<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock ($2 par value) New York Stock Exchange
$2.12 Convertible Cumulative New York Stock Exchange
Preference Stock (no par value)
Preference Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
4% Convertible Cumulative Preferred Stock ($50 par value)
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
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
The aggregate market value of voting stock (common stock and $2.12
preference stock) held by non-affiliates of the Registrant as of March 15,
1996 is $7,317,695,742.
Number of shares of common stock, $2 par value, outstanding as of March 15,
1996 is 149,835,860.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE:
1. Only the following portions of the Pitney Bowes Inc. 1995 Annual
Report to Stockholders are incorporated by reference into Parts I, II
and IV of this Form 10-K Annual Report.
(a) Financial Statements, pages 28 to 41.
(b) Management's Discussion and Analysis and Summary of Selected
Financial Data on pages 20 to 27 excluding the information on
page 26 relating to Dividend Policy.
(c) Stock Information and Stock Exchanges, on page 42.
2. Pitney Bowes Inc. Notice of the 1996 Annual Meeting and Proxy
Statement dated March 29, 1996 pages 3, 4, 7, 8, 11-13, 20 and
portions of pages 2, 5, 9, 10, 14 and 19 are incorporated by reference
into Part III of this Form 10-K Annual Report.
PART I
Item 1. Business
Pitney Bowes Inc. and its subsidiaries (the company) operate within three
industry segments: business equipment, business services, and commercial
and industrial financing. The company operates in two geographic areas:
the United States and outside the U.S. Financial information concerning
revenue, operating profit and identifiable assets by industry segment and
geographic area appears on pages 20 and 40 of the Pitney Bowes Inc. 1995
Annual Report to Stockholders and is incorporated herein by reference.
Business Equipment. Business equipment consists of four products and
service classes: mailing systems, copying systems, facsimile systems and
related financing. These products and services are sold, rented or leased
by the company. Some of the company's products are sold through dealers
outside the U.S.
Mailing systems include postage meters, parcel registers, mailing
machines, manifest systems, letter and parcel scales, mail openers,
mailroom furniture, folders, and paper handling and shipping equipment.
Copying systems include a wide range of copying systems and supplies.
Facsimile systems include a wide range of facsimile systems and
supplies.
The financial services operations provide lease financing for the
company's products in the U.S., Canada, the United Kingdom, Germany,
France, Norway, Ireland and Australia.
The company sold its Dictaphone Corporation (Dictaphone) and Monarch
Marking Systems, Inc. (Monarch) subsidiaries in 1995 resulting in gains
approximating $155 million net of approximately $130 million of income
taxes. Dictaphone and Monarch have been classified in the Consolidated
Statement of Income as discontinued operations; revenue and income from
continuing operations exclude the results of Dictaphone and Monarch for all
periods presented. (See Note 12, Acquisitions and discontinued operations,
of the Notes to the Consolidated Financial Statements in the Pitney Bowes
Inc. 1995 Annual Report to Stockholders which information is incorporated
herein by reference).
Business Services. Business services consists of two classes of servicing
the needs of third parties: facilities management and mortgage servicing.
Facilities management services are provided for a variety of business
support functions, including correspondence mail and reprographics
management, high volume
<PAGE>
automated mail center management and related
activities such as facsimile, supplies distribution and records management
provided by the company's Pitney Bowes Management Services, Inc. subsidiary
(PBMS).
The business services segment also includes mortgage servicing.
Mortgage servicing provides billing, collecting and processing services for
major investors in residential first mortgages for a fee.
In October 1993, the company acquired all outstanding shares of
Ameriscribe Corporation (Ameriscribe), a nationwide provider of on-site
reprographics, mailroom and other office services. The company
consolidated this unit with its facilities management business operated
through its wholly-owned subsidiary, PBMS.
Commercial and Industrial Financing. The commercial and industrial
financing segment provides equipment financing for non-Pitney Bowes
equipment and other financial services to the commercial and industrial
markets in the U.S. Products financed include both commercial and non-
commercial aircraft, over-the-road trucks and trailers, railcars and
locomotives and high-technology equipment such as data processing and
communications equipment as well as commercial real estate properties. The
finance operations have also participated, on a select basis, in certain
other types of financial transactions including: sale of certain lease
transactions, senior secured loans in connection with acquisitions,
leveraged buyout and recapitalization financings and certain project
financings.
Since the first quarter of 1993, the company has continued to phase out
the business of financing non-Pitney Bowes equipment outside the U.S. In
the U.S. the company continues to finance a broad range of other commercial
and industrial products. Consolidated financial services operations
financed 39 percent of consolidated sales from continuing operations in
1995, 41 percent in 1994 and 44 percent in 1993. The decreasing percentage
financed is a direct result of the increasing significance of the
facilities management business to the company's revenue. The facilities
management business does not utilize traditional financing services used by
the other businesses within the company.
Financial services' (which includes commercial and industrial, and
internal financing) borrowing strategy is to use a balanced mix of debt
maturities, variable- and fixed-rate debt and interest rate swap agreements
to control its sensitivity to interest rate volatility. The company
utilizes interest rate swap agreements when it considers the economic
benefits to be favorable. Swap agreements have been principally utilized
to fix interest rates on commercial paper and/or obtain a lower cost on
debt than would otherwise be available absent the swap. The financial
services businesses 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. While the company's funding
strategy may reduce sensitivity to interest rate changes over the long-
term, effective interest costs have been and will continue to be impacted
by interest rate changes. The company periodically adjusts prices on its
new leasing and financing transactions to reflect changes in interest
rates; however, the impact of these rate changes on revenue is usually less
immediate than the impact on borrowing costs.
Nonrecurring Items, Net. 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.
Accordingly, in the third quarter of 1994 the company recorded a $93.2
million charge to income to cover the costs of such actions. The charge
anticipated $61 million of severance and benefit costs for work force
reductions, $22 million of asset write downs and $10 million of other exit
costs. As of December 31, 1995, the company has made severance and benefit
payments of approximately
<PAGE>
$49 million, the majority of which was expended
in 1995, to nearly 1,500 employees separated under these strategic focus
initiatives.
The phase-out of older product lines, introduction of new, advanced
products and increased need for higher employee skill levels to deliver and
service these products will ultimately require a work force reduction of
approximately 1,700 employees worldwide, and the future hiring of
approximately 450 new employees with these requisite enhanced skills upon
completion of these strategic focus initiatives. As of December 31, 1995,
approximately 400 employees with the requisite skills have been hired to
produce and service advanced product offerings. All costs associated with
hiring of new employees were excluded from the charge and have been and
will continue to be recognized appropriately in the period incurred.
Current and future advanced 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. These disciplines anticipated a work force reduction of more
than 850 employees with related severance and benefit costs of $27 million.
As of December 31, 1995, the actions taken by the company relative to this
portion of the initiative have resulted in cash expenditures of
approximately $21 million and anticipated 1996 expenditures of
approximately $6 million. Other anticipated strategic actions included
reengineering and streamlining of order flow, logistics and other
administrative processes in the U.S., Europe and the Asia Pacific region
which anticipated an additional work force reduction of more than 800
employees with related severance and benefit costs of $22.7 million. As of
December 31, 1995, the actions taken by the company relative to this
portion of the initiative have resulted in cash expenditures of
approximately $17 million, an additional accrual of approximately $5
million in separation and benefit costs and anticipated 1996 expenditures
of approximately $10 million. The additional accrual has been recorded in
selling, service and administrative expense in the Consolidated Statement
of Income in the Pitney Bowes Inc. 1995 Annual Report to Stockholders which
information is incorporated herein by reference. The decisions to phase
out non-mailing products in Germany and the cessation of further
development and marketing of shipping products which could not be cost-
effectively upgraded to new technologies accounted for the remaining work
force reductions and related severance and benefit costs. As of December
31, 1995, the actions taken by the company relative to this portion of the
initiative have resulted in cash expenditures of approximately $9 million
and anticipated 1996 expenditures of approximately $2 million.
As noted above, included in the plan to refine the strategic business
focus of the company were anticipated asset write downs of $22 million and
$10 million of other exit costs for certain additional actions. Consistent
with a refinement of focus on core businesses, these actions include
phasing-out non-mailing products in Germany. This decision anticipated the
write down of inventories, lease and rental contracts and other assets to
their net realizable value for which $7.4 million was provided. The
decision to cease development and marketing of certain shipping products as
noted above anticipated further inventory and other asset write-offs of
$8.6 million. The company decided to transition a software-based business
with its own product offerings to a limited product development and
marketing support function. As a result, $6.3 million of goodwill related
to the acquisition of this business was written-off. The $10 million of
other exit costs are primarily due to the adoption of a centralized
organizational structure in the European financial services businesses that
anticipated the early termination of a facility lease. As of December 31,
1995, approximately $19 million in assets have been written off, $3 million
of certain other exit costs have been incurred, approximately $2 million of
the original anticipated write down associated with the phase-out of non-
mailing products in Germany has been reclassified as other exit costs
within the reserve and $5 million originally provided for the early
termination of a facility lease has been reversed through selling, service
and administration expense in the Consolidated Statement of Income in the
Pitney Bowes Inc. 1995 Annual Report to Stockholders which information is
incorporated herein by reference. Anticipated 1996 expenditures
approximate $5 million, with the majority to be cash expenditures.
<PAGE>
Benefits from the strategic focus initiatives (principally reduced
employee expense) will be offset, in part, by increased hiring and training
expenses to obtain employees with requisite skills.
Support Services. The company maintains extensive field service
organizations in the U.S. and certain other countries to provide support
services to customers who have rented, leased or purchased equipment. Such
support services, provided primarily on the basis of annual maintenance
contracts, accounted for 12 percent, 13 percent and 14 percent of revenue
in 1995, 1994 and 1993, respectively.
Marketing. The company's products and services are marketed through an
extensive network of offices in the U.S. and through a number of
subsidiaries and independent distributors and dealers in many countries
throughout the world as well as through direct marketing and outbound
telemarketing. The company sells to a variety of business, governmental,
institutional and other organizations (See Regulatory Matters below). It
has a broad base of customers, and is not dependent upon any one customer
or type of customer for a significant part of its business. The company
does not have significant backlog or seasonality relating to its
businesses.
Operations Outside the United States. The company's manufacturing
operations outside the U.S. are in the United Kingdom.
Competition. The company has historically been a leading supplier of
certain products and services in its business segments, particularly
postage meters and mailing machines. However, all segments have strong
competition from a number of companies. In particular, it is facing
competition in many countries for new placements from several postage meter
and mailing machine suppliers, and its mailing systems products face some
competition from products and services offered as alternative means of
message communications. PBMS, a market leader in providing mail and
related support services to the corporate, financial services, and
professional services markets, competes against national, regional and
local firms specializing in facilities management. The company believes
that its long experience and reputation for product quality, and its sales
and support service organizations are important factors in influencing
customer choices with respect to its products and services.
The financing business is highly competitive with aggressive rate
competition. Leasing companies, commercial finance companies, commercial
banks and other financial institutions compete, in varying degrees, in the
several markets in which the finance operations do business and range from
very large, diversified financial institutions to many small, specialized
firms. In view of the market fragmentation and absence of any dominant
competitors which result from such competition, it is not possible to
provide a meaningful description of the finance operations' competitive
position in these markets.
Research and Development/Patents. The company has research and development
programs that are directed towards developing new products and improving
the economy and efficiency of its operations, including its production and
service methods. Expenditures on research and development totaled $81.8
million, $78.6 million and $80.9 million in 1995, 1994 and 1993,
respectively.
As a result of its research and development efforts, the company has
been awarded a number of patents with respect to several of its existing
and planned products. However, the company believes its businesses are not
materially dependent on any one patent or any group of related patents.
The company also believes its businesses are not materially dependent on
any one license or any group of related licenses.
<PAGE>
Material Supplies and Environmental Protection. The company believes it
has adequate sources for most parts and materials for the products it
manufactures. However, products manufactured by the company rely to an
increasing extent on microelectronic components, and temporary shortages of
these components have occurred from time to time due to the demands by many
users of such components.
The company purchases copiers, facsimile equipment, and scales,
primarily from Japanese suppliers. The company believes that it has
adequate sources available to it for the foreseeable future for such
products.
The company is subject to federal, state and local laws and regulations
concerning the environment, and is currently participating in
administrative or court proceedings as a participant in various groups of
potentially responsible parties. These proceedings are at various stages
of activity, and it is impossible to estimate with any certainty the total
cost of remediation, the timing and extent of remedial actions which may be
required by governmental authorities, and the amount of the liability, if
any, of the company. If and when it is possible to make a reasonable
estimate of the company's liability, if any, with respect to such a matter,
a provision would be made as appropriate. Based on facts presently known
to it, the company does not believe that the outcome of these proceedings
will have a material adverse effect on its financial condition.
Regulatory Matters. On June 9, 1995, the United States Postal Service
(U.S.P.S.) issued final regulations addressing the manufacture,
distribution and use of postage meters. The regulations cover four general
categories: meter security, administrative controls, Computerized Meter
Resetting Systems (C.M.R.S.) and other issues. In general, the regulations
impose reporting and performance obligations on meter manufacturers,
prescribe potential administrative sanctions for failure to meet these
obligations and require a restructuring of the fund management system of
C.M.R.S., such as the company's Postage by Phone(R) System, to give the
U.S.P.S. more direct control over meter licensee deposits. The company is
working with the U.S.P.S. to ensure that the implementation of these
regulations provides mailing customers and the U.S.P.S. with the intended
benefits, and that Pitney Bowes also benefits. The company believes that
the financial impact to the company resulting from implementation of these
regulations will not be material.
The company is also currently working with the U.S.P.S. to devise a
multi-year migration schedule to phase out mechanical meters and replace
them with electronic meters in a manner that is most beneficial and least
disruptive to the operations of the company's customers. This is
consistent with the company's strategy of introducing new technology into
the market place to add value to customer operations and meet postal needs.
This strategy and the company's long-term focus has resulted in an increase
in the percentage of the electronic meter base in the U.S. from six percent
of the overall base in 1986 to nearly 50 percent of the installed meter
base in 1995. Until such time as a final meter migration plan is
promulgated, the financial impact, if any, on the company cannot be
determined; but, it is currently the belief of the company that the
migration plan will not cause a material adverse financial impact.
Employee Relations. At December 31, 1995, 23,136 persons were employed by
the company in the U.S. and 4,587 outside the U.S. Employee relations
are considered to be very satisfactory. The great majority of employees
are not represented by any labor union. Management follows the policy of
keeping employees informed of its decisions, and encourages and implements
employee suggestions whenever practicable.
Item 2. Properties
The company's World Headquarters and certain other office and manufacturing
facilities are located in Stamford, Connecticut. The company maintains
research and development operations at a corporate engineering and
technology center in Shelton, Connecticut. A sales and service training
center is located near Atlanta, Georgia. The company built a new facility
in Shelton, Connecticut, which was completed in 1995. The company believes
<PAGE>
that its current and planned manufacturing, administrative and sales office
properties are adequate for the needs of all of its business segments.
Business Equipment. Business equipment products are manufactured in a
number of plants principally in Connecticut, as well as in Harlow, England.
Most of these facilities are owned by the company. There are 195 sales,
support services, and finance offices, substantially all of which are
leased, located throughout the U.S. and in a number of other countries.
Executive and administrative offices of the financing operations within the
U.S. are located in Norwalk, Connecticut. Offices outside the U.S. are
maintained in London, England; Heppenheim, Germany; Paris, France;
Mississauga, Ontario, Canada; North Ryde, Australia; Oslo, Norway; and
Dublin, Ireland.
Business Services. The company's PBMS subsidiary is headquartered in
Stamford, Connecticut and leases facilities in 29 cities located throughout
the U.S. as well as leased facilities in Montreal, Quebec and Toronto,
Ontario, Canada; and London, England. The Atlantic Mortgage and Investment
Corporation operates in Jacksonville, Florida.
Commercial and Industrial Financing. Pitney Bowes Credit Corporation
leases executive and administrative offices in Norwalk, Connecticut and
Tualatin, Oregon. There are seven leased regional and district sales
offices located throughout the U.S.
Item 3. 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 intellectual property or patent rights; equipment, service or payment
disputes with customers; disputes with employees; or other matters. The
company is currently a defendant in 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 U.S.
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.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Executive
Officer
Name Age Title Since
George B. Harvey 64 Chairman, President and Chief 1967
Executive Officer
Carmine F. Adimando 51 Vice President - Finance and 1982
Administration, and Treasurer
Marc C. Breslawsky 53 Vice-Chairman 1985
Amy C. Corn 42 Corporate Secretary and Senior 1996
Associate General Counsel
Michael J. Critelli 47 Vice-Chairman 1988
Meredith B. Fischer 43 Vice President - Communications, 1996
Marketing and Future Strategy
Arlen F. Henock 39 Vice President - Controller and 1996
Chief Tax Counsel
Douglas A. Riggs 51 Vice President - General Counsel 1988
Carole F. St. Mark 53 President and Chief Executive Officer - 1985
Pitney Bowes Business Services
Johnna G. Torsone 45 Vice President - Personnel 1993
There is no family relationship among the above officers, all of whom have
served in various corporate, division or subsidiary positions with the
company for at least the past five years.
George B. Harvey, Chairman, President and Chief Executive Officer,
will retire at the end of the year in accordance with the company's
retirement age of 65. Michael J. Critelli was elected Vice Chairman and
Chief Executive Officer and Marc C. Breslawsky was elected President and
Chief Operating Officer, both effective at the company's annual meeting on
May 13, 1996. Mr. Critelli was also elected Chairman of the Board and
Chief Executive Officer, effective January 1, 1997. Mr. Harvey will
continue to serve as Chairman until December 31, 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholders' Matters
The sections entitled "Stock Information" and "Stock Exchanges" on page 42
of the Pitney Bowes Inc. 1995 Annual Report to Stockholders are
incorporated herein by reference. At December 31, 1995, the company had
32,859 common stockholders of record.
Item 6. Selected Financial Data
The section entitled "Summary of Selected Financial Data" on page 27 of the
Pitney Bowes Inc. 1995 Annual Report to Stockholders is incorporated herein
by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The section entitled "Management's Discussion and Analysis" on pages 20 to
26 of the Pitney Bowes Inc. 1995 Annual Report to Stockholders is
incorporated herein by reference, except for the section on page 26
relating to "Dividend Policy".
The company wishes to caution readers that any forward-looking
statements contained in this Form 10-K 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
strength of worldwide economies; the effects of and changes in trade,
monetary and fiscal policies and laws, and inflation and monetary
fluctuations; the timely development of and acceptance of new Pitney Bowes
products and the perceived overall value of these products by users
including the features, pricing, and quality compared to competitors'
products; the willingness of users to substitute competitors' products for
Pitney Bowes products; the success of the company in gaining approval of
its products in new markets where regulatory approval is required; the
ability of the company to successfully enter new markets, including the
ability to efficiently distribute and finance its products; the impact of
changes in postal regulations around the world that directly regulate the
manufacture, ownership and or distribution of postage meters, or that
regulate postal rates and discounts; the willingness of mailers to utilize
alternative means of communication; and the company's success at managing
customer credit risk.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of Price
Waterhouse LLP dated January 29, 1996, appearing on pages 28 to 41 of the
Pitney Bowes Inc. 1995 Annual Report to Stockholders are incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Except for the information regarding the company's executive officers (see
"Executive Officers of the Registrant" on page 8), the information called
for by this Item is incorporated herein by reference to the sections
entitled "Election of Directors" and "Security Ownership of Directors and
Executive Officers" on pages 2 to 5 and 7 and 8 of the Pitney Bowes Inc.
Notice of the 1996 Annual Meeting and Proxy Statement.
Item 11. Executive Compensation
The sections entitled "Directors' Compensation", "Executive Officer
Compensation", "Severance and Change of Control Arrangements" and "Pension
Benefits" on pages 8, 9, 10 to 14, and 19 to 20 of the Pitney Bowes Inc.
Notice of the 1996 Annual Meeting and Proxy Statement are incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The section entitled "Security Ownership of Directors and Executive
Officers" on pages 7 and 8 of the Pitney Bowes Inc. Notice of the 1996
Annual Meeting and Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial statements - see Item 8 on page 9 and
"Index to Financial Statements and Schedules" on page 17.
2. Financial statement schedules - see "Index to
Financial Statements and Schedules" on page 17.
3. Exhibits (numbered in accordance with Item 601 of
Regulation S-K).
Reg. S-K Status or Incorporation
Exhibits Description by Reference
(3)(a) Restated Certificate Incorporated by reference to Exhibit
of Incorporation, as (3a) to Form 10-K as filed with the
amended Commission on March 30, 1993.
(Commission file number 1-3579)
(b) By-laws, as amended Exhibit (i)
(4)(a) Form of Indenture Incorporated by reference to Exhibit
dated as of November (4a) to Form 10-K as filed with the
15, 1987 between the Commission on March 24, 1988.
company and Chemical (Commission file number 1-3579)
Bank, as Trustee
(b) Form of Debt Securities Incorporated by reference to Exhibit
(4b) to Form 10-K as filed with the
Commission on March 24, 1988.
(Commission file number 1-3579)
(c) Form of First Incorporated by reference to Exhibit
Supplemental Indenture (1) to Form 8-K as filed with the
dated as of June 1, Commission on June 16, 1989.
1989 between the (Commission file number 1-3579)
company and Chemical
Bank, as Trustee
(d) Form of Indenture Incorporated by reference to Exhibit
dated as of April 15, (4.1) to Registration Statement on Form
1990 between the S-3(No. 33-33948) as filed with the
company and Chemical Commission on March 28, 1990.
