<PAGE>
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 September 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: 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
September 30, 1995 is 151,596,027.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 2 of 19
Pitney Bowes Inc.
Index
Page Number
Part I - Financial Information:
Consolidated Statement of Income - Three and
Nine Months Ended September 30, 1995 and 1994 3
Consolidated Balance Sheet - September 30, 1995
and December 31, 1994 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 14
Part II - Other Information:
Item 1: Legal Proceedings 15
Item 5: Other Information 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 Fixed Charges 18
Exhibit (iii) - Financial Data Schedule 19
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 3 of 19
Part I - Financial Information
Pitney Bowes Inc.
Consolidated Statement of Income
(Unaudited)
<TABLE>
(Dollars in thousands, except per share data)
<CAPTION> Three Months Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue from:
Sales $ 372,889 $ 341,070 $ 1,107,690 $ 1,002,514
Rentals and financing 395,494 359,896 1,147,372 1,058,538
Support services 107,748 105,475 322,584 309,052
Total revenue 876,131 806,441 2,577,646 2,370,104
Costs and expenses:
Cost of sales 230,507 201,719 676,784 585,424
Cost of rentals and financing 117,205 110,132 330,007 342,256
Selling, service and administrative 307,145 297,281 885,037 851,599
Research and development 18,961 20,005 60,943 57,691
Interest, net 51,523 47,851 170,484 136,118
Nonrecurring items, net - (25,366) - (25,366)
Total costs and expenses 725,341 651,622 2,123,255 1,947,722
Income from continuing operations before
income taxes 150,790 154,819 454,391 422,382
Provision for income taxes 50,050 69,498 159,313 168,367
Income from continuing operations 100,740 85,321 295,078 254,015
Income, net of income tax, from discontinued
operations prior to discontinuance 721 10,706 21,483 32,492
Net gain from discontinued operations 153,713 - 153,948 -
Income before effect of a change in accounting
for postemployment benefits 255,174 96,027 470,509 286,507
Effect of a change in accounting for
postemployment benefits - - - (119,532)
Net income $ 255,174 $ 96,027 $ 470,509 $ 166,975
Income per common and common equivalent share:
Income from continuing operations $ .66 $ .54 $ 1.94 $ 1.60
Discontinued operations 1.01 .07 1.15 .20
Effect of a change in accounting for
postemployment benefits - - - (.75)
Net income $ 1.67 $ .61 $ 3.09 $ 1.05
Average common and common equivalent shares
outstanding 152,854,912 158,029,162 152,393,328 158,874,016
Dividends declared per share of
common stock $ .30 $ .26 $ .90 $ .78
Ratio of earnings to fixed charges 3.33 3.52 3.17 3.43
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 4 of 19
Pitney Bowes Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
(Dollars in thousands) September 30, December 31,
1995 1994
<CAPTION>
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 135,157 $ 75,106
Short-term investments, at cost which
approximates market 1,661 639
Accounts receivable, less allowances:
9/95, $14,640; 12/94, $16,909 372,020 422,276
Finance receivables, less allowances:
9/95, $37,972; 12/94, $36,224 1,128,816 1,050,090
Inventories (Note 2) 331,021 430,641
Other current assets and prepayments 97,276 104,992
Total current assets 2,065,951 2,083,744
Property, plant and equipment, net (Note 3) 508,193 578,650
Rental equipment and related
inventories, net (Note 3) 750,575 695,343
Property leased under capital
leases, net (Note 3) 9,561 12,633
Long-term finance receivables, less allowances:
9/95, $79,725; 12/94, $76,867 3,320,318 3,086,401
Investment in leveraged leases 538,059 481,308
Goodwill, net of amortization:
9/95, $28,803; 12/94, $40,984 209,579 222,445
Other assets 287,239 239,196
Total assets $7,689,475 $7,399,720
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 754,246 $ 828,396
Income taxes payable 348,516 194,427
Notes payable and current portion of
long-term obligations 2,008,464 2,626,231
Advance billings 299,930 329,415
Total current liabilities 3,411,156 3,978,469
Deferred taxes on income 520,318 453,438
Long-term debt 1,051,016 779,217
Other noncurrent liabilities 423,854 443,527
Total liabilities 5,406,344 5,654,651
Preferred stockholders' equity in a
subsidiary company 200,000 -
Stockholders' equity:
Cumulative preferred stock, $50 par
value, 4% convertible 47 48
Cumulative preference stock, no par
