UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
F O R M 1 0 - Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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
Delaware Identification No.
06-0495050
World Headquarters
Stamford, Connecticut 06926-0700
Telephone Number: (203) 356-5000
The Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No_____
Number of shares of common stock, $2 par value, outstanding
as of September 30, 1996 is 148,449,856.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 2 of 19
Pitney Bowes Inc.
Index
Page Number
Part I - Financial Information:
Consolidated Statement of Income - Three and
Nine Months Ended September 30, 1996 and 1995 3
Consolidated Balance Sheet - September 30, 1996
and December 31, 1995 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 14
Part II - Other Information:
Item 1: Legal Proceedings 15
Item 6: Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit (i) - Computation of Earnings per Share 17
Exhibit (ii) - Computation of Ratio of Earnings
to Fixed Charges 18
Exhibit (iii) - Financial Data Schedule 19
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 3 of 19
Part I - Financial Information
Pitney Bowes Inc.
Consolidated Statement of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
1996 1995 1996 1995
Revenue from:
Sales $ 404,194 $ 372,889 $ 1,198,847 $ 1,107,690
Rentals and financing 429,754 395,494 1,254,098 1,147,372
Support services 116,766 107,748 346,971 322,584
Total revenue 950,714 876,131 2,799,916 2,577,646
Costs and expenses:
Cost of sales 248,757 230,507 745,560 676,784
Cost of rentals and financing 133,114 117,205 373,441 330,007
Selling, service and administrative 323,554 307,145 954,661 885,037
Research and development 19,140 18,961 58,487 60,943
Interest, net 49,699 51,523 145,682 170,484
Total costs and expenses 774,264 725,341 2,277,831 2,123,255
Income from continuing operations before
income taxes 176,450 150,790 522,085 454,391
Provision for income taxes 59,745 50,050 180,338 159,313
Income from continuing operations 116,705 100,740 341,747 295,078
Income, net of income tax, from discontinued
operations prior to discontinuance - 721 - 21,483
Net gain from discontinued operations - 153,713 - 153,948
Net income $ 116,705 $ 255,174 $ 341,747 $ 470,509
Income per common and common equivalent
share:
Income from continuing operations $ .78 $ .66 $ 2.27 $ 1.94
Discontinued operations - 1.01 - 1.15
Net income $ .78 $ 1.67 $ 2.27 $ 3.09
Average common and common equivalent shares
outstanding 150,238,719 152,854,912 150,866,658 152,393,328
Dividends declared per share of
common stock $ .345 $ .30 $ 1.035 $ .90
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 4 of 19
Pitney Bowes Inc.
Consolidated Balance Sheet
(Unaudited)
(Dollars in thousands) September 30, December 31,
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 134,032 $ 85,352
Short-term investments, at cost which
approximates market 1,327 3,201
Accounts receivable, less allowances:
9/96, $13,934; 12/95, $13,050 352,786 386,727
Finance receivables, less allowances:
9/96, $38,475; 12/95, $37,699 1,359,290 1,208,532
Inventories (Note 2) 275,374 311,271
Other current assets and prepayments 110,389 106,014
Total current assets 2,233,198 2,101,097
Property, plant and equipment, net (Note 3) 494,541 495,001
Rental equipment and related
inventories, net (Note 3) 808,445 773,337
Property leased under capital
leases, net (Note 3) 7,669 7,876
Long-term finance receivables, less
allowances:
9/96, $70,703; 12/95, $75,807 3,291,192 3,390,597
Investment in leveraged leases 603,456 570,008
Goodwill, net of amortization:
9/96, $35,210; 12/95, $30,504 214,941 208,698
Other assets 329,816 298,034
Total assets $7,983,258 $7,844,648
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 716,586 $ 818,122
Income taxes payable 244,824 232,794
Notes payable and current portion of
long-term obligations 1,951,903 2,138,065
Advance billings 320,384 312,595
Total current liabilities 3,233,697 3,501,576
Deferred taxes on income 681,227 612,811
Long-term debt 1,300,221 1,048,515
Other noncurrent liabilities 394,559 410,646
Total liabilities 5,609,704 5,573,548
Preferred stockholders' equity in a
subsidiary company 200,000 200,000
Stockholders' equity:
Cumulative preferred stock, $50 par
value, 4% convertible 47 47
Cumulative preference stock, no par
value, $2.12 convertible 2,414 2,547
Common stock, $2 par value 323,338 323,338
Capital in excess of par value 26,395 30,299
Retained earnings 2,373,831 2,186,996
Cumulative translation adjustments (44,524) (46,991)
Treasury stock, at cost (507,947) (425,136)
Total stockholders' equity 2,173,554 2,071,100
Total liabilities and stockholders' equity $7,983,258 $7,844,648
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 5 of 19
Pitney Bowes Inc.