Bank, as successor to
Manufacturers Hanover
Trust Company, as
Trustee
(e) Forms of Debt Securities Incorporated by reference to Exhibit
(4) to Form 10-Q as filed with the
Commission on May 14, 1990. (Commission
file number 1-3579)
<PAGE>
(f) Form of Indenture Incorporated by reference to Exhibit
dated as of May 1, (4a) to Registration Statement on Form
1985 between Pitney S-3(No. 2-97411) as filed with the
Bowes Credit Commission on May 1, 1985.
Corporation and
Bankers Trust Company,
as Trustee
(g) Letter Agreement Incorporated by reference to Exhibit
between Pitney Bowes (4b) to Registration Statement on Form
Inc. and Bankers Trust S-3(No. 2-97411) as filed with the
Company, as Trustee Commission on May 1, 1985.
(h) Form of First Incorporated by reference to Exhibit
Supplemental Indenture (4b) to Registration Statement on Form
dated as of December S-3(No. 33-10766) as filed with the
1, 1986 between Pitney Commission on December 12, 1986.
Bowes Credit
Corporation and
Bankers Trust Company,
as Trustee
(i) Form of Second Incorporated by reference to Exhibit
Supplemental Indenture (4c) to Registration Statement on Form S-
dated as of February 3(No. 33-27244) as filed with the
15, 1989 between Commission on February 24, 1989.
Pitney Bowes Credit
Corporation and
Bankers Trust Company,
as Trustee
(j) Form of Third Incorporated by reference to Exhibit (1)
Supplemental Indenture to Form 8-K as filed with the Commission
dated as of May 1, on May 16, 1989. (Commission file number
1989 between Pitney 1-3579)
Bowes Credit
Corporation and
Bankers Trust Company,
as Trustee
(k) Indenture dated as of Incorporated by reference to Exhibit
November 1, 1995 (4a) to Amendment No. 1 to Registration
between the company Statement on Form S-3 (No. 33-62485) as
and Chemical Bank, as filed with the Commission on November 2,
Trustee 1995.
(l) Preference Share Incorporated by reference to Exhibit (4)
Purchase Rights to Form 8-K as filed with the Commission
Agreement dated on March 13, 1996. (commission file
December 11, 1995 number 1-3579)
between the company
and Chemical Mellon
Shareholder Services,
LLC., as Rights Agent
The company has outstanding certain other long-term indebtedness.
Such long-term indebtedness does not exceed 10% of the total
assets of the company; therefore, copies of instruments defining
the rights of holders of such indebtedness are not included as
exhibits. The company agrees to furnish copies of such
instruments to the Securities and Exchange Commission upon
request.
<PAGE>
Executive Compensation Plans:
(10)(a) Retirement Plan for Incorporated by reference to Exhibit
Directors of Pitney (10a) to Form 10-K as filed with the
Bowes Inc. Commission on March 30, 1993.
(Commission file number 1-3579)
(b) Deferred Compensation Incorporated by reference to Exhibit
Plan for Directors (10b) to Form 10-K as filed with the
Commission on March 30, 1993.
(Commission file number 1-3579)
(c) Pitney Bowes Inc. Incorporated by reference to Exhibit
Directors' Stock Plan (10a) to Form 10-K as filed with the
Commission on March 25, 1992.
(Commission file number 1-3579)
(d) Pitney Bowes 1991 Incorporated by reference to Exhibit
Stock Plan (10b) to Form 10-K as filed with the
Commission on March 25, 1992.
(Commission file number 1-3579)
(e) Pitney Bowes Inc. Key Incorporated by reference to Exhibit
Employees' Incentive (10c) to Form 10-K as filed with the
Plan (as amended and Commission on March 25, 1992.
restated) (Commission file number 1-3579)
(f) 1979 Pitney Bowes Incorporated by reference to Exhibit
Stock Option Plan (as (10d) to Form 10-K as filed with the
amended and restated) Commission on March 25, 1992.
(Commission file number 1-3579)
(g) Pitney Bowes Severance Incorporated by reference to Exhibit
Plan, as amended, (10) to Form 10-K as filed with the
dated December 12, Commission on March 23, 1989.
1988 (Commission file number 1-3579)
(h) Pitney Bowes Executive Exhibit (ii)
Severance Policy,
adopted December 11,
1996.
(11) Statement re Exhibit (iii)
computation of per
share earnings
(12) Computation of ratio Exhibit (iv)
of earnings to fixed
charges
(13) Portions of annual Exhibit (v)
report to security
holders
(21) Subsidiaries of the Exhibit (vi)
registrant
(23) Consent of experts and Exhibit (vii)
counsel
(27) Financial Data Schedule Exhibit (viii)
(b) No reports on Form 8-K were filed for the three months ended
December 31, 1995.
On March 13, 1996, the company filed a Form 8-K disclosing the
Preference Share Purchase Rights Agreement dated December 11, 1995
between the company and Chemical Mellon Shareholder Services,
L.L.C., as Rights Agent.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ George B. Harvey
(George B. Harvey)
Chairman, President and Chief
Executive Officer
Date April 1, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ George B. Harvey Chairman, President April 1, 1996
George B. Harvey and Chief Executive
Officer - Director
/s/ Carmine F. Adimando Vice President-Finance April 1, 1996
Carmine F. Adimando and Administration, and
Treasurer (principal
financial officer)
/s/ Arlen F. Henock Vice President-Controller April 1, 1996
Arlen F. Henock and Chief Tax Counsel
(principal accounting
officer)
/s/ Linda G. Alvarado Director April 1, 1996
Linda G. Alvarado
/s/ Marc C. Breslawsky Director April 1, 1996
Marc C. Breslawsky
/s/ William E. Butler Director April 1, 1996
William E. Butler
/s/ Colin G. Campbell Director April 1, 1996
Colin G. Campbell
/s/ Michael J. Critelli Director April 1, 1996
Michael J. Critelli
<PAGE>
Signature Title Date
/s/ Charles E. Hugel Director April 1, 1996
Charles E. Hugel
/s/ David T. Kimball Director April 1, 1996
David T. Kimball
/s/ Leroy D. Nunery Director April 1, 1996
Leroy D. Nunery
/s/ Michael I. Roth Director April 1, 1996
Michael I. Roth
/s/ Phyllis S. Sewell Director April 1, 1996
Phyllis S. Sewell
/s/ Arthur R. Taylor Director April 1, 1996
Arthur R. Taylor
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The additional financial data should be read in conjunction with the
financial statements in the Pitney Bowes Inc. 1995 Annual Report to
Stockholders. Schedules not included with this additional financial data
have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto. Also,
separate financial statements of less than 100 percent owned companies,
which are accounted for by the equity method, have been omitted because
they do not constitute significant subsidiaries.
ADDITIONAL FINANCIAL DATA
Page
Pitney Bowes Inc.:
Report of independent accountants on financial
statement schedules 18
Financial statement schedule for the years 1993 - 1995:
Valuation and qualifying accounts and
reserves (Schedule II) 19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Pitney Bowes Inc.
Our audits of the consolidated financial statements referred to in our
report dated January 29, 1996 appearing on page 41 of the Pitney Bowes Inc.
1995 Annual Report to Stockholders (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-
K) also included an audit of the financial statement schedule listed by
reference in Item 14(a)2 of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
Price Waterhouse LLP
Stamford, Connecticut
January 29, 1996
<PAGE>
PITNEY BOWES INC.
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1993 TO 1995
<TABLE>
<CAPTION>
(Dollars in thousands)
Additions
Balance at charged to Balance
beginning of costs and at end
Description year expenses Deductions of year
Allowance for doubtful accounts
<S> <C> <C> <C> <C>
1995 $16,909 $ 4,126(1) $ 7,985(2)(3) $ 13,050
1994 $16,691 $ 4,262 $ 4,044(3) $ 16,909
1993 $16,578 $ 9,024(4) $ 8,911(3) $ 16,691
Allowance for credit losses on finance receivables
1995 $113,091 $68,275 $67,860(3) $113,506
1994 $116,512 $64,933 $68,354(3) $113,091
1993 $ 96,975 $84,524 $64,987(3) $116,512
Reserve for transition costs(5)
1995 $64,893 $ 5,145 $47,052(6) $ 22,986
1994 $ 344 $93,258 $28,709(6) $ 64,893
1993 $ 1,627 $ - $ 1,283(7) $ 344
Valuation allowance for deferred tax asset(5)
1995 $37,532 $12,076 $ 915 $ 48,693
1994 $25,975 $12,867 $ 1,310 $ 37,532
1993 $28,800 $ 2,059 $ 4,884 $ 25,975
<FN>
(1) Includes $382 of additions applicable to a business at acquisition.
(2) Includes $2,406 of deductions applicable to a business disposition.
(3) Principally uncollectible accounts written off.
(4) Includes $1,300 of additions applicable to a business at acquisition.
(5) Included in balance sheet as a liability.
(6) Includes amounts for asset write downs and amounts paid as well as
reclassifications.
(7) Amounts paid.
</TABLE>
<PAGE>
Exhibit (i)
BY-LAWS
OF
PITNEY BOWES INC.
(As amended and revised February 12, 1996)
<PAGE>
PITNEY BOWES INC.
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of
the stockholders for the election of directors and the trans
action of such other business as may properly be brought
before the meeting shall be held on such date, and at such
place and time, as the Chairman of the Board or the Board of
Directors shall designate.
Section 2. Special Meeting. Special meetings of
the stockholders may be called by the Board of Directors, as
provided in Article I, Section 7.
Section 3. Notice of Meetings. Subject to the
provisions of the Restated Certificate of Incorporation and
except as otherwise required by law, written notice of an
annual or special meeting of stockholders shall be given not
less than ten (10) nor more than sixty (60) days prior to the
meeting to each stockholder entitled to vote at the meeting.
In the case of a special meeting of stockholders, the purpose
or purposes for which the meeting is called shall be set
forth in the notice. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation.
Section 4. List of Stockholders. The Secretary or
the Treasurer shall prepare and make, or cause the Transfer
Agent to prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list, as of the
record date, of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the
address of, and the number of shares registered in the name of,
each stockholder. Such list shall be open to the examination
of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten
(10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of
the meeting during the whole time thereof and may be
inspected by any stockholder who is present. The stock ledger
shall be the only evidence as to who are the stockholders
entitled to examine the list of stockholders, or to vote in
person or by proxy at any meeting of stockholders.
Section 5. Advance Notice Procedures. (a)
General. The business to be conducted at any stockholder's
meeting of the Corporation and nominations for the election
of directors of the Corporation's Board of Directors shall be
limited to such business and nominations as shall comply with
the procedures set forth in this Article I and in Article II
of these By-laws.
<PAGE>
(b) Notification of Stockholder Business. At a
special meeting of stockholders' only such business shall be
conducted as shall have been set forth in the notice of
special meeting. At an annual meeting of stockholders, only
such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an
annual meeting, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the
Board of Directors, or (iii) otherwise (a) properly requested
to be brought before the meeting by a stockholder of record
entitled to vote in the election of directors generally, and
(b) constitute a proper subject to be brought before such
meeting.
For business to be properly brought before an
annual meeting by the stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal
executive offices of the Corporation, not later than 90 days
in advance of such meeting. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they
appear on the Corporation's books, of the stockholder
intending to propose such business, (c) the class and number
of shares of capital stock of the Corporation which are
beneficially owned by the stockholder, (d) a representation
that the stockholder is a holder of record of capital stock
of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to
present such business, and (e) any material interest of the
stockholder in such business. Nominations for elections of
directors at either an annual or special meeting of
stockholders shall be made, if at all, in accordance with
Section 6 of Article II of these By-laws.
Notwithstanding anything in the By-laws to the
contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in
this Section 5. The chairman of the annual meeting may, if
the facts warrant, determine and declare to the meeting that
(i) the business proposed to be brought before the meeting
was not a proper subject therefor and/or (ii) such business
was not properly brought before the meeting and in accordance
with the provisions of this Section 5, and, if he should so
determine, he may so declare to the meeting and any such
business not properly brought before the meeting or not a
proper subject therefor shall not be transacted.
(c) Meeting Delay. For purposes of this Section
5, and Section 6 of Article II of these By-laws, reference to
a requirement to deliver notice of information to the
Corporation a set number of days in advance of an annual
meeting shall mean that such notice must be delivered such
number of days in advance of the first anniversary of the
preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from the
first anniversary of the preceding year's annual meeting,
notice by the stockholder to be timely must be so delivered
not later than the close of
<PAGE>
business on the later of the 60th day prior to such annual
meeting or the 10th day following the day on which notice of
such meeting is first given to stockholders. For purposes of
these By-laws, notice shall be deemed to be first given to
stockholders when disclosure of such date is first made in a
press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the
Securities and Exchange Commission Pursuant to Sections 13,
14 or 15(d) of the Securities Exchange Act of 1934.
Section 6. Adjournments. Subject to the
provisions of Article I, Section 7 hereof, any meeting of stock
holders, annual or special, may adjourn from time to time to
reconvene at the same or some other place, and notice need
not be given of such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may
transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 7. Quorum and Voting. At any meeting of
stockholders the holders of a majority of the shares entitled
to vote thereat shall constitute a quorum for the transaction
of any business. Directors shall be elected by a plurality
of the votes cast. Each other question properly presented to
any meeting of stockholders shall be decided by a majority of
the votes cast on the question entitled to vote thereon,
except as otherwise required by law. Elections of directors
shall be by ballot but the vote upon any other question need
be by ballot only if so ordered by the person presiding at
the meeting, or by a vote of a majority of the stockholders,
present in person or by proxy, entitled to vote on the question.
In the event of lack of a quorum, the chairman of the
meeting or majority in interest of the stockholders present
in person or by proxy may adjourn the meeting from time to
time until a quorum shall be obtained.
Treasury shares as of the record date shall not be
shares entitled to vote or to be counted in determining the
total number of outstanding shares.
Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly
called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders.
Except as otherwise required by law and subject to the rights
of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation, special meetings of stockholders of the Corpora
tion may be called only by the Board of Directors pursuant to
a resolution approved by a majority of the entire Board of
Directors.
Section 8. Conduct of Meetings. The date and time
of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meet-
<PAGE>
ing shall be announced at such meeting by the person
presiding over the meeting. The Board of Directors may (i)
appoint a person to preside over meetings of stockholders (in
the absence of the Chairman of the Board, the Chief Executive
Officer and the President), and (ii) adopt by resolution such
rules and regulations for the conduct of meetings of stock
holders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by
the Board of Directors, the chairman of any meeting of stock
holders shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts as,
in the judgment of such chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or
procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without
limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at
or participation in the meeting to stockholders of record of
the Corporation, their duly authorized and constituted proxies
or such other persons as the chairman shall permit; (iv)
restrictions on entry to the meeting after the time fixed for
the commencement thereof; and (v) limitations on the time
allotted to questions or comments by participants. Unless and
to the extent determined by the Board of Directors or the
chairman of the meeting, meetings of stockholders shall not
be required to be held in accordance with rules of parliamentary
procedure.
Section 9. Inspectors of Election. The Corporation
shall, in advance of any meeting of stockholders, appoint
one or more inspectors of election, who may be employees
of the Corporation, to act at the meeting or any adjournment
thereof and to make a written report thereof. The
Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. In the
event that no inspector so appointed or designated is able to
act at a meeting of stockholders, the person presiding at the
meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge
of his duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality
and according to the best of his ability.
The inspector or inspectors so appointed or
designated shall (i) ascertain the number of shares of capital
stock of the Corporation outstanding and the voting power
of each such share, (ii) determine the shares of capital
stock of the Corporation represented at the meeting and the
validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their
determination of the number of shares of capital stock of the
Corporation represented at the meeting and such inspectors'
count of all votes and ballots. Such certification and
report shall specify such other information as may be
required by law. In determining the validity and counting of
proxies and ballots cast at any meeting of stockholders of
the Corporation, the inspectors may consider such information
as is permitted by applicable law. No person who is a candidate
for an office at an election may serve as an inspector
at such election.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 1. Powers of Board. The business of the
Corporation shall be managed by or under the direction of the
Board of Directors.
Section 2. Number, Election and Terms. Except as
otherwise fixed by or pursuant to the provisions of Article
Fourth of the Restated Certificate of Incorporation relating
to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or
upon liquidation to elect additional directors under specified
circumstances, the number of the Directors of the Corporation
shall be fixed from time to time by the Board of
Directors but shall not be less than three. The Directors,
other than those who may be elected by the holders of any
class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, shall be classified,
with respect to the time for which they severally hold
office, into three classes, as nearly equal in number as
possible, as determined by the Board of Directors of the
Corporation, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in
1985, another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 1986,
and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 1987,
with each class to hold office until its successor is elected
and qualified at each annual meeting of the stockholders of
the Corporation, the successors of the class of Directors
whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of
stockholders held in the third year following the year of
their election.
Section 3. Stockholder nomination of director
candidates. Advance notice of stockholder nominations for the
election of Directors shall be given in the manner provided
in Article II, Section 6 of these By-laws.
Section 4. Newly created directorships and vacancies.
Except as otherwise provided for or fixed by or pursuant
to the provisions of Article Fourth of the Restated
Certificate of Incorporation relating to the rights of the
holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to
elect directors under specified circumstances, newly created
directorships resulting from any increase in the number of
Directors and any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote of a
majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors. Any
Director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created
or the vacancy occurred and until such Director's successor
shall have been elected and qualified. No decrease in the
number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
<PAGE>
Section 5. Removal. Subject to the rights of any
class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect Directors
under specified circumstances, any Director may be removed
from office, with or without cause and only by the affirmative
vote of the holders of 80% of the combined voting power
of the then outstanding shares of stock entitled to vote
generally in the election of Directors, voting together as a
single class.
Section 6. Notification of Nominations. Subject
to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or
upon liquidation, nominations for the election of directors
may be made by the Board of Directors or a committee appointed
by the Board of Directors by any stockholder entitled to
vote in the election of directors generally. However, any
stockholder entitled to vote in the election of directors
generally may nominate one or more persons for election as
directors at a meeting only if written notice of such
stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation
not later than (i) with respect to an election to be held at
an annual meeting of stockholders, 90 days in advance of such
meeting, and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of directors,
the close of business on the seventh day following the
date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of
the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description
of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder; (d)
such other information regarding each nominee proposed by
such stockholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a
director of the Corporation if so elected. The chairman of
the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
Section 7. Quorum; Vote Required for Action. At
all meetings of the Board of Directors a majority of the
whole Board shall constitute a quorum for the transaction of
business; but if at any meeting of the Board there is less
than a quorum present, a majority of those present may
adjourn the meeting from time to time. Except in cases in
which the Restated Certificate of Incorporation or these By-
laws otherwise provide, the vote of a majority of the directors
present at a meeting at which a quorum is present shall
be the act of the Board of Directors.
<PAGE>
Section 8. First Meeting. As soon as practicable
after each annual election of directors, the Board of Directors
shall meet for the purpose of organization and the
transaction of other business. Notice of such meeting need
not be given. In the alternative, such first meeting may be
held at any other time which shall be specified in a notice
given as hereinafter provided, for special meetings of the
Board of Directors.
Section 9. Regular Meetings. Regular meetings of
the Board of Directors may be held, without notice, at such
times and places as may be fixed by the Board.
Section 10. Special Meetings. Special meetings of
the Board of Directors shall be held whenever called by the
Chairman or by any two of the directors. Notice of each
special meeting of the Board shall be given to each director
either by mail not later than noon, New York time, on the
third day prior to the meeting, or by electronic transmission,
written message or orally to the director not later
than noon, New York time, on the day prior to the meeting.
Notices are deemed to have been given: by mail, when
deposited in the United States mail; by electronic transmission,
at the time of transmission; and by messenger, at the
time of delivery. Notices by mail, electronic transmission
or messenger shall be sent to each director at the address
designated by him for that purpose, or, if none has been
designated, at his last known residence or business address.
A notice of meeting of the Board of Directors need
not specify the purpose of any meeting of the Board of
Directors.
Section 11. Organization. The Chairman of the
Board of Directors shall preside at meetings of the Board; in
the Chairman's absence, a member of the Board selected by the
members present shall preside at meetings of the Board. The
Secretary of the Corporation shall act as Secretary, but in
his absence the presiding officer may appoint a Secretary.
Section 12. Resignations. Any director of the
Corporation may resign at any time by giving written notice
to the Board of Directors or to the Chairman or to the Secretary
of the Corporation. Such resignation shall take effect
at the time specified therein, or if no time is specified,
upon receipt thereof. Unless otherwise specified, the acceptance
of such resignation shall not be necessary to make it
effective. Any vacancy created by a resignation may be
filled in the same manner as prescribed under Article II,
Section 4, hereof.
Section 13. Compensation of Directors. The Board
of Directors shall have authority to fix the compensation and
provide for the reimbursement of expenses of directors in
respect of their service in any capacity.
<PAGE>
Section 14. Committees. The Board of Directors
may, by resolution passed by a majority of the whole Board of
Directors, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more
directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present
at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member.
Any such committee, to the extent permitted by law and to the
extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
Section 15. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by
the Board of Directors may make, alter and repeal rules for
the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner
as the Board of Directors conducts its business pursuant to
these By-laws.
<PAGE>
ARTICLE III
OFFICERS
Section 1. Election; Term of Office. The officers
of the Corporation shall be elected by and shall serve at the
pleasure of the Board of Directors. There may be a Chairman
of the Board, a Chief Executive Officer, a President, one or
more Vice Presidents, a Secretary, a Treasurer and such other
officers as the Board of Directors may determine. Subject to
the provisions of these By-laws, officers shall hold their
offices until their successors are elected and qualified or
until their earlier death, resignation or removal. Any
number of offices may be held by the same person.