value, $2.12 convertible 2,602 2,790
Common stock, $2 par value 323,338 323,338
Capital in excess of par value 31,515 35,200
Retained earnings 2,119,766 1,785,513
Cumulative translation adjustments (45,521) (41,617)
Treasury stock, at cost (348,616) (360,203)
Total stockholders' equity 2,083,131 1,745,069
Total liabilities and stockholders' equity $7,689,475 $7,399,720
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 5 of 19
Pitney Bowes Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
(Dollars in thousands) Nine Months Ended September 30,
<CAPTION> 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 470,509 $ 166,975
Gain on sale of discontinued operations (153,948) -
Effect of a change in accounting for
postemployment benefits - 119,532
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 198,312 199,670
Nonrecurring items, net - (25,710)
Net change in the strategic focus
initiative (32,507) -
Increase in deferred taxes on income 56,253 78,152
Change in assets and liabilities:
Accounts receivable 938 17,723
Sales-type lease receivables (53,637) (71,471)
Inventories (9,979) (48,658)
Other current assets and prepayments (2,892) (4,614)
Accounts payable and accrued
liabilities (96,430) (99,996)
Income taxes payable 18,967 21,516
Advance billings 9,915 3,039
Other, net (88,906) (50,726)
Net cash provided by operating
activities 316,595 305,432
Cash flows from investing activities:
Short-term investments (969) 454
Net investment in fixed assets (252,683) (227,705)
Net investment in direct-finance lease
receivables (255,968) 43,945
Investment in leveraged leases (37,345) (45,369)
Proceeds from sale of subsidiaries 577,000 -
Net cash provided by (used in)
investing activities 30,035 (228,675)
Cash flows from financing activities:
(Decrease) increase in notes payable (587,090) 210,094
Proceeds from long-term obligations 275,000 200,000
Principal payments on long-term
obligations (43,855) (262,635)
Proceeds from issuance of stock 20,637 20,283
Stock repurchases (14,932) (111,708)
Proceeds from preferred stock issued by a
subsidiary 200,000 -
Dividends paid (136,256) (122,812)
Net cash used in financing
activities (286,496) (66,778)
Effect of exchange rate changes on cash (83) 385
Increase in cash and cash equivalents 60,051 10,364
Cash and cash equivalents at beginning of
period 75,106 54,653
Cash and cash equivalents at end of period $ 135,157 $ 65,017
Interest paid $ 178,224 $ 151,641
Income taxes paid $ 91,540 $ 85,768
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
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
September 30, 1995 and the results of its operations and cash flows for the
nine months ended September 30, 1995 and 1994 have been included. Operating
results for the nine months ended September 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 to
Stockholders and Form 10-K Annual Report for the year ended December 31, 1994.
Note 2:
<TABLE>
Inventories are comprised of the following:
<CAPTION>
(Dollars in thousands) September 30, December 31,
1995 1994
<S> <C> <C>
Raw materials and work in process $ 62,124 $ 111,051
Supplies and service parts 86,626 114,429
Finished products 182,271 205,161
Total $ 331,021 $ 430,641
</TABLE>
Note 3:
<TABLE>
Fixed assets are comprised of the following:
<CAPTION>
(Dollars in thousands) September 30, December 31,
1995 1994
<S> <C> <C>
Property, plant and equipment $1,077,656 $1,218,016
Accumulated depreciation (569,463) (639,366)
Property, plant and equipment, net $ 508,193 $ 578,650
Rental equipment and related
inventories $1,570,950 $1,484,698
Accumulated depreciation (820,375) (789,355)
Rental equipment and related
inventories, net $ 750,575 $ 695,343
Property leased under capital
leases $ 34,273 $ 38,644
Accumulated amortization (24,712) (26,011)
Property leased under capital
leases, net $ 9,561 $ 12,633
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 7 of 19
Note 4:
The company has refined its strategic focus with the intent to capitalize on
its strengths and competitive position. Based on an extensive review, the
company decided to concentrate its energies and resources on products and
services which facilitate the preparation, organization, movement, delivery,
tracking, storage and retrieval of documents, packages, letters and other
materials, in hard copy and digital form for its customers. Accordingly, the
company announced in 1994 its intent to seek buyers for its Dictaphone
Corporation (Dictaphone) and Monarch Marking Systems, Inc. (Monarch)
subsidiaries.
