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 March 31, 2001
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
--------------- ------------------
Commission File Number: 1-3579
PITNEY BOWES INC.
State of Incorporation IRS Employer Identification No.
Delaware 06-0495050
World Headquarters
Stamford, Connecticut 06926-0700
Telephone Number: (203) 356-5000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
Number of shares of common stock, $1 par value, outstanding as of April 30, 2001
is 246,791,148.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 2
Pitney Bowes Inc.
Index
-----------------
Page Number
-----------
Part I - Financial Information:
Item 1: Financial Statements
Consolidated Statements of Income (unaudited) - Three Months
Ended March 31, 2001 and 2000................................ 3
Consolidated Balance Sheets - March 31, 2001 (unaudited)
and December 31, 2000........................................ 4
Consolidated Statements of Cash Flows (unaudited) -
Three Months Ended March 31, 2001 and 2000................... 5
Notes to Consolidated Financial Statements....................... 6 - 10
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 11 - 17
Part II - Other Information:
Item 1: Legal Proceedings......................................... 18
Item 6: Exhibits and Reports on Form 8-K.......................... 18
Signatures............................................................ 19
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
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 March 31,
-----------------------------
2001 2000
------------- -------------
Revenue from:
Sales................................................. $ 471,472 $ 441,194
Rentals and financing................................. 367,992 380,671
Support services...................................... 126,859 122,900
------------- -------------
Total revenue....................................... 966,323 944,765
------------- -------------
Costs and expenses:
Cost of sales......................................... 278,350 258,094
Cost of rentals and financing......................... 90,833 99,916
Selling, service and administrative................... 322,903 317,869
Research and development.............................. 31,602 29,511
Interest, net......................................... 50,585 44,684
Restructuring charge.................................. 43,151 -
------------- -------------
Total costs and expenses............................ 817,424 750,074
------------- -------------
Income from continuing operations before
income taxes.......................................... 148,899 194,691
Provision for income taxes.............................. 44,962 61,238
------------- -------------
Income from continuing operations....................... 103,937 133,453
Income from discontinued operations (Note 2)............ - 18,100
Cumulative effect of accounting change................ - (4,683)
============= =============
Net income.............................................. $ 103,937 $ 146,870
============= =============
Basic earnings per share:
Continuing operations................................. $ .42 $ .51
Discontinued operations............................... - .07
Cumulative effect of accounting change................ - (.02)
------------- -------------
Net income............................................ $ .42 $ .56
============= =============
Diluted earnings per share:
Continuing operations................................. $ .42 $ .50
Discontinued operations............................... - .07
Cumulative effect of accounting change................ - (.02)
------------- -------------
Net income............................................ $ .42 $ .55
============= =============
Dividends declared per share of
common stock.......................................... $ .29 $ .285
============= =============
See Notes to Consolidated Financial Statements
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 4
Pitney Bowes Inc.
Consolidated Balance Sheets
---------------------------
March 31, December 31,
(Dollars in thousands, except share data) 2001 2000
------------- -------------
(unaudited)
Assets
- ------
Current assets:
Cash and cash equivalents.......................................... $ 194,386 $ 198,255
Short-term investments, at cost which
approximates market............................................ 1,572 15,250
Accounts receivable, less allowances:
3/01, $25,860; 12/00, $26,468.................................. 323,135 313,510
Finance receivables, less allowances:
3/01, $43,184; 12/00, $44,129.................................. 1,539,414 1,592,920
Inventories (Note 3)............................................... 184,734 167,969
Other current assets and prepayments............................... 168,177 145,786
Net assets of discontinued operations.............................. 215,594 193,018
------------- -------------
Total current assets........................................... 2,627,012 2,626,708
Property, plant and equipment, net (Note 4)............................ 492,749 491,312
Rental equipment and related inventories, net (Note 4)................. 586,340 620,841
Property leased under capital leases, net (Note 4)..................... 2,098 2,303
Long-term finance receivables, less allowances:
3/01, $53,681; 12/00, $53,222...................................... 1,916,666 1,980,876
Investment in leveraged leases......................................... 1,169,389 1,150,656
Goodwill, net of amortization:
3/01, $60,423; 12/00, $58,658...................................... 219,859 203,447
Other assets........................................................... 647,814 612,760
Net assets of discontinued operations.................................. 211,726 212,363
------------- -------------
Total assets........................................................... $ 7,873,653 $ 7,901,266
============= =============
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities........................... $ 1,004,469 $ 995,283
Income taxes payable............................................... 264,379 262,125
Notes payable and current portion of
long-term obligations ......................................... 1,229,189 1,277,941
Advance billings................................................... 339,297 346,228
------------- -------------
Total current liabilities...................................... 2,837,334 2,881,577
Deferred taxes on income............................................... 1,240,225 1,226,597
Long-term debt (Note 5)................................................ 1,911,636 1,881,947
Other noncurrent liabilities........................................... 321,913 316,170
------------- -------------
Total liabilities.............................................. 6,311,108 6,306,291
------------- -------------
Preferred stockholders' equity in a subsidiary company................. 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par
value, 4% convertible.......................................... 29 29
Cumulative preference stock, no par
value, $2.12 convertible....................................... 1,695 1,737
Common stock, $1 par value......................................... 323,338 323,338
Capital in excess of par value..................................... 7,972 10,298
Retained earnings.................................................. 3,798,924 3,766,995
Accumulated other comprehensive income (Note 8).................... (135,815) (139,434)
Treasury stock, at cost............................................ (2,743,598) (2,677,988)
------------- -------------
Total stockholders' equity..................................... 1,252,545 1,284,975
------------- -------------
Total liabilities and stockholders' equity............................. $ 7,873,653 $ 7,901,266
============= =============
See Notes to Consolidated Financial Statements
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 5
Pitney Bowes Inc.
