UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
- ---
For the quarterly period ended March 31, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 1-3579
PITNEY BOWES INC.
State of Incorporation IRS Employer Identification No.
Delaware 06-0495050
World Headquarters
Stamford, Connecticut 06926-0700
Telephone Number: (203) 356-5000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No_____
Number of shares of common stock, $1 par value, outstanding as of April 30, 1998
is 273,568,575.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 2
Pitney Bowes Inc.
Index
-----------------
Page Number
-----------
Part I - Financial Information
Item 1: Financial Statements
Consolidated Statements of Income - Three Months
Ended March 31, 1998 and 1997........................... 3
Consolidated Balance Sheets - March 31, 1998
and December 31, 1997................................... 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997.............. 5
Notes to Consolidated Financial Statements................. 6 - 8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 9 - 14
Part II - Other Information
Item 1: Legal Proceedings.................................... 15
Item 5: Other Information.................................... 15
Item 6: Exhibits and Reports on Form 8-K..................... 16
Signatures....................................................... 17
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 3
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
---------------------------------
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
------------ ------------
Revenue from:
<S> <C> <C>
Sales.................................... $ 450,425 $ 417,822
Rentals and financing.................... 438,160 424,562
Support services......................... 122,989 118,986
------------ ------------
Total revenue.......................... 1,011,574 961,370
------------ ------------
Costs and expenses:
Cost of sales............................ 275,000 253,808
Cost of rentals and financing............ 138,379 127,674
Selling, service and administrative...... 330,982 326,109
Research and development................. 23,631 20,648
Interest, net............................ 45,585 49,496
------------ ------------
Total costs and expenses............... 813,577 777,735
------------ ------------
Income before income taxes................. 197,997 183,635
Provision for income taxes................. 68,310 63,690
------------ ------------
Net income................................. $ 129,687 $ 119,945
============ ============
Basic earnings per share .................. $ .46 $ .41
============ ============
Diluted earnings per share ................ $ .46 $ .40
============ ============
Dividends declared per share of
common stock............................. $ .225 $ .20
============ ============
Ratio of earnings to fixed charges......... 4.13 3.77
============ ============
Ratio of earnings to fixed
charges excluding minority interest...... 4.41 3.92
============ ============
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 4
<TABLE>
Pitney Bowes Inc.
Consolidated Balance Sheets
---------------------------
<CAPTION>
(Dollars in thousands, except share data) March 31, December 31,
1998 1997
------------ ------------
Assets (unaudited)
- ------
Current assets:
<S> <C> <C>
Cash and cash equivalents..................... $ 117,200 $ 137,073
Short-term investments, at cost which
approximates market......................... 34,597 1,722
Accounts receivable, less allowances:
3/98, $21,962; 12/97, $21,129............... 347,263 348,792
Finance receivables, less allowances:
3/98, $57,519; 12/97, $54,170............... 1,726,328 1,546,542
Inventories (Note 2).......................... 241,553 249,207
Other current assets and prepayments.......... 209,618 180,179
------------ ------------
Total current assets........................ 2,676,559 2,463,515
Property, plant and equipment, net (Note 3)..... 495,189 497,261
Rental equipment and related
inventories, net (Note 3)..................... 799,377 788,035
Property leased under capital
leases, net (Note 3).......................... 4,219 4,396
Long-term finance receivables, less allowances:
3/98, $74,540; 12/97, $78,138................. 2,473,189 2,581,349
Investment in leveraged leases.................. 758,932 727,783
Goodwill, net of amortization:
3/98, $42,522; 12/97, $40,912................. 204,058 203,419
Other assets.................................... 902,075 627,631
------------ ------------
Total assets.................................... $ 8,313,598 $ 7,893,389
============ ============
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and
accrued liabilities......................... $ 937,532 $ 878,759
Income taxes payable.......................... 169,777 147,921
Notes payable and current portion of
long-term obligations....................... 1,718,449 1,982,988
Advance billings.............................. 377,343 363,565
------------ ------------
Total current liabilities................... 3,203,101 3,373,233
Deferred taxes on income........................ 937,507 905,768
Long-term debt (Note 4)......................... 1,626,870 1,068,395
Other noncurrent liabilities.................... 368,906 373,416
------------ ------------
Total liabilities........................... 6,136,384 5,720,812
Preferred stockholders' equity in a
subsidiary company............................ 300,000 300,000
Stockholders' equity:
Cumulative preferred stock, $50 par
value, 4% convertible....................... 34 39
Cumulative preference stock, no par
value, $2.12 convertible.................... 2,159 2,220
Common stock, $1 par value.................... 323,338 323,338
Capital in excess of par value................ 25,120 28,028
Retained earnings............................. 2,811,675 2,744,929
Accumulated other comprehensive income........ (73,387) (63,348)
Treasury stock, at cost....................... (1,211,725) (1,162,629)
------------ ------------
Total stockholders' equity.................. 1,877,214 1,872,577
------------ ------------
Total liabilities and stockholders' equity...... $ 8,313,598 $ 7,893,389
============ ============
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 5
<TABLE>
Pitney Bowes Inc.
Consolidated Statements of Cash Flows
(Unaudited)
-------------------------------------
<CAPTION>
(Dollars in thousands) Three Months Ended March 31,
----------------------------
1998 1997*
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 129,687 $ 119,945
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization................ 79,916 73,905
Increase in deferred taxes on income......... 32,864 80,599
Change in assets and liabilities:
Accounts receivable........................ (671) 12,222
Sales-type lease receivables............... (21,602) (23,640)
Inventories................................ 6,641 15,447
Other current assets and prepayments....... (30,534) (12,243)
Accounts payable and accrued liabilities... 64,824 3,844
Income taxes payable....................... 21,743 (29,099)
Advance billings........................... 15,590 12,549
Other, net................................... (26,330) (14,063)
----------- -----------
Net cash provided by operating activities.. 272,128 239,466
----------- -----------
Cash flows from investing activities:
Short-term investments........................... (33,314) (10,836)
Net investment in fixed assets................... (79,074) (60,251)
Net investment in finance receivables............ (162,512) 5,400
Investment in leveraged leases................... (34,151) (8,219)
Investment in mortgage servicing rights.......... (159,607) (39,850)
Other investing activities....................... 378 7,320
----------- -----------
Net cash used in investing activities...... (468,280) (106,436)
----------- -----------
Cash flows from financing activities:
(Decrease) increase in notes payable, net........ (258,098) 280,101
Proceeds from issuance of long-term
obligations.................................... 554,123 -
Principal payments on long-term obligations...... (4,205) (204,507)
Proceeds from issuance of stock.................. 5,546 5,004
Stock repurchases................................ (56,452) (145,507)
Dividends paid................................... (62,941) (59,184)
----------- -----------
Net cash provided by (used in) financing
activities............................... 177,973 (124,093)
----------- -----------
Effect of exchange rate changes on cash............ (1,694) (1,490)
----------- -----------
(Decrease) increase in cash and cash equivalents... (19,873) 7,447
Cash and cash equivalents at beginning of period... 137,073 135,271
----------- -----------
Cash and cash equivalents at end of period......... $ 117,200 $ 142,718
=========== ===========
Interest paid...................................... $ 34,869 $ 49,766
=========== ===========
Income taxes paid, net............................. $ 14,922 $ 15,609
=========== ===========
<FN>
* Certain prior year amounts have been reclassified to conform with the 1998
presentation.
