UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 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 October 31,
1998 is 272,640,700.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 2
Pitney Bowes Inc.
Index
-----------------
Page Number
-----------
Part I - Financial Information:
Item 1: Financial Statements
Consolidated Statements of Income - Three and Nine
Months Ended September 30, 1998 and 1997............... 3
Consolidated Balance Sheets - September 30, 1998
and December 31, 1997.................................. 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 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 - 15
Part II - Other Information:
Item 1: Legal Proceedings.................................. 16
Item 2: Changes in Securities.............................. 16
Item 5: Other Information.................................. 16
Item 6: Exhibits and Reports on Form 8-K................... 16
Signatures ....................................................... 17
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 3
Part I - Financial Information
Item 1. Financial Statements
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
---------------------------------
(Dollars in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- ---------------------------------
1998 1997* 1998 1997*
--------------- --------------- --------------- ---------------
Revenue from:
Sales ................................................ $ 488,575 $ 449,904 $ 1,431,310 $ 1,317,483
Rentals and financing ................................ 435,557 404,049 1,262,371 1,192,407
Support services ..................................... 128,271 120,671 379,715 359,870
--------------- --------------- --------------- ---------------
Total revenue ...................................... 1,052,403 974,624 3,073,396 2,869,760
--------------- --------------- --------------- ---------------
Costs and expenses:
Cost of sales ........................................ 282,503 265,563 847,486 788,861
Cost of rentals and financing ........................ 133,237 119,528 377,154 334,882
Selling, service and administrative .................. 362,921 339,717 1,046,819 1,001,508
Research and development ............................. 24,699 21,578 73,395 64,061
Interest, net ........................................ 36,704 38,935 110,076 117,520
--------------- --------------- --------------- ---------------
Total costs and expenses ........................... 840,064 785,321 2,454,930 2,306,832
--------------- --------------- --------------- ---------------
Income from continuing operations before income taxes .. 212,339 189,303 618,466 562,928
Provision for income taxes ............................. 73,120 65,121 212,929 193,979
--------------- --------------- --------------- ---------------
Income from continuing operations ...................... 139,219 124,182 405,537 368,949
Discontinued operations (Note 2) ....................... 2,367 3,623 7,753 9,872
--------------- --------------- --------------- ---------------
Net income ............................................. $ 141,586 $ 127,805 $ 413,290 $ 378,821
=============== =============== =============== ===============
Basic earnings per share:
Continuing operations .................................. $ .51 $ .43 $ 1.47 $ 1.27
Discontinued operations ................................ .01 .01 .03 .03
--------------- --------------- --------------- ---------------
Net income ............................................. $ .52 $ .44 $ 1.50 $ 1.30
=============== =============== =============== ===============
Diluted earnings per share:
Continuing operations .................................. $ .50 $ .43 $ 1.44 $ 1.26
Discontinued operations ................................ .01 .01 .03 .03
--------------- --------------- --------------- ---------------
Net income ............................................. $ .51 $ .44 $ 1.47 $ 1.29
=============== =============== =============== ===============
Dividends declared per share of common stock ........... $ .225 $ .20 $ .675 $ .60
=============== =============== =============== ===============
Ratio of earnings to fixed charges ..................... 4.72 4.31 4.61 4.29
=============== =============== =============== ===============
Ratio of earnings to fixed charges
excluding minority interest .......................... 5.09 4.65 4.97 4.58
=============== =============== =============== ===============
*Reclassified to reflect discontinued operations.
See Notes to Consolidated Financial Statements
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 4
Pitney Bowes Inc.
Consolidated Balance Sheets
---------------------------
September 30, December 31,
(Dollars in thousands, except share data) 1998 1997
--------------- ---------------
(unaudited)
Assets
- - ------
Current assets:
Cash and cash equivalents............................................. $ 144,974 $ 137,073
Short-term investments, at cost which
approximates market............................................... 1,930 1,722
Accounts receivable, less allowances:
9/98, $22,513; 12/97, $21,129..................................... 346,475 348,792
Finance receivables, less allowances:
9/98, $43,348; 12/97, $54,170..................................... 1,435,795 1,546,542
Inventories (Note 3).................................................. 235,568 249,207
Other current assets and prepayments.................................. 173,458 180,179
Net assets of discontinued operations................................. 776,941 --
--------------- ---------------
Total current assets.............................................. 3,115,141 2,463,515
Property, plant and equipment, net (Note 4)................................ 470,110 497,261
Rental equipment and related inventories, net (Note 4)..................... 803,738 788,035
Property leased under capital leases, net (Note 4)......................... 3,909 4,396
Long-term finance receivables, less allowances:
9/98, $49,479; 12/97, $78,138......................................... 1,938,581 2,581,349
Investment in leveraged leases............................................. 817,144 727,783
Goodwill, net of amortization:
9/98, $45,902; 12/97, $40,912......................................... 213,778 203,419
Other assets ............................................................. 869,944 627,631
--------------- ---------------
Total assets ............................................................ $ 8,232,345 $ 7,893,389
=============== ===============
Liabilities and stockholders' equity
- - ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities.............................. $ 842,511 $ 878,759
Income taxes payable.................................................. 165,414 147,921
Notes payable and current portion of
long-term obligations ............................................ 1,844,077 1,982,988
Advance billings...................................................... 362,801 363,565
--------------- ---------------
Total current liabilities......................................... 3,214,803 3,373,233
Deferred taxes on income................................................... 929,199 905,768
Long-term debt (Note 5).................................................... 1,710,533 1,068,395
Other noncurrent liabilities............................................... 366,799 373,416
--------------- ---------------
Total liabilities................................................. 6,221,334 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.......................................... 2,076 2,220
Common stock, $1 par value............................................ 323,338 323,338
Capital in excess of par value........................................ 18,198 28,028
Retained earnings..................................................... 2,971,883 2,744,929
Accumulated other comprehensive income (Note 8)....................... (90,548) (63,348)
Treasury stock, at cost............................................... (1,513,970) (1,162,629)
--------------- ---------------
Total stockholders' equity........................................ 1,711,011 1,872,577
--------------- ---------------
Total liabilities and stockholders' equity................................. $ 8,232,345 $ 7,893,389
=============== ===============
See Notes to Consolidated Financial Statements
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 5
Pitney Bowes Inc.