Consolidated Statements of Cash Flows
(Unaudited)
-------------------------------------
(Dollars in thousands)
Three Months Ended
March 31,
-----------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net income......................................................... $ 103,937 $ 146,870
Adjustments to reconcile net income to
net cash provided by operating activities:
Nonrecurring charges, net................................... 49,160 -
Nonrecurring payments....................................... (6,693) -
Depreciation and amortization............................... 80,219 78,588
Increase in deferred taxes on income........................ 17,832 36,454
Change in assets and liabilities:
Accounts receivable..................................... 3,387 15,457
Net investment in internal finance receivables.......... 33,242 16,765
Inventories............................................. 3,614 (5,863)
Other current assets and prepayments.................... (762) (25,155)
Accounts payable and accrued liabilities................ (107,762) (44,117)
Income taxes payable.................................... 2,684 10,688
Advance billings........................................ (10,869) (1,500)
Other, net.............................................. (6,337) (12,108)
------------ ------------
Net cash provided by operating activities............... 161,652 216,079
------------ ------------
Cash flows from investing activities:
Short-term investments............................................. 13,667 (16,682)
Net investment in fixed assets..................................... (56,671) (52,490)
Net investment in finance receivables.............................. 17,353 (33,726)
Net investment in capital and mortgage services.................... 58,741 74,373
Investment in leveraged leases..................................... (16,188) (18,159)
Proceeds and cash receipts from the sale of
discontinued operations ........................................... - 512,780
Net investment in insurance contracts.............................. 2,960 (131,548)
Other investing activities......................................... 6,402 6,148
------------ ------------
Net cash provided by investing activities............... 26,264 340,696
------------ ------------
Cash flows from financing activities:
Increase (decrease) in notes payable, net.......................... 228,079 (343,659)
Proceeds from long-term obligations................................ 786 45,181
Principal payments on long-term obligations........................ (282,521) (5,970)
Proceeds from issuance of stock.................................... 3,901 7,084
Stock repurchases.................................................. (71,879) (218,291)
Dividends paid..................................................... (72,008) (75,045)
------------ ------------
Net cash used in financing activities................... (193,642) (590,700)
------------ ------------
Effect of exchange rate changes on cash................................ 1,857 (1,282)
------------ ------------
Decrease in cash and cash equivalents.................................. (3,869) (35,207)
Cash and cash equivalents at beginning of period....................... 198,255 254,270
------------ ------------
Cash and cash equivalents at end of period............................. $ 194,386 $ 219,063
============ ============
Interest paid.......................................................... $ 64,021 $ 63,594
============ ============
Income taxes paid, net................................................. $ 11,718 $ 17,753
============ ============
See Notes to Consolidated Financial Statements
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
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 the management 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 March 31, 2001 and December 31, 2000, and the results of its operations and
cash flows for the three months ended March 31, 2001 and 2000 have been
included. Operating results for the three months ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. These statements should be read in conjunction with the
financial statements and notes thereto included in the company's 2000 Annual
Report to Stockholders on Form 10-K.
Note 2:
- ------
On December 11, 2000, the company announced that its Board of Directors approved
a formal plan to spin off the company's Office Systems business to stockholders
as an independent, publicly-traded company. The company expects the spin-off to
be tax free as provided for under the Internal Revenue Code. The transaction is
expected to be completed by the end of the third quarter of 2001. Revenue of
Office Systems was $151.9 million and $157.2 million for the quarters ended
March 31, 2001 and 2000, respectively. Net interest expense allocated to Office
Systems' discontinued operations was $2.9 million and $2.5 million for the
quarters ended March 31, 2001 and 2000, respectively. Interest has been
allocated based on the net assets of Office Systems charged at the company's
weighted average borrowing rate. Operating results of Office Systems have been
segregated and reported as discontinued operations in the Consolidated
Statements of Income. Prior year results have been reclassified to conform to
the current year presentation. Income from Office Systems' discontinued
operations for the first quarter of 2001 was $7.6 million (net of taxes of $4.8
million), offset by costs, expenses and restructuring charges directly
associated with the spin-off. The company expects that income from Office
Systems' discontinued operations between the measurement date (December 11,
2000) and the spin-off date will exceed the total amount of costs, expenses and
restructuring charges directly associated with the spin-off. Income from Office
Systems' discontinued operations for the first quarter of 2000 was $18.1 million
(net of taxes of $11.7 million). Net assets of Office Systems' discontinued
operations have been separately classified in the Consolidated Balance Sheets.
