52.0 million primarily due to the sale of an asset portfolio
by Colonial Pacific Leasing Corporation ("CPLC") during the third quarter of
1996. Revenue generated from mortgage servicing increased 41.3 percent to $19.5
million in the third quarter of 1997 compared with $13.8 million in the third
quarter of 1996, due to a larger mortgage servicing portfolio in keeping with
the Company's fee-based income growth strategy.
Selling, general and administrative ("SG&A") expenses increased 0.2 percent to
$47.9 million in the third quarter of 1997 compared to $47.8 million in 1996.
SG&A for internal small-ticket financing programs increased to $16.0 million
from $14.9 million principally due to higher professional fees and outsourcing
expenses related to new business initiatives as well as consulting services in
support of strategic initiatives such as improvements to the information
technology and customer service departments. SG&A for external large-ticket
financing programs includes a charge of approximately $5.0 million for costs and
asset valuation related to the Transfer (See Note 5 to Consolidated Financial
Statements). Excluding the expenses relating to the Transfer, SG&A for external
large-ticket financing programs increased to $6.0 million in 1997 from $5.4
million in 1996 due to higher personnel related expenses. SG&A for external
small-ticket financing programs decreased to $15.0 million from $22.8 million
principally due to fees related to the CPLC asset sale during the third quarter
of 1996. SG&A expenses related to mortgage servicing increased 25.5 percent to
$5.9 million in 1997 from $4.7 million in 1996 primarily due to the
administration of a larger mortgage servicing portfolio.
Depreciation on operating leases was $2.7 million in the third quarter of 1997
compared to $3.4 million in 1996 reflecting a lower operating lease investment
balance at September 30, 1997 compared to September 30, 1996. Amortization of
mortgage servicing rights was $8.2 million in the third quarter of 1997 compared
to $6.4 million in 1996 due to a larger mortgage servicing portfolio.
Amortization of deferred costs associated with the Company's participation in a
partnership transaction was $0.6 million for the third quarters of both 1997 and
1996.
The provision for credit losses was $13.4 million for the third quarter of
1997 compared with $17.5 million in 1996. The provision for internal
small-ticket financing programs decreased to $6.7 million from $7.1 million
primarily due to lower reserve requirements offset by increased provisions for
new business initiatives. The provision for external small-ticket financing
programs was $6.8 million for the third quarter of 1997 compared to $10.6
million in 1996 primarily due to an accelerated provision made in connection
with the sale of CPLC finance assets in the third quarter of 1996. The provision
for external large-ticket financing programs was a credit of $.1 million in the
third quarter of 1997 compared with a credit of $.2 million in the third quarter
of 1996, reflecting favorable reserve adjustments in both 1997 and 1996 based on
management's current evaluation of expected losses.
The Company's allowance for credit losses as a percentage of net lease
receivables (net investments before allowance for credit losses plus the
uncollected principal balance of receivables sold) increased from 1.88 percent
at December 31, 1996 to 2.10 percent at September 30, 1997. PBCC charged $38.7
million and $54.2 million against the allowance for credit losses through the
third quarter of 1997 and 1996, respectively.
<PAGE>
Page 9 of 14
PITNEY BOWES CREDIT CORPORATION
MANAGEMENT'S NARRATIVE ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Third Quarter of 1997 Compared to Third Quarter of 1996 (continued)
Interest expense was $51.2 million in the third quarter of 1997 compared with
$50.4 million in 1996. The increase reflects higher average borrowings in 1997
combined with slightly higher interest rates. The effective interest rate on
average borrowings was 6.05 percent for the third quarter of 1997 compared to
5.99 percent for the same period of 1996. 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 third quarter of 1997 was 27.4 percent compared
with 32.4 percent for the same period of 1996. The decrease is principally due
to lower state tax provisions related to certain external large-ticket
transactions as well as a higher level of tax-exempt income.
The Company's ratio of earnings to fixed charges was 2.27 times for the third
quarter of 1997 compared with 2.28 times for the same period of 1996. The slight
decrease is mainly due to higher interest expense in 1997.