Consolidated Statements of Cash Flows
(Unaudited)
-------------------------------------
(Dollars in thousands)
Nine Months Ended September 30,
-----------------------------------
1998 1997*
--------------- ---------------
Cash flows from operating activities:
Income from continuing operations ........................ $ 405,537 $ 368,949
Discontinued operations .................................. 7,753 9,872
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ........................ 266,127 222,699
Increase in deferred taxes on income ................. 72,909 171,277
Change in assets and liabilities:
Accounts receivable ................................ (490) 7,564
Net investment in internal finance receivables ..... (103,061) (87,666)
Inventories ........................................ 13,683 25,951
Other current assets and prepayments ............... 4,838 (22,474)
Accounts payable and accrued liabilities ........... (12,267) 23,837
Income taxes payable ............................... 17,659 (83,801)
Advance billings ................................... 2,584 13,542
Other, net ........................................... (17,033) (68,595)
--------------- ---------------
Net cash provided by operating activities ............ 658,239 581,155
--------------- ---------------
Cash flows from investing activities:
Short-term investments ................................... (310) (713)
Net investment in fixed assets ........................... (219,896) (202,579)
Net investment in external finance receivables ........... (72,105) 95,255
Investment in leveraged leases ........................... (95,534) (47,086)
Investment in mortgage servicing rights .................. (189,252) (71,589)
Other investing activities ............................... (16,471) (3,025)
--------------- ---------------
Net cash used in investing activities ................ (593,568) (229,737)
--------------- ---------------
Cash flows from financing activities:
(Decrease)increase in notes payable, net ................. (109,532) 387,937
Proceeds from issuance of long-term obligations .......... 836,123 --
Principal payments on long-term obligations .............. (231,805) (252,794)
Proceeds from issuance of stock .......................... 32,424 27,964
Stock repurchases ........................................ (394,716) (447,759)
Proceeds from preferred stock issued by a subsidiary...... -- 100,000
Dividends paid ........................................... (186,336) (174,993)
--------------- ---------------
Net cash used in financing activities ................ (53,842) (359,645)
--------------- ---------------
Effect of exchange rate changes on cash .................... (2,928) (1,904)
--------------- ---------------
Increase (decrease) in cash and cash equivalents ........... 7,901 (10,131)
Cash and cash equivalents at beginning of period ........... 137,073 135,271
--------------- ---------------
Cash and cash equivalents at end of period ................. $ 144,974 $ 125,140
=============== ===============
Interest paid .............................................. $ 141,191 $ 154,165
=============== ===============
Income taxes paid, net ..................................... $ 128,850 $ 112,180
=============== ===============
* Certain prior year amounts have been reclassified to conform with the 1998
presentation and to reflect discontinued operations.
See Notes to Consolidated Financial Statements
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 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 at September
30, 1998 and December 31, 1997, the results of its operations for the three
months and nine months ended September 30, 1998 and 1997 and its cash flows for
the nine months ended September 30, 1998 and 1997 have been included. Operating
results for the three and nine months ended September 30, 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:
- - -------
On October 30, 1998, Colonial Pacific Leasing Corporation (CPLC), a wholly owned
subsidiary of the company, transferred the operations, employees and
substantially all assets related to its broker-oriented external financing
business to General Electric Capital Corporation (GECC), a subsidiary of the
General Electric Company. The company received approximately $790 million at
closing, which approximates the book value of the net assets sold or otherwise
disposed of and related transaction costs. The transaction is subject to post
closing adjustments pursuant to the terms of the purchase agreement with GECC
entered into on October 12, 1998.
Operating results of CPLC have been segregated and reported as discontinued
operations for the three and nine months ended September 30, 1998. Prior year
results have been reclassified to conform to the current year presentation. Net
assets of discontinued operations have been separately classified in the
Consolidated Balance Sheet at September 30, 1998. Cash flow impacts of
discontinued operations have not been segregated in the Consolidated Statements
of Cash Flows. Revenue of CPLC was $32.0 million and $38.1 million for the three
months ended September 30, 1998 and 1997, respectively, and $102.1 million and
$110.4 million for the nine months ended September 30, 1998 and 1997,
respectively. Income from discontinued operations includes allocated interest
expense of $9.6 million and $12.1 million for the three months ended September
30, 1998 and 1997, respectively, and $30.6 million and $34.0 million for the
nine months ended September 30, 1998 and 1997, respectively. Interest expense
has been allocated based on CPLC's intercompany borrowing levels with Pitney
Bowes Credit Corporation (PBCC), charged at PBCC's weighted average borrowing
rate.
Note 3:
- - -------
Inventories are comprised of the following:
(Dollars in thousands) September 30, December 31,
1998 1997
--------------- ---------------
Raw materials and work in process .......................................... $ 54,671 $ 51,429
Supplies and service parts ................................................. 93,096 93,064
Finished products .......................................................... 87,801 104,714
--------------- ---------------
Total ...................................................................... $ 235,568 $ 249,207
=============== ===============
Note 4:
- - -------
Fixed assets are comprised of the following:
(Dollars in thousands) September 30, December 31,
1998 1997
--------------- ---------------
Property, plant and equipment .............................................. $ 1,133,112 $ 1,120,325
Accumulated depreciation ................................................... (663,002) (623,064)
--------------- ---------------
Property, plant and equipment, net ......................................... $ 470,110 $ 497,261
=============== ===============
Rental equipment and related inventories ................................... $ 1,674,693 $ 1,577,370
Accumulated depreciation ................................................... (870,955) (789,335)
--------------- ---------------
Rental equipment and related inventories, net .............................. $ 803,738 $ 788,035
=============== ===============
Property leased under capital leases ....................................... $ 19,382 $ 20,507
Accumulated amortization ................................................... (15,473) (16,111)
--------------- ---------------
Property leased under capital leases, net .................................. $ 3,909 $ 4,396
=============== ===============
Note 5:
- - -------
On September 30, 1998, certain partnerships controlled by affiliates of PBCC, a
wholly owned subsidiary of the company, issued a total of $282 million of Series
A and Series B Secured Floating Rate Senior Notes (the Notes). The Notes are due
in 2001 and bear interest at a floating rate of LIBOR plus 0.65 percent, set as
of the quarterly interest payment dates. The proceeds from the Notes were used
to purchase subordinated debt obligations from the company (PBI Obligations).