Consolidated Statement of Cash Flows
(Unaudited)
(Dollars in thousands) Nine Months Ended September 30,
1996 1995*
Cash flows from operating activities:
Net income $ 341,747 $ 470,509
Gain on sale of discontinued operations - (153,948)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 206,950 198,312
Net change in the strategic focus
initiative (12,145) (32,507)
Increase in deferred taxes on income 68,163 56,253
Change in assets and liabilities:
Accounts receivable 34,639 938
Sales-type lease receivables (94,577) (53,637)
Inventories 36,685 (9,979)
Other current assets and prepayments (2,146) (2,892)
Accounts payable and accrued
liabilities (90,407) (96,430)
Income taxes payable 11,951 18,967
Advance billings 7,491 9,915
Other, net (74,201) (69,517)
Net cash provided by operating
activities 434,150 335,984
Cash flows from investing activities:
Short-term investments 1,874 (969)
Net investment in fixed assets (215,130) (252,683)
Net investment in direct-finance lease
receivables 45,330 (255,968)
Investment in leveraged leases (37,997) (56,734)
Proceeds from sale of subsidiaries - 577,000
Net cash (used in) provided by
investing activities (205,923) 10,646
Cash flows from financing activities:
Decrease in notes payable (426,784) (587,090)
Proceeds from long-term obligations 500,000 275,000
Principal payments on long-term
obligations (9,310) (43,855)
Proceeds from issuance of stock 24,327 20,637
Stock repurchases (113,385) (14,932)
Proceeds from preferred stock issued by a
subsidiary - 200,000
Dividends paid (154,912) (136,256)
Net cash used in financing
activities (180,064) (286,496)
Effect of exchange rate changes on cash 517 (83)
Increase in cash and cash equivalents 48,680 60,051
Cash and cash equivalents at beginning of
period 85,352 75,106
Cash and cash equivalents at end of period $ 134,032 $ 135,157
Interest paid $ 158,164 $ 178,224
Income taxes paid $ 96,708 $ 91,540
[FN]
* Certain prior year amounts have been reclassified to conform with the
1996 presentation.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 6 of 19
Pitney Bowes Inc.
Notes to Consolidated Financial Statements
Note 1:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of Pitney Bowes Inc. ("the company"), all adjustments
(consisting of only normal recurring adjustments) necessary to present
fairly the financial position of the company as of September 30, 1996
and the results of its operations and cash flows for the nine months
ended September 30, 1996 and 1995 have been included. Operating results
for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1996. These statements should be read in conjunction with
the financial statements and notes thereto included in the company's
Annual Report to Stockholders and Form 10-K Annual Report for the year
ended December 31, 1995.
Note 2:
Inventories are comprised of the following:
(Dollars in thousands) September 30, December 31,
1996 1995
Raw materials and work in process $ 62,219 $ 57,203
Supplies and service parts 94,986 87,863
Finished products 118,169 166,205
Total $ 275,374 $ 311,271
Note 3:
Fixed assets are comprised of the following:
(Dollars in thousands) September 30, December 31,
1996 1995
Property, plant and equipment $1,095,719 $1,072,229
Accumulated depreciation (601,178) (577,228)
Property, plant and equipment, net $ 494,541 $ 495,001
Rental equipment and related
inventories $1,653,645 $1,591,321
Accumulated depreciation (845,200) (817,984)
Rental equipment and related
inventories, net $ 808,445 $ 773,337
Property leased under capital
leases $ 26,088 $ 25,468
Accumulated amortization (18,419) (17,592)
Property leased under capital
leases, net $ 7,669 $ 7,876
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 7 of 19
Note 4:
The company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" on January 1, 1996. The company periodically
reviews the fair value of long-lived assets, the result of which has had
no material affect on the company's reported results.
The company adopted Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" (FAS 122) on January 1, 1996.
FAS 122 requires that capitalized mortgage servicing rights be assessed
periodically for impairment based on the fair value of those rights.
Based on an evaluation performed as of September 30, 1996, no impairment
was recognized in the company's mortgage servicing rights portfolio.