Section 2. Powers and Duties. The officers of the
Corporation shall have such authority and perform such duties
in the management of the Corporation as may be prescribed by
the By-laws, or by the Board of Directors, and to the extent
not so prescribed pursuant to the By-laws, they shall have
such authority and perform such duties in the management of
the Corporation, subject to the control of the Board, as
generally pertain to their respective offices.
Section 3. Chairman of the Board. The Chairman of
the Board shall preside at the meetings of the Board and of
stockholders and shall see that all orders and resolutions of
the Board are carried into effect.
Section 4. Chief Executive Officer. The Chief
Executive Officer shall have general and active supervision
and management of the business of the Corporation. In the
absence of the Chairman, he shall preside at meetings of
stockholders.
Section 5. President. The President shall be the
chief operating officer of the Corporation. In the absence
of the Chairman and the Chief Executive Officer, he shall
preside at meetings of stockholders.
Section 6. Resignation, Removal and Vacancies.
Any officer may resign at any time upon written notice to the
Corporation. Any officer elected by the Board of Directors
may be removed at any time, with or without cause, by the
affirmative vote of a majority of a quorum of Directors. The
Board of Directors may fill any vacancies resulting from
death, resignation, or removal of an officer in the same
manner as provided for the election or appointment of such
person.
<PAGE>
ARTICLE IV
OTHER MATTERS
Section 1. Corporate Seal. The corporate seal
shall be in such form as the Board of Directors shall
prescribe. Said seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise used. The
Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer may affix the seal to any instrument signed
by a duly authorized officer, or when specifically authorized
by the Board of Directors, and may attest the same. Unless
otherwise provided by the Board of Directors, the seal may
also be attested by any officer of the Corporation except the
officer signing the instrument on behalf of the Corporation.
Section 2. Waiver of Notice. Whenever any notice
is required to be given under the Restated Certificate of
Incorporation, the By-laws or otherwise by law, a waiver
thereof in writing, signed by the person or persons entitled
to the notice, whether before or after the time stated there
in, shall be deemed equivalent thereto. Attendance of a
person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the
business to be transacted at nor the purpose of any regular
or special meeting of the stockholders, directors, or members
of a committee of directors need be specified in any written
waiver of notice.
Section 3. Voting of Stocks Owned by the Corporation.
The Chairman of the Board of Directors or such other
person as the Board of Directors may designate shall be authorized
to attend, vote and grant proxies to be used at any
meeting of stockholders of any corporation in which the
Corporation may hold stock.
Section 4. By-law Amendment. Subject to the
provisions of the Restated Certificate of Incorporation,
these By-laws may be altered, amended or repealed at any
regular meeting of the stockholders (or at any special meeting
thereof duly called for that purpose) by a majority of
the votes cast on the question entitled to vote thereon;
provided that in the notice of such special meeting notice of
such purpose shall be given. Subject to the laws of the
State of Delaware, the Restated Certificate of Incorporation
and these By-laws, the Board of Directors may, by majority
vote of those present at any meeting at which a quorum is
present, amend these By-laws or enact such other By-laws as
in their judgment may be advisable for the regulation of the
conduct of the affairs of the Corporation.
Section 5. Construction. The masculine gender,
where appearing in these By-laws, shall be deemed to include
the feminine gender.
<PAGE>
Exhibit (ii)
SENIOR EXECUTIVE SEVERANCE POLICY
I. Purpose
To provide a period of continued income to certain senior
executive employees whose employment is terminated within two
years after a Change of Control as defined herein.
II. Definitions
As used herein the following words and phrases shall have the
following respective meanings unless the context clearly
indicates otherwise.
1. Annual Incentive. The annual Performance Based
Compensation Incentive that a Participant is eligible to earn
pursuant to the Company's Key Employee Incentive Plan.
2. Annual Incentive Award. The highest amount a
Participant received as an annual Performance Based
Compensation Incentive award in any of the three years prior
to a termination of employment entitling the Participant to a
Separation Benefit.
3. Annual Salary. The Participant's regular
annual base salary immediately prior to his or her termination
of employment, including compensation converted to other
benefits under a flexible pay arrangement maintained by the
Company or deferred pursuant to a written plan or agreement
with the Company, but excluding overtime pay, allowances,
premium pay, compensation paid or payable under any Company
long-term or short-term incentive plan or any similar payment.
4. Board. The Board of Directors of the Company.
5. Code. The Internal Revenue Code of 1986, as
amended from time to time.
6. Date of the Change of Control. The date on
which a Change of Control occurs.
7. Date of Termination. The date on which a
Participant ceases to be an Employee.
8. Effective Date. The date specified in the
resolution of the Board adopting this Plan.
9. Employee. Any full-time, regular-benefit, non-
<PAGE>
bargaining employee of the Company.
10. ERISA. The Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
11. Participant. An individual who is designated
as such pursuant to Section III.
12. Plan. The Pitney Bowes Inc. Senior Executive
Severance Policy.
13. Separation Period. The period beginning on a
Participant's Date of Termination and ending upon the second
anniversary thereof.
III. Participation
Each of the individuals named on Schedule 1 hereto shall
be a Participant in the Plan. Schedule 1 may be amended
by the Board from time to time to add or delete
individuals as Participants.
IV. Separation Benefits
A. If any Participant is terminated as that term is
defined in Section IV.F. within two years after a Change
of Control occurs (whether or not such termination is as
a result of such Change of Control), the Company shall
pay such Participant, within ten days of the Date of
Termination, a cash lump sum as set forth in Section
IV.B. below and the continued benefits set forth in
Section IV.C. below. For purposes of determining the
benefits set forth in Sections IV.B. and IV.C., if the
termination of the Participant's employment follows a
reduction of the Participant's Annual Salary, opportunity
to earn an Annual Incentive, or other compensation or
employee benefits, such reduction shall be ignored.
B. The cash lump sum referred to in Section IV.A. is
the aggregate of the following amounts:
(i) the sum of (1) the Participant's
Annual Salary through the Date of Termination
to the extent not theretofore paid, (2) the
product of (x) the Annual Incentive Award and
(y) a fraction, the numerator of which is the
number of days in the such year through the
Date of Termination, and the denominator of
which is 365, and (3) any compensation
previously deferred by the Participant
<PAGE>
(together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid and in
full satisfaction of the rights of the
Participant thereto;
(ii) an amount equal to the product of
(1) two times (2) the sum of (x) the
Participant's Annual Salary and (y) the
Participant's Annual Incentive Award; and
(iii) an amount equal to the difference
between (a) the actuarial equivalent of the
benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan")
and any excess or supplemental retirement plans
in which the Participant participates
(collectively, the "SERP") which the
Participant would receive if his or her
employment continued during the Separation
Period, assuming that the Participant's
compensation during the Separation Period would
have been equal to his or her compensation as
in effect immediately before the termination
or, if higher, on the Effective Date, and (b)
the actuarial equivalent of the Participant's
actual benefit (paid or payable), if any, under
the Retirement Plan and the SERP as of the Date
of Termination. The actuarial assumptions used
for purposes of determining actuarial
equivalence shall be no less favorable to the
Participant than the most favorable of those in
effect under the Retirement Plan and the SERP
on the Date of Termination and the Effective
Date.
C. The continued benefits referred to above are as
follows:
(i) during the Separation Period, the
Participant and his or her family shall be
provided with medical, dental and life
insurance benefits as if the Participant's
employment had not been terminated; provided,
however, that if the Participant becomes
reemployed with another employer and is
eligible to receive medical or other welfare
benefits under another employer-provided plan,
the medical and other welfare benefits
described herein shall be secondary to those
<PAGE>
provided under such other plan during such
applicable period of eligibility. For purposes
of determining eligibility (but not the time of
commencement of benefits) of the Participant
for retiree medical, dental and life insurance
benefits under the Company's plans, practices,
programs and policies, the Participant shall be
considered to have remained employed during the
Separation Period and to have retired on the
last day of such period; and
(ii) The Company shall, at its sole
expense as incurred, provide the Participant
with outplacement services the scope and
provider of which shall be selected by the
Company, but at a cost to the Company of not
more than 12% of base pay not to exceed fifty
thousand dollars ($50,000.00).
To the extent any benefits described in this Section
IV.C. cannot be provided pursuant to the appropriate
plan or program maintained for Company employees,
the Company shall provide such benefits outside such
plan or program at no additional cost (including
without limitation tax cost) to the Participant.
D. The cash lump sum and continuing benefits described
in Sections IV.A., IV.B. and IV.C. above shall be payable
in addition to, and not in lieu of, all other accrued or
vested or earned but deferred rights, options or other
benefits which may be owed to a Participant upon or
following termination, including but not limited to
accrued vacation or sick pay, amounts or benefits payable
under any incentive (other than the Annual Incentive) or
other compensation plans, stock option plan, stock
ownership plan, stock purchase plan, life insurance plan,
health plan, disability plan or similar or successor
plan, but excluding any severance pay or pay in lieu of
notice required to be paid to such Participant under
applicable law.
E. For purposes of this Plan, a "Change of Control"
shall be deemed to have occurred if:
1. There is an acquisition, in any one transaction
or a series of transactions, other than from the Company,
by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), of
beneficial ownership (within the meaning of Rule 13d-3
<PAGE>
promulgated under the Exchange Act) of 20% or more of
either the then outstanding shares of common stock of the
Company or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, but
excluding, for this purpose, any such acquisition by the
Company or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its
subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of the then
outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by the
individuals and entities who were the beneficial owners,
respectively, of the common stock and voting securities
of the Company immediately prior to such acquisition in
substantially the same proportion as their ownership,
immediately prior to such acquisition, of the then
outstanding shares of common stock of the Company or the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors, as the case may be; or
2. Individuals who, as of December 11, 1995,
constitute the Board of Directors (as of such date, the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any
individual becoming a director subsequent to December 11,
1995, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an
actual or threatened election contest relating to the
election of the Directors of the Company (as such terms
are used in Rule 14a-11 or Regulation 14A promulgated
under the Exchange Act); or
3. There occurs either (i) the consummation of a
reorganization, merger or consolidation, in each case,
with respect to which the individuals and entities who
were the respective beneficial owners of the common stock
and voting securities of the Company immediately prior to
such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50%
<PAGE>
of, respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or
consolidation, or (ii) an approval by the shareholders of
the Company of a complete liquidation or dissolution of
the Company or of the sale or other disposition of all or
substantially all of the assets of the Company.
F. For purposes of this Plan, a "termination" shall
include not only any termination by the Company of a
Participant for reasons other than (i) an act or acts of
personal dishonesty by such Participant at the expense of
the Company or its subsidiaries or (ii) the conviction of
such Participant of a felony involving moral turpitude,
but also shall include a termination of employment by the
Participant for any reason during the 30-day period
immediately following the first anniversary of the Date
of the Change of Control or for any of the following
reasons:
1. The assignment to a Participant of any duties
inconsistent in any respect with the Participant's
position, authority, duties and responsibilities as
existed on the day immediately prior to the Change of
Control, or any other action by the Company which results
in a diminution in such position, authority, duties, or
responsibilities, excluding for this purpose an isolated,
insubstantial, and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Participant;
2. Any failure by the Company following a Change
of Control to continue to provide the Participant with
Annual Salary, opportunity to earn Annual Incentives,
employee benefits, or other compensation equal to or
greater than that to which such Participant was entitled
immediately prior to the Date of the Change of Control,
other than an isolated, insubstantial, and inadvertent
failure not occurring in bad faith and which is remedied
by the Company promptly after receipt of notice thereof
given by the Participant;
3. The Company's requiring the Participant to be
based at any office or location more than 35 miles
farther from the Participant's place of residence than
the office or location at which the Participant is
employed immediately prior to the Date of the Change of
Control; or
<PAGE>
4. Any failure by the Company to require any
successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) who acquired all or
substantially all of the business and/or assets of the
Company to expressly assume and agree to perform the
Company's obligations under this Severance Plan in the
same manner and to the same extent that the Company would
be required to perform it if no such succession had taken
place.
For purposes of subparagraphs 1 through 4 of this
Section IV.F., any good faith determination made by
a Participant shall be conclusive.
G. Any termination by the Company or by the Participant
in accordance with Section IV.F. shall be communicated by
a Notice of Termination to the other party. Any Notice
of Termination shall be by written instrument which (i)
indicates the specific termination provision in Section
IV.F. above relied upon, (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of the Participant's employment
under the provision so indicated, and (iii) if the Date
of Termination is other than the date of receipt of such
notice, specifies the Date of Termination (which date
shall not be more than 15 days after the giving of such
notice). The failure by any Participant to set forth in
the Notice of Termination any fact or circumstance which
contributes to a showing of entitlement to terminate
under subparagraphs 1 through 4 of Section IV.F. above
shall not waive any right of such Participant or preclude
such Participant from asserting such fact or circumstance
in enforcing his rights.
H. In case of death, any unpaid allowance will be paid
to the Participant's survivors or estate.
V. Plan Administration and Claims
A. The Plan Administrator shall be Pitney Bowes Inc.,
World Headquarters, Stamford, CT 06926- 0700.
Claims with regard to eligibility or other matters
covered in the Plan may be brought to the attention
of the following individual:
Executive Director-Compensation.
B. If an Employee or former Employee makes a written
<PAGE>
request alleging a right to receive benefits under
this Plan or alleging a right to receive an
adjustment in benefits being paid under the Plan,
the Company shall treat it as a claim for benefit.
All claims for benefit under the Plan shall be sent
to the Executive Director-Compensation of the
Company and must be received within 90 days after
termination of employment. If the Company
determines that any individual who has claimed a
right to receive benefits, or different benefits,
under the Plan is not entitled to receive all or any
part of the benefits claimed, it will inform the
claimant in writing of its determination and the
reasons therefor in terms calculated to be
understood by the claimant. The notice will be sent
within 90 days of the claim unless the Company
determines additional time, not exceeding 90 days,
is needed. The notice shall make specific reference
to the pertinent Plan provisions on which the denial
is based, and describe any additional material or
information as necessary. Such notice shall, in
addition, inform the claimant what procedure the
claimant should follow to take advantage of the
review procedures set forth below in the event the
claimant desires to contest the denial of the claim.
The claimant may within 90 days thereafter submit in
writing to the Company a notice that the claimant
contests the denial of his or her claim by the
Company and desires a further review. The Company
shall within 60 days thereafter review the claim and
authorize the claimant to appear personally and
review pertinent documents and submit issues and
comments relating to the claim to the persons
responsible for making the determination on behalf
of the Company. The Company will render its final
decision with specific reasons therefor in writing
and will transmit it to the claimant within 60 days
of the written request for review, unless the
Company determines additional time, not exceeding 60
days, is needed, and so notifies the Participant.
If the Company fails to respond to a claim filed in
accordance with the foregoing within 60 days or any
such extended period, the Company shall be deemed to
have denied the claim.
C. If a Participant institutes any legal action in
seeking to obtain or enforce, or is required to defend in
any legal action the validity or enforceability of, any
right or benefit provided by this Plan, the Company will
pay for all actual legal fees and expenses incurred (as
<PAGE>
incurred) by such Participant, regardless of the outcome
of such action and whether such action is between the
Company and the Participant or between either of them and
any third party.
VI. Miscellaneous
A. Amendment and Termination
1. This Plan is established by the Company on a
voluntary basis and not on past consideration for
services rendered, and the benefits herein are provided
at the will of the Company. Neither the establishment of
this Plan nor the payment of benefits by the Company
shall be construed or interpreted as a condition of
employment, nor shall this Plan modify or enlarge any
rights of any person covered by it to be continued or to
be retained in the employ of the Company.
2. Prior to the time a Change of Control has
occurred, the Company may, in its sole discretion,
without notice, amend or modify, in whole or in part, all
of the terms and conditions of this Plan; provided,
however, that this Plan may not be so amended or modified
in connection with an actual, threatened, or proposed
Change of Control in any manner which would result in a
reduction of benefits to any Participant; and provided
further that any amendment or modification occurring
within one year prior to a Change of Control shall be
deemed to be "in connection with" an actual, threatened,
or proposed Change of Control and shall be void unless
the amended or modified Plan provides equivalent or
greater benefits to every eligible Participant. Such
amendment or modification may be retroactive in
application; provided, however, such retroactive
application shall not require or provide for the return
or repayment of any benefits paid prior to the date of
the adoption of the amendment or modification.
3. Prior to the time a Change of Control has
occurred, the Company shall have the sole and absolute
right to terminate this Plan without notice at any time;
provided, however, that this Plan may not be so
terminated in connection with an actual, threatened, or
proposed Change of Control, unless a new severance plan
is adopted which provides equivalent or greater benefits
to every eligible Participant; and provided further that
any termination occurring within one year prior to a
Change of Control shall be deemed to be in connection
<PAGE>
with an actual, threatened, or proposed Change of
Control, and shall be void unless a new severance plan is
adopted which provides equivalent or greater benefits to
every eligible Participant. Any valid termination shall
be effective as of the date specified, by the Company
and, if no date is specified, the date of the action of
termination by the Company. Upon termination, the
Company will continue to make payments according to the
terms of any executed terminated pay agreements which
have not been fully paid.
4. When a Change of Control, as defined herein,
occurs, then all rights to severance payments contained
herein shall vest in all covered Participants and shall
be considered a contract right enforceable against the
Company and any successors thereto.
B. Certain Additional Payments by the Company.
1. Anything in this Plan to the contrary
notwithstanding and except as set forth below,
in the event it shall be determined that any
payment or distribution by the Company to or
for the benefit of any Participant (whether
paid or payable or distributed or distributable
pursuant to the terms of this Plan or
otherwise, but determined without regard to any
additional payments required under this
Section VI.B.) (a "Payment") would be subject
to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are
incurred by the Participant with respect to
such excise tax (such excise tax, together with
any such interest and penalties, are
hereinafter collectively referred to as the
"Excise Tax"), then the Participant shall be
entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that
after payment by the Participant of all taxes
(including any interest or penalties imposed
with respect to such taxes), including, without
limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment,
the Participant retains an amount of the Gross-
Up Payment equal to the Excise Tax imposed upon
the Payments.
2. Subject to the provisions of Section VI.B.3.,
all determinations required to be made under this Section
<PAGE>
VI.B., including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by such certified public
accounting firm as may be designated by the Company (the
"Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the
Participant within 15 business days of the receipt of
notice from the Participant that there has been a
payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Company shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined
pursuant to this Section VI.B. shall be paid by the
Company to the Participant within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross- Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to
Section VI.B.3. and the Participant thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the
benefit of the Participant.
3. The Participant shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten
business days after the Participant is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim
is requested to be paid. The Participant shall not pay
such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the
Company (or such shorter period ending on the date that
<PAGE>
any payment of taxes with respect to such claim is due).
If the Company notifies the Participant in writing prior
to the expiration of such period that it desires to
contest such claim, the Participant shall:
(i) give the Company any information
reasonably requested by the Company
relating to such claim,
(ii) take such action in connection
with contesting such claim as the Company
shall reasonably request in writing from
time to time, including, without
limitation, accepting legal representation
with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in
good faith in order effectively to contest
such claim, and
(iv) permit the Company to
participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear
and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the
Participant harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section VI.B.3., the Company shall control all
proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Participant to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the
Participant agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Participant to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Participant, on an interest-free basis and shall
<PAGE>
indemnify and hold the Participant harmless, on an after-
tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed
income with respect to such advance; and further provided
that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the
Participant with respect to which such contested amount
is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and the
Participant shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
4. If, after the receipt by the Participant of an
amount advanced by the Company pursuant to
Section VI.B.3., the Participant becomes entitled to
receive any refund with respect to such claim, the
Participant shall (subject to the Company's complying
with the requirements of Section VI.B.3.) promptly pay to
the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Participant of an
amount advanced by the Company pursuant to
Section VI.B.3., a determination is made that the
Participant shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Participant in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
C. Non-Alienability
No benefit provided hereunder shall be subject to
any forms of sale, assignment or transfer. Benefits
provided by this Plan shall not be subject to
attachment, garnishment or other legal or equitable
proceedings by creditors or persons representing
creditors. Such payments are, however, subject to
all applicable taxes and appropriate withholdings.
D. Eligibility for Other Benefits
This Plan shall have no effect on the Participant's
eligibility for other benefits customarily provided
<PAGE>
after termination unless otherwise stated in a
written agreement executed by an authorized
representative of the Company. The payments of
benefits under this Plan shall not be deemed to be a
continuation of employment, pay, or credited service
for purposes of determining the availability,
nature, or extent of other benefits, including, but
not limited to, benefits available in the Company's
Retirement Plan, Major Medical Plan, or Dental Plan.
E. Unfunded Plan Status
This Plan is intended to be an unfunded plan
maintained primarily for the purpose of providing
deferred compensation for a select group of
management or highly compensated employees, within
the meaning of Section 401 of ERISA. All payments
pursuant to the Plan shall be made from the general
funds of the Company and no special or separate fund
shall be established or other segregation of assets
made to assure payment. No Participant or other
person shall have under any circumstances any
interest in any particular property or assets of the
Company as a result of participating in the Plan.
Notwithstanding the foregoing, the Company may (but
shall not be obligated to) create one or more
grantor trusts, the assets of which are subject to
the claims of the Company's creditors, to assist it
in accumulating funds to pay its obligations under
the Plan.