The PBI Obligations have a principal amount of $282 million and bear interest at
a floating rate of LIBOR plus 1.0 percent, set as of the Notes' quarterly
interest payment dates.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 7
On July 15, 1998, PBCC filed a shelf registration with the Securities and
Exchange Commission (SEC) which permits issuance of up to $750 million in debt
securities.
On April 29, 1998, the company filed a non-financial services shelf registration
with the SEC which combined with $32 million remaining under a previous shelf
registration statement permits issuance of up to $500 million in debt
securities. On September 25, 1998, the company established a medium-term note
facility (MTN facility) under this shelf registration. The MTN facility permits
issuance from time to time of up to $500 million of medium-term notes with
maturities of nine months or more from the date of issuance. At September 30,
1998, the entire $500 million remained available.
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 were used for general corporate purposes,
including the repayment of short-term debt.
On January 16, 1998, PBCC 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 6:
- - -------
A reconciliation of the basic and diluted earnings per share computations for the three months ended September 30, 1998 and 1997
is as follows (in thousands, except per share data):
1998 1997*
-------------------------------------------- --------------------------------------------
Per Per
Income Shares Share Income Shares Share
- - ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing
operations $ 139,219 $ 124,182
Less:
Preferred stock
dividends - (1)
Preference stock
dividends (40) (44)
- - -------------------------------------------------------------------------------- --------------------------------------------
Basic earnings per
share $ 139,179 273,868 $ .51 $ 124,137 287,282 $ .43
- - -------------------------------------------------------------------------------- --------------------------------------------
Effect of dilutive
securities:
Preferred stock - 17 1 22
Preference stock 40 1,236 44 1,342
Stock options 2,897 2,280
Other 695 263
- - -------------------------------------------------------------------------------- --------------------------------------------
Diluted earnings per
share $ 139,219 278,713 $ .50 $ 124,182 291,189 $ .43
================================================================================ ============================================
A reconciliation of the basic and diluted earnings per share computations for the nine months ended September 30, 1998 and 1997
is as follows (in thousands, except per share data):
1998 1997*
-------------------------------------------- --------------------------------------------
Per Per
Income Shares Share Income Shares Share
- - -------------------------------------------------------------------------------- --------------------------------------------
Income from continuing
operations $ 405,537 $ 368,949
Less:
Preferred stock
dividends - (1)
Preference stock
dividends (124) (135)
- - -------------------------------------------------------------------------------- --------------------------------------------
Basic earnings per
share $ 405,413 276,028 $ 1.47 $ 368,813 290,929 $ 1.27
- - -------------------------------------------------------------------------------- --------------------------------------------
Effect of dilutive
securities:
Preferred stock - 17 1 22
Preference stock 124 1,263 135 1,365
Stock options 2,812 1,938
Other 547 268
- - -------------------------------------------------------------------------------- --------------------------------------------
Diluted earnings per
share $ 405,537 280,667 $ 1.44 $ 368,949 294,522 $ 1.26
================================================================================ ============================================
* Adjusted to reflect discontinued operations.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 8
Note 7:
- - -------
Revenue and operating profit by business segment for the three and nine months
ended September 30, 1998 and 1997 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
(Dollars in thousands) 1998 1997* 1998 1997*
--------------- --------------- --------------- ---------------
Revenue
Business equipment ................................... $ 830,450 $ 779,672 $ 2,446,692 $ 2,304,156
Business services .................................... 181,635 142,270 507,396 408,721
Commercial and industrial financing .................. 40,318 52,682 119,308 156,883
--------------- --------------- --------------- ---------------
Total revenue .......................................... $ 1,052,403 $ 974,624 $ 3,073,396 $ 2,869,760
=============== =============== =============== ===============
Operating Profit(1):
Business equipment ................................... $ 213,162 $ 186,436 $ 615,945 $ 542,464
Business services .................................... 20,657 13,413 53,497 35,692
Commercial and industrial financing .................. 11,482 7,455 32,029 32,569
--------------- --------------- --------------- ---------------
Total operating profit ................................. $ 245,301 $ 207,304 $ 701,471 $ 610,725
=============== =============== =============== ===============
*Reclassified to reflect discontinued operations.
(1) Operating profit excludes general corporate expenses, income taxes, and
net interest other than that related to finance operations.
Note 8:
- - -------
Comprehensive income for the three and nine months ended September 30, 1998 and
1997 was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
(Dollars in thousands) 1998 1997 1998 1997
--------------- --------------- --------------- ---------------
Net income ............................................. $ 141,586 $ 127,805 $ 413,290 $ 378,821
Other comprehensive income:
Foreign currency translation
adjustments ........................................ (15,918) (13,413) (27,200) (34,593)
--------------- --------------- --------------- ---------------
Comprehensive income ................................... $ 125,668 $ 114,392 $ 386,090 $ 344,228
=============== =============== =============== ===============
Note 9:
- - -------
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities", was issued. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999 (January 1, 2000 for the company) and requires that an entity recognize all
derivative instruments as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Changes in the
fair value of those instruments will be reflected as gains or losses. The
accounting for the gains and losses depends on the intended use of the
derivative and the resulting designation. The company is currently evaluating
the impact of this statement.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Operations - third quarter of 1998 vs. third quarter of 1997
- - ------------------------------------------------------------------------
On October 30, 1998, Colonial Pacific Leasing Corporation (CPLC), a wholly owned
subsidiary of the company, transferred the operations, employees and
substantially all assets related to its broker-oriented external financing
business to General Electric Capital Corporation (GECC), a subsidiary of the
General Electric Company. As a result, CPLC's results have been excluded from
continuing operations. The company received approximately $790 million at
closing, which approximates the book value of the net assets sold or otherwise
disposed of and related transaction costs. The transaction is subject to post
closing adjustments pursuant to the terms of the purchase agreement with GECC
entered into on October 12, 1998. Proceeds from the sale will be used to
reinvest in core businesses around the world, pay down consolidated debt and
repurchase shares of the company's stock.