First Nine Months of 1997 Compared to First Nine Months of 1996
For the first nine months of 1997 compared to the same period of 1996, total
revenue increased 1.3 percent to $556.0 million, SG&A expenses increased 4.4
percent to $131.6 million, depreciation and amortization including the cost of
equipment sales increased 6.5 percent to $31.9 million, provision for credit
losses decreased 7.8 percent to $44.4 million, interest expense increased 1.7
percent to $152.2 million, provision for income taxes decreased by 9.0 percent
to $58.4 million, generating a net income increase of 5.2 percent to $137.5
million.
The variances noted in the paragraph above include certain non-recurring
transactions which affect the comparability of results between periods. These
include the sale of external small-ticket finance assets during the third
quarter of 1996 and the sale of the Custom Vendor Finance finance asset
portfolio during the second quarter of 1996 and the charge of approximately $5.0
million related to the Transfer.
Except for these non-recurring transactions, the factors that affected the
change in each of the above income or expense items were essentially the same as
those affecting the third quarter of 1997 versus 1996.
Financial Condition
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 debt maturities, variable-
and fixed-rate debt and interest rate swap agreements to control sensitivity to
interest rate volatility. PBCC's debt mix was 60 and 58 percent short-term and
40 and 42 percent long-term at September 30, 1997 and December 31, 1996,
respectively. PBCC's swap-adjusted variable-rate versus fixed-rate debt mix was
52 percent variable-rate and 48 percent fixed-rate at September 30, 1997 and 43
percent variable-rate and 57 percent fixed-rate at December 31, 1996. 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.
The Company has $250 million of unissued debt securities available from a
shelf registration statement filed with the Securities and Exchange Commission
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 the Company's financing needs for the next
two years. The Company also had unused lines of credit and revolving credit
facilities totaling $1.6 billion at September 30, 1997, largely supporting its
commercial paper borrowings.
<PAGE>
Page 10 of 14
PITNEY BOWES CREDIT CORPORATION
MANAGEMENT'S NARRATIVE ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Liquidity and Capital Resources (continued)
The Company's utilization of derivative instruments is normally 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 also entered into an interest rate swap to manage interest rate risk
on a portion of the transaction with GATX Capital (See Note 5 to Consolidated
Financial Statements). The interest differential on the swap will be offset
against changes in valuation of the assets resulting from interest rate
movements. 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.
Gross finance assets at the end of the third quarter of 1997 decreased 3.5
percent from December 31, 1996. The decrease is principally due to the shift in
emphasis from asset-based investments in the external large-ticket segment to
fee-based transactions. Overall levels of lease receivables are in line with
management's expectations.
The Company continues to actively pursue a strategy of external large-ticket
asset sales, thereby allowing the Company to focus on fee- and service-based
revenue rather than asset-based income. In keeping with this strategy, the
Company has entered into an agreement with GATX Capital that will reduce the
Company's external large-ticket finance portfolio by approximately $1.2 billion.
This represents approximately 50 percent of PBCC's current external large-ticket
portfolio. (See Note 5 to Consolidated Financial Statements).
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 .85 times at September 30, 1997 and
.78 times at December 31, 1996.
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. Borrowing requirements will be primarily dependent upon the level of
equipment purchases from Pitney Bowes Inc., the level of external financing
activity, capital requirements for new business initiatives, and the refinancing
of maturing debt. 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 under revolving
credit facilities and credit lines.
- --------------------------------------------------------------------------------
The Company wishes to caution readers that any forward-looking statements
contained in this Form 10-Q or made by the management of the Company involve
risks and uncertainties, and are subject to change based on various important
factors. The following factors, among others, could affect the Company's
financial results and could cause the Company's financial performance to differ
materially from the expectations expressed in any forward-looking statement made
by or on behalf of the Company - the level of business and financial performance
of Pitney Bowes Inc; the impact of governmental financing regulations; the
success of the Company in developing strategies to manage debt levels, including
the ability of the Company to access the capital markets; the strength of
worldwide economies; the effects of and changes in trade, monetary and fiscal
policies and laws, and inflation and monetary fluctuations, including changes in
interest rates; the willingness of customers to substitute financing sources;
and the level of write-offs and the Company's associated collection and asset
management efforts.