F. Validity and Severability
The invalidity or unenforceability of any provision
of the Plan shall not affect the validity or
enforceability of any other provision of the Plan,
which shall remain in full force and effect, and any
prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such
provision in any other jurisdiction.
G. Governing Law
The validity, interpretation, construction and
performance of the Plan shall in all respects be
governed by the laws of the State of Connecticut
without reference to principles of conflict of law,
except to the extent pre-empted by federal law.
<PAGE>
H. Plan Records
The records for this Plan are kept on a plan year
beginning on January 1 and ending on the following
December 31.
I. Legal Service
The person designated to receive legal papers or
summons in connection with this Plan is the
Corporate Secretary, Pitney Bowes Inc., World
Headquarters, Stamford CT 06926-0700.
J. Plan Identification Numbers
The following number(s) is(are) used for
identification on certain forms which must be filed
with various U.S. Government agencies:
Employer Identification Number: 06-0495050
<PAGE>
SCHEDULE 1
EXECUTIVE SENIOR MANAGEMENT EMPLOYEES DESIGNATED AS
PARTICIPANTS UNDER THE PITNEY BOWES INC. SENIOR EXECUTIVE
SEVERANCE POLICY
Carmine F. Adimando
Marc C. Breslawsky
Michael J. Critelli
George B. Harvey
Douglas A. Riggs
Carole F. St. Mark
Johnna G. Torsone
<PAGE>
PITNEY BOWES INC. EXHIBIT (iii)
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
(Dollars in thousands, except share data) Years Ended December 31,
1995 1994 1993(1) 1992(1) 1991(1)
<S> <C> <C> <C> <C> <C>
Primary
Income from continuing operations(2) $ 407,708 $ 348,428 $ 305,690 $ 260,736(3) $ 242,649(3)
Discontinued operations 175,431 45,161 47,495 54,129 52,648
Effect of accounting changes - (119,532) - (214,631) -
Net income $ 583,139 $ 274,057 $ 353,185 $ 100,234 $ 295,297
Weighted average number of common shares
outstanding 151,140,274 156,459,437 157,766,700 157,562,020 158,180,010
Preference stock, $2.12 cumulative convertible 785,355 847,430 905,231 1,085,684 1,386,566
Stock option and purchase plans 432,845 421,761 696,721 581,782 371,838
Convertible loan stock - - - 5,926 16,266
Total common and common equivalent shares
outstanding 152,358,474 157,728,628 159,368,652 159,235,412 159,954,680
Income per common and common equivalent share - primary:
Continuing operations $ 2.68 $ 2.21 $ 1.92 $ 1.64 $ 1.52
Discontinued operations 1.15 .29 .30 .34 .33
Effect of accounting changes - (.76) - (1.35) -
Net income $ 3.83 $ 1.74 $ 2.22 $ .63 $ 1.85
Fully Diluted
Income from continuing operations $ 407,709 $ 348,430 $ 305,694 $ 260,740(3) $ 242,653(3)
Discontinued operations 175,431 45,161 47,495 54,129 52,648
Effect of accounting changes - (119,532) - (214,631) -
Net income $ 583,140 $ 274,059 $ 353,189 $ 100,238 $ 295,301
Weighted average number of common shares
outstanding 151,140,274 156,459,437 157,766,700 157,562,020 158,180,010
Preference stock, $2.12 cumulative convertible 785,355 847,430 905,231 1,085,684 1,386,566
Stock option and purchase plans 460,348 439,756 706,981 606,915 410,102
Convertible loan stock - - - 5,926 16,266
Preferred stock, 4% cumulative convertible 11,502 14,265 23,464 26,409 28,930
Total common and common equivalent shares
outstanding 152,397,479 157,760,888 159,402,376 159,286,954 160,021,874
Income per common and common equivalent share - fully diluted:
Continuing operations $ 2.68 $ 2.21 $ 1.92 $ 1.64 $ 1.52
Discontinued operations 1.15 .29 .30 .34 .33
Effect of accounting changes - (.76) - (1.35) -
Net income $ 3.83 $ 1.74 $ 2.22 $ .63 $ 1.85
<FN>
(1) Reclassified to reflect discontinued operations.
(2) Income from continuing operations was adjusted for preferred dividends.
(3) Income from continuing operations was adjusted for interest on convertible debt.
</TABLE>
<PAGE>
PITNEY BOWES INC. EXHIBIT (iv)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1)
<TABLE>
<CAPTION>
(Dollars in thousands)
Years Ended December 31,
1995 1994 1993(2) 1992(2) 1991(2)
<S> <C> <C> <C> <C> <C>
Income from continuing
operations before
income taxes $618,931 $566,507 $498,860 $411,954 $388,997
Add:
Interest expense 226,110 194,115 189,292 230,764 257,595
Portion of rents
representative of
the interest factor 42,064 42,339 33,842 33,786 32,503
Amortization of
capitalized interest 914 914 914 914 914
Income as adjusted $888,019 $803,875 $722,908 $677,418 $680,009
Fixed charges:
Interest expense $226,110 $194,115 $189,292 $230,764 $257,595
Capitalized interest 2,178 733 - - -
Portion of rents
representative of
the interest factor 42,064 42,339 33,842 33,786 32,503
$270,352 $237,187 $223,134 $264,550 $290,098
Ratio of earnings to
fixed charges 3.28 3.39 3.24 2.56 2.34
<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.
(2) Reclassified to reflect discontinued operations.
</TABLE>
<PAGE>
Exhibit (v)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Segments
Pitney Bowes operates within three industry segments:
business equipment, business services and commercial and industrial financing.
The company has refined its strategic focus to capitalize on its strengths and
competitive position. The company is concentrating 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.
The business equipment segment includes: postage meters and mailing
equipment, production mail systems, shipping and facsimile systems, copiers and
copier supplies, and related financing. The business services segment includes:
mailroom, reprographics and related facilities management services, and mortgage
servicing. The commercial and industrial financing segment provides financial
services for the commercial and industrial markets.
The company sold its Dictaphone Corporation (Dictaphone) and Monarch Marking
Systems, Inc. (Monarch) subsidiaries in 1995 resulting in gains approximating
$155 million net of approximately $130 million of income taxes. Dictaphone and
Monarch have been classified in the Consolidated Statement of Income as
discontinued operations; revenue and income from continuing operations exclude
the results of Dictaphone and Monarch for all periods presented. See Note 12 to
the consolidated financial statements.
Revenue and operating profit by business segment and geographic area for the
years ended 1993 to 1995 were as follows:
Revenue
------------------------------------
(in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
Industry segments:
Business equipment $2,799 $2,592 $2,516
Business services 403 348 215
Commercial and
industrial financing 353 331 269
- --------------------------------------------------------------------------------
Total $3,555 $3,271 $3,000
================================================================================
Geographic areas:
United States $3,108 $2,851 $2,550
Outside the United States 573 524 554
Inter-area revenue (126) (104) (104)
- --------------------------------------------------------------------------------
Total $3,555 $3,271 $3,000
================================================================================
Operating profit
------------------------------------
(in millions) 1995 1994* 1993
- --------------------------------------------------------------------------------
Industry segments:
Business equipment $ 586 $ 561 $ 511
Business services 30 31 11
Commercial and
industrial financing 69 60 58
- --------------------------------------------------------------------------------
Total $ 685 $ 652 $ 580
================================================================================
Geographic areas:
United States $ 643 $ 655 $ 524
Outside the United States 56 6 61
Inter-area profit (14) (9) (5)
- -------------------------------------------------------------------------------
Total $ 685 $ 652 $ 580
================================================================================
* As a result of the nonrecurring items in 1994, industry segments include a
$21 million credit in Business equipment and a $6 million credit in Business
services; geographic areas include a $61 million credit in the United States
and a $34 million charge outside the United States (See Note 13).
Identifiable assets by business segment and geographic area for the years
1993 to 1995 were as follows:
Identifiable assets
------------------------------------
(in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
Industry segments:
Business equipment $3,612 $3,416 $3,163
Business services 374 330 313
Commercial and
industrial financing 3,638 3,129 2,866
- --------------------------------------------------------------------------------
Total $7,624 $6,875 $6,342
================================================================================
Geographic areas:
United States $6,928 $6,317 $5,743
Outside the United States 828 764 865
- --------------------------------------------------------------------------------
Total $7,756 $7,081 $6,608
================================================================================
Certain prior year amounts have been reclassified to conform with the 1995
presentation.
Results of Continuing Operations
1995 Compared to 1994
Revenue increased nine percent in 1995 as a result of growth in the United
States operations as well as strong growth in international operations. Income
per share from continuing operations increased 21 percent to $2.68 per share in
1995 from $2.21 per share in 1994. The 1995 revenue increase was primarily a
result of strong double-digit growth in the facilities management contract base,
strong facsimile systems supplies sales in support of the growing plain paper
facsimile base and international mailing growth led by the United Kingdom
mailing business which had strong equipment sales throughout 1995. In addition,
sales benefited from the first quarter United States Postal Service (U.S.P.S.)
rate change and the mid-1995 acquisition of Pitney Bowes' former Japanese joint
venture offset, in part, by slower performance in the low-end shipping market in
the U.S. In 1995, both price increases and foreign currency fluctuation had less
than a one percent favorable impact on sales growth.
Rentals and financing revenue increased nine percent in 1995. Rental revenue
increased eight percent in 1995. This growth was fueled by the impressive gain
in placements of electronic and digital meters including the introduction of the
company's first digital meter, PostPerfect,(TM) a continued shift to more
profitable electronic and digital meters utilizing the Postage By Phone(R) meter
resetting system and strong volume growth in plain paper facsimile equipment
placements. Financing revenue increased 10 percent in 1995. Excluding the impact
of finance asset sales in both years, revenue growth would have been 16 percent.
This growth was achieved by increased activity in the financing of the company's
products and strong increases in creditworthy small ticket leases. Financing
revenue also benefited from portfolio growth, fee-based income and increased
leveraged lease revenue offset by the continued impact of the 1993 decision to
phase out the business of financing non-Pitney Bowes equipment outside of the
U.S.
Volume and price growth contributed to a five percent increase in revenue
from support services included in the business equipment segment. Expansion of
the service agreement
20
<PAGE>
base in the facsimile and copier businesses offset the effect of a planned
competitive pricing strategy. U.S. mailing and shipping and production mail
systems had strong volume gains in the equipment service base; international
mailing and production mail systems also contributed to the growth with pricing
gains.
The ratio of cost of sales to sales in 1995 was 60.9 percent versus 58.4
percent in 1994. The facilities management business includes most of its costs
and expenses in cost of sales. The growth in its revenue and its increasing
significance to total revenue of the company continues to impact this ratio. The
increase in 1995 was also the result of increased efficiencies associated with
longer production runs in 1994 in U.S. mailing. Partially offsetting the
increase in the cost of sales to sales ratio was the favorable gross margin
realized from the 1995 U.S.P.S. rate change.
The ratio of cost of rentals and financing to related revenue improved to
29.4 percent in 1995 compared with 32.3 percent in 1994. The improvement was
attributable to growth in fee income which has minimal associated costs,
improved equipment rental margins in the U.S., a lower cost base supporting
higher earning asset levels and fewer sales, in 1995, of lower-margin lease
assets. Amortization of purchased mortgage rights served to partially offset the
decrease in the ratio of costs to related rental and financing revenue.
As a part of the company's direction toward new technology in transitioning
to all electronic postage meters and to meet postal needs, 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
at December 31, 1995 constituted approximately 50 percent of the meter base had
their depreciable lives shortened while electronic meters had their depreciable
lives lengthened due to enhanced security, functionality and limited risk of
technological obsolescence. These changes in depreciable lives were accounted
for as a change in accounting estimate and were not material to 1995 results of
operations.
Selling, service and administrative expense, as a percentage of revenue, was
down to 34.6 percent compared to 35.7 percent in 1994. The improvement was
primarily a result of more efficient operations and savings in the company's
benefit plans, largely emanating from the strategic focus initiatives commenced
in 1994. The improvement in this ratio was achieved despite the inclusion in
1994 of a patent royalty settlement and a special cash payment on an investment
security.
Research and development expense increased four percent as a result of
advanced product development with an emphasis on electronic technology and
software and the required higher expenditure on new products as they approach
the end of their development cycle. In 1995, a smaller portion of the
engineering activities were in support of newly introduced products.
Net interest increased 16 percent as a result of higher interest rates
coupled with higher average levels of borrowing primarily at the financial
services businesses. The increased borrowing levels at the financial services
businesses were used primarily to fund continued investments in finance assets.
Borrowings at the corporate level related to common stock repurchases made in
anticipation of the sale proceeds on Monarch and Dictaphone. Any future changes
to the interest rate environment could effect the company's borrowing
strategies. The company's practice is to manage the interest rate risk, most of
which is in the financial services businesses, through the use of a balanced mix
of debt maturities, variable and fixed-rate debt and interest rate swap
agreements. The company's swap adjusted variable-rate versus fixed-rate debt mix
was 57 percent and 43 percent, respectively, at December 31, 1995.
Through December 31, 1995 the company successfully implemented the plan
adopted in the third quarter of 1994 which was designed to address the impact of
technology on work force requirements and to further refine its strategic focus
on core businesses. The plan resulted in a $93.2 million charge against earnings
in 1994. The details of this plan are discussed below and in Note 13 to the
consolidated financial statements. The company has made severance and benefit
payments of approximately $49 million, the majority of which were paid in 1995,
to nearly 1,500 employees separated under the strategic focus initiatives. It is
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 million in excess of that initially provided
in 1994. This excess has been recorded in selling, service and administrative
expense. Also, the company has written down assets and incurred certain other
exit costs, as planned, by approximately $19 million and $3 million,
respectively, the majority of which occurred in 1994. At this time, management
believes that the remaining reserve of approximately $23 million, most of which
is committed to severance and benefit payments to separated employees, is
adequate to complete the actions identified in the plan. The majority of the
remaining reserve will require cash outlays. Benefits from the strategic focus
initiatives (primarily reduced employee expense) will be offset, in part, by
increased hiring and training expenses to obtain employees with requisite
skills.
Operating profit excluding the impact of nonrecurring items in 1994,
increased nine percent with business equipment reflecting growth of eight
percent, business services 21 percent and commercial and industrial financing 16
percent. The operating profit performance in the business equipment segment
reflects strong performances by mailing and facsimile businesses in the U.S. and
internationally as well as the copier business in the U.S. In the fourth quarter
1995, incremental installation and service costs approximating $9 million were
reimbursed to non-U.S. operations by the related U.S. manufacturer to support
certain new product introductions. All businesses contributed to the operating
profit growth in the business services segment. Operating profit growth in the
commercial and industrial financing segment was achieved despite increased
interest expense and lower contributions from asset sales. Lower credit loss
provisions together with a higher fee income contributed to the growth in
operating profit.
Inclusive of the nonrecurring charges, the operating profit growth, overall,
was five percent with business equipment and commercial and industrial financing
segments growing their respective operating profit by four percent and 16
percent while the business services segment reflected a three percent decrease
in operating profit.
The effective tax rate was 34.1 percent in 1995 compared to 38.5 percent in
1994. The 1994 effective tax rate includes the impact of approximately $28
million of strategic actions
21
<PAGE>
for which the company could not realize associated tax benefits. Excluding the
impact of such nonrecurring items, the 1994 tax rate was 36.3 percent. In
addition, the 1995 effective rate was favorably affected by tax benefits
associated with a company owned life insurance investment, as well as a higher
level of tax-exempt income and lower taxes on foreign operations.
Although not affecting income, deferred translation losses amounted to $1
million in 1995 versus gains of $6 million in 1994. In 1995 translation losses
resulted primarily from the weakening of the pound sterling.
Results of Continuing Operations
1994 Compared to 1993
Revenue increased nine percent in 1994 primarily as a result of growth in the
U.S. operations, especially in the facilities management, mailing, financial
services and facsimile businesses as well as improved performance in the U.K.
Favorable foreign currency impacts in the U.K. and Germany were mostly offset by
a weakening Canadian dollar. Growth was slowed by unfavorable performances in
Germany and in the low-end shipping market in the U.S. Additionally, revenue
growth in 1994 was slowed by the company's first-quarter 1993 decision to phase
out the business of financing non-Pitney Bowes equipment outside of the U.S.
Income per share from continuing operations increased 15 percent to $2.21 per
share in 1994 from $1.92 per share in 1993. In 1994 income from continuing
operations included the effect of a nonrecurring $25.4 million pretax credit.
The credit was 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 focus initiatives. This net credit
added only $3.5 million, or two cents per share to income from continuing
operations because some of the strategic actions were taken in countries where
the company is unable to recognize associated tax benefits.
In 1993, income from continuing operations was impacted by the enactment of
the Omnibus Budget Reconciliation Act of 1993 (the Tax Act), enacted August 10,
1993, which increased U.S. corporate income tax rates from 34 percent to 35
percent, retroactive to January 1, 1993. Consequently, the company recorded
$22.0 million of additional taxes against 1993 income from continuing operations
($5.4 million on 1993 earnings and $16.6 million on deferred taxes). Excluding
the effect of the nonrecurring net credit in 1994 and the impact of the Tax Act
on deferred taxes in 1993, income per share from continuing operations would
have been eight percent above the prior year.
Sales revenue increased 11 percent in 1994 driven by aggressive expansion of
the facilities management contract base, including the late 1993 acquisition of
Ameriscribe, strong growth in sales of facsimile supplies to support the growing
plain-paper equipment base and copier and production mail systems product
placements in the U.S., as well as strong mailing equipment sales in the U.K.
These growth factors were partly offset by greater revenue in 1993 from PROM
(memory chip) and scale chart sales resulting from parcel and postal rate
changes in the U.S. and 1994 sales declines in Germany and the U.S. shipping
business. The unfavorable comparison in the U.S. shipping business, particularly
in the low-volume segment was due principally to enhanced 1993 revenue due to
special marketing programs as well as increased competitive pressure from
carrier automation initiatives in 1994. In Germany, 1993 record results included
sales for equipment upgrades necessitated by consolidation of the East and West
German postal zones. Additionally, the decision in the third quarter 1994 to
phase out sales of non-mailing products as part of the company's formal plan of
strategic focus refinement negatively impacted sales revenue. In 1994, both
price increases and foreign currency impacts had less than a one percent
favorable impact on sales growth.
Rentals and financing revenue increased ten percent in 1994. Rental revenue
increased nine percent in 1994. This increase was due to mailing price
increases, higher numbers of postage meters on rental, including a greater mix
of higher-yielding Postage By Phone(R) and electronic meters, as well as a
greater mix of plain paper facsimile equipment placements. Financing revenue
increased 11 percent in 1994, reflecting a greater contribution from sales of
finance assets than in 1993, and included the sale of operating lease assets
which generated approximately $45 million in revenue. Financing revenue also
benefited from portfolio growth, increased leveraged lease revenue and fee-based
income partly offset by lower lease rates and the decision to phase out the
business of financing non-Pitney Bowes equipment outside of the U.S.
Support services revenue decreased slightly in 1994. This decrease was due to
a decline in the non-U.S. mailing equipment service base and a shift in mix of
shipping service agreements to low-end products which were mostly offset by
price increases on mailing contracts.
The cost of sales to sales revenue ratio increased to 58.4 percent in 1994
from 55.2 percent in 1993. The ratio increase was due to the growing
significance of the company's facilities management business which includes most
of its costs and expenses in cost of sales, particularly after the Ameriscribe
acquisition. In 1994, increased engineering support of the company's many new
products, reduced margins on certain of the company's mailing, shipping and
facsimile products and unfavorable LIFO expense negatively impacted the
comparison of these ratios. These factors were partly offset by improved margins
at the company's facilities management and copier operations in both years.
Results in 1993 also benefited from high-margin PROM and scale chart sales as
well as favorable LIFO effects.
The cost of rentals and financing to rentals and financing revenue ratio was
32.3 percent in 1994 compared with 31.7 percent in 1993. The increase in 1994
resulted from increased asset sale activity, including the sales of lower-margin
operating lease assets with a cost of $42.6 million, offset, in part, by
favorable mailing rental equipment margins in the U.S. The growing impact of
amortization of purchased mortgage servicing rights associated with the
company's mortgage servicing subsidiary also increased the cost ratio in 1994.
Selling, service and administrative expense as a percentage of revenue was
35.7 percent in 1994 compared to 37.3 percent in 1993. The ratio comparison
benefited from lower
22
<PAGE>
relative expenses related to the facilities management business after the
Ameriscribe acquisition, effective management of overall U.S. benefit costs, and
continued cost containment programs throughout the company. Also, 1994 benefited
from a patent royalty settlement and a special cash payment on an investment
security. Expense reductions resulted from the establishment of retiree medical
coverage maximums.
Research and development expense declined three percent in 1994. This decline
was caused by the completion of the primary development cycle for certain of the
company's major new mailing products, with the most significant new products
launched in 1992. These products currently use ongoing engineering support to
improve functionality and increase manufacturing efficiencies, the cost of which
is recorded in cost of sales.
Net interest expense increased six percent in 1994. In 1994 the increase was
due to higher short-term interest rates and average borrowing levels. Increased
borrowing levels were used primarily to fund common stock repurchases and
investments in finance assets. The company's practice is to manage its interest
rate risk, most of which is in the financial services businesses, through the
use of a balanced mix of debt maturities, variable- and fixed-rate debt and
interest rate swap agreements. The company's swap adjusted variable rate versus
fixed-rate debt mix was 65 percent and 35 percent, respectively, at December 31,
1994.
In 1994, as noted above, a net nonrecurring credit of $25.4 million resulted
from a $118.6 million credit to income for changes made to certain
postemployment benefits and the decision to undertake certain strategic actions
which resulted in the establishment of a $93.2 million reserve.