Revenue increased eight percent in the third quarter of 1998 to $1,052.4 million
compared with $974.6 million in the third quarter of 1997. Income from
continuing operations increased 12.1 percent to $139.2 million from $124.2
million for the same period in 1997. Diluted earnings per share from continuing
operations grew to 50 cents, a 17.4 percent increase from the third quarter of
1997. Revenue growth was 10 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.
Third quarter 1998 revenue included $488.6 million from sales, up nine percent
from $449.9 million in the third quarter of 1997; $435.6 million from rentals
and financing, up eight percent from $404.0 million; and $128.3 million from
support services, up six percent from $120.7 million.
In the Business Equipment segment, which includes Mailing Systems and Office
Systems operations, revenue grew seven percent and operating profit increased 14
percent during the third quarter.
Mailing Systems' revenue grew six percent during the quarter; excluding the
impact of foreign currency exchange rates primarily in Canada, Australia and
Japan, revenue grew seven percent. This growth was driven by strong customer
demand for advanced mailing equipment and systems, particularly at the high end,
and ongoing migration to advanced electronic and digital metering technology.
The company continued to lead the market conversion to more advanced technology,
with electronic and digital meters comprising 85 percent of the company's
installed U.S. meter base at September 30, 1998 compared with 70 percent at
September 30, 1997.
Office Systems' revenue grew nine percent, which was driven by growth in both
the facsimile and copier product lines. The company strengthened its solid
positioning as the preeminent provider of advanced office systems with
placements of the "Smart Image Plus" line of copiers, the addition of the
high-volume, 62-copy-per-minute DL620 copier to the digital product line, and
the latest 33.6 kbps facsimile--Model 9930.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 10
In the Business Services segment, third quarter revenue grew 28 percent and
operating profit grew 54 percent. The segment includes Pitney Bowes Management
Services and Atlantic Mortgage and Investment Corporation. Both businesses in
this segment continued to successfully broaden service offerings to existing
customers and add new customers to their respective bases. Operating profit also
continued to benefit from leveraging operating efficiencies. Operating profit
improvements were partially offset by a revaluation of the company's assets due
to a projected rise in future mortgage prepayments attributable to recent
declines in interest rates.
As planned, revenue in the Commercial and Industrial Financing segment was down
23 percent as compared with the third quarter of 1997. Operating profit for the
quarter declined eight percent after excluding a one-time charge associated with
the asset sales to GATX Capital Corporation during the third quarter of 1997. On
a reported basis, operating profit increased 54 percent compared to the third
quarter of last year. The strategic disposition of earning assets during 1997
and continued reduction in 1998 resulted in the anticipated declines in revenue
and operating profit. 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 decreased to 57.8% of sales revenue in the third quarter of 1998
compared with 59.0% in the third quarter of 1997. This was due primarily to
lower product costs at U.S. Mailing Systems and increased sales of high margin
supplies at Office Systems. The improvement was achieved despite the offsetting
effect of growth in the lower-margin management services business, which
includes most of its expenses in cost of sales.
Cost of rentals and financing increased to 30.6% of related revenues in the
third quarter of 1998 compared with 29.6% in the third quarter of 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, and higher depreciation expense from increased
placements of digital and electronic meters.
Selling, service and administrative expenses were 34.5% of revenues in the third
quarter of 1998 compared with 34.9% in the third quarter of 1997. This
improvement was due primarily to the company's continued emphasis on controlling
operating expenses.
Research and development expenses increased 14.5 percent to $24.7 million in the
third quarter of 1998 compared with $21.6 million in the third quarter of 1997.
The increase reflects the company's continued commitment to developing new
technologies for its digital meters and other mailing and software products.
Net interest expense decreased to $36.7 million in the third quarter of 1998
from $38.9 million in the third 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 third quarter of 1998 and 1997 was 34.4 percent.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 11
Net income and diluted earnings per share increased 10.8 percent and 15.7
percent, respectively, in the third 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 continuing share repurchase program.
Results of Operations - nine months of 1998 vs. nine months of 1997
- - -------------------------------------------------------------------
For the first nine months of 1998 compared with the same period of 1997, revenue
increased seven percent to $3,073.4 million while income from continuing
operations increased 10 percent to $405.5 million. The factors that affected
revenue and earnings performance included those cited for the third quarter of
1998 versus 1997.
New Pronouncements
- - ------------------
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities", was issued. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999 (January 1, 2000 for the company) and requires that an entity recognize all
derivative instruments as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Changes in the
fair value of those instruments will be reflected as gains or losses. The
accounting for the gains and losses depends on the intended use of the
derivative and the resulting designation. The company is currently evaluating
the impact of this statement.
Liquidity and Capital Resources
- - -------------------------------
The ratio of current assets to current liabilities improved to .97 to 1 at
September 30, 1998 compared with .73 to 1 at December 31, 1997. Excluding the
impact of reclassifying the balance sheet to reflect net assets of discontinued
operations in current assets, the ratio at September 30, 1998 is .82 to 1. The
improvement was due primarily to an increase in short-term finance receivables
and from the repayment of short-term debt.
On September 30, 1998, certain partnerships controlled by affiliates of Pitney
Bowes Credit Corporation (PBCC), a wholly owned subsidiary of the company,
issued a total of $282 million of Series A and Series B Secured Floating Rate
Senior Notes (the Notes). The Notes are due in 2001 and bear interest at a
floating rate of LIBOR plus 0.65 percent, set as of the quarterly interest
payment dates. The proceeds from the Notes were used to purchase subordinated
debt obligations from the company (PBI Obligations). The PBI Obligations have a
principal amount of $282 million and bear interest at a floating rate of LIBOR
plus 1.0 percent, set as of the Notes' quarterly interest payment dates.