On August 11, 1995, the company sold Dictaphone for approximately $450 million
in cash, subject to post-closing adjustments, to an affiliate of Stonington
Partners, Inc. On June 29, 1995, the company sold Monarch for approximately
$127 million in cash, subject to post-closing adjustments, to a new company
jointly formed by Paxar Corporation and Odyssey Partners, L.P. The sales
resulted in gains approximating $150 million net of approximately $130 million
of income taxes.
Dictaphone and Monarch have been classified in the Consolidated Statement of
Income as discontinued operations. Summary results of the Dictaphone and
Monarch operations prior to their sales, which have been classified separately,
were as follows (results included for Dictaphone in 1995 are through August 11,
1995 and for Monarch in 1995 are through June 29, 1995):
<TABLE>
(Dollars in thousands) Three Months Ended Nine Months Ended
<CAPTION> September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue $ 28,981 $144,526 $306,462 $412,501
Income before income taxes $ 1,290 $ 17,751 $ 36,007 $ 53,666
Provision for income taxes 569 7,045 14,524 21,174
Income from discontinued
operations $ 721 $ 10,706 $ 21,483 $ 32,492
</TABLE>
Note 5:
In June 1995, a subsidiary of the company issued $200 million of variable term
voting preferred stock to outside institutional investors in a private
placement. The preferred stock, $.01 par value, is entitled to cumulative
dividends at rates set at auction, generally for 49 day intervals. The stock
issuance, which appears on the consolidated balance sheet as "Preferred
stockholders' equity in a subsidiary company", is designed to enable the company
to better manage its international cash and investments. The consolidated
statement of income reflects the dividends as a minority interest in "Selling,
service and administrative" expense.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 8 of 19
Note 6:
During 1994, the company adopted a formal plan designed to address the impact of
technology on work force requirements and to further refine its strategic focus
on core businesses worldwide. Current and future product offerings require a
smaller, but more highly skilled engineering, manufacturing and service work
force to take full advantage of design, production, diagnostic and service
strategies. As of September 30, 1995, the company has made severance and benefit
payments of approximately $35.9 million to nearly 1,300 employees separated
under the strategic focus initiatives. Approximately 250 employees with the
requisite enhanced skills have been hired to produce and service advanced
product offerings. It is currently anticipated that upon completion of the
actions contemplated under the strategic initiatives, approximately 1,700
employees will have been separated from the company at a cost approximating $5.0
million in excess of that initially provided in 1994. This excess has been
recorded in "Selling, service & administrative" expense.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 9 of 19
Pitney Bowes Inc.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Continuing Operations - third quarter of 1995 vs. third quarter of
1994.
Revenue increased nine percent to $876.1 million in 1995 compared to $806.4
million in the third quarter of 1994. Income from continuing operations
increased 18 percent to $100.7 million in 1995 from $85.3 million in the third
quarter of 1994.
Sales revenue increased nine percent in 1995 primarily as a result of volume
growth with only minor favorable effects from both price and foreign currency
exchange rate changes. The facilities management business recorded strong sales
growth as it continued to expand its facilities management contract base,
especially in the commercial and industrial market segment. Sales revenue
comparisons were also enhanced by strong growth in the international mailing
operations especially in Europe, driven principally by new products and the
acquisition in 1995 of a former Japanese joint venture. In addition, copier
equipment sales and to a lesser extent facsimile systems sales favorably
impacted sales growth. These increases were offset by a slight decline in U.S.