</FN>
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 6
Pitney Bowes Inc.
Notes to Consolidated Financial Statements
Note 1:
- -------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Pitney Bowes Inc. ("the
company"), all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position of the company as of March
31, 1998 and the results of its operations and cash flows for the three months
ended March 31, 1998 and 1997 have been included. Operating results for the
three months ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1998. These statements
should be read in conjunction with the financial statements and notes thereto
included in the company's 1997 Annual Report to Stockholders on Form 10-K.
Note 2:
- -------
<TABLE>
Inventories are comprised of the following:
<CAPTION>
(Dollars in thousands) March 31, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Raw materials and work in process................... $ 51,928 $ 51,429
Supplies and service parts.......................... 92,259 93,064
Finished products................................... 97,366 104,714
---------- ------------
Total............................................... $ 241,553 $ 249,207
========== ============
</TABLE>
Note 3:
- -------
<TABLE>
Fixed assets are comprised of the following:
<CAPTION>
(Dollars in thousands) March 31, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Property, plant and equipment....................... $1,132,145 $ 1,120,325
Accumulated depreciation............................ (636,956) (623,064)
---------- ------------
Property, plant and equipment, net.................. $ 495,189 $ 497,261
========== ============
Rental equipment and related inventories............ $1,647,779 $ 1,577,370
Accumulated depreciation............................ (848,402) (789,335)
---------- ------------
Rental equipment and related inventories, net....... $ 799,377 $ 788,035
========== ============
Property leased under capital leases................ $ 19,281 $ 20,507
Accumulated amortization............................ (15,062) (16,111)
---------- ------------
Property leased under capital leases, net........... $ 4,219 $ 4,396
========== ============
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 7
Note 4:
- -------
As part of the company's non-financial services shelf registrations, a
medium-term note facility exists permitting issuance of up to $100 million in
debt securities with maturities ranging from more than one year to 30 years of
which $32 million remained available at March 31, 1998. On April 29, 1998, the
company filed a non-financial services shelf registration with the Securities
and Exchange Commission (SEC), which combined with the $32 million that remained
available at March 31, 1998, will permit issuance of up to $500 million in debt
securities.
On January 22, 1998, the company issued notes amounting to $300 million
remaining under a non-financial services shelf registration filed with the SEC.
These unsecured notes bear annual interest at 5.95% and mature in February 2005.
The net proceeds from these notes are being used for general corporate purposes,
including the repayment of short-term debt.
On January 16, 1998, Pitney Bowes Credit Corporation (PBCC), a wholly-owned
subsidiary of the company issued notes amounting to $250 million remaining under
a shelf registration filed with the SEC. These unsecured notes bear annual
interest at 5.65% and mature in January 2003. The proceeds from these notes are
being used for PBCC's financing needs during 1998.
Note 5:
- -------
<TABLE>
A reconciliation of the basic and diluted earnings per share computations for
the three months ended March 31, 1998 and 1997 is as follows (in thousands,
except per share data):
<CAPTION>
1998 1997
------------------------------------- ----------------------------------------
Per Per
Income Shares Share Income Shares Share
- ------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $129,687 $ 119,945
Less:
Preferred stock
dividends - -
Preference stock
dividends (42) (46)
- ------------------------------------------------------------------- ----------------------------------------
Basic earnings per
share $129,645 279,408 $ .46 $ 119,899 294,630 $ .41
- ------------------------------------------------------------------- ----------------------------------------
Effect of dilutive
securities:
Preferred stock - 17 - 22
Preference stock 42 1,292 46 1,389
Stock options 2,718 1,662
Employee stock
purchase plan shares 436 270
- ------------------------------------------------------------------- ----------------------------------------
Diluted earnings per
share $129,687 283,871 $ .46 $ 119,945 297,973 $ .40
=================================================================== ========================================
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 8
Note 6:
- -------
<TABLE>
Revenue and operating profit by business segment for the three months ended
March 31, 1998 and 1997 were as follows:
<CAPTION>
(Dollars in thousands) 1998 1997
----------- ---------
Revenue
<S> <C> <C>
Business equipment.................... $ 784,664 $ 745,120
Business services..................... 156,070 128,990
Commercial and industrial financing
Large-ticket external........ 33,748 49,551
Small-ticket external........ 37,092 37,709
----------- ---------
70,840 87,260
----------- ---------
Total revenue.................................. $ 1,011,574 $ 961,370
=========== =========
Operating Profit (1)
Business equipment.................... $ 189,869 $ 169,411
Business services..................... 13,923 10,488
Commercial and industrial financing... 12,803 16,511
----------- ---------
Total operating profit......................... $ 216,595 $ 196,410
=========== =========
<FN>
(1) Operating profit excludes general corporate expenses, income taxes, and
net interest other than that related to finance operations.
</FN>
</TABLE>
Note 7:
- -------
<TABLE>
Comprehensive income for the three months ended March 31, 1998 and 1997 was as
follows:
(Dollars in thousands)
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net income................................... $129,687 $119,945
Other comprehensive income:
Foreign currency translation adjustments.... (10,039) (22,791)
-------- --------
Comprehensive income......................... $119,648 $ 97,154
======== ========
</TABLE>
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Operations - first quarter of 1998 vs. first quarter of 1997
- -----------------------------------------------------------------------
Revenue increased five percent in the first quarter of 1998 to $1,011.6 million
compared with $961.4 million in the first quarter of 1997. Net income increased
eight percent to $129.7 million from $119.9 million for the same period in 1997.
Diluted earnings per share grew to 46 cents, a 13.4 percent increase from the
first quarter of 1997. Revenue growth was eight percent excluding revenue from
the Commercial and Industrial Financing segment. The decrease in Commercial and
Industrial Financing revenue resulted from the planned reductions in the
external lease financing portfolio.
First quarter 1998 revenue included $450.4 million from sales, up eight percent
from $417.8 million in the first quarter of 1997; $438.2 million from rentals
and financing, up three percent from $424.6 million; and $123.0 million from
support services, up three percent from $119.0 million.
In the Business Equipment segment, which includes Mailing and Office Systems
operations, revenue grew five percent and operating profit increased 12 percent
during the first quarter.