Cash flow impacts of Office Systems' discontinued operations have not been
segregated in the Consolidated Statements of Cash Flows.
On January 14, 2000, the company sold its mortgage servicing business, Atlantic
Mortgage & Investment Corporation (AMIC), a wholly-owned subsidiary of the
company, to ABN AMRO North America. The company received approximately $484
million in cash at closing. The transaction is subject to post-closing
adjustments.
Note 3:
- ------
Inventories are comprised of the following:
(Dollars in thousands) March 31, December 31,
2001 2000
------------------------------
Raw materials and work in process.............................. $ 71,809 $ 67,990
Supplies and service parts..................................... 46,304 38,708
Finished products.............................................. 66,621 61,271
-------------- --------------
Total ......................................................... $ 184,734 $ 167,969
============== ==============
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 7
Note 4:
- ------
Fixed assets are comprised of the following:
(Dollars in thousands) March 31, December 31,
2001 2000
-------------- --------------
Property, plant and equipment.................................. $ 1,215,829 $ 1,195,319
Accumulated depreciation....................................... (723,080) (704,007)
-------------- --------------
Property, plant and equipment, net............................. $ 492,749 $ 491,312
============== ==============
Rental equipment and related inventories....................... $ 1,208,958 $ 1,218,251
Accumulated depreciation....................................... (622,618) (597,410)
-------------- --------------
Rental equipment and related inventories, net.................. $ 586,340 $ 620,841
============== ==============
Property leased under capital leases........................... $ 19,112 $ 19,059
Accumulated amortization....................................... (17,014) (16,756)
-------------- --------------
Property leased under capital leases, net...................... $ 2,098 $ 2,303
============== ==============
Note 5:
- ------
The company has a medium-term note facility, which was established as part of
the company's shelf registrations, permitting issuances of up to $500 million in
debt securities with a minimum maturity of nine months, of which $300 million
remained available at March 31, 2001.
In April 2001, the company issued the remaining $300 million of notes available
from its shelf registration. These unsecured notes bear annual interest at
5.875% and mature in May 2006. The proceeds will be used for general corporate
purposes including the repayment of commercial paper, financing acquisitions and
the repurchase of the company's stock.
PBCC has $425 million of unissued debt securities available at March 31, 2001
from a shelf registration statement filed with the Securities and Exchange
Commission (SEC) in July 1998. As part of this shelf registration statement, in
August 1999, PBCC established a medium-term note program for the issuance from
time to time of up to $500 million aggregate principal amount of Medium-Term
Notes, Series D, of which $175 million remained available at March 31, 2001.
Note 6:
- ------
A reconciliation of the basic and diluted earnings per share computations for
income from continuing operations for the three months ended March 31, 2001 and
2000 is as follows (in thousands, except per share data):
2001 2000
------------------------------------ ------------------------------------
Per Per
Income Shares Share Income Shares Share
- ----------------------------------------------------------------- ------------------------------------
Income from continuing
operations $ 103,937 $ 133,453
Less:
Preferred stock
dividends (1) -
Preference stock
dividends (33) (35)
- ----------------------------------------------------------------- ------------------------------------
Basic earnings per
share $ 103,903 248,125 $ .42 $ 133,418 263,061 $ .51
- ----------------------------------------------------------------- ------------------------------------
Effect of dilutive
securities:
Preferred stock 1 14 - 14
Preference stock 33 1,013 35 1,078
Stock options 520 1,736
Other 89 145
- ----------------------------------------------------------------- ------------------------------------
Diluted earnings per
share $ 103,937 249,761 $ .42 $ 133,453 266,034 $ .50
================================================================= ====================================
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 8
Note 7:
- ------
Revenue and operating profit by business segment for the three months ended
March 31, 2001 and 2000 were as follows:
Three Months Ended March 31,
----------------------------------
(Dollars in thousands) 2001 2000
---------------- ----------------
Revenue:
Global Mailing.............................................. $ 692,736 $ 698,051
Enterprise Solutions........................................ 230,590 201,537
---------------- ----------------
Total Messaging Solutions................................... 923,326 899,588
Capital Services............................................ 42,997 45,177
---------------- ----------------
Total revenue.................................................. $ 966,323 $ 944,765
================ ================
Operating Profit: (1)
Global Mailing.............................................. $ 207,171 $ 197,177
Enterprise Solutions........................................ 18,819 14,695
---------------- ----------------
Total Messaging Solutions................................... 225,990 211,872
Capital Services............................................ 14,705 13,121
---------------- ----------------
Total operating profit......................................... 240,695 224,993
Unallocated amounts:
Net interest (corporate interest expense,
net of intercompany transactions).......................... (19,759) (12,317)
Corporate expense........................................... (28,886) (17,985)
Restructuring charge........................................ (43,151) -
---------------- ----------------
Income from continuing operations before
income taxes.................................................. $ 148,899 $ 194,691
================ ================
<FN>
(1) Operating profit excludes general corporate expenses, income taxes and net
interest other than that related to finance operations.