Mailing equipment sales.
Rentals and financing revenue increased 10 percent from the prior year. Rental
revenue growth reflected a higher number of postage meters on rental, especially
higher yielding Postage By Phone(r) and electronic meters, as well as a higher
number of plain paper facsimile systems in service. The increase in financing
revenue is principally due to a higher base of small-ticket equipment under
lease as well as an increased contribution from fee-based or non-interest
sensitive revenue sources, offset in part, by a greater contribution from sales
of finance assets last year than in the third quarter of 1995. In the third
quarter of 1994, approximately $55 million of net finance assets were sold which
produced approximately $8.7 million in revenue. Financing revenue growth in
1995 continues to be negatively affected by the company's 1993 decision to phase
out the business of financing non-Pitney Bowes equipment outside of the United
States.
Support services revenue rose two percent from the prior year. The revenue
growth was attributable to price increases and expansion of the service bases in
the U.S. mailing and shipping businesses.
The cost of sales to sales revenue ratio increased to 61.8 percent in the third
quarter of 1995 from 59.1 percent in the third quarter of 1994. The increased
ratio reflects higher U.S. mailing product costs which were driven, in part, by
increased volume and larger production runs in 1994 relating to the final build
of the model 6100 mailing machine. In addition, the ratio increase continues to
be affected by the increased significance of the company's facilities management
business which includes most of its expenses in cost of sales and, to a lesser
extent, to a stronger yen.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 10 of 19
The ratio of cost of rentals and financing to rentals and financing revenue
decreased to 29.6 percent in 1995 from 30.6 percent in 1994 primarily due to the
third quarter 1994 asset sale. This improvement was also impacted by reduced
credit loss requirements at the financial services businesses and, consistent
with the first half of 1995, by the change in the postage meter estimated
service lives which are based, in part, on technological content.
Selling, service and administrative expenses were 35.1 percent of revenue in the
third quarter 1995 compared to 36.9 percent in third quarter 1994. This ratio
benefited as the actions taken as part of the plan adopted in the third quarter
of 1994 to refine the strategic focus on the core businesses are being realized.
In addition, this ratio was favorably impacted by continuing cost containment
programs throughout the company and by a gain on the sale of an investment.
Research and development expenses decreased five percent to $19.0 million in the
third quarter of 1995 from $20.0 million in the third quarter 1994. This
decrease reflected higher 1994 expenditures for new products approaching the end
of their development cycle, offset to a degree, by increased engineering support
for recently introduced products the costs of which are included in cost of
sales. In addition, the company has maintained its cost containment programs
while continuing to significantly invest in advanced product development with
emphasis on electronic technology and software development.
Net interest expense increased to $51.5 million in the third quarter 1995 from
$47.9 million in 1994. This increase is due to higher short-term interest rates
and higher average borrowing levels in 1995 at financial services to support the
funding of equipment purchases.
The third quarter effective tax rate was 33.2 percent in 1995 compared to 44.9
percent in 1994. The 1994 effective tax rate was negatively impacted by a series
of strategic actions taken in the third quarter of 1994 totaling $28 million in
countries where the company could not realize associated tax benefits. In
addition, the 1995 effective rate was favorably affected by tax benefits
associated with a company owned life insurance program, as well as a higher
level of tax-exempt income.
Income from continuing operations increased 18 percent to $100.7 million in 1995
from $85.3 million in the third quarter of 1994. Excluding the effect of a
nonrecurring net credit in 1994, income from continuing operations would have
been 23 percent above the prior year. The credit is the result of a $118.6
million credit to income due to changes made in certain postemployment benefits
offset, in part, by the establishment of a $93.2 million reserve covering
strategic actions designed to address the impact of technology on work force
requirements and the continued refinement of the company's strategic focus
outlined in Note 6 to the consolidated financial statements. This net credit
added only $3.5 million, or two cents per share to net income primarily because
some of the strategic actions were planned in countries where the company was
unable to recognize associated tax benefits.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 11 of 19
Results of Continuing Operations - nine months of 1995 vs. nine months of 1994.