The company also adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (FAS 123), on January 1,
1996. Under FAS 123, companies can elect, but are not required, to
recognize compensation expense for all stock-based awards, using a fair
value methodology. The company has adopted the disclosure only
provisions, as permitted by FAS 123. These disclosures will be
included in the company's 1996 annual report to stockholders.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 8 of 19
Pitney Bowes Inc.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Continuing Operations - third quarter of 1996 vs. third
quarter of 1995.
In 1996, Pitney Bowes saw excellent overall market acceptance of our
products and services and achieved nine percent growth in total
revenue. Moreover, ongoing efforts to improve cost ratios and
operating expense structures offset the rising impact of lower margin
revenue from the facilities management business, resulting in a 16
percent increase in income from continuing operations.
Sales revenue increased eight percent from the prior year primarily due
to volume growth. Foreign exchange effects and price increases had no
material impact. The facilities management business recorded a 17
percent sales increase as it continues to expand its facilities
management contract base in the commercial market. Demand for the
company's production mail systems, small weighing and high-end mailing
equipment, notably Paragon II and associated products, was strong in
the third quarter. The sales revenue increase was somewhat offset by
lower PROM (memory chip) and copier sales in Canada.
Rentals and financing revenue increased nine percent from the prior
year. Rental revenue grew due to more higher-priced electronic meters
in service especially the A900, B900 and the new digital meters.
Rental revenue growth also reflects a higher number of facsimile
systems in service. Finance revenue grew due to a higher base of small-
ticket equipment under lease and increased contribution from fee-based
sources offset by declines in external large-ticket revenue. The sale
of finance assets produced $11 million in revenue.
Support services revenue rose eight percent from the prior year. Higher
equipment maintenance agreements at production mail and U.S. and U.K
mailing fueled the growth in service revenue.
The ratio of cost of sales to sales revenue decreased .3 percentage
points in 1996 to 61.5 percent. This improvement results from lower
product costs and higher prices attained from U.S. mailing equipment
and production mail sales and lower copier equipment costs related to a
weakened yen. Changes in the revenue mix continue to put upward
pressure on the cost of sales ratio, as the company's facilities
management business sustains its rapid growth. It includes most of its
expenses in cost of sales which affects this ratio.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 9 of 19
The ratio of cost of rentals and financing to rentals and financing
revenue increased 1.4 percentage points in 1996 to 31.0 percent. This
deterioration is due to the sale of finance assets which generates a
lower relative margin. Excluding the asset sale, the ratio increased .1
percentage point due to the change in mix resulting from the growth of
the company's mortgage servicing business which includes most of its
expenses in cost of financing.
Selling, service and administrative expenses were 34.0 percent of
revenue in 1996, a decrease of 1.1 percentage points. This improvement
reflects ongoing efforts to control operating expense structures,
effects of changes in the product and service mix as mentioned above,
and benefits from the company's strategic focus initiatives.
Research and development expenses increased one percent to $19.1
million in 1996. This increase reflects the company's belief that its
success in a global marketplace requires a continuous stream of
advanced products emphasizing electronic and digital technology and
software development.
Net interest expense decreased to $49.7 million in 1996 from $51.5
million in 1995. This decrease is due to lower interest rates.
The third quarter effective tax rate was 33.9 percent in 1996 compared
to 33.2 percent in 1995. The increase is due to the declining effect
of the residual portfolio purchase completed in the fourth quarter of
1994. In addition, the 1995 effective tax rate was favorably
influenced by tax benefits associated with a company owned life
insurance program, higher level of tax-exempt income, and variations in
the company's worldwide income mix and foreign taxes.
Income from continuing operations increased 16 percent to $116.7
million in 1996 from $100.7 million in 1995. As a percentage of
revenue, income from continuing operations rose to 12.3 percent in 1996
from 11.5 in 1995 due to the factors discussed above.
Average shares outstanding used to compute earnings per share were
150.2 million in 1996 and 152.9 million in 1995. The treasury stock
acquired by the company under its ongoing share repurchase program
caused the decrease in shares outstanding.
Results of Continuing Operations - nine months of 1996 vs. nine months
of 1995.
Revenue increased nine percent to $2.8 billion while income from
continuing operations increased 16 percent to $341.7 million. The
factors that affected revenue and earnings performance included those
cited for the third quarter 1996 versus 1995. In addition, first
quarter 1995 revenue included approximately $30 million in PROM sales
generated from the January 1, 1995 United States postal rate change.