</FN>
Note 8:
- ------
Comprehensive income for the three months ended March 31, 2001 and 2000 was as
follows:
(Dollars in thousands)
Three Months Ended March 31,
----------------------------------
2001 2000
---------------- ----------------
Net income...................................................... $ 103,937 $ 146,870
Other comprehensive income:
Foreign currency translation adjustments........................ 11,596 1,210
Cumulative effect of accounting change.......................... (9,152) -
Net unrealized gains on derivative instruments.................. 1,175 -
---------------- ----------------
Comprehensive income............................................ $ 107,556 $ 148,080
================ ================
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 9
Note 9:
- ------
In 1998, Statement of Financial Accounting Standards (FAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," amended in 2000 by FAS No.
138, was issued. FAS No. 133 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 or losses depends on the intended use of the derivative and the
resulting designation. The company adopted the provisions of FAS No. 133 in the
first quarter of 2001. The company uses derivatives to reduce the volatility in
earnings and cash flows associated with the impact of interest rate changes and
foreign currency fluctuations due to its investing and funding activities and
its operations in different foreign currencies. Derivatives designated as cash
flow hedges include primarily foreign exchange contracts and interest rate swaps
related to variable-rate debt. Derivatives designated as fair value hedges
include primarily interest rate swaps related to fixed rate debt. The adoption
of FAS No. 133 has resulted in an after-tax reduction to accumulated other
comprehensive income of $8.0 million, including a one-time cumulative effect of
accounting change which reduced accumulated other comprehensive income by
approximately $9.2 million. The adoption of FAS No. 133 has also impacted assets
and liabilities recorded on the Consolidated Balance Sheet. The adoption of FAS
No. 133 did not materially impact results of operations in the first quarter of
2001.
In 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements,"
summarizing certain guidance in applying generally accepted accounting
principles to revenue recognition in financial statements. The company adopted
the provisions of SAB No. 101 in the fourth quarter of 2000, retroactive to
January 1, 2000. The adoption of SAB No. 101 resulted in a one-time cumulative
after-tax reduction in net income of $4.7 million (net of taxes of approximately
$3.1 million) in the first quarter of 2000. The reduction to net income is
primarily attributable to the deferral of sales recognition of software-enabled
mail creation equipment and shipping products until installation.
In 2000, FAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued, replacing FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." FAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets and collateral, as well
as requiring certain additional disclosures. However, it carries over most of
the provisions contained in FAS No. 125. FAS No. 140 is effective for transfers
and servicing of financial assets and extinguishment of liabilities occurring
after March 31, 2001. However, it is effective for the recognition and
reclassification of collateral and for disclosures relating to those
transactions for the year ended December 31, 2000. The company believes it is in
compliance with these standards in all material respects.
Note 10:
- -------
As previously announced, the company adopted a formal restructuring plan in the
first quarter of 2001, designed to implement a common, streamlined business
infrastructure across the corporation as a result of our decisions to spin off
our office systems business and align our mailing business on a global basis,
cost saving opportunities due to strategic acquisitions and partnerships, and
additional benefits attained from the consolidation of our IT organization and
ERP initiatives. In connection with this plan, the company recorded a pretax
restructuring charge of $75 million during the first quarter of 2001, of which
$43.2 million was related to continuing operations, and the remaining $31.8
million related to discontinued operations. The restructuring charge related to
continuing operations has been segregated in the Consolidated Statement of
Income in the first quarter of 2001. The restructuring charge related to
discontinued operations has been reported in discontinued operations in the
Consolidated Statement of Income in the first quarter of 2001. See Note 2 to the
Consolidated Financial Statements.