On July 15, 1998, PBCC filed a shelf registration with the Securities and
Exchange Commission (SEC) which permits issuance of up to $750 million in debt
securities.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 12
On April 29, 1998, the company filed a non-financial services shelf registration
with the SEC which combined with $32 million remaining under a previous shelf
registration statement permits issuance of up to $500 million in debt
securities. On September 25, 1998, the company established a medium-term note
facility (MTN facility) under this shelf registration. The MTN facility permits
issuance from time to time of up to $500 million of medium-term notes with
maturities of nine months or more from the date of issuance. At September 30,
1998, the entire $500 million remained available.
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 were used for general corporate purposes,
including the repayment of short-term debt.
On January 16, 1998, PBCC 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.
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 69.3
percent at September 30, 1998 compared with 64.2 percent at December 31, 1997.
Book value per common share decreased to $6.26 at September 30, 1998 from $6.69
at December 31, 1997 driven primarily by the repurchase of common shares. During
the quarter ended September 30, 1998, the company repurchased 1.6 million common
shares for $87.3 million.
To control the impact of interest rate swings on its 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 the company otherwise would have been able to get without the swap.
Year 2000
- - ---------
In 1997, the company established a formal worldwide program to identify and
resolve the impact of the Year 2000 date processing issue on the company's
business systems, products and supporting infrastructure. This included a
comprehensive review of the company's information technology (IT) and non-IT
systems, software, and embedded processors. The program structure has strong
executive sponsorship and consists of a Year 2000 steering committee of senior
business and technology management, a Year 2000 program office of full-time
project management, and subject matter experts and dedicated business unit
project teams. The company has also engaged independent consultants to perform
periodic program reviews and assist in systems assessment and test plan
development.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 13
The program encompasses the following phases: an inventory of affected
technology and critical third party suppliers, an assessment of Year 2000
readiness, resolution, unit and integrated testing and contingency planning. The
company completed its worldwide inventory and assessment of all business
systems, products, and supporting infrastructure. Required modifications are in
progress and will be substantially complete by year-end 1998. Tests are
performed as software is remediated, upgraded, or replaced. Integrated testing
is expected to be complete by mid-1999.
As part of ongoing product development efforts, the company's recently
introduced products are Year 2000 compliant. Over 95 percent of our installed
product base, including all postage meters and copier and facsimile systems are
already Year 2000 compliant. For products not yet compliant, upgrades or
replacements will be available by mid-1999. Detailed product compliance
information is available on the company's website(www.pitneybowes.com/year2000).
The company relies on third parties for many systems, products and services. The
company could be adversely impacted if third parties do not make necessary
changes to their own systems and products successfully and in a timely manner.
We have established a formal process to identify, assess and monitor the Year
2000 readiness of critical third parties. This process includes regular meetings
with critical suppliers, including telecommunication carriers and utilities, as
well as business partners, including postal authorities. Although, there are no
known problems at this time, the company is unable to predict with certainty
whether such third parties will be able to address their Year 2000 problems on a
timely basis.
The company estimates the total cost of the worldwide program from inception in
1997 through the Year 2000 to be approximately $41-46 million, of which
approximately $22 million is expected to be incurred through December 31, 1998.
These costs, which are funded through the company's cash flows, include both
internal labor costs as well as consulting and other external costs. These costs
are incorporated in the company's budgets and current forecasts and are being
expensed as incurred.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from
uncertainty about the Year 2000 readiness of third parties, the company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the company's results of operations, liquidity or
financial condition. However, the company continues to evaluate its Year 2000
risks and is developing contingency plans to mitigate the impact of any
potential Year 2000 disruptions. We expect to complete our contingency plans by
the second quarter of 1999.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 14
Capital Investments
- - -------------------
In the first nine months of 1998, net investments in fixed assets included $62.4
million in net additions to property, plant and equipment and $157.5 million in
net additions to rental equipment and related inventories compared with $66.7
million and $135.9 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 September 30, 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 September 30, 1998, electronic and digital meters represented approximately
85 percent of the company's U.S. installed base, up from 75 percent at December
31, 1997 and 70 percent at September 30, 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. On
August 26, 1998, the USPS published for public comment a consolidated and
revised set of IBIP specifications entitled "Performance Criteria for
Information Based Indicia and Security Architecture for IBI Postage Metering
Systems" (the IBI Performance Criteria). The IBI Performance Criteria
consolidated the four aforementioned IBIP specifications and incorporated many
of the comments previously submitted by the company. The company is in the
process of drafting comments to the IBI Performance Criteria for submission to
the USPS on November 30, 1998.
As of September 30, 1998, 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.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 15
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:
o changes in postal regulations
o timely development and acceptance of new products
o success in gaining product approval in new markets where regulatory
approval is required
o successful entry into new markets
o mailers' utilization of alternative means of communication or
competitors' products
o the company's success at managing customer credit risk
o changes in interest rates
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 1998
Page 16
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:
o contractual rights under vendor, insurance or other contracts
o intellectual property or patent rights
o equipment, service or payment disputes with customers
o 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 2: Changes in Securities
On October 22, 1998, the company issued 418,165 shares of its common stock to a
financial institution in a transaction exempt from registration under the
Securities Act of 1933, as amended, in reliance on Section 4(2) of the
Securities Act. The company granted an option to repurchase these shares at an
exercise price of $55.7577 per share on November 25, 1998.
Item 5: Other Information
The Board of Directors have amended and restated the company's by-laws to, among
other things, clarify the advance notice procedures for stockholders wishing to
bring a matter to a vote before a stockholders' meeting.
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
Reg. S-K
Exhibits Description
----------- -----------------------------
(3)(ii) Amended By-Laws
(12) Computation of ratio of
earnings to fixed charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
On September 25, 1998, the company filed a Form 8-K relating to the
establishment of a medium-term note program for the issuance from time to
time of up to $500 million aggregated principal amount of medium-term
Notes.
On October 19, 1998, PBCC filed a Form 8-K relating to the definitive
agreement entered into with General Electric Capital Corporation (GECC), a
subsidiary of General Electric Company, to sell its broker-oriented
external financing business, Colonial Pacific Leasing Corporation (CPLC).