The comparison is also affected by the sale of the Custom Vendor
Finance (CVF) operations of Pitney Bowes Credit Corporation (PBCC) in
May 1996 and the acquisition in 1995 of a former Japanese joint
venture.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 10 of 19
Average shares outstanding used to compute earnings per share were
150.9 million in 1996 and 152.4 million in 1995. The treasury stock
acquired by the company under its ongoing share repurchase program
caused the decrease in shares outstanding.
Nonrecurring Item
As of September 30, 1996, the company has made cash payments for
severance and benefits of approximately $60.6 million to 1,500
employees separated under the strategic focus initiatives commenced in
1994. Approximately 400 employees with the requisite enhanced skills
have been hired to manufacture and service advanced product offerings.
The company has substantially completed its actions contemplated under
the strategic initiatives.
Accounting Changes
The company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" on January 1, 1996. The company
periodically reviews the fair value of long-lived assets, the results
of which had no material affect on the company's reported results.
The company adopted Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" (FAS 122) on January 1,
1996. FAS 122 requires that capitalized mortgage servicing rights be
assessed periodically for impairment based on the fair value of those
rights. Based on an evaluation performed as of September 30, 1996, no
impairment was recognized in the company's mortgage servicing rights
portfolio.
The company also adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (FAS 123), on
January 1, 1996. Under FAS 123, companies can, but are not required
to, elect to recognize compensation expense for all stock-based awards,
using a fair value methodology. The company has adopted the disclosure
only provisions, as permitted by FAS 123. These disclosures will be
included in the company's 1996 annual report.
The Financial Accounting Standards Board (FASB) issued Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (FAS 125). FAS
125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996 and is
to be applied prospectively; however, there is currently a proposal
before the FASB to defer for one year the effective date of certain
provisions of this standard. The company is currently assessing the
prospective impact of the provisions of this standard on its
consolidated financial statements.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 11 of 19
Liquidity and Capital Resources
The current ratio increased to .69 to 1 as of September 30, 1996 from
.60 to 1 as of December 31, 1995. The increase is due to the repayment
of notes payable with the proceeds from asset sales and issuance of
medium term notes at PBCC. The ratio also benefited from increases in
short term finance receivables, cash and a reduction in accounts
payable and accrued liabilities.
The company has a medium-term note facility, as part of its non-
financial services shelf registrations, of which $32 million is
available at September 30, 1996. These securities may have maturities
ranging from more than one year to 30 years. The company has an
additional $300 million remaining on its non-financial services shelf
registrations filed with the Securities and Exchange Commission (SEC).
Amounts available under credit agreements, shelf registrations and
commercial paper and medium-term note programs, in addition to cash
generated internally and by the sales of Monarch and Dictaphone, are
expected to be sufficient to provide for financing needs in the next
several years.
In July 1996, PBCC issued $200 million of medium-term notes due in July
1999 and $100 million of medium-term notes due in July 2001 with coupon
rates of 6.54 percent and 6.78 percent, respectively. In September
1996, PBCC issued $100 million of medium-term notes due in October 1998
and $100 million of medium-term notes due in October 2001 with coupon
rates of 6.305 percent and 6.800 percent, respectively.
PBCC has $250 million of unissued debt securities available from a
shelf registration statement filed with the SEC in September 1995. The
$250 million remaining under this shelf registration statement should
meet PBCC's financing needs for at least the next year. PBCC also had
unused lines of credit and revolving credit facilities totaling $1.55
billion at September 30, 1996, largely supporting its commercial paper
borrowings.
The ratio of total debt to total debt and stockholders' equity
including the preferred stockholders' equity in a subsidiary company in
total debt was 61.5% at September 30, 1996 compared to 62.2% at
December 31, 1995. The improvement is due to the earnings of the
company offset by the unfavorable effect of the repurchase of 2,316,200
shares of common stock for $113.4 million in the first nine months of
1996. Book value per common share increased to $14.63 at September 30,
1996 from $13.79 at year-end 1995 principally due to year-to-date
income. This was offset, in part, by the share repurchase described
above.
During the period October 1, to November 12, 1996, the company
repurchased approximately 178,300 additional shares of its common stock
at a total cost approximating $10.0 million.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 12 of 19
The company enters 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 the company's sensitivity to interest rate volatility. The
company utilizes interest rate swap agreements when it considers the
economic benefits to be favorable. Swap agreements, as noted above,
have been principally utilized to fix interest rates on commercial
paper and/or obtain a lower cost on debt than would otherwise be
available absent the swap.