Mailing Systems' revenue grew four percent during the quarter; however,
excluding the impact of foreign currency exchange rates primarily in Canada,
Germany, Australia and Japan, revenue would have increased five percent. This
growth was driven by strong placements of mailing equipment such as the Personal
Post Office (TM), as the company continued to help customers make a successful
transition to advanced electronic and digital metering, and introduced new
customers to the benefits of metering. At March 31, 1998, electronic and digital
meters grew to 78 percent of the company's installed U.S. meter base compared
with 63 percent at March 31, 1997.
Consolidated rental revenue growth has increased for the fifth consecutive
quarter on a year-over-year comparison to seven percent in the first quarter of
1998.
Office Systems' revenue grew 10 percent on continued demand for the company's
advanced facsimile and copier systems. This performance was paced by
double-digit sales growth in both product lines, and the highest ever quarterly
order level in the Facsimile business.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 10
In the Business Services segment, first quarter revenue grew 21 percent and
operating profit grew 33 percent. The segment includes Pitney Bowes Management
Services and Atlantic Mortgage and Investment Corporation. The segment's revenue
growth was driven by continued expansion of the customer base within the
segment, as well as broadening the service offerings to existing customers.
Operating profit benefited from leveraging the existing infrastructure as well
as ongoing programs to enhance customer service and competitiveness.
Revenue and operating profit in the Commercial and Industrial Financing segment
were down 19 percent and 22 percent, respectively. The segment includes Pitney
Bowes Capital Services and Colonial Pacific Leasing Corporation. The strategic
reduction of earning assets at Pitney Bowes Capital Services during 1997
resulted in the anticipated revenue and operating profit declines compared with
the first quarter of 1997. These reductions are part of the company's ongoing
strategy to reduce the level of capital committed to asset financing while
maintaining the ability to provide a full range of financial services to
customers.
Cost of sales increased to 61.1% of sales revenue in the first quarter of 1998
compared with 60.7% in 1997. This was due primarily to greater revenue
contribution from the facilities management business which includes most of its
expenses in cost of sales. The increased cost of sales rate was partially offset
by lower product costs at U.S. Mailing Systems and increased sales of high
margin supplies at Office Systems.
Cost of rentals and financing increased to 31.6% of related revenues in the
first quarter of 1998 compared with 30.1% in 1997. This was due mainly to
reduced revenues from the Commercial and Industrial Financing segment, the
impact of increased revenues from the relatively lower-margin mortgage servicing
business, a service based business with a higher cost to revenue ratio, and
higher depreciation expense and other costs from increased placements of digital
and electronic meters.
Selling, service and administrative expenses were 32.7% of revenue in the first
quarter of 1998 compared with 33.9% in 1997. This improvement was due primarily
to the company's continued emphasis on controlling operating expenses.
Research and development expenses increased 14 percent to $23.6 million in the
first quarter of 1998 compared with $20.6 million in 1997. The increase reflects
the company's continued commitment to developing new technologies for its
digital meters and other mailing and software products.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 11
Net interest expense decreased to $45.6 million in the first quarter of 1998
from $49.5 million in the first quarter of 1997. The decrease is due mainly to
lower average borrowings in 1998 compared with 1997 resulting from the
transaction with GATX Capital Corporation during 1997, and lower interest rates.
The effective tax rate for the first quarter of 1998 was 34.5 percent compared
with 34.7 percent in the first quarter of 1997.
Net income and diluted earnings per share increased eight percent and 13.4
percent, respectively, in the first quarter of 1998 due to the factors discussed
above. The reason for the increase in diluted earnings per share outpacing the
increase in net income was the company's share repurchase program.
Liquidity and Capital Resources
- -------------------------------
The ratio of current assets to current liabilities improved to .84 to 1 at March
31, 1998 compared with .73 to 1 at December 31, 1997. The improvement was due
primarily to an increase in short-term finance assets held for sale and from the
repayment of short-term debt.
As part of the company's non-financial services shelf registrations, a
medium-term note facility exists permitting issuance of up to $100 million in
debt securities with maturities ranging from more than one year to 30 years of
which $32 million remained available at March 31, 1998. On April 29, 1998, the
company filed a non-financial services shelf registration with the Securities
and Exchange Commission (SEC), which combined with the $32 million that remained
available at March 31, 1998, will permit issuance of up to $500 million in debt
securities.
On January 22, 1998, the company issued notes amounting to $300 million
remaining under a non-financial services shelf registration filed with the SEC.
These unsecured notes bear annual interest at 5.95% and mature in February 2005.
The net proceeds from these notes are being used for general corporate purposes,
including the repayment of short-term debt.
On January 16, 1998, Pitney Bowes Credit Corporation (PBCC), a wholly-owned
subsidiary of the company issued notes amounting to $250 million remaining under
a shelf registration filed with the SEC. These unsecured notes bear annual
interest at 5.65% and mature in January 2003. The proceeds from these notes are
being used for PBCC's financing needs during 1998. PBCC intends to file a new
shelf registration statement with the SEC during 1998.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 12
The company believes that its financing needs for the next few years can be met
with cash generated internally, money from existing credit agreements, debt
issued under new shelf registration statements and existing commercial and
medium-term note programs.
The ratio of total debt to total debt and stockholders' equity including the
preferred stockholders' equity in a subsidiary company in total debt was 66.1
percent at March 31, 1998 compared with 64.2 percent at December 31, 1997. Book
value per common share increased to $6.72 at March 31, 1998 from $6.69 at
December 31, 1997 driven primarily by the repurchase of common shares. During
the quarter ended March 31, 1998, the company repurchased approximately
1,172,000 common shares for $56.5 million.
To control the impact of interest rate swings on our business, the company uses
a balanced mix of debt maturities, variable and fixed rate debt and interest
rate swap agreements. The company enters into interest rate swap agreements,
primarily through its financial services business. Swap agreements are used to
fix interest rates on commercial paper and/or obtain a lower interest cost on
debt than we would otherwise have been able to get without the swap.
Capital Investments
- -------------------
In the first quarter of 1998, net investments in fixed assets included $22.3
million in net additions to property, plant and equipment and $56.8 million in
net additions to rental equipment and related inventories compared with $22.6
million and $37.7 million, respectively, in the same period in 1997. 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 March 31, 1998, 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.
Regulatory Matters
- ------------------
In May 1996, the United States Postal Service (USPS) issued a proposed Schedule
for the phaseout of mechanical meters in the United States. In accordance with
the schedule, the company voluntarily halted new placements of mechanical meters
in the U.S. as of June 1, 1996. As a result of the company's aggressive efforts
to meet the USPS mechanical meter migration schedule combined with the company's
ongoing and continuing investment in advanced postage evidencing technologies,
at
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 13
March 31, 1998, electronic and digital meters represented approximately 78
percent of the company's U.S. installed base, up from 75 percent at December 31,
1997 and 63 percent at March 31, 1997. Based on the announced USPS mechanical
meter migration schedule, the company believes that the phaseout of mechanical
meters will not cause a material adverse financial impact on the company.