For the first nine months of 1995 compared with the same period of 1994, revenue
increased nine percent while income from continuing operations increased 16
percent to $295.1 million. The factors that affected revenue and earnings
performance included those cited for the third quarter 1995 versus 1994. In
addition, in the first quarter of 1995, revenue was favorably affected by
approximately $30 million of increased PROM (memory chip) sales attributable to
the January 1, 1995 United States postal rate change.
As part of the company's review of the impacts of technology on its core
businesses and the desire of worldwide postal services to transition to all
electronic postage meters, the estimated service lives of postage meters was
revised effective January 1, 1995. The meter base has been segregated according
to technological content. Mechanical meters, which constitute approximately 60
percent of the meter base, had their depreciable lives shortened while
electronic meters had their depreciable lives lengthened due to improved
security, functionality and limited risk of technological obsolescence. These
changes have been accounted for as changes in accounting estimates and did not
have a material effect on the 1995 results.
The second quarter of 1994 included the sale of operating lease assets which
produced approximately $27 million in revenue, but which increased the cost of
rentals and financing to rentals and financing revenue ratio due to inclusion of
$25.2 million of related costs.
Nonrecurring Item
During 1994, the company adopted a formal plan designed to address the impact of
technology on work force requirements and to further refine its strategic focus
on core businesses worldwide. Current and future product offerings require a
smaller, but more highly skilled engineering, manufacturing and service work
force to take full advantage of design, production, diagnostic and service
strategies. As of September 30, 1995, the company has made severance and benefit
payments of approximately $35.9 million to nearly 1,300 employees separated
under the strategic focus initiatives. Approximately 250 employees with the
requisite enhanced skills have been hired to produce and service advanced
product offerings. It is currently anticipated that upon completion of the
actions contemplated under the strategic initiatives, approximately 1,700
employees will have been separated from the company at a cost approximating $5.0
million in excess of that initially provided in 1994. This excess has been
recorded in "Selling, service and administrative" expense.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 12 of 19
Discontinued Operations
On August 11, 1995, the company sold its Dictaphone Corporation subsidiary and
related worldwide operations (Dictaphone) for approximately $450 million in
cash, subject to post-closing adjustments, to an affiliate of Stonington
Partners, Inc. On June 29, 1995, the company sold Monarch Marking Systems, Inc.
(Monarch) for approximately $127 million in cash, subject to post-closing
adjustments, to a new company jointly formed by Paxar Corporation and Odyssey
Partners, L.P. These sales resulted in net after-tax gains approximating $150
million.
1994 Accounting Change
The company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (FAS 112), as of January 1,
1994. FAS 112 required 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 or inactive
employees, their beneficiaries and covered dependents. The one-time effect on
first quarter 1994 earnings of adopting FAS 112 was a non-cash, after-tax charge
of $119.5 million (net of approximately $80.5 million of income taxes), or 75
cents per share.
Liquidity and Capital Resources
Working capital has increased since year-end 1994 due to proceeds received from
the sales of Dictaphone and Monarch, decreases in short-term borrowings
resulting from the issuance of long-term debt by Pitney Bowes Credit Corporation
(PBCC), and the issuance in the second quarter of 1995 of preferred stock in a
subsidiary company. The current ratio as of September 30, 1995 was .61 to 1 and
as of December 31, 1994, was .52 to 1.
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 September 30, 1995. 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 and by the
sales of Monarch and Dictaphone, are expected to be sufficient to provide for
financing needs in the next several years.
In May 1995, PBCC 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, PBCC
also issued $75 million of medium term notes due in
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 13 of 19
June, 1998 and June, 2000 with a weighted average coupon rate of 6.014 percent.
PBCC has $125 million of unissued debt securities available from a $500 million
shelf registration statement filed with the SEC in October 1992. In September
1995, PBCC filed another registration statement for an additional $625 million
of debt securities. In November 1995, PBCC commenced a $500 million medium-term
note offering. The $500 million medium-term note offering and the remaining
$250 million of unissued debt securities should meet PBCC's long-term financing
needs for the next several years.