Capital Investments
In the first nine months of 1996, net investments in fixed assets
included $62.9 million in net additions to property, plant and
equipment and $152.7 million in net additions to rental equipment and
related inventories compared with $83.7 million and $165.7 million
during the same period in 1995, respectively. The decrease in net
additions to property, plant and equipment was due to the completion of
a new facility in 1995. In the case of rental equipment, the additions
included the production of postage meters and purchase of facsimile
equipment for both new placement and upgrade programs.
At September 30, 1996, commitments for the acquisition of property,
plant and equipment included plant and manufacturing equipment
improvements, as well as rental equipment for new and replacement
programs.
Legal and Regulatory Matters
The company has been advised by the Antitrust Division of the U.S.
Department of Justice that its civil investigation of Pitney Bowes'
postage equipment business has been closed. The investigation
concluded that Pitney Bowes had not violated the surviving provisions
of the 1959 consent decree between the company and the U.S. Department
of Justice, and/or the antitrust laws.
In June, 1995, the United States Postal Service (U.S.P.S.) issued final
revised 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
has undertaken a number of actions to implement these changes,
including modifying its Postage by Phone System. Customers now deposit
prepayments of postage into a U.S.P.S. account rather than a
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 13 of 19
trust account. The company's resetting of Postage by Phone meters still
requires the customer to request an authorization and reset code from
the company, a service for which the company charges a fee. The
company continues to believe that the financial impact to the company
resulting from implementation of these regulations will not be
material.
In May 1996, the U.S.P.S. issued a proposed schedule for the phase out
of mechanical meters in the United States marketplace. The schedule
proposes that (i) as of June 1, 1996, placements of mechanical meters
will be available only as replacements for existing licensed mechanical
meters; (ii) as of March 1, 1997, mechanical meters may not be used by
persons or firms who process mail for a fee; (iii) as of December 31,
1997, mechanical meters that interface with mail machines or processors
will no longer be approved; and (iv) as of March 1, 1999, all other
mechanical meters (stand alone meters) will no longer be approved. The
company has voluntarily ceased new placements of
mechanical meters in the United States as of June 1, 1996.
The company continues to work with the U.S.P.S. to devise a final
mechanical meter migration schedule that is most beneficial to our
customers and minimizes any negative impact to the company. This is
consistent with the company's strategy of introducing new technology
into the marketplace to add value to customers' 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 meters in
the current U.S. base 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 mechanical meter migration plan is completed, the financial
impact, if any, on the company cannot be determined with any certainty;
but, it is currently the belief of the company that such migration plan
will not cause a material adverse financial impact.
The May 1996 U.S.P.S. proposal also contemplates the evolution of
metering technology to include a digital information based indicia
standard which has not yet been developed. In July 1996, the U.S.P.S.
proposed initial specifications for a digital information based indicia
program. The U.S.P.S. anticipates that digital metering would
eventually replace electronic metering in the United States at some
undetermined date in the future. The company's long-term strategy also
envisions the use of digital technology in new product offerings, and the
company anticipates working with the U.S.P.S. in this effort to achieve
a timely and effective substitution plan. However, until final
standards for a digital information based indicia program are
completed, and transition to the new standard is clarified by the
U.S.P.S., the impact of this proposal, if any, on the company cannot be
determined.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 14 of 19
Forward Looking Statements
The company wishes to caution readers that any forward-looking
statements, which are those statements which express the company's
or management's current expectations as to the future, contained in this
Form 10-Q or made by the management of the
company involve risks and uncertainties, and are subject to change
based on various important factors. The following factors, among
others, could affect the company's financial results and could cause
the company's financial performance to differ materially from the
expectations expressed in any forward-looking statement made by or on
behalf of the company -- the impact of changes in postal regulations
around the world; the timely development of and acceptance of new
Pitney Bowes products and the users perceived overall product value;
the willingness of users to substitute competitors' products for Pitney
Bowes products; the success in gaining product approval in new markets
where regulatory approval is required; the ability of the company to
successfully enter new markets; the willingness of mailers to utilize
alternative means of communication; and the company's success at
managing customer credit risk.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 15 of 19
Part II - Other Information
Item 1: Legal Proceedings
The company is 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 by the Antitrust Division of the U.S.
Department of Justice that its civil investigation of Pitney
Bowes' postage equipment business has been closed. The
investigation concluded that Pitney Bowes had not violated the
surviving provisions of the 1959 consent decree between the
company and the U.S. Department of Justice, and/or the antitrust
laws.