In this transaction, the operations, employees and substantially all
assets related to CPLC will be transferred to GECC.
Pitney Bowes Inc. - Form 10-Q
Nine Months Ended September 30, 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.
November 16, 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)
Exhibit Index
-------------
Reg. S-K
Exhibits Description
---------- --------------------------------
(3)(ii) Amended By-Laws
(12) Computation of ratio of
earnings to fixed charges
(27) Financial Data Schedule
PITNEY BOWES INC.
BY-LAWS
ARTICLE I
---------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Annual Meeting. The annual meeting of the stockholders for
the election of directors and the transaction of such other business as may
properly be brought before the meeting shall be held on such date, and at such
place and time, as the Chairman of the Board or the Board of Directors shall
designate.
Section 2. Special Meeting. Special meetings of the stockholders
may be called by the Board of Directors, as provided in Article I, Section 7.
Section 3. Notice of Meetings. Subject to the provisions of the
Restated Certificate of Incorporation and except as otherwise required by law,
written notice of an annual or special meeting of stockholders shall be given
not less than ten (10) nor more than sixty (60) days prior to the meeting to
each stockholder entitled to vote at the meeting. In the case of a special
meeting of stockholders, the purpose or purposes for which the meeting is called
shall be set forth in the notice. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Section 4. List of Stockholders. The Secretary or the Treasurer shall
prepare and make, or cause the Transfer Agent to prepare and make, at least ten
(10) days before every meeting of stockholders, a complete list, as of the
record date, of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of, and the number of shares
registered in the name of, each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The stock ledger
shall be the only evidence as to who are the stockholders entitled to examine
the list of stockholders, or to vote in person or by proxy at any meeting of
stockholders.
Section 5. Advance Notice Procedures. (a) General. The business to be
conducted at any stockholders meeting of the Corporation and nominations for the
election of directors of the Corporation's Board of Directors at any
stockholders meeting of the Corporation shall be limited to such business and
nominations as shall comply with the procedures set forth in this Article I and
in Article II of these By-laws.
-1-
(b) Notification of Stockholder Business. At a special meeting of
stockholders only such business shall be conducted as shall have been set forth
in the notice of special meeting. At an annual meeting of stockholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (iii) otherwise
(a) properly requested to be brought before the meeting in accordance with this
By-law by a stockholder of record entitled to vote in the election of directors
generally, and (b) constitute a proper subject for stockholder action to be
brought before such meeting.
For business to be properly brought before an annual meeting by the
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not later than 90 days in advance of such meeting. In no event
shall the public announcement of an adjournment of an annual meeting commence a
new time period for the giving of a stockholder's notice as described above. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, and in the event that such
business includes a proposal to amend the By-laws of the Corporation, the
language of the proposed amendment, (b) the name and address, as they appear on
the Corporation's books, of the stockholder intending to propose such business
and the name and address of the beneficial owner, if any, on whose behalf the
proposal is made, (c) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and such beneficial
owner, if any, (d) a representation that the stockholder is a holder of record
of capital stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to present such business, (e) any
material interest of the stockholder and the beneficial owner in such business,
and (f) a representation whether the stockholder and the beneficial owner, if
any, intends or is part of a group which intends to (i) deliver a proxy
statement and form of proxy to holders of at least the percentage of the
Corporation's outstanding capital stock required to approve or adopt the
proposal and (ii) otherwise solicit proxies from stockholders in support of such
proposal. Nominations for elections of directors at either an annual or special
meeting of stockholders shall be made, if at all, in accordance with Section 6
of Article II of these By-laws.
Notwithstanding anything in the By-laws to the contrary, no business
shall be conducted at any annual meeting except in accordance with the
procedures set forth in this Section 5. The chairman of the annual meeting may,
if the facts warrant, determine and declare to the meeting that (i) the business
proposed to be brought before the meeting was not a proper subject therefor
and/or (ii) such business was not properly brought before the meeting and in
accordance with the provisions of this Section 5, and/or (iii) the stockholder
or beneficial owner has solicited or is part of a group which has solicited
proxies in support of such proposal without having made the representation
required by clause (f) of this Section 5, and, if the chairman should so
determine, he may so declare to the meeting and any such proposed business shall
not be transacted.
-2-
(c) Notice. For purposes of this Section 5, and Section 6 of Article II
of these By-laws, reference to a requirement to deliver notice of information to
the Corporation a set number of days in advance of an annual meeting shall mean
that such notice must be delivered such number of days in advance of the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from the first anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered to the Corporation not later than the close of business on the later
of the 60th day prior to such annual meeting or the 10th day following the day
on which notice of such meeting is first given to stockholders. For purposes of
these By-laws, notice shall be deemed to be first given to stockholders when
disclosure of such date is first made in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act").
(d) Notwithstanding the foregoing provisions of this Section 5, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 5 and in Article II, Section 6 of these By-laws. Nothing
in this Section 5 shall be deemed to affect any rights (i) of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of
Preferred Stock to elect directors under specified circumstances.
Section 6. Adjournments. Subject to the provisions of Article I,
Section 7 hereof, any meeting of stockholders, annual or special, may adjourn
from time to time to reconvene at the same or some other place, and notice need
not be given of such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business that might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 7. Quorum and Voting. At any meeting of stockholders the
holders of a majority of the shares entitled to vote thereat shall constitute a
quorum for the transaction of any business. Directors shall be elected by a
plurality of the votes cast. Each other question properly presented to any
meeting of stockholders shall be decided by a majority of the votes cast on the
question entitled to vote thereon, except as otherwise required by law.
Elections of directors shall be by ballot but the vote upon any other question
need be by ballot only if so ordered by the person presiding at the meeting, or
by a vote of a majority of the stockholders, present in person or by proxy,
entitled to vote on the question. In the event of lack of a quorum, the chairman
of the meeting or majority in interest of the stockholders present in person or
by proxy may adjourn the meeting from time to time until a quorum shall be
obtained.