As part of the work-life initiatives undertaken by the company in 1994, it
was concluded that employees prefer benefits more closely related to their
changing work-life needs. As a result, in the third quarter of 1994, the company
significantly reduced or eliminated certain postemployment benefits,
specifically service-related company-subsidized life insurance, salary
continuance and medical benefits, resulting in a pre-tax credit to income of
$118.6 million ($70.9 million net of approximately $47.7 million of income
taxes). Postemployment benefit expense for 1994 was not materially affected by
these benefit changes and the net impact of the adoption of Statement of
Financial Accounting Standards No. 112, "Employees' Accounting for
Postemployment Benefits" (FAS 112) discussed below in Accounting Changes, nor is
ongoing postemployment benefit expense expected to be materially affected. As a
further outgrowth of the above study, the company also instituted, effective
January 1, 1995, certain enhancements to its deferred investment plan, including
an increase in the company's match of employee contributions.
During the third quarter of 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. The phase-out of older
product lines, introduction of new, advanced products and increased need for
higher employee skill levels to deliver and service these products required a
work force reduction as described above. Severance and benefit related costs
approximating $61 million were included in this reserve for work force
reduction. All costs associated with hiring of new employees were excluded from
the plan and have been recognized appropriately in the period incurred.
Current and future advanced 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. These
requirements accounted for a work force reduction of more than 850 employees.
Other strategic actions included reengineering and streamlining of order flow,
logistics and other administrative processes in the U.S., Europe and the Asia
Pacific region. The decisions to phase out non-mailing products in Germany and
the cessation of further development and marketing of shipping products which
cannot be cost-effectively upgraded to new technologies accounted for the
remaining work force reductions.
Included in the plan to refine the strategic business focus of the company
were costs approximating $32 million for certain additional actions. Consistent
with a refinement of focus on core businesses, the actions included phasing out
non-mailing products in Germany. This decision required the write down of
inventories, accounts receivable, rental contracts and other assets to their
realizable value; such impacts were accrued with this reserve. In addition,
anticipated lease buyback exposure and expected future losses during the
phase-out of the non-mailing businesses were accrued. The decision to cease
development and marketing of certain shipping products as noted above also
resulted in inventory and other asset write-offs. As part of the administrative
reengineering actions, the adoption of a centralized organizational structure in
the European financial services businesses resulted in the planned early
termination of a facility lease, the cost of which was included in the reserve.
The company transitioned a software-based business with its own product offering
to a product development support function. As a result, the remaining goodwill
related to the acquisition of this business was written-off. As of December 31,
1994 the company had made severance and benefits payments of $3.4 million to
more than 200 employees separated under the strategic focus initiatives.
Benefits from the strategic focus initiatives (primarily reduced employee
expense) were offset, in part, by increased hiring and training expenses to
obtain employees with requisite skills.
Operating profit inclusive of the nonrecurring items in 1994, increased 12
percent with business equipment reflecting growth of 10 percent and commercial
and industrial financing increasing three percent. Operating profit increased
substantially at business services due to the fourth quarter 1993 acquisition of
Ameriscribe, a nationwide provider of on-site reprographics, mailroom and other
office services to industrial corporations and professional service firms on a
contract basis.
The effective tax rate was 38.5 percent in 1994 compared to 38.7 percent in
1993. The 1994 effective tax rate includes the impact of approximately $28
million of strategic actions for which the company could not realize associated
tax benefits offset, in part, by higher levels of tax exempt income and research
and development tax credits. The 1993 effective tax rate reflects the impacts of
the Tax Act discussed above. Excluding the impact of the tax legislation, the
effective tax
23
<PAGE>
rate for 1993 was 34.3 percent. Further affecting this rate was the tax impact
of a partnership lease transaction and research and development tax credits.
Although not affecting income, deferred translation gains amounted to $6
million in 1994 versus losses of $20 million in 1993, respectively. In 1994 the
gains resulted primarily from the strengthening of the pound sterling. In 1993
losses resulted primarily from the weakening of the pound sterling. The Canadian
dollar, which weakened in 1993 and 1994, contributed to these impacts.
Discontinued Operations and Acquisitions
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. 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. The sales of
Dictaphone and Monarch resulted in gains approximating $155 million, net of
approximately $130 million of income taxes. Dictaphone and Monarch have been
classified in the Consolidated Statement of Income as discontinued operations;
revenue and income from continuing operations exclude the results of Dictaphone
and Monarch for all periods presented.
With the fourth quarter 1993 acquisition of Ameriscribe, the company
continued the expansion of its facilities management business. The transaction
was accounted for by the purchase method.
See Note 12 to the consolidated financial statements.
Financial Services
The financial services operations provide lease financing for Pitney Bowes
products in the U.S., Canada, the U.K., Germany, France, Norway, Ireland and
Australia, the results of which are included in the business equipment segment.
It also provides equipment financing for non-Pitney Bowes equipment and other
financial services to the commercial and industrial markets in the U.S., the
results of which are included in the commercial and industrial financing
segment.
Condensed financial information of the company's consolidated financial
services operations is disclosed in Note 16 to the consolidated financial
statements. Consolidated financial services operations financed 39 percent of
consolidated sales from continuing operations in 1995, 41 percent in 1994 and 44
percent in 1993. The decreasing percentage financed is a direct result of the
increasing significance of the facilities management business to the company's
revenue. The facilities management business does not require traditional
financing services used by the other businesses within the company.
Total financial services revenue amounted to $714 million in 1995 up eight
percent from 1994. Total financial services assets increased to $5.4 billion at
year-end 1995, up 12 percent from $4.8 billion in 1994. To fund finance assets,
borrowings were $3.7 billion in 1995 and $3.2 billion in 1994. Borrowing
requirements for the funding of new business were reduced by the proceeds
received from the sale of approximately $100 million and $190 million of finance
assets during 1995 and 1994, respectively. In addition to the $250 million of
borrowings available under shelf registration statements, the financial services
businesses had approximately $1.7 billion of unused lines of credit outstanding
as of year-end 1995, largely supporting commercial paper borrowings.
Accounting Changes
The company adopted FAS 112 as of January 1, 1994 which 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 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 76 cents
per share. Additional information with respect to accounting for postemployment
benefits is disclosed in Note 11 to the consolidated financial statements.
In addition to the adoption of FAS 112 as discussed above, the company also
adopted in 1994 Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," and Statement of
Financial Accounting Standards No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments." In 1995, Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan," and Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan-Income Recognition and Disclosures" were
also adopted. None of these statements significantly affected the company's
reported results. In 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" and Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" were issued. These
statements must be adopted effective January 1, 1996. None of these
pronouncements is expected to materially affect the company.
Liquidity and Capital Resources
The current ratio reflects the company's practice of utilizing a balanced mix of
debt maturities to fund finance assets. The current ratio increased to .60 to 1
as of December 31, 1995 from .52 to 1 as of December 31, 1994 as a result of
decreased short-term borrowings, which were reduced by the proceeds received
from the sales of Monarch and Dictaphone, the issuance of long-term debt by
Pitney Bowes Credit Corporation (PBCC), a wholly-owned subsidiary of the
company, and the issuance in June 1995 of preferred stock in a subsidiary
company. See Note 6 to the consolidated financial statements. The company also
entered into interest rate swap agreements principally through its financial
services businesses. It has been the practice and objective of the company to
use a balanced mix of debt maturities, variable- and fixed-rate debt and
interest rate swap agreements to control its sensitivity to interest rate
volatility. The
24
<PAGE>
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.
The ratio of total debt to the total of such debt and stockholders' equity
was 62.2 percent as of December 31, 1995, compared to 66.3 percent as of
December 31, 1994, including preferred stock in a subsidiary company in total
debt. The ratio of total debt to the total of such debt and stockholders' equity
was 60.7 percent as of December 31, 1995, compared to 66.3 percent as of
December 31, 1994, excluding preferred stock in a subsidiary company. This ratio
was favorably impacted by the company's sales of Dictaphone and Monarch, by the
sale of certain finance assets, by the 1993 strategic decision to phase out the
business of financing non-Pitney Bowes equipment outside of the U.S. as well as
by the company's strong operating cash flow. These factors were partially offset
in 1995 by the repurchase of approximately 2.3 million shares of common stock
for $98 million and increased investment in finance assets.
Of the cash required to be paid under the company's strategic focus
initiatives, severance and benefit related costs paid out were $45.1 million and
$3.4 million in 1995 and 1994, respectively, with the remaining cash outlays of
approximately $23 million expected on obligations committed to under the plan.
As part of the company's non-financial services shelf registrations, a
medium-term note facility was established permitting issuance of up to $100
million in debt securities with maturities ranging from more than one year up to
30 years on which $32 million remain available as of December 31, 1995. The
company also has an additional $300 million remaining on shelf registrations
filed with the Securities and Exchange Commission (SEC).
PBCC has $125 million available from a $500 million shelf registration
statement filed with the SEC. 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 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 June, 2000 with a
weighted average coupon rate of 6.014 percent.
In June 1995, Pitney Bowes International Holdings, Inc., a subsidiary of the
company, issued $200 million of variable term voting preferred stock to outside
institutional investors in a private placement transaction. The stock issuance
enables the company to better manage its international cash and investments. The
proceeds of the issuance were used to pay down short-term borrowings. Preferred
stockholders' equity in a subsidiary company on the Consolidated Balance Sheet
represents the outstanding preferred stock (2,000,000 shares) of Pitney Bowes
International Holdings, Inc. All of the outstanding common stock of Pitney Bowes
International Holdings, Inc., representing 75% of the combined voting power of
all classes of capital stock, is owned directly or indirectly by Pitney Bowes
Inc. The balance of the capital stock, consisting of such preferred stock, is
owned by certain outside institutional investors and accounts for the remaining
25% of the combined voting power. The preferred stock, $.01 par value, is
entitled to cumulative dividends at rates set at auction. The auction intervals
are for generally 49 days although longer periods may be set in the future. The
weighted average dividend rate in 1995 was 4.3%. Dividends are reflected as a
minority interest in the Consolidated Statement of Income in selling, service,
and administrative expense.
As of year-end 1995, the company had unused lines of credit and revolving
credit facilities totaling $2.0 billion in the U.S. and $106 million outside the
U.S. largely supporting commercial paper borrowings. 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
Dictaphone and Monarch, are expected to be sufficient to provide for financing
needs in the next two years. Information with respect to debt maturities is
disclosed in Note 5 to the consolidated financial statements.
Capital Investment
During 1995, net investments in fixed assets included $100 million in net
additions to property, plant and equipment and $225 million in net additions to
rental equipment and related inventories compared with $126 million and $213
million, respectively, in 1994. These additions included expenditures for normal
plant and manufacturing equipment as well as a new facility in Shelton,
Connecticut. In the case of rental equipment, the additions included the
production of postage meters and the purchase of facsimile and copier equipment
for both new placements and upgrade programs.
As of December 31, 1995, commitments for the acquisition of property, plant
and equipment reflected plant and manufacturing equipment improvements as well
as rental equipment for new and replacement programs.
The company's commercial and industrial financing segment has made senior
secured loans and commitments in connection with acquisition, leveraged buyout
and recapitalization financing. The company has not participated in unsecured or
subordinated debt financing in any highly leveraged transactions.
Legal, Environmental and Regulatory Matters
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 intellectual property
or patent rights; equipment, service or payment disputes with customers;
disputes with employees; or other matters. The company is currently a defendant
in 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 U.S.
Department of Justice is conducting a civil investigation of its postage
equipment business to determine whether
25
<PAGE>
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.
The company is subject to federal, state and local laws and regulations
concerning the environment, and is currently participating in administrative or
court proceedings as a participant in various groups of potentially responsible
parties. These proceedings are at various stages of activity, and it is
impossible to estimate with any certainty the total cost of remediation, the
timing and extent of remedial actions which may be required by governmental
authorities, and the amount of the liability, if any, of the company. If and
when it is possible to make a reasonable estimate of the company's liability, if
any, with respect to such a matter, a provision would be made as appropriate.
Based on facts presently known to it, the company does not believe that the
outcome of these proceedings will have a material adverse effect on its
financial condition.
On June 9, 1995, the U.S.P.S. issued final regulations addressing the
manufacture, distribution and use of postage meters. The regulations cover four
general categories: meter security, administrative controls, Computerized Meter
Resetting Systems (C.M.R.S.) and other issues. In general, the regulations
impose reporting and performance obligations on meter manufacturers, prescribe
potential administrative sanctions for failure to meet these obligations and
require a restructuring of the fund management system of C.M.R.S., such as the
company's Postage by Phone(R) System, to give the U.S.P.S. more direct control
over meter licensee deposits. The company is working with the U.S.P.S. to ensure
that the implementation of these regulations provides mailing customers and the
U.S.P.S. with the intended benefits, and that Pitney Bowes also benefits. The
company believes that the financial impact to the company resulting from
implementation of these regulations will not be material.
The company is also currently working with the U.S.P.S. to devise a
multi-year migration schedule to phase out mechanical meters and replace them
with electronic meters in a manner that is most beneficial and least disruptive
to the operations of the company's customers. This is consistent with the
company's strategy of introducing new technology into the market place to add
value to customer operations and meet postal needs. This strategy and the
company's long-term focus has resulted in an increase in the percentage of the
electronic meter base in the U.S. from six percent of the overall base in 1986
to nearly 50 percent of the installed meter base in 1995. Until such time as a
final meter migration plan is promulgated, the financial impact, if any, on the
company cannot be determined; but, it is currently the belief of the company
that the migration plan will not cause a material adverse financial impact.
Effects of Inflation and Foreign Exchange
Inflation, even though moderate in recent years, continues to have an effect on
worldwide economies and the way companies operate. In addition to increasing
labor costs and operating expenses, the company would have higher costs
associated with replacement of fixed assets especially rental equipment assets.
In the face of increasing costs, the company has generally been able to maintain
profit margins through productivity and efficiency improvements, continual
review of both manufacturing capacity and operating expense levels and, to an
extent, price increases.
The results of the company's international operations are subject to currency
fluctuations. The company enters into foreign exchange contracts for purposes
other than trading primarily to minimize its risk of loss from fluctuations in
exchange rates on the settlement of firm and budgeted intercompany receivables
and payables arising in connection with transfers of finished goods inventories
between affiliates as well as certain intercompany loans.
As of December 31, 1995, the company had approximately $157.5 million of
foreign exchange contracts outstanding, to buy or sell various currencies. These
contracts mature through 1997. Risks arise from the possible non-performance by
counterparties in meeting the terms of their contracts and from movements in
securities values and interest and exchange rates. However, the company does not
anticipate non-performance by the counterparties as they are composed of a
number of major international financial institutions. Maximum risk of loss on
these contracts is limited to the amount of the difference between the spot rate
at the date of the contract delivery and the contracted rate.
Dividend Policy
It is policy of the Pitney Bowes board of directors to pay a cash dividend on
common stock each quarter when feasible. In setting dividend payments, the board
considers the dividend rate in relation to the company's recent and projected
earnings and its capital investment opportunities and requirements. Pitney Bowes
has paid a dividend each year since 1934.
--------------------------
The company wishes to caution readers that any forward-looking statements
contained in this annual report 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 strength of worldwide economies; the
effects of and changes in trade, monetary and fiscal policies and laws, and
inflation and monetary fluctuations; the timely development of and acceptance of
new Pitney Bowes products and the perceived overall value of these products by
users including the features, pricing, and quality compared to competitors'
products; the willingness of users to substitute competitors' products for
Pitney Bowes products; the success of the company in gaining approval of its
products in new markets where regulatory approval is required; the ability of
the company to successfully enter new markets, including the ability to
efficiently distribute and finance its products; the impact of changes in postal
regulations around the world that directly regulate the manufacture, ownership
and or distribution of postage meters, or that regulate postal rates and
discounts; the willingness of mailers to utilize alternative means of
communication; and the company's success at managing customer credit risk.
26
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data) Pitney Bowes, Inc.
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $3,554,754 $3,270,613 $3,000,386 $2,887,583 $2,803,160
Costs and expenses 2,935,823 2,729,472 2,501,526 2,475,629 2,414,163
Nonrecurring items, net - (25,366) - - -
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 618,931 566,507 498,860 411,954 388,997
Provision for income taxes 211,222 218,077 193,166 151,215 146,346
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 407,709 348,430 305,694 260,739 242,651
Discontinued operations 175,431 45,161 47,495 54,129 52,648
Effect of accounting changes - (119,532) - (214,631) -
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 583,140 $ 274,059 $ 353,189 $ 100,237 $ 295,299
==========================================================================================================================
Income per common and common equivalent share:
Continuing operations $2.68 $2.21 $1.92 $ 1.64 $1.52
Discontinued operations 1.15 .29 .30 .34 .33
Effect of accounting changes - (.76) - (1.35) -
- --------------------------------------------------------------------------------------------------------------------------
Net income $3.83 $1.74 $2.22 $ .63 $1.85
==========================================================================================================================
Total dividends on common, preference
and preferred stock $181,657 $162,714 $142,142 $123,112 $107,948
Dividends per share of common stock $1.20 $1.04 $.90 $.78 $.68
Average common and common equivalent
shares outstanding 152,358,474 157,728,628 159,368,652 159,235,412 159,954,680
Balance sheet at December 31
Total assets $7,844,648 $7,399,720 $6,793,816 $6,498,752 $6,380,580
Long-term debt $1,048,515 $779,217 $847,316 $1,015,401 $1,058,763
Capital lease obligations $14,241 $23,147 $29,462 $32,161 $35,755
Stockholders' equity $2,071,100 $1,745,069 $1,871,595 $1,652,881 $1,800,683
Book value per common share $13.79 $11.52 $11.81 $10.50 $11.31
Ratios
Profit margin-continuing operations:
Pretax earnings 17.4% 17.3% 16.6% 14.3% 13.9%
After-tax earnings 11.5% 10.7% 10.2% 9.0% 8.7%
Return on stockholders' equity -
before accounting changes 28.2% 22.6% 18.9% 19.0% 16.4%
Debt to total capital 62.2% 66.3% 61.3% 64.5% 62.8%
Other
Common stockholders of record 32,859 31,226 31,189 30,828 29,588
Total employees 27,723 32,792 32,539 28,958 29,421
Postage meters in service, U.S., U.K.
and Canada 1,517,806 1,480,692 1,445,689 1,413,448 1,393,774
</TABLE>
See notes, pages 32 through 41
27
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share data) Pitney Bowes Inc.
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue from:
Sales $1,546,393 $1,418,304 $1,278,859
Rentals and financing 1,575,094 1,441,183 1,309,361
Support services 433,267 411,126 412,166
- --------------------------------------------------------------------------------------------------------------------------
Total revenue 3,554,754 3,270,613 3,000,386
- --------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 941,124 828,221 705,438
Cost of rentals and financing 463,601 466,070 415,521
Selling, service and administrative 1,230,671 1,167,422 1,120,607
Research and development 81,800 78,618 80,874
Interest expense 226,110 194,115 189,292
Interest income (7,483) (4,974) (10,206)
Nonrecurring items, net - (25,366) -
- --------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 2,935,823 2,704,106 2,501,526
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes 618,931 566,507 498,860
Provision for income taxes 211,222 218,077 193,166
- --------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 407,709 348,430 305,694
Income, net of income tax, from discontinued
operations prior to discontinuance 21,483 45,161 47,495
Net gains on sale of discontinued operations 153,948 - -
- --------------------------------------------------------------------------------------------------------------------------
Income before effect of a change in
accounting for postemployment benefits 583,140 393,591 353,189
Effect of a change in accounting for postemployment benefits - (119,532) -
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 583,140 $ 274,059 $ 353,189
==========================================================================================================================
Income per common and common equivalent share:
Income from continuing operations $2.68 $2.21 $1.92
Discontinued operations 1.15 .29 .30
Effect of a change in accounting for postemployment benefits - (.76) -
- --------------------------------------------------------------------------------------------------------------------------
Net income $3.83 $1.74 $2.22
==========================================================================================================================
</TABLE>
See notes, pages 32 through 41
28
<PAGE>
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share data) Pitney Bowes Inc.
<TABLE>
<CAPTION>
December 31 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 85,352 $ 75,106
Short-term investments, at cost which approximates market 3,201 639
Accounts receivable, less allowances: 1995, $13,050; 1994, $16,909 386,727 422,276
Finance receivables, less allowances: 1995, $37,699; 1994, $36,224 1,208,532 1,050,090
Inventories 311,271 430,641
Other current assets and prepayments 106,014 104,992
- --------------------------------------------------------------------------------------------------------------------------
Total current assets 2,101,097 2,083,744
Property, plant and equipment, net 495,001 578,650
Rental equipment and related inventories, net 773,337 695,343
Property leased under capital leases, net 7,876 12,633
Long-term finance receivables, less allowances:
1995, $75,807; 1994, $76,867 3,390,597 3,086,401
Investment in leveraged leases 570,008 481,308
Goodwill, net of amortization: 1995, $30,504; 1994, $40,984 208,698 222,445
Other assets 298,034 239,196
- --------------------------------------------------------------------------------------------------------------------------
Total assets $7,844,648 $7,399,720
==========================================================================================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 818,122 $ 828,396
Income taxes payable 232,794 194,427
Notes payable and current portion of long-term obligations 2,138,065 2,626,231
Advance billings 312,595 329,415
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,501,576 3,978,469
Deferred taxes on income 612,811 453,438
Long-term debt 1,048,515 779,217
Other noncurrent liabilities 410,646 443,527
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,573,548 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 2,547 2,790
Common stock, $2 par value (240,000,000 shares authorized;
161,668,956 shares issued) 323,338 323,338
Capital in excess of par value 30,299 35,200
Retained earnings 2,186,996 1,785,513
Cumulative translation adjustments (46,991) (41,617)
Treasury stock, at cost (11,722,744 shares) (425,136) (360,203)
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 2,071,100 1,745,069
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $7,844,648 $7,399,720
==========================================================================================================================
</TABLE>
See notes, pages 32 through 41
29
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands) Pitney Bowes Inc.