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Reg. S-K Status or Incorporation
Exhibits Description by Reference
(11) Computation of earnings See Exhibit (i)
per share. on page 17.
(12) Computation of ratio of See Exhibit (ii)
earnings to fixed charges. on page 18.
(27) Financial Data Schedule See Exhibit (iii)
on page 19.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the three months ended
September 30, 1996.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 16 of 19
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PITNEY BOWES INC.
November 14, 1996
/s/ M. L. Reichenstein
M. L. Reichenstein
Vice President - Chief Financial
Officer
(Principal Financial Officer)
/s/ A. F. Henock
A. F. Henock
Vice President - Controller and
Chief Tax Counsel
(Principal Accounting Officer)
Pitney Bowes Inc. - Form 10-Q Pitney Bowes Inc.
Nine Months Ended September 30, 1996 Computation of Earnings per Share Exhibit (i)
Page 17 of 19
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share data) 1996 1995 1996 1995
Primary
Income from continuing operations (1) $ 116,705 $ 100,740 $ 341,746 $ 295,077
Discontinued operations - 154,434 - 175,431
Net income applicable to common stock $ 116,705 $ 255,174 $ 341,746 $ 470,508
Weighted average number of common shares
outstanding 148,844,925 151,524,929 149,385,408 151,263,445
Preference stock, $2.12 cumulative convertible 720,902 774,412 733,008 792,100
Stock option and purchase plans 672,892 555,571 748,242 337,783
Total common and common equivalent shares
outstanding 150,238,719 152,854,912 150,866,658 152,393,328
Income per common and common equivalent share -
primary:
Continuing operations $ .78 $ .66 $ 2.27 $ 1.94
Discontinued operations - 1.01 - 1.15
Net income $ .78 $ 1.67 $ 2.27 $ 3.09
Fully Diluted
Income from continuing operations $ 116,705 $ 100,740 $ 341,747 $ 295,078
Discontinued operations - 154,434 - 175,431
Net income applicable to common stock $ 116,705 $ 255,174 $ 341,747 $ 470,509
Weighted average number of common shares
outstanding 148,844,925 151,524,929 149,385,408 151,263,445
Preference stock, $2.12 cumulative convertible 720,902 774,412 733,008 792,100
Stock option and purchase plans 736,864 561,119 809,917 364,667
Preferred stock, 4% cumulative convertible 11,490 11,490 11,490 11,514
Total common and common equivalent shares
outstanding 150,314,181 152,871,950 150,939,823 152,431,726
Income per common and common equivalent share -
fully diluted:
Continuing operations $ .78 $ .66 $ 2.26 $ 1.94
Discontinued operations - 1.01 - 1.15
Net income $ .78 $ 1.67 $ 2.26 $ 3.09
[FN]
(1) Income from continuing operations was adjusted for preferred dividends.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1996
Page 18 of 19
Exhibit (ii)
Pitney Bowes Inc.
Computation of Ratio of Earnings to Fixed Charges (1)
(Dollars in thousands) Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Income from continuing
operations before income
taxes $176,450 $150,790 $522,085 $454,391
Add:
Interest expense 52,212 54,059 151,095 175,763
Portion of rents
representative of the
interest factor 11,469 9,952 33,780 31,179
Amortization of capitalized
interest 228 228 685 685
Minority interest in the
income of subsidiary
with fixed charges 2,011 2,823 6,121 2,823
Income as adjusted $242,370 $217,852 $713,766 $664,841
Fixed charges:
Interest expense 52,212 54,059 151,095 175,763
Capitalized interest - 608 1,201 1,570
Portion of rents
representative of the
interest factor 11,469 9,952 33,780 31,179
Minority interest in the
income of subsidiary
with fixed charges 2,011 2,823 6,121 2,823
$ 65,692 $ 67,442 $192,197 $211,335
Ratio of earnings to fixed
charges 3.69 3.23 3.71 3.15
Ratio of earnings to fixed
charges excluding minority
interest 3.77 3.33 3.80 3.17
(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.
5
1,000
9-MOS
DEC-31-1996
SEP-30-1996
134,032
1,327
366,720
13,934
275,374
2,233,198
1,095,719
601,178
7,983,258
3,233,697
1,300,221
323,338
200,000
2,461
1,847,755
7,983,258
1,198,847
2,799,916
745,560
1,119,001
1,013,148
0
145,682
522,085
180,338
341,747
0
0
0
341,747
2.27
2.26