The charge related to continuing operations includes $35.2 million of severance
and benefit costs for workforce reductions, $2.2 million of asset write downs
and $5.8 million of other exit costs. All but the asset write downs will result
in cash outflows. The severance and benefit costs relate to a reduction in
workforce of approximately 1,100 employees worldwide to be completed over the
next 12 months. The workforce reductions relate to actions across several of our
business units resulting from infrastructure and process improvements and our
continuing efforts to streamline operations, and include managerial,
professional, clerical and technical roles. Approximately 85% of the workforce
reductions are in the U.S. The majority of the international workforce
reductions are in Europe. None of the reductions will impact sales coverage. As
of March 31, 2001, 289 employees were separated under these initiatives and
approximately $5 million of severance and benefit costs were paid.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 10
The charge related to discontinued operations includes $1.5 million of severance
and benefit costs for workforce reductions, $16.5 million of asset write downs
and $13.8 million of other exit costs. The severance and benefit costs relate to
a reduction in workforce of approximately 25 employees. The asset write downs
relate primarily to a write-down of residual amounts in connection with leases
of copier equipment and the write-down of facsimile equipment, resulting from
the spin-off of our office systems business. Other exit costs relate primarily
to incremental costs associated with cancellation and separation of facility
occupancy leases that are shared between the company and Office Systems.
Note 11:
- -------
In April 2001, the company announced it had entered into an agreement to acquire
Danka Services International, a wholly-owned division of Danka Business Systems
PLC, for $290 million in cash. The transaction is expected to close by the end
of the second quarter of 2001. Danka Services International provides on- and
off-site document management services, including the management of central
reprographics departments, the placement and maintenance of photocopiers,
print-on-demand operations and document archiving and retrieval services.
In April 2001, the company also announced it had entered into an agreement to
acquire Bell & Howell's International Mail and Messaging Technologies (MMT)
business in Europe, Africa, the Middle East and Asia, for $51 million in cash.
The transaction is expected to close by the end of the second quarter of 2001,
subject to government approval as well as work council consultation. MMT markets
and services high-end mail processing, sorting and service-related products
through a network of distributors and direct operations.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Continuing Operations - first quarter of 2001 vs. first quarter of
- --------------------------------------------------------------------------------
2000
- ----
Revenue increased two percent in the first quarter of 2001 to $966.3 million
compared with $944.8 million in the first quarter of 2000. Income from
continuing operations decreased one percent to $131.6 million from $133.5
million for the same period in 2000 excluding the restructuring charge in the
first quarter of 2001. Diluted earnings per share from continuing operations was
42 cents in the first quarter of 2001. During the quarter, the company recorded
a $75 million pre-tax restructuring charge, of which $43 million was related to
continuing operations and $32 million to discontinued operations. The
restructuring charge is associated with infrastructure and process improvements,
and the planned spin-off of our office systems business. Excluding the
restructuring charge, diluted earnings per share from continuing operations grew
to 53 cents, a five percent increase from the first quarter of 2000.
First quarter 2001 revenue included $471.5 million from sales, up seven percent
from $441.2 million in the first quarter of 2000; $368.0 million from rentals
and financing, down three percent from $380.7 million; and $126.9 million from
support services, up three percent from $122.9 million.
Total Messaging Solutions, the combined results of the Global Mailing segment
and Enterprise Solutions segment, reported three percent revenue growth and
seven percent operating profit growth.
The Global Mailing segment includes worldwide revenues and related expenses from
the rental of postage meters and the sale, rental and financing of mailing
equipment, including mail finishing and software-based mail creation equipment,
software-based shipping, transportation and logistics systems, and related
supplies and services. During the first quarter of 2001, revenue declined one
percent and operating profit increased five percent. Revenue growth was
negatively impacted by the sale of the credit card portfolio at the end of the
second quarter of 2000 and the negative impact of foreign currency, principally
related to the British Pound, Canadian Dollar and the Euro. Excluding the impact
of these two factors, Global Mailing revenues increased three percent. Core
metering and mail finishing applications performed in line with the first
quarter of 2000; however, these results were offset by softer sales of mail
creation and shipping products. Global Mailing's operating profit benefited from
lower administrative costs due to continuous process improvements.
The Enterprise Solutions segment includes Pitney Bowes Management Services and
Document Messaging Technologies. Pitney Bowes Management Services includes
facilities management contracts for advanced mailing, reprographic, document
management and other value-added services to large enterprises. Document
Messaging Technologies includes sales, service and financing of high speed,
software-enabled production mail systems, sorting equipment, incoming mail
systems, electronic statement, billing and payment solutions, and mailing
software. During the first quarter of 2001, revenue grew 14 percent and
operating profit grew 28 percent. Revenue growth was driven by a 15 percent
increase at Pitney Bowes Management Services and a 12 percent increase at
Document Messaging Technologies resulting from higher volume in both businesses.
The operating profit improvement was driven by higher revenue and improved
operating margins in both businesses.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 12
The Capital Services segment includes primarily asset- and fee-based income
generated by large-ticket, non-core asset transactions. During the quarter,
revenue decreased five percent and operating profit increased 12 percent. This
performance is consistent with the company's previously stated strategy to
concentrate on fee-based income opportunities.