In May 1995, the USPS publicly announced its concept of its Information Based
Indicia Program (IBIP), the purpose of which was to develop a new standard for
future digital postage evidencing devices. In July 1996, the USPS published for
public comment draft specifications for the Indicium, Postal Security Device and
Host specifications. The company submitted extensive comments to these
specifications in November 1996. Revised specifications were then published in
1997 which incorporated many of the changes recommended by the company in its
prior comments. The company submitted comments to these revised specifications.
Also, in March 1997 the USPS published for public comment the Vendor
Infrastructure specification to which the company responded on June 27, 1997. As
of March 31, 1998, the USPS had not yet finalized the four IBIP specifications;
however, the company is in the process of finalizing the development of a PC
product which satisfies the proposed IBIP specifications. This product is
currently undergoing testing by the USPS and is expected to be ready for market
upon final approval from the USPS.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 14
Forward-looking Statements
- --------------------------
The company wants to caution readers that any forward-looking statements (those
which talk about the company's or management's current expectations as to the
future) in this Form 10-Q or made by the company management involve risks and
uncertainties which may change based on various important factors. Some of the
factors which could cause future financial performance to differ materially from
the expectations as expressed in any forward-looking statement made by or on
behalf of the company include:
-changes in postal regulations
-timely development and acceptance of new products
-success in gaining product approval in new markets where regulatory
approval is required
-successful entry into new markets
-mailers' utilization of alternative means of communication or competitors'
products
-the company's success at managing customer credit risk
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 15
Part II - Other Information
---------------------------
Item 1: Legal Proceedings
In the course of normal business, the company is occasionally party to lawsuits.
These may involve litigation by or against the company relating to, among other
things:
-contractual rights under vendor, insurance or other contracts
-intellectual property or patent rights
-equipment, service or payment disputes with customers
-disputes with employees
The company is currently a defendant in a number of lawsuits, none of which
should have, in the opinion of management and legal counsel, a material adverse
effect on the company's financial position or results of operations.
Item 5: Other Information
On February 9, 1998, the Pitney Bowes 1991 Stock Plan was amended to provide
that: (i) all employees are eligible to participate in the Plan; (ii) no stock
option granted under the Plan may have an exercise price of less than 100% of
fair market value on the date of grant; (iii) shares issuable under the Plan in
the form of restricted stock are limited to 30% of total shares authorized under
the Plan; (iv) awards of restricted stock must bear a restriction of a minimum
of three years if a tenure requirement is the sole restriction for earning the
award, but if performance goals must be met to earn the award, the restriction
period must be for a minimum of one year; (v) the committee administering the
Plan may not waive any conditions or rights of awards, amend terms or otherwise
alter any award without the consent of the holder of the award; and (vi) the
term of the Plan is extended to May 31, 2006. The Plan is set forth in its
entirety as Exhibit 10.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 16
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reg. S-K
Exhibits Description
-------- -----------
(10) The Pitney Bowes Amended and
Restated 1991 Stock Plan
(12) Computation of ratio of
earnings to fixed charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
On February 23, 1998, the company filed a Form 8-K relating to the
issuance of $300 million aggregate principal amount of 5.95% Notes due
2005.
On February 4, 1998, PBCC filed a Form 8-K relating to the issuance of
$250 million aggregate principal amount of 5.65% Notes due 2003.
<PAGE>
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 1998
Page 17
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PITNEY BOWES INC.
May 14, 1998
/s/ M. L. Reichenstein
----------------------
M. L. Reichenstein
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ A. F. Henock
----------------
A. F. Henock
Vice President - Controller
and Chief Tax Counsel
(Principal Accounting Officer)
<PAGE>
Exhibit Index
-------------
Reg. S-K
Exhibit Description
-------- -----------
(10) The Pitney Bowes Amended and
Restated 1991 Stock Plan
(12) Computation of ratio of
earnings to fixed charges
(27) Financial Data Schedule
Exhibit (10)
------------
THE PITNEY BOWES AMENDED AND RESTATED 1991 STOCK PLAN
Section 1. Purpose.
The purposes of this Pitney Bowes 1991 Stock Plan (the "Plan") are (1) to make
available to employees of the Company and its Affiliates, who can make a
substantial contribution to the success of the business, certain compensatory
arrangements related to the common stock of the Company so as to generate an
increased incentive to contribute to the Company's future success and
prosperity, and (2) to enhance the ability of the Company and its Affiliates to
attract and retain exceptionally qualified individuals upon whom, in large
measure, the sustained progress, growth and profitability of the Company depend.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or through one or more
intermediaries, is controlled by the Company or (ii) any entity in which
the Company has a significant equity interest, as determined by the
Committee.
(b) "Award" shall mean any Option, Restricted Stock, Restricted Stock Unit,
Dividend Equivalent, Other Stock-Based Award, Performance Award or
Substitute Award, granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted under the Plan.
(d) "Board of Directors" shall mean the Board of Directors of the Company as it
may be composed from time to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor code thereto.
(f) "Committee" shall mean the Board of Directors, excluding any director who
is not a "Non-Employee Director" within the meaning of Rule 16b-3, or any
such other committee designated by the Board of Directors to administer the
Plan, which committee shall be composed of not less than the minimum number
of members of the Board of Directors from time to time required by Rule
16b-3 or any applicable law, each of whom is a "Non-Employee Director"
within the meaning of Rule 16b-3.
(g) "Company" shall mean Pitney Bowes Inc., or any successor thereto.
(h) "Covered Award" means an Award, other than an Option or other Award with an
exercise price per Share not less than the Fair Market Value of a Share on
the date of grant of such Award, to a Covered Employee, if it is designated
as such by the Committee at the time it is granted. Covered Awards are
subject to the provisions of Section 13 of this Plan.
(i) "Covered Employees" means Participants who are designated by the Committee
prior to the grant of an Award who are, or are expected to be at the time
taxable income will be realized with respect to the Award, "covered
employees" within the meaning of Section 162(m).
(j) "Dividend Equivalent" shall mean any right granted under Section 6(c) of
the Plan.
(k) "Employee" shall mean any employee of the Company or of any Affiliate.
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(l) "Fair Market Value" shall mean, with respect to any property (including,
without limitation, any Shares or other securities), the fair market value
of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(m) "Incentive Stock Option" or "ISO" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code, or any successor provision thereto.
(n) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(o) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(p) "Other Stock-Based Award" shall mean any Award granted under Section 6(d)
of the Plan.
(q) "Participant" shall mean an Employee who is granted an Award under the Plan.
(r) "Performance Award" shall mean any Award granted hereunder that complies
with Section 6(e)(ii) of the Plan.