<TABLE>
<CAPTION>
Years ended December 31 1995 1994* 1993*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 583,140 $ 274,059 $ 353,189
Net gains 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 271,648 268,293 247,884
Nonrecurring items, net - (25,710) (1,283)
Net change in the strategic focus initiative (45,078) (3,386) -
Increase in deferred taxes on income 148,828 119,180 81,811
Change in assets and liabilities:
Accounts receivable (18,696) (8,500) (11,346)
Sales-type lease receivables (146,010) (173,691) (136,667)
Inventories 9,788 (43,801) (51,286)
Other current assets and prepayments (7,519) (22,762) (17,012)
Accounts payable and accrued liabilities 28,517 14,658 48,451
Income taxes payable (96,436) (332) (13,085)
Advance billings 22,637 12,826 3,102
Other, net (88,339) (40,827) (47,828)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 508,532 489,539 455,930
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Short-term investments (2,553) 600 537
Net investment in fixed assets (337,718) (345,593) (291,783)
Net investment in direct-finance lease receivables (316,343) (72,170) 108,991
Investment in leveraged leases (141,898) (125,775) (24,117)
Proceeds from sales of subsidiaries 577,000 - -
Net investment in company acquired - - (8,428)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (221,512) (542,938) (214,800)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
(Decrease) increase in notes payable (432,418) 555,457 195,024
Proceeds from long-term obligations 275,000 200,000 -
Principal payments on long-term obligations (66,734) (275,333) (244,503)
Proceeds from issuance of stock 26,999 22,702 22,544
Stock repurchases (98,038) (268,419) (86,861)
Proceeds from preferred stock issued by a subsidiary 200,000 - -
Dividends paid (181,657) (162,714) (142,142)
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (276,848) 71,693 (255,938)
- --------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 74 2,159 (1,555)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 10,246 20,453 (16,363)
Cash and cash equivalents at beginning of year 75,106 54,653 71,016
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 85,352 $ 75,106 $ 54,653
==========================================================================================================================
Interest paid $ 228,460 $ 203,747 $ 199,176
==========================================================================================================================
Income taxes paid $ 163,745 $ 99,379 $ 124,034
==========================================================================================================================
</TABLE>
*Certain prior year amounts have been reclassified to conform with the 1995
presentation.
See notes, pages 32 through 41
30
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data) Pitney Bowes Inc.
<TABLE>
<CAPTION>
Capital in Cumulative Treasury
Preferred Preference Common excess of Retained translation stock,
stock stock stock par value earnings adjustments at cost
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $107 $3,161 $323,338 - $1,463,121 $(27,211) $(109,635)
Net income - 1993 353,189
Cash dividends:
Preferred ($2.00 per share) (3)
Preference ($2.12 per share) (239)
Common ($.90 per share) (141,900)
Issuances under dividend
reinvestment and stock plans 5,987 20,071
Conversions to common stock (39) (192) (1,539) 1,770
Issuance for company acquired 31,329 56,264
Repurchase of common stock (86,861)
Translation adjustments (20,108)
Tax credits relating to stock options 985
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 68 2,969 323,338 36,762 1,674,168 (47,319) (118,391)
Net income - 1994 274,059
Cash dividends:
Preferred ($2.00 per share) (2)
Preference ($2.12 per share) (223)
Common ($1.04 per share) (162,489)
Issuances under dividend
reinvestment and stock plans (801) 23,635
Conversions to common stock (20) (179) (1,813) 2,012
Issuance for company acquired 40 960
Repurchase of common stock (268,419)
Translation adjustments 5,702
Tax credits relating to stock options 1,012
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 48 2,790 323,338 35,200 1,785,513 (41,617) (360,203)
Net income - 1995 583,140
Cash dividends:
Preferred ($2.00 per share) (1)
Preference ($2.12 per share) (261)
Common ($1.20 per share) (181,395)
Issuances under dividend
reinvestment and stock plans (4,047) 30,594
Conversions to common stock (1) (243) (2,267) 2,511
Repurchase of common stock (98,038)
Translation adjustments (5,374)
Tax credits relating to stock options 1,413
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $ 47 $2,547 $323,338 $30,299 $2,186,996 $(46,991) $(425,136)
==========================================================================================================================
</TABLE>
See notes, pages 32 through 41
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousand, except per share data or as otherwise indicated)
Pitney Bowes Inc.
1. Summary of significant accounting policies
Consolidation. The consolidated financial statements include the accounts of
Pitney Bowes Inc. and all of its subsidiaries (the company). All significant
intercompany transactions have been eliminated.
Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash equivalents, short-term investments and accounts receivable. Cash
equivalents include short-term, highly liquid investments with a maturity of
three months or less from date of acquisition. The company places its temporary
cash and short-term investments with financial institutions and limits the
amount of credit exposure with any one financial institution. Concentrations of
credit risk with respect to accounts receivable are limited due to the large
number of customers and relatively small account balances within the majority of
the company's customer base, and their dispersion across different businesses
and geographic areas.
Inventory valuation. Inventories are valued at the lower of cost or market. Cost
is determined on the last-in, first-out (LIFO) basis for most U.S. inventories,
and the first-in, first-out (FIFO) basis for most non-U.S. inventories.
Fixed assets and depreciation. Property, plant and equipment are stated at cost
and depreciated principally using the straight-line method over appropriate
periods; machinery and equipment principally three to 15 years and buildings up
to 50 years. Major improvements which add to productive capacity or extend the
life of an asset are capitalized while repairs and maintenance are charged to
expense as incurred. Rental equipment is depreciated on the straight-line method
over appropriate periods, principally three to ten years. Other depreciable
assets are depreciated using either the straight-line method or accelerated
methods. Properties leased under capital leases are amortized on a straight-line
basis over the primary lease terms.
Rental arrangements and advance billings. The company rents equipment to its
customers, primarily postage meters and mailing, shipping, copier and facsimile
systems under short-term rental agreements, generally for periods of three
months to three years. Charges for equipment rental and maintenance contracts
are billed in advance; the related revenue is included in advance billings and
taken into income as earned.
Financing transactions. At the time a finance transaction is consummated, the
company's finance operations record the gross finance receivable, unearned
income and the estimated residual value of leased equipment. Unearned income
represents the excess of the gross finance receivable plus the estimated
residual value over the cost of equipment or contract acquired. Unearned income
is recognized as financing income using the interest method over the term of the
transaction and is included in rentals and financing revenue in the Consolidated
Statement of Income. Initial direct costs incurred in consummating a transaction
are accounted for as part of the investment in a lease and amortized to income
using the interest method over the term of the lease.
In establishing the provision for credit losses, the company has successfully
utilized an asset based percentage. This percentage varies depending on the
nature of the asset, recent historical experience, vendor recourse, management
judgment and the credit rating of the respective customer. The company evaluates
the collectibility of its net investment in finance receivables based upon its
loss experience and assessment of prospective risk, and does so through ongoing
reviews of its exposures to net asset impairment. The carrying value of its net
investment in finance receivables is adjusted to the estimated collectible
amount through adjustments to the allowance for credit losses. Finance
receivables are charged to the allowance for credit losses after collection
efforts are exhausted and the account is deemed uncollectible.
The company's general policy is to discontinue income recognition for finance
receivables contractually past due for over 90 to 120 days depending on the
nature of the transaction. Resumption of income recognition occurs when payments
are reduced to 60 days or less past due. However, large-ticket external
transactions are reviewed on an individual basis. Income recognition is normally
discontinued as soon as it is apparent that the obligor will not be making
payments in accordance with lease terms and resumed after the company has
sufficient experience on resumption of payments to be satisfied that such
payments will continue in accordance with the original or restructured contract
terms.
The company has, from time to time, sold selected finance assets. The company
follows Statement of Financial Accounting Standards No. 77, "Reporting by
Transferors for Transfers of Receivables with Recourse," when accounting for its
sale of finance assets. The difference between the sale price and the net
receivable, exclusive of residuals, is recognized as a gain or loss.
The company's investment in leveraged leases consist of rentals receivable
net of principal and interest on the related nonrecourse debt, estimated
residual value of the leased property and unearned income. The unearned income
is recognized as leveraged lease revenue in income from investments over the
lease term.
Goodwill. Goodwill represents the excess of cost over the value of net tangible
assets acquired in business combinations and is amortized using the
straight-line method over appropriate periods, principally 40 years. The
recoverability of goodwill is assessed by determining whether the unamortized
balance can be recovered from expected future cash flows from the applicable
operation.
Revenue. Sales revenue is primarily recognized when a product is shipped.
Costs and expenses. Operating expenses of field sales and service offices are
included in selling, service and administrative expense because no meaningful
allocation of such expenses to cost of sales, rentals and financing or support
services is practicable.
Income taxes. The deferred tax provision is determined under the liability
method. Deferred tax assets and liabilities are recognized based on differences
between the book and tax bases of assets and liabilities using currently enacted
tax rates. The provision for income taxes is the sum of the amount of income tax
paid or payable for the year as determined by applying the provisions of enacted
tax laws to the taxable income for that year and the net change during the year
in the company's deferred tax assets and liabilities.
32
<PAGE>
Deferred taxes on income result principally from expenses not currently
recognized for tax purposes, the excess of tax over book depreciation, deferral
of lease revenue and gross profits on sales to finance subsidiaries.
For tax purposes, income from leases is recognized under the operating method
and represents the difference between gross rentals billed and operating
expenses.
It has not been necessary to provide for income taxes on $414 million of
cumulative undistributed earnings of subsidiaries outside the U.S. These
earnings will be either indefinitely reinvested or remitted substantially free
of additional tax. Determination of the liability that would result in the event
all of these earnings were remitted to the U.S. is not practicable. It is
estimated, however, that withholding taxes on such remittances would approximate
$16 million.
Nonpension postretirement benefits and postemployment benefits. The company
provides certain health care and life insurance benefits to eligible retirees
and their dependents. The cost of these benefits are recognized over the period
the employee provides credited service to the company. Substantially all of the
company's U.S. and Canadian employees become eligible for retiree health care
benefits after reaching age 55 and with the completion of the required service
period. 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. It is the company's practice to fund
amounts for these nonpension postretirement and postemployment benefits as
incurred.
Income per share. Income per share is based on the weighted average number of
common and common equivalent shares outstanding during the year. Common
equivalent shares include preference stock and stock option and purchase plan
shares.
Deposits in trust. The company's customers electing the use of the Pitney Bowes
Postage By Phone(R) meter setting system, a computerized system developed by the
company for the resetting of postage meters via telephone, are required to make
deposits with a trustee to cover expected postage usage. Such funds, which are
not available to the company, are transferred to the respective postal services
upon resettings of meters for which the company receives fees. Deposits in trust
are not included in the company's Consolidated Balance Sheet. Effective during
1996, customers in the U.S. will be required to make such deposits directly to
the U.S. Postal Service. Resetting fees received by the company will not be
negatively affected by this change.
Foreign currency translation. Assets and liabilities of subsidiaries operating
outside the U.S. are translated at rates in effect at the end of the period, and
revenues and expenses were translated at average rates during the period. Net
deferred translation gains and losses are accumulated in stockholders' equity.
The company enters into foreign exchange contracts for purposes other than
trading primarily to minimize its risk of loss from fluctuations in exchange
rates on the settlement of firm and budgeted intercompany receivables and
payables arising in connection with transfers of finished goods inventories
between affiliates as well as certain intercompany loans. Gains and losses on
foreign exchange contracts entered into as hedges are deferred and recognized as
part of the cost of the underlying transaction. Gains and losses related to
changes in the value of speculative contracts are recognized in income
currently. At December 31, 1995, the company had approximately $157.5 million of
foreign exchange contracts outstanding, maturing through 1997, to buy or sell
various currencies. Risks arise from the possible non-performance by
counterparties in meeting the terms of their contracts and from movements in
securities values and interest and exchange rates. However, the company does not
anticipate non-performance by the counterparties as they are composed of a
number of major international financial institutions. Maximum risk of loss on
these contracts is limited to the amount of the difference between the spot rate
at the date of the contract delivery and the contracted rate.
Foreign currency transaction and translation gains and (losses) net of tax
were $1.6 million, $0.1 million and $(1.1) million in 1995, 1994 and 1993,
respectively.
2. Inventories
Inventories consist of the following:
December 31 1995 1994
- --------------------------------------------------------------------------------
Raw materials and work in process $ 57,203 $ 111,051
Supplies and service parts 87,863 114,429
Finished products 166,205 205,161
- --------------------------------------------------------------------------------
Total $ 311,271 $ 430,641
================================================================================
Had all inventories valued at LIFO been stated at current costs, inventories
would have been $40.1 million and $45.1 million higher than reported at December
31, 1995 and 1994, respectively.
3. Fixed assets
December 31 1995 1994
- --------------------------------------------------------------------------------
Land $ 34,860 $ 39,698
Buildings 303,559 337,417
Machinery and equipment 733,810 840,901
- --------------------------------------------------------------------------------
1,072,229 1,218,016
Accumulated depreciation (577,228) (639,366)
- --------------------------------------------------------------------------------
Property, plant and equipment, net $ 495,001 $ 578,650
================================================================================
Rental equipment and related inventories $1,591,321 $1,484,698
Accumulated depreciation (817,984) (789,355)
- --------------------------------------------------------------------------------
Rental equipment and related inventories, net $ 773,337 $ 695,343
================================================================================
Property leased under capital leases $ 25,468 $ 38,644
Accumulated amortization (17,592) (26,011)
- --------------------------------------------------------------------------------
Property leased under capital leases, net $ 7,876 $ 12,633
================================================================================
4. Current liabilities
Accounts payable and accrued liabilities and notes payable and current portion
of long-term obligations are comprised as follows:
December 31 1995 1994
- --------------------------------------------------------------------------------
Accounts payable-trade $ 216,715 $ 242,090
Accrued salaries, wages and commissions 86,243 93,289
Accrued pension benefits 97,937 108,313
Accrued nonpension postretirement benefits 15,500 15,500
Accrued postemployment benefits 6,884 15,084
Miscellaneous accounts payable
and accrued liabilities 394,843 354,120
- --------------------------------------------------------------------------------
Accounts payable and accrued liabilities $ 818,122 $ 828,396
================================================================================
Notes payable and overdrafts $2,124,044 $2,556,783
Current portion of long-term debt 12,296 66,987
Current portion of capital lease obligations 1,725 2,461
- --------------------------------------------------------------------------------
Notes payable and current portion
of long-term obligations $2,138,065 $2,626,231
================================================================================
33
<PAGE>
In countries outside the U.S., banks generally lend to non-finance
subsidiaries of the company on an overdraft or term-loan basis. These overdraft
arrangements and term-loans, for the most part, are extended on an uncommitted
basis by banks and do not require compensating balances or commitment fees.
Notes payable were issued as commercial paper, loans against bank lines of
credit, or to trust departments of banks and others at below prevailing prime
rates. Fees paid to maintain lines of credit were $1.8 million, $2.6 million and
$2.8 million in 1995, 1994 and 1993, respectively.
At December 31, 1995, notes payable and overdrafts outside the U.S. totaled
$1.1 million and U.S. notes payable totaled $2.1 billion. Unused credit
facilities outside the U.S. totaled $106.3 million at December 31, 1995 of which
$74.1 million were for finance operations. In the U.S., the company had $2.0
billion of unused credit facilities in place at December 31, 1995 largely in
support of commercial paper borrowings of which $1.7 billion were for the
finance operations. The weighted average interest rates were 5.5% and 5.7% on
notes payable and overdrafts outstanding at December 31, 1995 and 1994,
respectively.
The company periodically enters into interest rate swap and swap option
agreements as a means of managing interest rate exposure on both its U.S. and
non-U.S. debt. The interest 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 losses in the event of non-performance by the other
parties to the interest rate swap agreements to the extent of the differential
between the fixed- and variable-rates; such exposure is considered minimal.
The company enters into interest rate swap agreements primarily through its
Pitney Bowes Credit Corporation (PBCC) subsidiary. It has been the policy 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 its 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. At December 31, 1995, the company had outstanding interest rate
swap agreements with notional principal amounts of $319.9 million and terms
expiring at various dates from 1996 to 2004. The company exchanged variable
commercial paper rates on an equal notional amount of notes payable and
overdrafts for fixed rates ranging from 5.50% to 10.75%.
5. Long-term debt
December 31 1995 1994
- --------------------------------------------------------------------------------
Non-financial services debt:
Due 1996-1997 (4.75% to 5.5%) $ 688 $ 750
Financial services debt:
Senior notes:
7.39% to 7.48% notes due 1997 45,500 45,500
5.63% notes due 1997 200,000 200,000
5.84% to 6.25% notes due 1998 125,000 -
6.06% to 6.11% notes due 2000 50,000 -
6.63% notes due 2002 100,000 -
8.80% notes due 2003 150,000 150,000
8.63% notes due 2008 100,000 100,000
9.25% notes due 2008 100,000 100,000
8.55% notes due 2009 150,000 150,000
Canadian dollar notes due
1996-2000 (11.05% to 12.50%) 25,371 29,856
Other, due 1996-1998 (9.92%) 1,956 3,111
- --------------------------------------------------------------------------------
Total long-term debt $1,048,515 $ 779,217
================================================================================
The company has a medium-term note facility which was established as a part of
the company's shelf registrations, permitting issuance of up to $100 million in
debt securities of which $32 million remain available. Securities issued under
this medium-term note facility would have maturities ranging from more than one
year up to 30 years. The company also has an additional $300 million remaining
on shelf registrations filed with the Securities and Exchange Commission (SEC).
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.
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 June, 1998 and June,
2000 with a weighted average coupon rate of 6.014 percent. In March 1994, PBCC
issued $200 million of 5.63 percent notes due in February 1997. In April 1994,
PBCC redeemed $100 million of 10.65 percent notes due in April 1999. PBCC had
previously sold an option on a notional principal amount of $100 million to
enable a counterparty to require PBCC to pay a fixed rate of 10.67 percent for
five years starting April 1, 1994. The counterparty exercised that option. In
September 1994, PBCC redeemed $100 million of 10.13 percent notes due in
September 1997.
The annual maturities of the outstanding debt during each of the next five
years are as follows: 1996, $12.3 million; 1997, $252.1 million; 1998, $130.5
million; 1999, $3.7 million and 2000, $62.2 million.
Under terms of their senior and subordinated loan agreements, certain of the
finance operations are required to maintain earnings before taxes and interest
charges at prescribed levels. With respect to such loan agreements, the company
will endeavor to have these finance operations maintain compliance with such
terms and, under certain loan agreements, is obligated, if necessary, to pay to
these finance operations amounts sufficient to maintain a prescribed ratio of
income available for fixed charges. The company has not been required to make
any such payments to maintain income available for fixed charge coverage.
6. Preferred stockholders' equity
in a subsidiary company
Preferred stockholders' equity in a subsidiary company represents the
outstanding preferred stock (2,000,000 shares) of Pitney Bowes International
Holdings, Inc., a subsidiary of the company. All of the outstanding common stock
of Pitney Bowes International Holdings, Inc., representing 75% of the combined
voting power of all classes of capital stock, is owned directly or indirectly by
Pitney Bowes Inc. The balance of the capital stock, consisting of such preferred
stock, is owned by certain outside institutional investors and accounted for the
remaining 25% of the combined voting power. The preferred stock, $.01 par value,
is entitled to cumulative dividends at rates set at auction. The weighted
average dividend rate in 1995 was 4.3%. Dividends are reflected as a minority
interest in the Consolidated Statement of Income in selling, service, and
administrative expense. The preferred stock is subject to mandatory redemption
based on certain events, at a redemption price not less than $100 per share,
plus the amount of any dividends accrued or in arrears.
7. Capital stock and capital in excess of par value
At December 31, 1995, 240,000,000 shares of common stock, 600,000 shares of
cumulative preferred stock, and 5,000,000 shares of preference stock were
authorized, and 149,946,212 shares of common stock (net of 11,722,744 shares of
treasury stock), 948 shares of 4% Convertible
34
<PAGE>
Cumulative Preferred Stock (4% preferred stock) and 94,060 shares of $2.12
Convertible Preference Stock ($2.12 preference stock) were issued and
outstanding. The balance of unreserved and unissued preferred stock (599,052
shares) and preference stock (4,905,940 shares) may be issued in the future by
the board of directors, which will determine the dividend rate, terms of
redemption, terms of conversion (if any) and other pertinent features.
Unreserved and unissued common stock (exclusive of treasury stock) at December
31, 1995 amounted to 67,946,929 shares.
In October 1993, the company acquired all outstanding shares and options of
Ameriscribe Corporation in exchange for 2,257,792 shares of Pitney Bowes common
stock. See Note 12 to the consolidated financial statements.
The 4% preferred stock outstanding, which is entitled to cumulative dividends
at the rate of $2 per year, is redeemable at the option of the company, in whole
or in part at any time, at the price of $50 per share, plus dividends accrued to
the redemption date. Each share of the 4% preferred stock is convertible into
12.12 shares of common stock, subject to adjustment in certain events.
The $2.12 preference stock is entitled to cumulative dividends at the rate of
$2.12 per year and is redeemable at the option of the company at the rate of $28
per share. Each share of the $2.12 preference stock is convertible into eight
shares of common stock, subject to adjustment in certain events.