In June 1995, a subsidiary of the company issued $200 million of variable term
voting preferred stock to outside institutional investors in a private
placement. The preferred stock, $.01 par value, is entitled to cumulative
dividends at rates set at auction, generally for 49 day intervals. The stock
issuance, which appears on the consolidated balance sheet as "Preferred
stockholders' equity in a subsidiary company", is designed to enable the company
to better manage its international cash and investments. The proceeds of the
issuance were used to pay down short-term borrowings. The consolidated
statement of income reflects the dividends as a minority interest in "Selling,
service, and administrative" expense.
The ratio of total debt to total debt and stockholders' equity including the
preferred stockholders' equity in a subsidiary company in total debt was 61.2%
at September 30, 1995 compared to 66.3% at December 31, 1994. This ratio was
favorably affected by the proceeds from the sales of Dictaphone and Monarch
which were used primarily to repay short-term debt. This ratio is expected to be
unfavorably impacted by the anticipated repurchase of common shares in the
future. Book value per common share increased to $13.72 at September 30, 1995
from $11.52 at year-end 1994 principally due to year-to-date income. This was
offset, in part, by the repurchase of approximately 450,000 common shares for
$14.9 million in the first quarter of 1995. These repurchases were made in
anticipation of the proceeds from the sales of Dictaphone and Monarch.
During the period October 31, to November 10, 1995, the company repurchased
approximately 390,000 additional shares of its common stock at a total cost
approximating $17 million.
The company enters into interest rate swap agreements principally through its
financial services business. 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, as
noted above, 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.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 14 of 19
Capital investments
In the first nine months of 1995, net investments in fixed assets included $83.7
million in net additions to property, plant and equipment and $165.7 million in
net additions to rental equipment and related inventories compared with $82.5
million and $140.8 million during the same period in 1994, respectively. These
additions included expenditures for a new facility the company is building in
Shelton, Connecticut, as well as normal plant and manufacturing equipment. In
the case of rental equipment, the additions included the production of postage
meters and purchase of facsimile equipment for both new placement and upgrade
programs.
At September 30, 1995, 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.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 15 of 19
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.
The company has been advised that the Antitrust Division of the United
States Department of Justice is conducting a civil investigation of its
postage equipment business to determine whether there is, has been, or may
be a violation of the surviving provisions of the 1959 consent decree
between the company and the U.S. Department of Justice, and or the
antitrust laws. The company intends to cooperate with the Department's
investigation.
Item 5: Other Information.
On November 13, 1995 the board of directors of Pitney Bowes Inc. elected
Michael I. Roth, Chairman and Chief Executive Officer, Mutual of New York,
to the board effective as of the meeting of the board scheduled for
December 11, 1995; and, expanded the total number of directors to twelve.
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. on page 17.
(12) Computation of ratio of See Exhibit (ii)
earnings to fixed charges. on page 18.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the three months ended
September 30, 1995.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
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.
November 14, 1995
/s/ C. F. Adimando
C. F. Adimando
Vice President - Finance and
Administration, and Treasurer
(Principal Financial Officer)
/s/ S. J. Green
S. J. Green
Vice President - Controller
(Principal Accounting Officer)
<PAGE>
<TABLE>
Pitney Bowes Inc. - Form 10-Q Pitney Bowes Inc.