(s) "Performance Goals" means one or more objective performance goals,
established by the Committee at the time an Award is granted, and based
upon the attainment of targets for one or any combination of the following
criteria: operating income, revenues, return on operating assets, earnings
per share, return on stockholder equity, stock price, or achievement of
cost control, of the Company or such subsidiary, division or department of
the Company for or within which the participant is primarily employed.
Performance Goals also may be based upon attaining specified levels of
Company performance based upon one or more of the criteria described above
relative to prior periods or the performance of other corporations.
Performance Goals shall be set by the Committee within the time period
prescribed by Section 162(m).
(t) "Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, or government or
political subdivision thereof.
(u) "Released Securities" shall mean securities that were Restricted Securities
with respect to which all applicable restrictions have expired, lapsed, or
been waived.
(v) "Restricted Securities" shall mean Awards of Restricted Stock or other
Awards under which issued and outstanding Shares are held subject to
certain restrictions.
(w) "Restricted Stock" shall mean any Share granted under Section 6(b) of the
Plan.
(x) "Restricted Stock Unit" shall mean any right granted under Section 6(b) of
the Plan that is denominated in Shares.
(y) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation thereto.
(z) "Section 162(m)" means Section 162(m) of the Code or any successor thereto,
and the Treasury Regulations thereunder.
(aa) "Share" or "Shares" shall mean share(s) of the common stock of the Company,
$2 par value, and such other securities or property as may become the
subject of Awards pursuant to the adjustment provisions of Section 4(c).
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<PAGE>
(bb) "Substitute Award" shall mean an Award granted in assumption of, or in
substitution for, an outstanding award previously granted by a company
acquired by the Company or with which the Company combines.
Section 3. Administration.
(a) The Plan shall be administered by the Committee. Subject to the terms of
the Plan and applicable law, the Committee shall have full power and
authority to:
(i) designate Participants;
(ii) determine the type or types of Awards to be granted to each
Participant under the Plan;
(iii)determine the number of Shares to be covered by (or with respect to
which payments, rights, or other matters are to be calculated in
connection with) Awards;
(iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards
may be settled or exercised in cash, Shares, other securities, other
Awards, or other property, or to what extent, and under what
circumstances Awards may be canceled, forfeited, or suspended, and the
method or methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended;
(vi) determine whether, to what extent, and under what circumstances cash,
Shares, other securities, other Awards, other property, and other
amounts payable with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder thereof
or of the Committee;
(vii)interpret and administer the Plan and any instrument or agreement
relating to the Plan, or any Award made under the Plan, including any
Award Agreement;
(viii) establish, amend, suspend, or reconcile such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and
(ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the
Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect
to the Plan, any Award, or any Award Agreement, shall be within the sole
discretion of the Committee, may be made at any time, and shall be final,
conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, and any
employee of the Company or of any Affiliate.
(c) The Committee may delegate to one or more executive officers of the Company
or to a committee of executive officers of the Company the authority to
grant Awards to Employees who are not officers or directors of the Company
and to amend, modify, cancel or suspend Awards to such employees.
Section 4. Shares Available For Award.
(a) Maximum Shares Available. The maximum number of Shares that may be issued
to Participants pursuant to Awards under the Plan shall be 12,800,000 (the
"Plan Maximum"), subject to adjustment as provided in Section 4(c) below.
Only 3,840,000 Shares may be issued pursuant to Awards of Restricted Stock
and Restricted Stock Units under Section 6(b) of the Plan. In its
discretion, the Company may issue pursuant to Awards treasury Shares or
3
<PAGE>
authorized but previously unissued Shares pursuant to Awards hereunder. For
the purpose of accounting for Shares available for Awards under the Plan,
the following shall apply:
(i) Only Shares relating to Awards actually issued or granted hereunder
shall be counted against the Plan Maximum. Shares corresponding to
Awards that by their terms expired, or that are forfeited, canceled or
surrendered to the Company without full consideration paid therefor
shall not be counted against the Plan Maximum.
(ii) Shares that are forfeited by a Participant after issuance, or that are
reacquired by the Company after issuance without full consideration
paid therefor, shall be deemed to have never been issued under the
Plan and accordingly shall not be counted against the Plan Maximum.
(iii)Awards not denominated in Shares shall be counted against the Plan
Maximum in such amount and at such time as the Committee shall
determine under procedures adopted by the Committee consistent with
the purposes of the Plan.
(iv) Substitute Awards shall not be counted against the Plan Maximum, and
clauses (i) and (ii) of this Section shall not apply to such Awards.
The maximum number of Shares that may be the subject of Awards made to a
single Participant in any one calendar year shall be 400,000.
(b) Shares Available for ISOs. The maximum number of Shares for which ISOs may
be granted under the Plan shall not exceed the Plan Maximum as defined in
Section 4(a) above, subject to adjustment as provided in Section 4(c)
below.
(c) Adjustments to avoid dilution. Notwithstanding paragraphs (a) and (b)
above, in the event of a stock dividend, split-up or combination of Shares,
merger, consolidation, reorganization, recapitalization, or other change in
the corporate structure or capitalization affecting the outstanding common
stock of the Company, such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the
Plan or any Award, then the Committee may make appropriate adjustments to
(i) the number or kind of Shares available for the future granting of
Awards hereunder, (ii) the number and type of Shares subject to outstanding
Awards, and (iii) the grant, purchase, or exercise price with respect to
any Award; or if it deems such action appropriate, the Committee may make
provision for a cash payment to the holder of an outstanding Award;
provided, however, that with respect to any ISO no such adjustment shall be
authorized to the extent that such would cause the ISO to violate Code
Section 422 or any successor provision thereto. The determination of the
Committee as to the adjustments or payments, if any, to be made shall be
conclusive.
(d) Other Plans. Shares issued under other plans of the Company shall not be
counted against the Plan Maximum under the Plan.
Section 5. Eligibility.
Any Employee, including any officer or employee director of the Company or of
any Affiliate, who is not a member of the Committee shall be eligible to be
designated a Participant.
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such
additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine:
(i) Exercise Price. The exercise price per Share under an Option shall be
determined by the Committee, provided, however, that except in the
case of Substitute Awards, no Option
4
<PAGE>
granted hereunder may have an exercise price of less than 100% of Fair
Market Value of a Share on the date of grant.
(ii) Times and Method of Exercise. The Committee shall determine the time
or times at which an Option may be exercised in whole or in part; in
no event, however, shall the period for exercising an Option extend
more than 10 years from the date of grant. The Committee shall also
determine the method or methods by which options may be exercised, and
the form or forms (including without limitation, cash, Shares, other
Awards, or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the relevant exercise
price), in which payment of the exercise price with respect thereto
may be made or deemed to have been made.
(iii)Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder.