Treasury shares as of the record date shall not be shares entitled to
vote or to be counted in determining the total number of outstanding shares.
-3-
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders.
Except as otherwise required by law and subject to the rights of the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors.
Section 8. Conduct of Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at such meeting by the person presiding over the
meeting. The Board of Directors may (i) appoint a person to preside over
meetings of stockholders (in the absence of the Chairman of the Board, the Chief
Executive Officer and the President), and (ii) adopt by resolution such rules
and regulations for the conduct of meetings of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman shall permit; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
Section 9. Inspectors of Election. The Corporation shall, in advance of
any meeting of stockholders, appoint one or more inspectors of election, who may
be employees of the Corporation, to act at the meeting or any adjournment
thereof and to make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. In the event that no inspector so appointed or designated is able to act at
a meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath to execute faithfully
the duties of inspector with strict impartiality and according to the best of
his ability.
The inspector or inspectors so appointed or designated shall (i)
ascertain the number of shares of capital stock of the Corporation outstanding
and the voting power of each such share, (ii) determine the shares of capital
stock of the Corporation represented at the meeting and the validity of proxies
and ballots, (iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of the
number of shares of capital stock of the Corporation represented at the meeting
and such inspectors' count of all votes and ballots. Such
-4-
certification and report shall specify such other information as may be required
by law. In determining the validity and counting of proxies and ballots cast at
any meeting of stockholders of the Corporation, the inspectors may consider such
information as is permitted by applicable law. No person who is a candidate for
an office at an election may serve as an inspector at such election.
-5-
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 1. Powers of Board. The business of the Corporation shall be
managed by or under the direction of the Board of Directors. Section 2. Number,
Election and Terms. Except as otherwise fixed by or pursuant to the provisions
of Article Fourth of the Restated Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of the directors of the
Corporation shall be fixed from time to time by the Board of Directors but shall
not be less than three. The directors, other than those who may be elected by
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible, as determined by the Board of Directors of the
Corporation, one class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1985, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1986, and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in 1987, with each class to
hold office until its successor is elected and qualified at each annual meeting
of the stockholders of the Corporation, the successors of the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election.
Section 3. Stockholder Nomination of Director Candidates. Advance
notice of stockholder nominations for the election of directors shall be given
in the manner provided in Article II, Section 6 of these By-laws.
Section 4. Newly Created Directorships and Vacancies. Except as
otherwise provided for or fixed by or pursuant to the provisions of Article
Fourth of the Restated Certificate of Incorporation relating to the rights of
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect directors under specified
circumstances, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors. Any director elected
in accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
-6-
Section 5. Removal. Subject to the rights of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified circumstances, any director may
be removed from office, with or without cause and only by the affirmative vote
of the holders of 80% of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class.
Section 6. Notification of Nominations. Only such persons who are
nominated in accordance with the procedures set forth in this Section 6 shall be
eligible to be elected at an annual meeting or, in accordance with the
provisions of Article I, Section 5 of these By-laws, a special meeting of
stockholders of the Corporation to serve as directors. Subject to the rights of
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors by any stockholder of record entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election as
directors at a meeting only if written notice of such stockholder's intent to
make such nomination or nominations has been delivered, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders, 90 days in advance of such meeting, and (ii)
with respect to an election to be held at a special meeting of stockholders for
the election of directors, the close of business on the seventh day following
the date on which notice of such meeting is first given to stockholders. In no
event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination (and of the beneficial owner, if
any, on whose behalf the nomination is made) and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder (and beneficial owner, if any) and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; (e) the consent of each
nominee to serve as a director of the Corporation if so elected; and (f) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group which intends to (a) deliver a proxy statement and form of
proxy to holders of at least the percentage of the Corporation's outstanding
capital stock required to elect the nominee(s) and (b) otherwise solicit proxies
from stockholders in support of such nomination. The chairman of the meeting may
refuse to acknowledge or permit the nomination of any person not made in
compliance with the foregoing procedure or if the stockholder or beneficial
owner has solicited or is part of a group which has solicited proxies in support
of such nomination without having made the representations required by clause
(f) of this Section 6.
-7-
Section 7. Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the whole Board shall constitute a quorum for
the transaction of business; but if at any meeting of the Board there is less
than a quorum present, a majority of those present may adjourn the meeting from
time to time. Except in cases in which the Restated Certificate of Incorporation
or these By-laws otherwise provide, the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 8. First Meeting. As soon as practicable after each annual
election of directors, the Board of Directors shall meet for the purpose of
organization and the transaction of other business. Notice of such meeting need
not be given. In the alternative, such first meeting may be held at any other
time which shall be specified in a notice given as hereinafter provided, for
special meetings of the Board of Directors.
Section 9. Regular Meetings. Regular meetings of the Board of Directors
may be held, without notice, at such times and places as may be fixed by the
Board.
Section 10. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman or by any two of the
directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, New York time, on the third day
prior to the meeting, or by electronic transmission, written message or orally
to the director not later than noon, New York time, on the day prior to the
meeting. Notices are deemed to have been given: by mail, when deposited in the
United States mail; by electronic transmission, at the time of transmission; and
by messenger, at the time of delivery. Notices by mail, electronic transmission
or messenger shall be sent to each director at the address designated by him for
that purpose, or, if none has been designated, at his last known residence or
business address.
A notice of meeting of the Board of Directors need not specify the
purpose of any meeting of the Board of Directors.
Section 11. Organization. The Chairman of the Board of Directors shall
preside at meetings of the Board; in the Chairman's absence, a member of the
Board selected by the members present shall preside at meetings of the Board.
The Secretary of the Corporation shall act as Secretary, but in his absence the
presiding officer may appoint a Secretary.
Section 12. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors or to the Chairman
or to the Secretary of the Corporation. Such resignation shall take effect at
the time specified therein, or if no time is specified, upon receipt thereof.
Unless otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective. Any vacancy created by a resignation may be
filled in the same manner as prescribed under Article II, Section 4, hereof.
Section 13. Compensation of Directors. The Board of Directors shall
have authority to fix the compensation and provide for the reimbursement of
expenses of directors in respect of their service in any capacity.