Nine Months Ended September 30, 1995 Computation of Earnings per Share Exhibit (i)
Page 17 of 19
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share data) 1995 1994 1995 1994
<CAPTION>
<S> <C> <C> <C> <C>
Primary
Income from continuing operations (1) $ 100,740 $ 85,320 $ 295,077 $ 254,013
Discontinued operations 154,434 10,706 175,431 32,492
Effect of accounting change - - - (119,532)
Net income applicable to common stock $ 255,174 $ 96,026 $ 470,508 $ 166,973
Weighted average number of common shares
outstanding 151,524,929 156,825,702 151,263,445 157,519,505
Preference stock, $2.12 cumulative convertible 774,412 838,086 792,100 852,922
Stock option and purchase plans 555,571 365,374 337,783 501,589
Total common and common equivalent shares
outstanding 152,854,912 158,029,162 152,393,328 158,874,016
Income per common and common equivalent share -
primary:
Income from continuing operations $ .66 $ .54 $ 1.94 $ 1.60
Discontinued operations 1.01 .07 1.15 .20
Effect of accounting change - - - (.75)
Net income $ 1.67 $ .61 $ 3.09 $ 1.05
Fully Diluted
Income from continuing operations $ 100,740 $ 85,321 $ 295,078 $ 254,015
Discontinued operations 154,434 10,706 175,431 32,492
Effect of accounting change - - - (119,532)
Net income applicable to common stock $ 255,174 $ 96,027 $ 470,509 $ 166,975
Weighted average number of common shares
outstanding 151,524,929 156,825,702 151,263,445 157,519,505
Preference stock, $2.12 cumulative convertible 774,412 838,086 792,100 852,922
Stock option and purchase plans 561,119 387,410 364,667 524,984
Preferred stock, 4% cumulative convertible 11,490 12,774 11,514 14,895
Total common and common equivalent shares
outstanding 152,871,950 158,063,972 152,431,726 158,912,306
Income per common and common equivalent share -
fully diluted:
Income from continuing operations $ .66 $ .54 $ 1.94 $ 1.60
Discontinued operations 1.01 .07 1.15 .20
Effect of accounting change - - - (.75)
Net income $ 1.67 $ .61 $ 3.09 $ 1.05
<FN>
(1) Income from continuing operations was adjusted for preferred dividends.
</TABLE>
<PAGE>
<TABLE>
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1995
Page 18 of 19
Exhibit (ii)
Pitney Bowes Inc.
Computation of Ratio of Earnings to Fixed Charges (1)
(Dollars in thousands) Three Months Ended Nine Months Ended
<CAPTION> September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income from continuing
operations before income
taxes $150,790 $154,819 $454,391 $422,382
Add:
Interest expense 54,059 50,031 175,763 141,301
Portion of rents
representative of the
interest factor 9,952 11,157 31,179 32,545
Amortization of capitalized
interest 228 228 685 685
Income as adjusted $215,029 $216,235 $662,018 $596,913
Fixed charges:
Interest expense 54,059 50,031 175,763 141,301
Capitalized interest 608 200 1,570 372
Portion of rents
representative of the
interest factor 9,952 11,157 31,179 32,545
$ 64,619 $ 61,388 $208,512 $174,218
Ratio of earnings to fixed
charges 3.33 3.52 3.17 3.43
<FN>
(1) The computation of the ratio of earnings to fixed charges has been
computed by dividing income from continuing operations before income
taxes and fixed charges by fixed charges. Included in fixed charges
is one-third of rental expense as the representative portion of
interest.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 135,157
<SECURITIES> 1,661
<RECEIVABLES> 386,660
<ALLOWANCES> 14,640
<INVENTORY> 331,021
<CURRENT-ASSETS> 2,065,951
<PP&E> 1,077,656
<DEPRECIATION> 569,463
<TOTAL-ASSETS> 7,689,475
<CURRENT-LIABILITIES> 3,411,156
<BONDS> 1,051,016
<COMMON> 323,338
200,000
2,649
<OTHER-SE> 1,757,144
<TOTAL-LIABILITY-AND-EQUITY> 7,689,475
<SALES> 1,107,690
<TOTAL-REVENUES> 2,577,646
<CGS> 676,784
<TOTAL-COSTS> 1,006,791
<OTHER-EXPENSES> 945,980
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,484
<INCOME-PRETAX> 454,391
<INCOME-TAX> 159,313
<INCOME-CONTINUING> 295,078
<DISCONTINUED> 175,431
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 470,509
<EPS-PRIMARY> 3.09
<EPS-DILUTED> 3.09
</TABLE>