Cost of sales increased to 59.0 percent of sales revenue in the first quarter of
2001 compared with 58.5 percent in the first quarter of 2000. The increase was
due to the increasing mix of lower margin Pitney Bowes Management Services sales
revenue.
Cost of rentals and financing decreased to 24.7 percent of related revenues in
the first quarter of 2001 compared with 26.2 percent in the first quarter of
2000. This was due primarily to lower depreciation of rental equipment.
Selling, service and administrative expenses were 33.4 percent of revenue in the
first quarter of 2001 compared with 33.6 percent in the first quarter of 2000.
This was due primarily to the company's continued emphasis on controlling
operating expenses.
Research and development expenses increased 7.1 percent to $31.6 million in the
first quarter of 2001 compared with $29.5 million in the first quarter of 2000.
The increase reflects the company's continued commitment to developing new
technologies and other mailing and software products.
Net interest expense increased to $50.6 million in the first quarter of 2001
from $44.7 million in the first quarter of 2000. The increase is due mainly to
higher average interest rates and borrowings to fund the company's investment in
leasing and rental products, and the share repurchase program.
The effective tax rate for the first quarter of 2001 was 30.2 percent. Excluding
the restructuring charge, the effective tax rate for the first quarter of 2001
and 2000 was 31.5 percent.
Excluding the restructuring charge, income from continuing operations decreased
1.4 percent while diluted earnings per share from continuing operations
increased 5.0 percent. The reason for the increase in diluted earnings per share
outperforming income from continuing operations was the company's share
repurchase program.
Discontinued Operations
- -----------------------
On December 11, 2000, the company announced that its Board of Directors approved
a formal plan to spin off the company's office systems business to stockholders
as an independent, publicly-traded company. The transaction is expected to be
completed by the end of the third quarter of 2001. Operating results of Office
Systems have been segregated and reported as discontinued operations in the
Consolidated Statements of Income. Prior year results have been reclassified to
conform to the current year presentation. See Note 2 to the Consolidated
Financial Statements.
On January 14, 2000, the company sold its mortgage servicing business, Atlantic
Mortgage & Investment Corporation, a wholly-owned subsidiary of the company, to
ABN AMRO North America. The company received approximately $484 million in cash
at closing. The transaction is subject to post-closing adjustments.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 13
Accounting Pronouncements
- -------------------------
In 1998, Statement of Financial Accounting Standards (FAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," amended in 2000 by FAS No.
138, was issued. FAS No. 133 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 or losses depends on the intended use of the derivative and the
resulting designation. The company adopted the provisions of FAS No. 133 in the
first quarter of 2001. The company uses derivatives to reduce the volatility in
earnings and cash flows associated with the impact of interest rate changes and
foreign currency fluctuations due to its investing and funding activities and
its operations in different foreign currencies. Derivatives designated as cash
flow hedges include primarily foreign exchange contracts and interest rate swaps
related to variable-rate debt. Derivatives designated as fair value hedges
include primarily interest rate swaps related to fixed rate debt. The adoption
of FAS No. 133 has resulted in an after-tax reduction to accumulated other
comprehensive income of $8.0 million, including a one-time cumulative effect of
accounting change which reduced accumulated other comprehensive income by
approximately $9.2 million. The adoption of FAS No. 133 has also impacted assets
and liabilities recorded on the Consolidated Balance Sheet. The adoption of FAS
No. 133 did not materially impact results of operations in the first quarter of
2001.
In 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements,"
summarizing certain guidance in applying generally accepted accounting
principles to revenue recognition in financial statements. The company adopted
the provisions of SAB No. 101 in the fourth quarter of 2000, retroactive to
January 1, 2000. The adoption of SAB No. 101 resulted in a one-time cumulative
after-tax reduction in net income of $4.7 million (net of taxes of approximately
$3.1 million)in the first quarter of 2000. The reduction to net income is
primarily attributable to the deferral of sales recognition of software-enabled
mail creation equipment and shipping products until installation.
In 2000, FAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was issued, replacing FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." FAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets and collateral, as well
as requiring certain additional disclosures. However, it carries over most of
the provisions contained in FAS No. 125. FAS No. 140 is effective for transfers
and servicing of financial assets and extinguishment of liabilities occurring
after March 31, 2001. However, it is effective for the recognition and
reclassification of collateral and for disclosures relating to those
transactions for the year ended December 31, 2000. The company believes it is in
compliance with these standards in all material respects.