(iv) Termination of Employment. In the event that a Participant's
employment terminates for any reason, then Options shall be
exercisable as specified below:
(A) With respect to Options that by their terms are not exercisable in
whole or in part on the date the Participant's employment
terminates, no such Option or part thereof may be exercised and
such Option or part thereof shall be forfeited by the Participant;
provided, however, that in the event that the Participant's
employment terminates because of the death, or total disability or
retirement of the Participant, the Committee may provide that
Options held by the Participant, or a part thereof, that were not
exercisable on the date of termination of employment may be
exercised by the Participant (or his estate, as the case may be)
during such period as the Committee may determine, not to exceed
four (4) years after the date of termination, after which any
Option or part thereof remaining unexercised shall be forfeited.
(B) With respect to Options that by their terms are exercisable in
whole or in part on the date the Participant's employment
terminates, then such Options, or such part thereof that is
exercisable, may be exercised by the Participant (or his estate as
the case may be) during such period following the date of
termination, as the Committee may determine, not to exceed four
(4) years after the date of termination, after which any Option or
part thereof remaining unexercised shall be forfeited.
(b) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Awards of Restricted Stock and or Restricted Stock
Units to Participants with the following terms and conditions.
(i) Restrictions. Shares of Restricted Stock and Restricted Stock Units
shall be subject to such restrictions as the Committee may impose
(including, without limitation, continued employment over a specified
period or the attainment of specified Performance Objectives (as
defined in Section 6(e)(ii)(B) or Performance goals, in accordance
with Section 13), which restrictions may lapse separately or
concurrently at such time or times, in such installments or otherwise,
as the Committee may deem appropriate. Notwithstanding the foregoing,
(A) any Awards of Restricted Stock or Restricted Stock Units as to
which the sole restriction relates to the passage of time and
continued employment must have a restriction period of not less than
three years and (B) any Award not described in Clause (A) must have a
restriction period of not less than one year subject, in the case of
both (A) and (B) to the proviso to Section 6(b)(iii) below.
(ii) Registration. Any Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate,
including without limitation, book-entry registration or issuance of a
stock certificate or certificates. In the event any stock certificate
is issued in respect of Shares of Restricted Stock granted under the
Plan, such certificate shall be registered in the name of the
Participant and shall bear an appropriate
5
<PAGE>
legend referring to the terms, conditions, and restrictions applicable
to such Restricted Stock.
(iii)Termination of Employment. Upon termination of employment of a
Participant for any reason during the applicable restriction period,
all Restricted Stock and all Restricted Stock Units, or portion
thereof, still subject to restriction shall be forfeited and
reacquired by the Company; provided, however, that in the event
termination of employment is due to the death, total disability or
retirement of the Participant, the Committee may waive in whole or in
part any or all remaining restrictions with respect to Restricted
Stock or Restricted Stock Units.
(c) Dividend Equivalents. The Committee may grant to Participants Dividend
Equivalents under which the holders thereof shall be entitled to receive
payments equivalent to dividends with respect to a number of Shares
determined by the Committee, and the Committee may provide that such
amounts, if any, shall be deemed to have been reinvested in additional
Shares or otherwise reinvested. Subject to the terms of the Plan, such
Awards may have such terms and conditions as the Committee shall determine.
(i) Termination of Employment. Upon termination of the Participant's
employment for any reason during the term of a Dividend Equivalent,
the right of a Participant to payment under a Dividend Equivalent
shall terminate as of the date of termination; provided, however, that
in the event the Participant's employment terminates because of the
death, total disability or retirement of a Participant the Committee
may determine that such right terminates at a later date.
(d) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Participants such other Awards that are denominated or payable in, valued
in whole or in part by reference to, or otherwise based on or related to
Shares (including without limitation securities convertible into Shares),
as are deemed by the Committee to be consistent with the purposes of the
Plan; provided, however, that such grants must comply with Rule 16b-3 and
applicable law.
(i) If applicable, Shares or other securities delivered pursuant to a
purchase right granted under this Section 6(d) shall be purchased for
such consideration, which may be paid by such method or methods and in
such form or forms, including without limitation cash, Shares, other
securities, other Awards or other property, or any combination
thereof, as the Committee shall determine; provided, however, that
except in the case of Substitute Awards, no derivative security (as
defined in Rule 16b-3) awarded hereunder may have an exercise price of
less than 100% of Fair Market Value of a Share on the date of grant.
(ii) In granting any Stock-Based Award pursuant to this Section 6(d) the
Committee shall also determine what effect the termination of
employment of the Participant holding such Award shall have on the
rights of the Participant pursuant to the Award.
(e) General. The following general provisions shall apply to all Awards granted
hereunder, subject to the terms of other sections of this Plan or any Award
Agreement.
(i) Award Agreements. Each Award granted under this Plan shall be
evidenced by an Award Agreement which shall specify the relevant
material terms and conditions of the Award and which shall be signed
by the Participant receiving such Award.
(ii) Performance Awards. Subject to the other terms of this Plan, the
payment, release or exercisability of any Award, in whole or in part,
may be conditioned upon the achievement of such "Performance
Objectives" (as defined below) during such performance periods as are
specified by the Committee. (Hereinafter in this Section 6(e)(ii) the
terms payment, pay, and paid also refer to the release or
exercisability of a Performance Award, as the case may require.)
6
<PAGE>
(A) Terms. The Committee shall establish the terms and conditions of
any Performance Award including the Performance Objectives (as
defined below) to be achieved during any performance period, the
length of any performance period, any event the occurrence of
which will entitle the holder to payment, and the amount of any
Performance Award granted.
(B) Performance Objectives. The Committee shall establish "Performance
Objectives" the achievement of which shall entitle the Participant
to payment under a Performance Award. Performance Objectives may
be any measure of the business performance of the Company, or any
of its divisions or Affiliates, including but not limited to the
growth in book or market value of capital stock, the increase in
the earnings in total or per share, or any other financial or
non-financial indicator specified by the Committee.
(C) Fulfillment of Conditions and Payment. The Committee shall
determine in a timely manner whether all or part of the conditions
to payment of a Performance Award have been fulfilled and, if so,
the amount, if any, of the payment to which the Participant is
entitled.
(iii)Rule 16b-3 Six Month Limitations. To the extent required in order to
render the grant of an Award, the exercise of an Award or any
derivative security, or the sale of securities corresponding to an
Award, an exempt transaction under Section 16b of the Securities
Exchange Act of 1934 only, any equity security granted under the Plan
to a Participant must be held by such Participant for at least six
months from the date of grant, or in the case of a derivative security
granted pursuant to the Plan to a Participant, at least six months
must elapse from the date of acquisition of the derivative security to
the date of disposition of the derivative security (other than upon
exercise or conversion) or its underlying equity security. Terms used
in the preceding sentence shall, for the purposes of such sentence
only, have the meanings if any, assigned or attributed to them under
Rule 16b-3.