-8-
Section 14. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it.
Section 15. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to these By-laws.
-9-
ARTICLE III
-----------
OFFICERS
--------
Section 1. Election; Term of Office. The officers of the Corporation
shall be elected by and shall serve at the pleasure of the Board of Directors.
There may be a Chairman of the Board, a Chief Executive Officer, a President,
one or more Vice Presidents, a Secretary, a Treasurer and such other officers as
the Board of Directors may determine. Subject to the provisions of these
By-laws, officers shall hold their offices until their successors are elected
and qualified or until their earlier death, resignation or removal. Any number
of offices may be held by the same person.
Section 2. Powers and Duties. The officers of the Corporation shall
have such authority and perform such duties in the management of the Corporation
as may be prescribed by the By-laws, or by the Board of Directors, and to the
extent not so prescribed pursuant to the By-laws, they shall have such authority
and perform such duties in the management of the Corporation, subject to the
control of the Board, as generally pertain to their respective offices.
Section 3. Chairman of the Board. The Chairman of the Board shall
preside at the meetings of the Board and of stockholders and shall see that all
orders and resolutions of the Board are carried into effect.
Section 4. Chief Executive Officer. The Chief Executive Officer
shall have general and active supervision and management of the business of
the Corporation. In the absence of the Chairman, he shall preside at meetings
of stockholders.
Section 5. President. The President shall be the chief operating
officer of the Corporation. In the absence of the Chairman and the Chief
Executive Officer, he shall preside at meetings of stockholders.
Section 6. Resignation, Removal and Vacancies. Any officer may resign
at any time upon written notice to the Corporation. Any officer elected by the
Board of Directors may be removed at any time, with or without cause, by the
affirmative vote of a majority of a quorum of directors. The Board of Directors
may fill any vacancies resulting from death, resignation, or removal of an
officer in the same manner as provided for the election or appointment of such
person.
-10-
ARTICLE IV
----------
OTHER MATTERS
-------------
Section 1. Corporate Seal. The corporate seal shall be in such form as
the Board of Directors shall prescribe. Said seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise used. The Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer may affix the seal
to any instrument signed by a duly authorized officer, or when specifically
authorized by the Board of Directors, and may attest the same. Unless otherwise
provided by the Board of Directors, the seal may also be attested by any officer
of the Corporation except the officer signing the instrument on behalf of the
Corporation.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the Restated Certificate of Incorporation, the By-laws or otherwise
by law, a waiver thereof in writing, signed by the person or persons entitled to
the notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 3. Voting of Stocks Owned by the Corporation. The Chairman of
the Board of Directors or such other person as the Board of Directors may
designate shall be authorized to attend, vote and grant proxies to be used at
any meeting of stockholders of any corporation in which the Corporation may hold
stock.
Section 4. By-law Amendment. Subject to the provisions of the Restated
Certificate of Incorporation, these By-laws may be altered, amended or repealed
at any regular meeting of the stockholders (or at any special meeting thereof
duly called for that purpose) by a majority of the votes cast on the question
entitled to vote thereon; provided that in the notice of such special meeting
notice of such purpose shall be given. Subject to the laws of the State of
Delaware, the Restated Certificate of Incorporation and these By-laws, the Board
of Directors may, by majority vote of those present at any meeting at which a
quorum is present, amend these By-laws or enact such other By-laws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation.
Section 5. Construction. The masculine gender, where appearing in
these By-laws, shall be deemed to include the feminine gender.
-11-
Exhibit (12)
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,
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
Income from continuing operations
before income taxes .................................. $ 212,339 $ 189,303 $ 618,466 $ 562,928
Add:
Interest expense ..................................... 40,991 41,163 122,583 123,870
Portion of rents
representative of the
interest factor .................................... 11,038 13,252 33,517 34,145
Amortization of capitalized
interest ........................................... 243 243 730 730
Minority interest in the
income of subsidiary
with fixed charges ................................. 3,074 3,153 9,203 8,184
--------------- --------------- --------------- ---------------
Income as adjusted ..................................... $ 267,685 $ 247,114 $ 784,499 $ 729,857
=============== =============== =============== ===============
Fixed charges:
Interest expense ..................................... $ 40,991 $ 41,163 $ 122,583 $ 123,870
Portion of rents
representative of the
interest factor .................................... 11,038 11,319 33,517 33,872
Minority interest, excluding
taxes, in the income of
subsidiary with fixed charges ...................... 4,689 4,807 14,035 12,487
--------------- --------------- --------------- ---------------
$ 56,718 $ 57,289 $ 170,135 $ 170,229
=============== =============== =============== ===============
Ratio of earnings to
fixed charges ........................................ 4.72 4.31 4.61 4.29
=============== =============== =============== ===============
Ratio of earnings to fixed
charges excluding minority
interest ............................................. 5.09 4.65 4.97 4.58
=============== =============== =============== ===============
(1) The computation of the ratio of earnings to fixed charges has been computed by dividing income from continuing
operations before income taxes as adjusted by fixed charges. Included in fixed charges is one-third of rental
expense as the representative portion of interest.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
TAGGING FOR EXHIBIT: FINANCIAL DATA SCHEDULE
Exhibit (27)
5
1,000
9-MOS
DEC-31-1998
SEP-30-1998
144,974
1,930
1,848,131
65,861
235,568
3,115,141
2,807,805
1,533,957
8,232,345
3,214,803
1,710,533
323,338
300,000
2,110
1,385,563
8,232,345
1,431,310
3,073,396
847,486
1,224,640
73,395
0
122,583
618,466
212,929
405,537
7,753
0
0
413,290
1.50
1.47
Receivables are comprised of gross trade receivables of $368,988 and
short-term finance receivables of $1,479,143. Allowances are comprised of
allowances for trade receivables of $22,513 and for short-term finance
receivables of $43,348.
Property, plant and equipment are comprised of gross fixed assets of
$1,133,112 and rental equipment and related inventories of $1,674,693.
Depreciation is comprised of depreciation on fixed assets of $663,002 and on
rental equipment and related inventories of $870,955.