Restructuring Charge
- --------------------
As previously announced, the company adopted a formal restructuring plan in the
first quarter of 2001, designed to implement a common, streamlined business
infrastructure across the corporation as a result of our decisions to spin off
our office systems business and align our mailing business on a global basis,
cost saving opportunities due to strategic acquisitions and partnerships, and
additional benefits attained from the consolidation of our IT organization and
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 14
ERP initiatives. In connection with this plan, the company recorded a pretax
restructuring charge of $75 million during the first quarter of 2001, of which
$43.2 million was related to continuing operations, and the remaining $31.8
million related to discontinued operations. The company expects to record an
additional charge of approximately $25 million to $35 million in the second
quarter of 2001 to complete this restructuring plan. The restructuring charge
related to continuing operations has been segregated in the Consolidated
Statement of Income in the first quarter of 2001. The restructuring charge
related to discontinued operations has been reported in discontinued operations
in the Consolidated Statement of Income in the first quarter of 2001. See Note 2
to the Consolidated Financial Statements.
The charge related to continuing operations includes $35.2 million of severance
and benefit costs for workforce reductions, $2.2 million of asset write downs
and $5.8 million of other exit costs. All but the asset write down will result
in cash outflows. The severance and benefit costs relate to a reduction in
workforce of approximately 1,100 employees worldwide to be completed over the
next 12 months. The workforce reductions relate to actions across several of our
business units resulting from infrastructure and process improvements and our
continuing efforts to streamline operations, and include managerial,
professional, clerical and technical roles. Approximately 85% of the workforce
reductions are in the U.S. The majority of the international workforce
reductions are in Europe. None of the reductions will impact sales coverage. As
of March 31, 2001, 289 employees were separated under these initiatives and
approximately $5 million of severance and benefit costs were paid.
The charge related to discontinued operations includes $1.5 million of severance
and benefit costs for work force reductions, $16.5 million of asset write downs
and $13.8 million of other exit costs. The severance and benefit costs relate to
a reduction in workforce of approximately 25 employees. The asset write downs
relate primarily to a write-down of residual amounts in connection with leases
of copier equipment and the write-down of facsimile equipment, resulting from
the spin-off of our office systems business. Other exit costs relate primarily
to incremental costs associated with cancellation and separation of facility
occupancy leases that are shared between the company and Office Systems.
Total cash payments resulting from the restructuring charge for the first
quarter of 2001 were approximately $6 million. We expect that the majority of
the remaining cash outflows related to the restructuring charge will take place
over the next 12 months, funded primarily by cash provided by operating
activities. The restructuring charge is expected to increase our operating
efficiency and effectiveness in 2002 and beyond while enhancing growth,
primarily as a result of reduced personnel-related expenses.
Liquidity and Capital Resources
- -------------------------------
The ratio of current assets to current liabilities is .93 to 1 at March 31, 2001
compared with .91 to 1 at December 31, 2000.
The company has a medium-term note facility which was established as part of the
company's shelf registrations, permitting issuances of up to $500 million in
debt securities with a minimum maturity of nine months, of which $300 million
remained available at March 31, 2001.
In April 2001, the company issued the remaining $300 million of notes available
from its shelf registration. These unsecured notes bear annual interest at
5.875% and mature in May 2006. The proceeds will be used for general corporate
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 15
purposes including the repayment of commercial paper, financing acquisitions and
the repurchase of the company's stock.
PBCC has $425 million of unissued debt securities available at March 31, 2001
from a shelf registration statement filed with the SEC in July 1998. As part of
this shelf registration statement in August 1999, PBCC established a medium-term
note program for the issuance from time to time of up to $500 million aggregate
principal amount of Medium-Term Notes, Series D, of which $175 million remained
available at March 31, 2001.
The company believes that its financing needs for the next 12 months can be met
with cash generated internally, money from existing credit agreements, debt
issued under new and existing shelf registration statements and existing
commercial paper 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 was 73.4 percent at March
31, 2001 compared with 73.0 percent at December 31, 2000. Book value per common
share decreased to $5.07 at March 31, 2001 from $5.16 at December 31, 2000
driven primarily by the repurchase of common shares. During the first quarter of
2001, the company repurchased two million common shares for $71.9 million.
To control the impact of interest rate risk 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.
Capital Investments
- -------------------
In the first three months of 2001, net investments in fixed assets included
$31.5 million in net additions to property, plant and equipment and $25.2
million in net additions to rental equipment and related inventories compared
with $18.7 million and $33.8 million, respectively, in the same period in 2000.
These additions include expenditures for normal plant and manufacturing
equipment. In the case of rental equipment, the additions included the
production of postage meters and the purchase of facsimile and copier equipment
related to the discontinued operations of Office Systems.
Expenditures for property, plant and equipment, and rental equipment and related
inventories are expected to be consistent with historical levels.
Subsequent Events
- -----------------
In April 2001, the company announced it had entered into an agreement to acquire
Danka Services International, a wholly-owned division of Danka Business Systems
PLC, for $290 million in cash. The transaction is expected to close by the end
of the second quarter of 2001. Danka Services International provides on- and
off-site document management services, including the management of central
reprographics departments, the placement and maintenance of photocopiers,
print-on-demand operations and document archiving and retrieval services.