At December 31, 1995, an aggregate of 763,970 shares of common stock was
reserved for issuance upon conversion of the 4% preferred stock (11,490 shares)
and $2.12 preference stock (752,480 shares). In addition, 1,481,449 shares of
common stock were reserved for issuance under the company's dividend
reinvestment and other corporate plans.
Each share of common stock outstanding has attached one preference share
purchase right. The rights, which are subject to certain anti-dilution
adjustments, become exercisable in certain circumstances, after which they will
entitle the holder to purchase 1/400 of a share of Series A Junior Participating
Preference Stock. If, after the rights become exercisable, the company is
involved in a merger or certain other transactions, the holder will be entitled
to buy stock in the surviving company at a 50 percent discount. These rights
expire on February 20, 1996, on which date one new preference share purchase
right will be issued with respect to each share of common stock outstanding as
of such date. Each new right will entitle each holder to purchase 1/100th of a
share of Series A Junior Participating Preference Stock for $195 and will expire
in February 2006. Following a merger or certain other transactions, the new
rights will entitle the holder to purchase common stock of the company or the
acquirers at a 50 percent discount.
8. Stock plans
Transactions under the company's stock plans are summarized below:
Price per
Common stock Shares share
- --------------------------------------------------------------------------------
January 1, 1994, shares reserved 2,292,027 $ 7-$43
Shares offered 1994 (price approximates
market value at date of grant) 1,009,102 $32-$40
Shares issued 1994 (519,765) $ 7-$38
Shares canceled 1994 (152,398) $30-$42
- --------------------------------------------------------------------------------
December 31, 1994, shares reserved 2,628,966 $10-$43
Shares offered 1995 (price approximates
market value at date of grant) 939,091 $31-$41
Shares issued 1995 (730,199) $10-$42
Shares canceled 1995 (124,229) $30-$42
- --------------------------------------------------------------------------------
December 31, 1995, shares reserved 2,713,629 $15-$43
================================================================================
Of the common shares reserved at December 31, 1995, options for 1,411,526 are
exercisable. At December 31, 1995, there remain 984,633 common shares for which
rights to purchase may be granted under the stock purchase plans. In addition,
stock-based awards representing up to 4,440,434 common shares may be granted
under other stock plans.
9. Taxes on income
Income from continuing operations before income taxes and the provision for
income taxes consist of the following:
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
Income from continuing operations
before income taxes:
U.S $ 566,806 $ 565,375 $ 437,167
Outside the U.S. 52,125 1,132 61,693
- --------------------------------------------------------------------------------
Total $ 618,931 $ 566,507 $ 498,860
================================================================================
Provision for income taxes:
U.S. federal:
Current $ (17,024) $ 37,644 $ 79,666
Deferred 168,297 123,037 53,497
- --------------------------------------------------------------------------------
151,273 160,681 133,163
- --------------------------------------------------------------------------------
U.S. state and local:
Current 13,691 12,856 20,065
Deferred 26,221 31,295 14,834
- --------------------------------------------------------------------------------
39,912 44,151 34,899
- --------------------------------------------------------------------------------
Outside the U.S.:
Current 28,233 19,342 40,311
Deferred (8,196) (6,097) (15,207)
- --------------------------------------------------------------------------------
20,037 13,245 25,104
- --------------------------------------------------------------------------------
Total current 24,900 69,842 140,042
Total deferred 186,322 148,235 53,124
- --------------------------------------------------------------------------------
Total $ 211,222 $ 218,077 $ 193,166
================================================================================
Including discontinued operations, current provisions for 1995 federal, state
and local and outside the U.S. would have been $87.6 million, $39.9 million and
$41.9 million, respectively. Total tax provision would have been $355.7 million.
Deferred tax liabilities and (assets)
- --------------------------------------------------------------------------------
December 31 1995 1994
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ 54,469 $ 58,441
Deferred profit (for tax purposes) on sales
to finance subsidiaries 342,435 316,630
Lease revenue and related depreciation 707,484 578,916
Other 77,362 46,667
- --------------------------------------------------------------------------------
Deferred tax liabilities 1,181,750 1,000,654
- --------------------------------------------------------------------------------
Deferred tax assets:
Nonpension postretirement benefits (112,201) (141,153)
Pension liability (32,219) (36,068)
Inventory and equipment capitalization (32,775) (30,095)
Net operating loss carryforwards (52,639) (43,528)
Alternative minimum tax (AMT)
credit carryforwards (57,194) (65,485)
Strategic focus reserve (4,212) (27,007)
Postemployment benefits (22,804) (34,320)
Other (108,503) (87,753)
Valuation allowance 48,692 37,532
- --------------------------------------------------------------------------------
Deferred tax assets (373,855) (427,877)
- --------------------------------------------------------------------------------
Net deferred taxes $ 807,895 $ 572,777
================================================================================
Net deferred taxes includes $195.1 million and $119.3 million for 1995 and
1994, respectively, of current deferred taxes which are included in income taxes
payable in the Consolidated Balance Sheet.
35
<PAGE>
The deferred tax asset for net operating losses and related valuation
allowance changed due to losses incurred during 1995 by certain foreign
subsidiaries. As of December 31, 1995 and 1994, approximately $113.2 million and
$101.4 million, respectively, of net operating loss carryforwards were available
to the company. Most of these losses, as well as the company's alternative
minimum tax credit, can be carried forward indefinitely.
In 1995 and 1994, the company recognized a reduction in tax expense resulting
from its investment in a life insurance program. In 1993, the company completed
a transaction whereby it contributed certain commercial aircraft, subject to
direct finance leases, to a partnership. The partnership transaction had the
effect of reducing the company's obligation for previously accrued deferred
taxes. The reduction in deferred taxes has been recognized as a reduction in
1993 income tax expense. Tax benefits from this transaction have also been
recognized in 1995 and 1994. Also in 1993, the company recorded additional tax
expense in the U.S. as a result of the Omnibus Budget Reconciliation Act of
1993.
A reconciliation of the U.S. federal statutory rate to the company's
effective tax rate for continuing operations follows:
Percent of pretax income 1995 1994 1993
- --------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% 35.0%
State and local income taxes 4.2 5.1 4.5
Rate adjustment for deferred taxes - - 3.2
Partnership tax benefits (.4) (.8) (2.3)
Life insurance investment (2.1) (.6) -
Other (2.6) (.2) (1.7)
- --------------------------------------------------------------------------------
Effective income tax rates 34.1% 38.5% 38.7%
================================================================================
The effective tax rate for discontinued operations differs from the statutory
rate due primarily to state and local income taxes and non-deductible goodwill.
10. Retirement plans
The company has several defined benefit and defined contribution pension plans
covering substantially all employees worldwide. Benefits are primarily based on
employees' compensation and years of service. Company contributions are
determined based on the funding requirements of U.S. federal and other
governmental laws and regulations.
Total ongoing pension expense amounted to $52.2 million in 1995, $50.2
million in 1994 and $46.4 million in 1993. Net pension expense for defined
benefit plans for 1995, 1994 and 1993 included the following components:
<TABLE>
<CAPTION>
United States Foreign
----------------------------------- ------------------------------------
1995 1994 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during period $ 33,061 $ 35,908 $ 30,797 $ 5,952 $ 5,975 $ 5,971
Interest cost on projected benefit obligations 68,027 65,745 62,241 10,317 10,090 9,163
Actual return on assets (124,866) 6,880 (85,971) (17,594) (10,681) (31,494)
Net amortization and (deferral) 58,831 (67,094) 30,804 5,237 (1,502) 19,896
- ------------------------------------------------------------------------------------------------------------------------------------
Ongoing net periodic defined benefit pension expense 35,053 41,439 37,871 3,912 3,882 3,536
Curtailment (gain) loss charge(a) (13,974) - - 2,921 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total pension expense $ 21,079 $ 41,439 $ 37,871 $ 6,833 $ 3,882 $ 3,536
====================================================================================================================================
</TABLE>
(a) Pitney Bowes merged the pension plans of Monarch Marking Systems, Inc. and
Dictaphone Corporation into the Pitney Bowes Retirement Plan. Benefits
ceased to be accrued for active employees of Monarch and Dictaphone as of
the date of the sales resulting in a net curtailment gain of approximately
$14.0 million. There was a $2.9 million curtailment charge to the Pitney
Bowes, Ltd. pension plan due primarily to actions taken by Pitney Bowes,
Ltd.
The funded status at December 31, 1995 and 1994 for the company's defined
benefit plans was:
<TABLE>
<CAPTION>
United States Foreign
------------------------ ------------------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $722,282 $526,832 $103,296 $107,064
===========================================================================================================================
Accumulated benefit obligations $802,299 $581,639 $103,459 $107,283
===========================================================================================================================
Projected benefit obligations $946,420 $798,933 $130,590 $128,942
- ---------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value, primarily stocks and bonds, adjusted by: 771,000 670,182 141,417 137,494
Unrecognized net loss (gain) 86,281 26,191 (12,034) (6,997)
Unrecognized net asset (15,815) (19,906) (13,828) (17,877)
Unamortized prior service costs from plan amendments 22,246 27,686 7,605 9,928
- ---------------------------------------------------------------------------------------------------------------------------
863,712 704,153 123,160 122,548
- ---------------------------------------------------------------------------------------------------------------------------
Net pension liability $ 82,708 $ 94,780 $ 7,430 $ 6,394
===========================================================================================================================
Assumptions for defined benefit plans:(a)
Discount rate 7.25% 8.75% 7.0%-8.5% 6.7%- 9.0%
Rate of increase in future compensation levels 4.25% 5.75% 3.0%-5.5% 3.5%- 6.5%
Expected long-term rate of return on plan assets 9.50% 9.50% 8.0%-9.5% 9.0%-10.0%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Pension costs are determined using assumptions as of the beginning of the
year while the funded status of the plans is determined using assumptions as
of the end of the year.
36
<PAGE>
11. Nonpension postretirement
and postemployment benefits
Net nonpension postretirement benefit costs consisted of the following
components:
<TABLE>
<CAPTION>
Years ended December 31 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 8,688 $ 10,140 $ 9,249
Interest cost on accumulated postretirement
benefit obligations 18,917 19,379 21,146
Net (deferral) and amortization (17,920) (19,143) (18,647)
- ------------------------------------------------------------------------------------------
Net periodic postretirement benefit costs $ 9,685 $ 10,376 $ 11,748
==========================================================================================
</TABLE>
The company's nonpension postretirement benefit plans are not funded. The
status of the plans was as follows:
December 31 1995 1994
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligations:
Retirees and dependents $ 186,324 $ 165,397
Fully eligible active plan participants 52,199 38,792
Other active plan participants 63,813 63,751
Unrecognized net (loss) gain (4,392) 16,179
Unrecognized prior service cost 53,450 81,650
- --------------------------------------------------------------------------------
Accrued nonpension postretirement benefits $ 351,394 $ 365,769
================================================================================
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligations was 9.25% and 11.75% in 1995 and 1994,
respectively. This was assumed to gradually decline to 3.75% and 5.75% by the
year 2000 and remaining at that level thereafter for 1995 and 1994,
respectively. A one-percentage-point increase in the assumed health care cost
trend rate would increase the year-end accumulated postretirement benefit
obligations by approximately $15 million as of December 31, 1995 and the net
periodic postretirement health care cost by $1.2 million in 1995.
The assumed weighted average discount rate used in determining the
accumulated postretirement benefit obligations was 7.25% and 8.75% in 1995 and
1994, respectively.
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. The effect of adopting FAS 112 was a one-time non-cash,
after-tax charge of $119.5 million (net of approximately $80.5 million of income
taxes), or $.76 per share.
In 1994, as part of the company's employee work-life initiatives, employee
input was actively sought about benefits and it was concluded that employees
prefer benefits more closely related to their changing work-life needs. As a
result, the company significantly reduced or eliminated certain postemployment
benefits, specifically service-related company-subsidized life insurance, salary
continuance and medical benefits, resulting in an after-tax credit to income of
$70.9 million (net of approximately $47.7 million of income taxes). As a further
outgrowth of this study, the company also instituted, effective January 1, 1995,
certain enhancements to its deferred investment plan, including an increase in
the company's match of employee contributions.
12. Acquisitions and discontinued operations
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 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. 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. The sales resulted in
gains approximating $155 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:
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
Revenue $306,462 $552,255 $542,495
================================================================================
Income before income taxes $ 36,007 $ 74,843 $ 75,947
Provision for income taxes 14,524 29,682 28,452
- --------------------------------------------------------------------------------
Income from discontinued
operations $ 21,483 $ 45,161 $ 47,495
================================================================================
In October 1993, the company acquired all outstanding shares of Ameriscribe
Corporation (Ameriscribe), a nationwide provider of on-site reprographics,
mailroom and other office services, in exchange for approximately $83 million of
Pitney Bowes common stock, plus approximately $5 million of additional shares
for outstanding Ameriscribe options. The company consolidated this unit with its
facilities management business operated through its wholly-owned subsidiary,
Pitney Bowes Management Services, Inc. The transaction was accounted for by the
purchase method and the proforma effect on the company's results was not
significant.
13. Nonrecurring items, net
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. Accordingly, in the third quarter of 1994 the
company recorded a $93.2 million charge to income to cover the costs of such
actions. The charge anticipated $61 million of severance and benefit costs for
work force reductions, $22 million of asset write downs and $10 million of other
exit costs. As of December 31, 1995, the company has made severance and benefit
payments of approximately $49 million, the majority of which was expended in
1995, to nearly 1,500 employees separated under these strategic focus
initiatives.
The phase-out of older product lines, introduction of new, advanced products
and increased need for higher employee skill levels to deliver and service these
products will ultimately require a work force reduction of approximately 1,700
employees worldwide, and the future hiring of approximately 450 new employees
with these requisite enhanced skills upon completion of these strategic focus
initiatives. As of December 31, 1995, approximately 400 employees with the
requisite skills have been hired to produce and service advanced product
offerings. All costs associated with hiring of new employees were excluded from
the charge and have been and will continue to be recognized appropriately in the
period incurred.
Current and future advanced 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. These
disciplines anticipated a work force reduction of more than 850 employees with
related severance and benefit costs of $27 million. As of December 31, 1995, the
actions taken by the company relative to this
37
<PAGE>
portion of the initiative have resulted in cash expenditures of approximately
$21 million and anticipated 1996 expenditures of approximately $6 million. Other
anticipated strategic actions included reengineering and streamlining of order
flow, logistics and other administrative processes in the U.S., Europe and the
Asia Pacific region which anticipated an additional work force reduction of more
than 800 employees with related severance and benefit costs of $22.7 million. As
of December 31, 1995, the actions taken by the company relative to this portion
of the initiative have resulted in cash expenditures of approximately $17
million, an additional accrual of approximately $5 million in separation and
benefit costs and anticipated 1996 expenditures of approximately $10 million.
The additional accrual has been recorded in selling, service and administrative
expense in the Consolidated Statement of Income. The decisions to phase out
non-mailing products in Germany and the cessation of further development and
marketing of shipping products which could not be cost-effectively upgraded to
new technologies accounted for the remaining work force reductions and related
severance and benefit costs. As of December 31, 1995, the actions taken by the
company relative to this portion of the initiative have resulted in cash
expenditures of approximately $9 million and anticipated 1996 expenditures of
approximately $2 million.
As noted above, included in the plan to refine the strategic business focus
of the company were anticipated asset write downs of $22 million and $10 million
of other exit costs for certain additional actions. Consistent with a refinement
of focus on core businesses, these actions include phasing-out non-mailing
products in Germany. This decision anticipated the write down of inventories,
lease and rental contracts and other assets to their net realizable value for
which $7.4 million was provided. The decision to cease development and marketing
of certain shipping products as noted above anticipated further inventory and
other asset write-offs of $8.6 million. The company decided to transition a
software-based business with its own product offerings to a limited product
development and marketing support function. As a result, $6.3 million of
goodwill related to the acquisition of this business was written-off. The $10
million of other exit costs are primarily due to the adoption of a centralized
organizational structure in the European financial services businesses that
anticipated the early termination of a facility lease. As of December 31, 1995,
approximately $19 million in assets have been written off, $3 million of certain
other exit costs have been incurred, approximately $2 million of the original
anticipated write down associated with the phase-out of non-mailing products in
Germany has been reclassified as other exit costs within the reserve and $5
million originally provided for the early termination of a facility lease has
been reversed through selling, service and administration expense in the
Consolidated Statement of Income. Anticipated 1996 expenditures approximate $5
million, with the majority to be cash expenditures.
Benefits from the strategic focus initiatives (principally reduced employee
expense) will be offset, in part, by increased hiring and training expenses to
obtain employees with requisite skills.
14. Commitments, contingencies
and regulatory matters
At December 31, 1995, the company's finance subsidiaries had unfunded
commitments of $1.1 million to extend credit to customers. The company evaluates
each customer's credit worthiness on a case-by-case basis. Upon extension of
credit, the amount and type of collateral obtained, if deemed necessary by the
company, is based on management's credit assessment of the customer. Fees
received under the agreements are recognized over the commitment period. The
maximum risk of loss arises from the possible non-performance of the customer to
meet the terms of the credit agreement. As part of the company's review of its
exposure to risk, adequate provisions are made for finance assets which may be
uncollectible.
The company is currently a defendant in a number of lawsuits arising in the
ordinary course of business, 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 U.S.
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.
The company is subject to federal, state and local laws and regulations
concerning the environment, and is currently participating in administrative or
court proceedings, which are at various stages of activity, as a participant in
various groups of potentially responsible parties. These proceedings are at
various stages of activity, and it is impossible to estimate with any certainty
the total cost of remediation, the timing and extent of remedial actions which
may be required by governmental authorities, and the amount of the liability, if
any, of the company. If and when it is possible to make a reasonable estimate of
the company's liability, if any, with respect to such a matter, a provision
would be made as appropriate. Based on facts presently known to it, the company
does not believe that the outcome of these proceedings will have a material
adverse effect on its financial condition.
On June 9, 1995, the United States Postal Service (U.S.P.S.) issued final
regulations addressing the manufacture, distribution and use of postage meters.
The regulations cover four general categories: meter security, administrative
controls, Computerized Meter Resetting Systems (C.M.R.S.) and other issues. In
general, the regulations impose reporting and performance obligations on meter
manufacturers, prescribe potential administrative sanctions for failure to meet
these obligations and require a restructuring of the fund management system of
C.M.R.S., such as the company's Postage by Phone(R) System, to give the U.S.P.S.
more direct control over meter licensee deposits. The company is working with
the U.S.P.S. to ensure that the implementation of these regulations provides
mailing customers and the U.S.P.S. with the intended benefits, and that Pitney
Bowes also benefits. The company believes that the financial impact to the
company resulting from implementation of these regulations will not be material.
Pitney Bowes is also currently working with the U.S.P.S. to devise a
multi-year migration schedule to phase out mechanical meters and replace them
with electronic meters in a manner that is most beneficial and least disruptive
to the operations of the company's customers. This is consistent with the
company's strategy of introducing new technology into the market place to add
value to customer operations and meet postal needs. This strategy and the
company's long-term focus has resulted in an increase in the percentage of the
electronic meter base in the U.S. from six percent of the overall base in 1986
to nearly 50 percent of the installed meter base in 1995. Until such time as a
final meter migration plan is promulgated, the financial impact, if any, on the
company cannot be determined; but, it is currently the belief of the company
that the migration plan will not cause a material adverse financial impact.
15. Leases
In addition to factory and office facilities owned, the company leases similar
properties, as well as sales and service offices, equipment and other
properties, generally under long-term lease agreements extending from three to
25 years. Certain of these leases have been capitalized at the present value of
the net lease payments at inception. Amounts included under liabilities
represent the present value of remaining lease payments.
38
<PAGE>
Future minimum lease payments under both capital and operating leases as of
December 31, 1995 are as follows:
Capital Operating
Years ending December 31 leases leases
- --------------------------------------------------------------------------------
1996 $ 3,948 $ 72,840
1997 3,636 49,616
1998 3,424 36,725
1999 3,415 25,129
2000 3,057 18,005
Later years 9,862 55,083
- --------------------------------------------------------------------------------
Total minimum lease payments 27,342 $257,398
========
Less amount representing interest (11,376)
- -------------------------------------------------------------
Present value of net
minimum lease payments $ 15,966
=============================================================
Rental expense was $129.3 million, $127.0 million and $101.6 million in 1995,
1994 and 1993, respectively.
16. Financial services
The company has several consolidated finance operations which are engaged in
lease financing of the company's products in the U.S., Canada, the U.K.,
Germany, France, Norway, Ireland and Australia as well as other commercial and
industrial transactions in the U.S. In 1993, the company decided to phase out
the business of financing non-Pitney Bowes equipment outside of the U.S.