<PAGE>
Page 11 of 14
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings
From time to time, the Company is a party to lawsuits that arise in the
ordinary course of its business. These lawsuits may involve litigation by or
against the Company to enforce contractual rights under vendor, insurance or
other contracts; lawsuits by or against the Company relating to equipment,
service or payment disputes with customers; disputes with employees; or other
matters. 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 6 -- Exhibits and Reports on Form 8-K
a. Financial Statements - see index on page 2
Exhibits (numbered in accordance with Item 601 of Regulation S-K)
<TABLE>
Reg S-K Incorporation
Exhibits Description by Reference
--------- ------------------------------------------------- ---------------
<S> <C> <C> <C>
(12) Computation of Ratio of Earnings to Fixed Charges See Exhibit (i)
on page 13
(27) Financial Data Schedule See Exhibit (ii)
on page 14
</TABLE>
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 on
request.
b. Reports on Form 8-K
The following reports on Form 8-K were filed with the Securities
and Exchange Commission during the quarter ended September 30,
1997.
Form 8-K dated August 21, 1997. This Form 8-K reported
information under Item 2(Acquisition or Disposition of Assets)
and Item 7 (Financial Statements and Exhibits).
<PAGE>
Page 12 of 14
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
By /s/ G. KIRK HUDSON
----------------------
G. Kirk Hudson
Vice President - Finance
(Principal Financial and
Accounting Officer)
Dated: November 13, 1997
<PAGE>
Page 13 of 14
Exhibit (i)
Computation of Ratio of Earnings to Fixed Charges
(in thousands of dollars)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before income taxes.......... $ 65,429 $ 65,157 $ 195,945 $ 194,925
------ ------- -------- -------
Fixed charges:
Interest on debt.................. 51,172 50,394 152,165 149,663
One-third of rent expense......... 511 393 1,244 1,190
------- ------- -------- -------
Total fixed charges................. 51,683 50,787 153,409 150,853
------- ------- -------- -------
Earnings before fixed charges....... $ 117,112 $ 115,944 $ 349,354 $ 345,778
======= ======= ======== =======
Ratio of earnings to
fixed charges (1)................. 2.27X 2.28X 2.28X 2.29X
======= ======= ======== ========
Years Ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income before income taxes.......... $ 266,089 $ 231,334 $ 218,913 $ 189,960 $ 185,704
------- ------- -------- -------- -------
Fixed charges:
Interest on debt.................. 201,543 202,090 151,239 137,372 146,594
One-third of rent expense......... 1,530 1,519 1,463 1,575 1,491
------- ------- -------- -------- -------
Total fixed charges................. 203,073 203,609 152,702 138,947 148,085
------- ------- -------- -------- -------
Earnings before fixed charges....... $ 469,162 $ 434,943 $ 371,615 $ 328,907 $ 333,789
======= ======= ======== ======== =======
Ratio of earnings to
fixed charges (1)................. 2.31X 2.14X 2.43X 2.37X 2.25X
======= ======= ======== ======== =======
</TABLE>
(1) The ratio of earnings to fixed charges is computed by dividing earnings
before fixed charges by fixed charges. Fixed charges consist of interest on
debt and one-third of rent expense as representative of the interest
portion.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Page 14 of 14
Exhibit (ii)
Financial Data Schedule
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 9/30/97
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 38,458
<SECURITIES> 0
<RECEIVABLES> 4,837,897
<ALLOWANCES> 104,413
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,504,206
<CURRENT-LIABILITIES> 2,522,800
<BONDS> 0
<COMMON> 46,000
0
0
<OTHER-SE> 1,011,041
<TOTAL-LIABILITY-AND-EQUITY> 5,504,206
<SALES> 0
<TOTAL-REVENUES> 555,998
<CGS> 0
<TOTAL-COSTS> 163,536
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 44,352
<INTEREST-EXPENSE> 152,165
<INCOME-PRETAX> 195,945
<INCOME-TAX> 58,432
<INCOME-CONTINUING> 137,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,513
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