(iv) Limits on Transfer of Awards. No Award (other than Released
Securities), and no right under any such Award shall be assignable,
alienable, saleable, or transferable by a Participant other than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I
of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder (or, in the case of Awards that are forfeited or
canceled, to the Company); provided, however, that, if so determined
by the Committee, a Participant may in the manner established by the
Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant, and to receive any property distributable,
with respect to any Award upon the death of the Participant. Each
Award, and each right under any Award, shall be exercisable, during
the Participant's lifetime only by the Participant or, if permissible
under applicable law, by the Participant's guardian or legal
representative or by a transferee receiving such Award pursuant to a
qualified domestic relations order referred to above. No Award (other
than Released Securities), and no right under any such Award, may be
pledged, alienated, attached, or otherwise encumbered, and any
purported pledge, alienation, attachment, or encumbrance thereof shall
be void and unenforceable against the Company or any Affiliate.
(v) No Cash Consideration for Awards. Awards may be granted for no cash
consideration, or for such minimal cash consideration as the Committee
may specify, or as may be required by applicable law.
(vi) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other Award or any
award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or in
addition to or in tandem with awards granted under any other plan of
the Company or any Affiliate may
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<PAGE>
be granted either at the same time as or at a different time from the
grant of such other Awards or awards. Performance Awards and Awards
which are not Performance Awards may be granted to the same
Participant.
(vii)Forms Of Payment Under Awards. Subject to the terms of the Plan and of
any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise, or payment of an
Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other
securities, other Awards, or other property, or any combination
thereof, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment
or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents in respect
of installment or deferred payments.
(viii) Term of Awards. Except as provided in Sections 6(a)(ii) or 6(a)(iv),
the term of each Award shall be for such period as may be determined
by the Committee.
(ix) Share Certificates. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other
securities are then listed, and any applicable Federal or state
securities laws, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions. Unrestricted certificates representing Shares, evidenced
in such manner as the Committee shall deem appropriate, shall be
delivered to the holder of Restricted Stock, Restricted Stock Units or
any other relevant Award promptly after such related Shares shall
become Released Securities.
Section 7. Amendment And Termination Of Awards.
Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan, the following shall apply to all
Awards.
(a) Amendments to Awards. Subject to Section 6(b)(i), the Committee may waive
any conditions or rights under, amend any terms of, or amend, alter,
suspend, discontinue, cancel or terminate, any Award heretofore granted
without the consent of any relevant Participant or holder or beneficiary of
an Award; provided, however, that no such amendment, alteration,
suspension, discontinuance, cancellation or termination that would be
adverse to the holder of such Award may be made without such holder's
consent. Notwithstanding the foregoing, the Committee shall not amend any
outstanding Option to change the exercise price thereof to any price that
is lower than the original exercise price thereof, except in connection
with an adjustment authorized under Section 4(c).
(b) Adjustments of Awards Upon Certain Acquisitions. In the event the Company
or an Affiliate shall issue Substitute Awards, the Committee may make such
adjustments, not inconsistent with the terms of the Plan, in the terms of
Awards as it shall deem appropriate in order to achieve reasonable
comparability or other equitable relationship between the assumed awards
and the Substitute Awards granted under the Plan.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) hereof) affecting the
Company, any Affiliate, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement
8
<PAGE>
of the benefits or potential benefits to be made available under the Plan
or an Award Agreement.
(d) Correction of Defects, Omissions, and Inconsistencies. The Committee may
correct any defect, supply any omission, or reconcile any inconsistency in
any Award Agreement in the manner and to the extent it shall deem desirable
to carry the Plan into effect.
Section 8. Acceleration Upon A Change Of Control. In the event of a Change of
Control (as defined in Section 8(b) below) the following shall
apply:
(a) Effect on Awards.
(i) Options. In the event of a Change of Control, (1) all Options
outstanding on the date of such Change of Control shall become
immediately and fully exercisable without regard to any vesting
schedule provided for in the Option.
(ii) Restricted Stock and Restricted Stock Units. In the event of a Change
of Control, all restrictions applicable to any Restricted Stock or
Restricted Stock Unit shall terminate and be deemed to be fully
satisfied for the entire stated restricted period of any such Award,
and the total number of underlying Shares shall become Released
Securities. The Participant shall immediately have the right to the
prompt delivery of certificates reflecting such Released Securities.
(iii)Dividend Equivalents. In the event of a Change of Control, the holder
of any outstanding Dividend Equivalent shall be entitled to surrender
such Award to the Company and to receive payment of an amount equal to
the amount that would have been paid over the remaining term of the
Dividend Equivalent, as determined by the Committee.
(iv) Other Stock-Based Awards. In the event of a Change of Control, all
outstanding Other Stock-Based Awards of whatever type become
immediately vested and payable in an amount that assumes that the
Awards were outstanding for the entire period stated therein, as
determined by the Committee.
(v) Performance Awards. In the event of a Change of Control, Performance
Awards for all performance periods including those not yet completed,
shall immediately become fully vested and payable in accordance with
the following:
(A) The total amount of Performance Awards conditioned on nonfinancial
Performance Objectives and those conditioned on financial
Performance Objectives and payable in stock, shall be immediately
payable (or exercisable or released, as the case may be) as if the
Performance Objectives had been fully achieved for the entire
performance period.
(B) For Performance Awards conditioned on financial Performance
Objectives and payable in cash, the Committee shall determine the
amount payable under such Award by taking into consideration the
actual level of attainment of the Performance Objectives during
that portion of the performance period that had occurred prior to
the date of the Change of Control, and with respect to the part of
the performance period that had not occurred prior to the date of
the Change of Control, the Committee shall determine an
anticipated level of attainment taking into consideration
available historical data and the last projections made by the
Company's Chief Financial Officer prior to the Change of Control.
The amount payable shall be the present value of the amount so
determined by the Committee discounted using a factor that is the
Prime Rate as established by Chase Manhattan Bank, N.A. as of the
date of the Change of Control.
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<PAGE>
(vi) The Committee's determination of amounts payable under this Section
8(a) shall be final. Except as otherwise provided in Section 8(a)(1),
any amounts due under this Section 8(a) shall be paid to Participants
within 30 days after such Change of Control.
(vii)The provisions of this Section 8(a) shall not be applicable to any
Award granted to a Participant if any Change of Control results from
such Participant's beneficial ownership (within the meaning of Rule
13d-3 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act")) of Shares or other Company common stock or Company
voting securities.
(b) Change of Control Defined. A "Change of Control" shall be deemed to have
occurred upon the occurrence of either of the following:
(i) 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
Exchange Act) of beneficial ownership (within the meaning of Rule
13d-3 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 by any employee benefit plan (or related
trust) of the Company or its subsidiaries; or by 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
(ii) Individuals who, as of September 12, 1988, 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,
however, that any individual becoming a director subsequent to
September 12, 1988 whose election or nomination for election by the
Company's stockholders was approved by a vote of at least a majority
of 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 of Regulation 14A
promulgated under the Exchange Act); or
(iii)There is an approval by the stockholders of the Company of (a) 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% 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 (b) 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.