Condensed financial data for the consolidated finance operations follows:
Condensed summary of operations
Years ended December 31 1995 1994* 1993*
- --------------------------------------------------------------------------------
Revenue $ 713,909 $ 659,619 $ 597,624
- --------------------------------------------------------------------------------
Costs and expenses 238,457 256,638 219,148
Interest, net 217,499 175,987 173,115
Nonrecurring items, net - 6,096 -
- --------------------------------------------------------------------------------
Total expenses 455,956 438,721 392,263
- --------------------------------------------------------------------------------
Income before income taxes 257,953 220,898 205,361
Provision for income taxes 81,422 70,398 73,688
- --------------------------------------------------------------------------------
Income before effect of a change
in accounting for
postemployment benefits 176,531 150,500 131,673
Effect of a change in accounting
for postemployment benefits - (2,820) -
- --------------------------------------------------------------------------------
Net income $ 176,531 $ 147,680 $ 131,673
================================================================================
Condensed balance sheet at December 31 1995 1994*
- --------------------------------------------------------------------------------
Cash and cash equivalents $ 11,486 $ 15,114
Finance receivables, net 1,208,532 1,050,090
Other current assets and prepayments 40,170 42,230
- --------------------------------------------------------------------------------
Total current assets 1,260,188 1,107,434
Long-term finance receivables, net 3,390,597 3,086,401
Investment in leveraged leases 570,008 481,308
Other assets 162,347 151,609
- --------------------------------------------------------------------------------
Total assets $5,383,140 $4,826,752
================================================================================
Accounts payable and accrued liabilities $ 180,243 $ 332,408
Income taxes payable 128,461 104,662
Notes payable and current portion
of long-term obligations 2,398,051 2,199,843
- --------------------------------------------------------------------------------
Total current liabilities 2,706,755 2,636,913
Deferred taxes on income 334,716 263,780
Long-term debt 1,272,700 973,222
Other noncurrent liabilities 4,956 4,983
- --------------------------------------------------------------------------------
Total liabilities 4,319,127 3,878,898
- --------------------------------------------------------------------------------
Equity 1,064,013 947,854
- --------------------------------------------------------------------------------
Total liabilities and equity $5,383,140 $4,826,752
================================================================================
* Certain prior year amounts have been reclassified to conform with the 1995
presentation.
Finance receivables are generally due in monthly, quarterly or semi-annual
installments over periods ranging from three to seven years. In addition, 20
percent of the company's net finance assets represent secured commercial and
private jet aircraft transactions with lease terms ranging from five to 25
years. The company considers its credit risk for these leases to be minimal
since all aircraft lessees are making payments in accordance with lease
agreements. The company believes any potential exposure in aircraft investment
is mitigated by the value of the collateral as the company retains a security
interest in the leased aircraft.
Maturities of gross finance receivables and notes payable for the finance
operations are as follows:
Gross finance Notes payable and
Years ending December 31 receivables subordinated debt
- --------------------------------------------------------------------------------
1996 $1,628,934 $2,398,051
1997 1,190,451 251,406
1998 844,774 130,483
1999 541,317 3,710
2000 316,949 62,228
Thereafter 961,270 824,873
- --------------------------------------------------------------------------------
Total $5,483,695 $3,670,751
================================================================================
Finance operations' net purchases of Pitney Bowes equipment amounted to
$618.6 million, $617.4 million and $585.1 million in 1995, 1994 and 1993,
respectively.
The components of net finance receivables were as follows:
December 31 1995 1994
- --------------------------------------------------------------------------------
Gross finance receivables $ 5,483,695 $ 5,012,175
Residual valuation 680,055 599,430
Initial direct cost deferred 94,571 76,323
Allowance for credit losses (113,506) (113,091)
Unearned income (1,545,686) (1,438,346)
- --------------------------------------------------------------------------------
Net finance receivables $ 4,599,129 $ 4,136,491
================================================================================
39
<PAGE>
The company's net investment in leveraged leases is composed of the following
elements:
December 31 1995 1994
- --------------------------------------------------------------------------------
Net rent receivable $ 532,153 $ 479,027
Unguaranteed residual valuation 589,520 550,516
Unearned income (551,665) (548,235)
- --------------------------------------------------------------------------------
Investment in leveraged leases 570,008 481,308
Deferred taxes arising from
leveraged leases (216,873) (169,537)
- --------------------------------------------------------------------------------
Net investment in leveraged leases $ 353,135 $ 311,771
================================================================================
Following is a summary of the components of income from leveraged leases:
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
Pretax leveraged lease income $11,667 $ 6,694 $ 3,785
Income tax effect 4,408 5,050 5,381
- --------------------------------------------------------------------------------
Income from leveraged leases $16,075 $11,744 $ 9,166
================================================================================
Leveraged lease assets acquired by the company are financed primarily through
nonrecourse loans from third-party debt participants. These loans are secured by
the lessee's rental obligations and the leased property. Net rents receivable
represent gross rents less the principal and interest on the nonrecourse debt
obligations. Unguaranteed residual values are principally based on independent
appraisals of the values of leased assets remaining at the expiration of the
lease.
Leveraged lease investments totaling $265.2 million are related to commercial
real estate facilities, with original lease terms ranging from 5 to 25 years.
Also included are ten aircraft transactions with major commercial airlines, with
a total investment of $266.8 million and with original lease terms ranging from
22 to 25 years and two transactions involving locomotives with a total
investment of $38.0 million with an original lease term ranging from 25 to 38
years.
The company has sold net finance receivables with varying amounts of recourse
in privately-placed transactions with third-party investors. The uncollected
principal balance of receivables sold and residual guarantee contracts totaled
$263.3 million and $275.2 million at December 31, 1995 and 1994, respectively.
The maximum risk of loss arises from the possible non-performance of lessees to
meet the terms of their contracts and from changes in the value of the
underlying equipment. Conversely, these contracts are supported by the
underlying equipment value and credit worthiness of customers. As part of the
review of its exposure to risk, the company believes adequate provisions have
been made for sold receivables which may be uncollectible.
The company has invested in various types of equipment under operating
leases; the net investment at December 31, 1995 and 1994 was not significant.
17. Business segment information
For a description of the company's segments and financial information relating
to revenue, operating profit and identifiable assets by business segment for the
years 1995, 1994 and 1993, see "Segments" on page 20. That information is
incorporated herein by reference. The information set forth below should be read
in conjunction with such information. Operating profit of each segment is
determined by deducting from revenue the related costs and operating expenses
directly attributable to the segment. Segment operating profit excludes general
corporate expenses, which amounted to $63.5 million in 1995, $71.7 million in
1994 and $74.4 million in 1993, income taxes and net interest other than that
related to the financial services businesses. Additional segment information is
as follows:
Years ended December 31 1995 1994 1993
- --------------------------------------------------------------------------------
Depreciation and
amortization:
Business equipment $223,732 $220,848 $210,682
Business services 22,948 18,418 13,133
Commercial and
industrial financing 14,230 12,454 9,625
- --------------------------------------------------------------------------------
Total $260,910 $251,720 $233,440
================================================================================
Net additions to property,
plant and equipment
and rental equipment
and related inventories:
Business equipment $255,852 $249,892 $243,275
Business services 7,161 1,306 4,089
Commercial and
industrial financing 35,654 42,811 26,613
- --------------------------------------------------------------------------------
Total $298,667 $294,009 $273,977
================================================================================
Identifiable assets are those used in the company's operations in each
segment and exclude cash and cash equivalents and short-term investments.
Identifiable assets of geographic areas include intercompany profits on
inventory and rental equipment transferred between segments and intercompany
accounts. A reconciliation of identifiable assets to consolidated assets is as
follows:
December 31 1995 1994
- --------------------------------------------------------------------------------
Identifiable assets by geographic area $ 7,756,187 $ 7,081,244
Inter-area profits (41,507) (29,772)
Intercompany accounts (91,025) (176,874)
- --------------------------------------------------------------------------------
Identifiable assets by industry segment 7,623,655 6,874,598
Cash and cash equivalents and
short-term investments 88,553 75,745
General corporate assets 132,440 142,928
Discontinued operations - 306,449
- --------------------------------------------------------------------------------
Consolidated assets $ 7,844,648 $ 7,399,720
================================================================================
18. Fair value of financial instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash, cash equivalents, short-term investments, accounts receivable, accounts
payable and notes payable. The carrying amounts approximate fair value because
of the short maturity of these instruments.
Investment securities. The fair value of investment securities is estimated
based on quoted market prices, dealer quotes and other estimates.
Loan receivables. The fair value of loan receivables is estimated based on
quoted market prices, dealer quotes or by discounting the future cash flows
using current interest rates at which similar loans would be made to borrowers
with similar credit ratings.
Long-term debt. The fair value of long-term debt is estimated based on quoted
dealer prices for the same or similar issues.
Interest rate swap and swap option agreements and foreign currency exchange
contracts. The fair values of interest rate swaps, swap options and foreign
currency exchange contracts are obtained from dealer quotes. These values
represent the estimated amount the company would receive or pay to terminate
agreements taking
40
<PAGE>
into consideration current interest rates, the credit worthiness of the
counterparties and current foreign currency exchange rates.
Residual and conditional commitment guarantee contracts. The fair value of
residual and conditional commitment guarantee contracts is based on the
projected fair market value of the collateral as compared to the guaranteed
amount plus a commitment fee generally required by the counterparty assuming the
guarantee.
Commitments to extend credit. The fair value of commitments to extend credit is
estimated by comparing current market conditions taking into account the
remaining terms of existing agreements and present credit worthiness of the
counterparties.
Transfer of receivables with recourse. The fair value of the recourse liability
represents the estimate of expected future losses. The company periodically
evaluates the adequacy of reserves and estimates of expected losses, if the
resulting evaluation of expected losses differs from the actual reserve,
adjustments are made to the reserve.
The estimated fair value of the company's financial instruments is as
follows:
- --------------------------------------------------------------------------------
Carrying* Fair
December 31, 1995 value* value
- --------------------------------------------------------------------------------
Investment securities $1,797 $1,813
Loan receivables $280,013 $284,245
Long-term debt $(1,080,381) $(1,174,836)
Interest rate swaps $(1,147) $(42,318)
Foreign currency exchange contracts $(499) $(850)
Residual and conditional commitment
guarantee contracts $(4,669) $(5,782)
Commitments to extend credit - $(165)
Transfer of receivables with recourse $(17,349) $(17,349)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Carrying* Fair
December 31, 1994 value* value
- --------------------------------------------------------------------------------
Investment securities $7,490 $7,553
Loan receivables $265,795 $268,342
Long-term debt $(860,295) $(855,670)
Interest rate swaps $(3,180) $(17,855)
Foreign currency exchange contracts $704 $329
Residual and conditional commitment
guarantee contracts $(3,870) $(3,798)
Commitments to extend credit - $(450)
Transfer of receivables with recourse $(31,556) $(31,556)
- --------------------------------------------------------------------------------
* Carrying value includes accrued interest and deferred fee income.
19. Quarterly financial data (unaudited)
Summarized quarterly financial data (in millions of dollars, except for per
share data) for 1995 and 1994 follows:
Three Months Ended
- --------------------------------------------------------------------------------
1995 March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------
Total revenue $839 $863 $876 $977
Cost of sales and rentals
and financing $319 $340 $348 $398
Income from
continuing operations $96 $98 $101 $113
Discontinued operations 10 11 154 -
- --------------------------------------------------------------------------------
Net income $106 $109 $255 $113
================================================================================
Income per common and
common equivalent share:
Continuing operations $.63 $.65 $ .66 $.74
Discontinued operations .07 .07 1.01 -
- --------------------------------------------------------------------------------
Net income $.70 $.72 $1.67 $.74
================================================================================
Three Months Ended
- --------------------------------------------------------------------------------
1994 March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------
Total revenue $745 $818 $806 $902
Cost of sales and rentals
and financing $286 $330 $312 $366
Income from
continuing operations $ 82 $ 87 $ 85 $ 94
Discontinued operations 10 12 11 13
Effect of a change in
accounting for
postemployment benefits (120) - - -
- --------------------------------------------------------------------------------
Net income $(28) $ 99 $ 96 $107
================================================================================
Income per common and common
equivalent share:
Continuing operations $.51 $.55 $.54 $.61
Discontinued operations .07 .07 .07 .08
Effect of a change in
accounting for post-
employment benefits (.75) -- -- --
- --------------------------------------------------------------------------------
Net income $(.17) $.62 $.61 $.69
================================================================================
Report of Independent Accountants
Price Waterhouse LLP LOGOMARK
To the Stockholders and Board of Directors of Pitney Bowes Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Pitney Bowes
Inc. and its subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 11 to the consolidated financial statements, the company
adopted a new accounting standard for postemployment benefits in 1994.
SIGNATURE HERE
Stamford, Connecticut
January 29, 1996
41
<PAGE>
Stock Exchanges
Pitney Bowes common stock is traded under the symbol "PBI." The principal
market it is listed on is the New York Stock Exchange. The stock is also
traded on the Chicago, Philadelphia, Boston, Pacific and Cincinnati stock
exchanges.
Stock Information
<TABLE>
DIVIDENDS PER COMMON SHARE
<CAPTION>
Quarter 1995 1994
- ------------------------------------------------
<S> <C> <C>
First $ .30 $ .26
Second .30 .26
Third .30 .26
Fourth .30 .26
--------------
Total $1.20 $1.04
--------------
QUARTERLY PRICE RANGES OF COMMON STOCK
<CAPTION>
1995
-------------
Quarter High Low
- ------------------------------------------------
<S> <C> <C>
First 37 30
Second 40 34 7/8
Third 43 3/8 38 1/8
Fourth 48 1/4 40 3/4
<CAPTION>
1994
-------------
Quarter High Low
- ------------------------------------------------
<S> <C> <C>
First 46 3/8 39 7/8
Second 42 3/8 37
Third 39 1/4 34 1/2
Fourth 36 1/2 29 1/4
</TABLE>
42
<PAGE>
EXHIBIT (vi)
Page 1 of 3
PITNEY BOWES INC.
SUBSIDIARIES OF THE REGISTRANT
The Registrant, Pitney Bowes Inc., a Delaware Corporation, has no parent.
The following are subsidiaries of the Registrant
(as of December 31, 1995)
Country or
state of
Company name incorporation
Adrema Leasing Corporation Delaware
Adrema Maschinen und Auto-Leasing GmbH Germany
Adrema Maschinenbau Inc. Delaware
Adrema Mobilien Leasing GmbH Germany
Andeen Enterprises, Inc. Panama
Artec International Corporation California
Atlantic Mortgage & Investment Corporation Florida
B. Williams Holding Corp. Delaware
Cascade Microfilm Systems, Inc. California
Chas. P. Young Health Fitness & Management, Inc. New York
Colonial Pacific Leasing Corporation Massachusetts
Datarite Systems Ltd. England
Dodwell Pitney Bowes K.K. Japan
ECL Finance Company, N.V. Netherlands
Elmcroft Road Realty Corporation Connecticut
Financial Structures Limited Bermuda
FSL Valuation Services Inc. Connecticut
Harlow Aircraft Inc. Delaware
Informatech California
La Agricultora Ecuatoriana S.A. Ecuador
Norlin Australia Investment Pty. Ltd. Australia
Norlin Industries Limited Canada
Norlin Music (U.K.) Ltd. England
PB Forms, Inc. Nebraska
PB Funding Corporation Delaware
PB Global Holdings Inc. Connecticut
PB Global Holdings II Inc. Connecticut
PB Global Holdings III Inc. Connecticut
PB Global Holdings IV Inc. Connecticut
PB Leasing Corporation Delaware
PB Leasing International Corporation Delaware
PB Leasing Services Inc. Nevada
PBA Foreign Sales Corporation Barbados
PB World Trade Corporation (Disc) Delaware
PB CFSC I Inc. Virgin Islands
PBL Holdings Inc. Nevada
PB Nikko FSC Ltd. Bermuda
PB Nihon FSC Ltd. Bermuda
Pitney Bowes AG Switzerland
Pitney Bowes Australia Pty. Limited Australia
<PAGE>
EXHIBIT (vi)
Page 2 of 3
SUBSIDIARIES OF THE REGISTRANT (continued)
Country or
state of
Company name incorporation
Pitney Bowes Australia FAS Pty. Ltd. Australia
Pitney Bowes Australia Funding Pty. Limited Australia
Pitney Bowes Austria Ges.m.b.H Austria
Pitney Bowes of Canada Ltd. Canada
Pitney Bowes Canada Funding Limited Canada
Pitney Bowes Canada Holding Ltd. Canada
Pitney Bowes China Inc. Delaware
Pitney Bowes Credit Australia Limited Australia
Pitney Bowes Credit Corporation Delaware
Pitney Bowes Data Systems, Ltd. England
Pitney Bowes de Mexico, S.A. de C.V. Mexico
Pitney Bowes Deutschland GmbH Germany
Pitney Bowes Espana, S.A. Spain
Pitney Bowes Finance S.A. France
Pitney Bowes Finans Norway AS Norway
Pitney Bowes Finance PLC England
Pitney Bowes Finance Ireland Limited Ireland
Pitney Bowes France S.A. France
Pitney Bowes Holdings Ltd. England
Pitney Bowes Holding SNC France
Pitney Bowes Hong Kong Inc. Delaware
Pitney Bowes Insurance Agency, Inc. Connecticut
Pitney Bowes International Ireland
Pitney Bowes International Holdings, Inc. Delaware
Pitney Bowes Italia S.r.l. Italy
Pitney Bowes (Ireland) Limited Ireland
Pitney Bowes Leasing Ltd. Canada
Pitney Bowes Macau Limited Macau
Pitney Bowes Management Services, Inc. Delaware
Pitney Bowes Management Services Canada, Inc. Canada
Pitney Bowes Management Services Limited England
Pitney Bowes Marking Systems Ltd. Delaware
Pitney Bowes Oy Finland
Pitney Bowes Limited England
Pitney Bowes Properties Inc. Connecticut
Pitney Bowes Real Estate Financing Corporation Delaware
Pitney Bowes Servicios, S.A. de C.V. Mexico
Pitney Bowes Shelton Realty Inc. Connecticut
Pitney Bowes Svenska Aktiebolag Sweden
Pitney Bowes World Trade Corporation (FSC) Virgin Islands
PREFCO I Inc. Delaware
PREFCO I LP Inc. Delaware
PREFCO II Inc. Delaware
PREFCO II LP Inc. Delaware
PREFCO III Inc. Delaware
PREFCO III LP Inc. Delaware
PREFCO IV Inc. Delaware
PREFCO IV LP Inc. Delaware
<PAGE>
EXHIBIT (vi)
Page 3 of 3
SUBSIDIARIES OF THE REGISTRANT (continued)
Country or
state of
Company name incorporation
PREFCO V Inc. Delaware
PREFCO V LP Inc. Delaware
PREFCO VI Inc. Delaware
PREFCO VI LP Inc. Delaware
PREFCO VII Inc. Delaware
PREFCO VII LP Inc. Delaware
PREFCO VIII Inc. Delaware
PREFCO VIII LP Inc. Delaware
PREFCO IX Inc. Delaware
PREFCO IX LP Inc. Delaware
PREFCO X Inc. Delaware
PREFCO X LP Inc. Delaware
PREFCO XI Inc. Delaware
PREFCO XI LP Inc. Delaware
PREFCO XII Inc. Delaware
PREFCO XII LP Inc. Delaware
PREFCO XIII Inc. Delaware
PREFCO XIII LP Inc. Delaware
PREFCO XIV Inc. Delaware
PREFCO XIV LP Inc. Delaware
PREFCO XV Inc. Delaware
PREFCO XV LP Inc. Delaware
PREFCO XVI Inc. Delaware
PREFCO XVI LP Inc. Delaware
PREFCO XVII Inc. Delaware
PREFCO XVII LP Inc. Delaware
PREFCO XVIII Inc. Delaware
PREFCO XVIII LP Inc. Delaware
RE Properties Management Corporation Delaware
Remington Customer Finance Pty. Limited Australia
Remington (PNG) Pty. Limited Papua New Guinea
Remington Pty. Limited Australia
ROM Holdings Pty. Limited Australia
ROM Securities Pty. Limited Australia
Sales and Service Training Center Inc. Georgia
TECO/Pitney Bowes Co., Ltd. (50% owned) Taiwan
Time-Sensitive Delivery Guide Inc. Delaware
Towers FSC, Ltd. Bermuda
Universal Postal Frankers Ltd. England
Walnut Street Corp. Delaware
1136 Corporation Delaware
75 V Corp. Delaware
<PAGE>
EXHIBIT (vii)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on:
Form Reference
Form S-8 No. 33-5291
Form S-8 No. 33-4549
Form S-8 No. 33-22238
Form S-8 No. 33-5765
Form S-8 No. 33-41182
Form S-3 No. 33-5289
Form S-3 No. 33-5290
Form S-3 No. 33-18280
Form S-3 No. 33-25730
Form S-3 No. 33-21723
Form S-3 No. 33-27244
Form S-3 No. 33-33948
of Pitney Bowes Inc. of our report dated January 29, 1996 appearing on page
41 of the Pitney Bowes Inc. 1995 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference in the aforementioned Registration Statements of
our report on the financial statement schedule, which appears in this Form
10-K.
Price Waterhouse LLP
Stamford, Connecticut
March 27, 1996
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 85,352
<SECURITIES> 3,201
<RECEIVABLES> 399,777
<ALLOWANCES> 13,050
<INVENTORY> 311,271
<CURRENT-ASSETS> 2,101,097
<PP&E> 1,072,229
<DEPRECIATION> 577,228
<TOTAL-ASSETS> 7,844,648
<CURRENT-LIABILITIES> 3,501,576
<BONDS> 1,048,515
<COMMON> 323,338
200,000
2,594
<OTHER-SE> 1,745,168
<TOTAL-LIABILITY-AND-EQUITY> 7,844,648
<SALES> 1,546,393
<TOTAL-REVENUES> 3,554,754
<CGS> 941,124
<TOTAL-COSTS> 1,404,725
<OTHER-EXPENSES> 1,312,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218,627
<INCOME-PRETAX> 618,931
<INCOME-TAX> 211,222
<INCOME-CONTINUING> 407,709
<DISCONTINUED> 175,431
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 583,140
<EPS-PRIMARY> 3.83
<EPS-DILUTED> 3.83
</TABLE>