Section 9. Amendment And Termination Of The Plan.
10
<PAGE>
Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan, the Board of Directors may amend,
alter, suspend, discontinue, or terminate the Plan, including without limitation
any such action to correct any defect, supply any omission or reconcile any
inconsistency in the Plan, without the consent of any stockholder, Participant,
other holder or beneficiary of an Award, or Person; provided that any such
amendment, alteration, suspension, discontinuation, or termination that would
impair the rights of any Participant, or any other holder or beneficiary of any
Award heretofore granted shall not be effective without the approval of the
affected Participant(s); and provided further, that, notwithstanding any other
provision of the Plan or any Award Agreement, without the approval of the
stockholders of the Company no such amendment, alteration, suspension,
discontinuation or termination shall be made that would increase the total
number of Shares available for Awards under the Plan, except as provided in
Section 4 hereof.
Section 10. General Provisions.
(a) No Rights to Awards. No Employee, Participant or other Person shall have
any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Employees, Participants, or
holders or beneficiaries of Awards under the Plan. The terms and conditions
of Awards need not be the same with respect to each recipient.
(b) Withholding. The Company or any Affiliate shall be authorized to withhold
from any Award granted or any payment due or transfer made under any Award
or under the Plan the amount (in cash, Shares, other securities, other
Awards, or other property) of withholding taxes due in respect of an Award,
its exercise, or any payment or transfer under such Award or under the Plan
and to take such other action as may be necessary in the opinion of the
Company or Affiliate to satisfy all obligations for the payment of such
taxes.
(c) No Limit on Other Compensation Agreements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements and such arrangements
may be either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company
or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.
(e) Governing Law. The validity, construction, and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Connecticut and applicable Federal
law.
(f) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as
to any Person or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision
shall be stricken as to such jurisdiction, Person, or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any
other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
11
<PAGE>
(h) No Fractional Shares. No fractional Share shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares, or whether such fractional
Shares, or whether such fractional Shares or any rights thereto shall be
canceled, terminated, or otherwise eliminated.
(i) Headings. Headings are given to the sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
Section 11. Effective Date Of The Plan.
The Plan shall be effective as of the date of its approval by the stockholders
of the Company.
Section 12. Term Of The Plan.
No Award shall be granted under the Plan after May 31, 2006. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date, and the authority of
the Committee hereunder to amend, alter, adjust, suspend, discontinue, or
terminate any such Award, or to waive any conditions or rights under any such
Award, and the authority of the Board of Directors of the Company to amend the
Plan, shall extend beyond such date.
Section 13. Participants Subject to Section 162(m).
(a) The provisions of this Section 13 shall be applicable to all Covered
Awards. Covered Awards shall be made subject to the achievement of one or
more preestablished Performance Goals, in accordance with procedures to be
established by the Committee from time to time. Notwithstanding any
provision of the Plan to the contrary, the Committee shall not have
discretion to waive or amend such Performance Goals or to increase the
number of Shares subject to Covered Awards or the amount payable pursuant
to Covered Awards after the Performance Goals have been established;
provided, however, that the Committee may, in its sole discretion, reduce
the number of Shares subject to Covered Awards or the amount which would
otherwise be payable pursuant to Covered Awards; and provided, further,
that the provisions of Section 8 shall override any contrary provision of
this Section 13.
(b) No shares shall be delivered and no payment shall be made pursuant to a
Covered Award unless and until the Committee shall have certified in
writing that the applicable Performance Goals have been attained.
(c) The Committee may from time to time establish procedures pursuant to which
Covered Employees will be permitted or required to defer receipt of amounts
payable under Awards made under the Plan.
(d) Notwithstanding any other provision of the Plan, for all purposes involving
Covered Awards, the Committee shall consist of at least two members of the
Board of Directors, each of whom is an "outside director" within the
meaning of Section 162(m).
12
Exhibit (12)
------------
<TABLE>
Pitney Bowes Inc.
Computation of Ratio of Earnings to Fixed Charges (1)
-----------------------------------------------------
(Dollars in thousands)
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------- ----------
<S> <C> <C>
Income before income taxes................. $ 197,997 $ 183,635
Add:
Interest expense......................... 47,899 51,905
Portion of rents
representative of the
interest factor........................ 10,307 11,129
Amortization of capitalized
interest............................... 243 243
Minority interest
in the income of
subsidiary with
fixed charges.......................... 3,059 1,966
----------- ----------
Income as adjusted......................... $ 259,505 $ 248,878
=========== ==========
Fixed charges:
Interest expense......................... $ 47,899 $ 51,905
Portion of rents
representative of the
interest factor........................ 10,307 11,129
Minority interest, excluding
taxes, in the income of
subsidiary with fixed
charges................................ 4,670 3,011
----------- ----------
$ 62,876 $ 66,045
=========== ==========
Ratio of earnings to fixed
charges.................................. 4.13 3.77
=========== ==========
Ratio of earnings to fixed
charges excluding minority
interest.............................. 4.41 3.92
=========== ==========
<FN>
(1) The computation of the ratio of earnings to fixed charges has been
computed by dividing income before income taxes as adjusted by fixed
charges. Included in fixed charges is one-third of rental expense as the
representative portion of interest.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM PITNEY BOWES INC.
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME, CORRESPONDING
FOOTNOTE #3 FIXED ASSETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 117,200
<SECURITIES> 34,597
<RECEIVABLES> <F1> 2,153,072
<ALLOWANCES> <F1> 79,481
<INVENTORY> 241,553
<CURRENT-ASSETS> 2,676,559
<PP&E> <F2> 2,779,924
<DEPRECIATION> <F2> 1,485,358
<TOTAL-ASSETS> 8,313,598
<CURRENT-LIABILITIES> 3,203,101
<BONDS> 1,626,870
<COMMON> 323,338
300,000
2,193
<OTHER-SE> 1,551,683
<TOTAL-LIABILITY-AND-EQUITY> 8,313,598
<SALES> 450,425
<TOTAL-REVENUES> 1,011,574
<CGS> 275,000
<TOTAL-COSTS> 413,379
<OTHER-EXPENSES> 23,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,899
<INCOME-PRETAX> 197,997
<INCOME-TAX> 68,310
<INCOME-CONTINUING> 129,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,687
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<FN>
<F1> Receivables are comprised of trade receivables of $369,225 and short-term
finance receivables of $1,783,847. Allowances are comprised of allowance for
trade receivables of $21,962 and for short-term finance receivables of $57,519.
<F2> Property, plant and equipment are comprised of fixed assets of $1,132,145
and rental equipment and related inventories of $1,647,779. Depreciation is
comprised of depreciation on fixed assets of $636,956 and on rental equipment
and related inventories of $848,402.
</FN>
</TABLE>