In April 2001, the company also announced it had entered into an agreement to
acquire Bell & Howell's International Mail and Messaging Technologies (MMT)
business in Europe, Africa, the Middle East and Asia, for $51 million in cash.
The transaction is expected to close by the end of the second quarter of 2001,
subject to government approval as well as work council consultation. MMT markets
and services high-end mail processing, sorting and service-related products
through a network of distributors and direct operations.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 16
Regulatory Matters
- ------------------
In 2000, the U.S. Postal Service (USPS) issued a proposed schedule for the
phaseout of manually reset electronic meters in the U.S. as follows:
o As of February 1, 2000, new placements of manually reset electronic meters
are no longer permitted.
o Current users of manually reset electronic meters can continue to use these
meters for the term of their current rental and lease agreements. Leases or
rentals due to expire in 2000 can be extended to December 31, 2001.
In August 2000, the USPS also issued a proposal to cease placements of
non-digital, or letterpress, meters as follows:
o New placements of non-digital meters with a "timeout" feature that enables
the meters to be automatically disabled, if not reset within a specified
time period are no longer permitted after December 2003.
o New placements of non-digital meters without the "timeout" feature are no
longer permitted after June 2001.
The company has submitted comments to the USPS's proposed schedules described
above. Based on the proposed schedules, the company believes that the phaseout
of manually reset electronic meters will not cause a material adverse financial
impact on the company. The company is working with the USPS to meet the
non-digital meter phaseout schedule and is currently evaluating the potential
financial impact on the company.
As a result of the company's aggressive efforts to meet the USPS's mechanical
meter migration phaseout schedule combined with the company's ongoing and
continuing investment in advanced postage evidencing technologies, mechanical
meters represented less than 1% of the company's installed meter base at
December 31, 2000 and 1999. The company continues to work, in close cooperation
with the USPS, to convert those mechanical meter customers who have not migrated
to digital or electronic meters.
In May 1995, the USPS publicly announced its concept of its Information Based
Indicia Program (IBIP) for future postage evidencing devices. As initially
stated by the USPS, the purpose of the program was to develop a new standard for
future digital postage evidencing devices which would significantly enhance
postal revenue security and support expanded USPS value-added services to
mailers. The program would consist of the development of four separate
specifications:
o the Indicium specification - the technical specifications for the indicium to
be printed
o a Postal Security Device specification - the technical specification for the
device that would contain the accounting and security features of the system
o a Host specification
o a Vendor Infrastructure specification
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 17
During the period from May 1995 through December 2000, the company submitted
extensive comments to a series of proposed IBIP specifications issued by the
USPS. In March 2000, the USPS issued the latest set of proposed specifications,
entitled "Performance Criteria for Information-Based Indicia and Security
Architecture for Open IBI Postage Evidencing Systems" (the IBI Performance
Criteria). The company has submitted comments to the IBI Performance Criteria.
In September and October 2000, the USPS issued further proposed regulations
regarding postage evidencing systems using Information Based Indicia, titled
"Refunds and Exchanges" and "Production, Distribution and Use of Postal Security
Devices and Information-Based Indicia." The Company has submitted comments
regarding those proposed regulations.
In March 2000, the company received approval from the USPS for the commercial
launch of the Internet version of a product which satisfies the proposed IBI
Performance Criteria, ClickStampTM Online.
In June 1999, the company was served with a Civil Investigative Demand (CID)
from the U.S. Justice Department's Antitrust Division. A CID is a tool used by
the Antitrust Division for gathering information and documents. The company
believes that the Justice Department may be reviewing the company's efforts to
protect its intellectual property rights. The company believes it has complied
fully with the antitrust laws and is cooperating fully with the department's
investigation.
Forward-Looking Statements
- --------------------------
The company wants to caution readers that any forward-looking statements with
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 in this Form 10-Q, other reports or press
releases or made by the company's management involve risks and uncertainties
which may change based on various important factors. These forward-looking
statements are those which talk about the company's or management's current
expectations as to the future and include, but are not limited to, statements
about the amounts, timing and results of possible restructuring charges and
future earnings. Words such as "estimate," "project," "plan," "believe,"
"expect," "anticipate," "intend," and similar expressions may identify such
forward-looking statements. 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
o foreign currency fluctuations
o terms and timing of the spin-off of Office Systems
o terms and timing of the restructuring plan
o regulatory approvals and satisfaction of other conditions to consummation
of any acquisitions
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 18
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 plaintiff or 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 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reg. S-K
Exhibits Description
-------- ------------------------------------
(10) 1996 Pitney Bowes Employee
Stock Purchase Plan
(12) Computation of ratio of
earnings to fixed charges
(b) Reports on Form 8-K
On February 8, 2001, the company filed a current report on Form 8-K pursuant to
Item 5 thereof, reporting segment data for the quarters ended in 2000 and 1999,
and the years ended December 31, 2000 and 1999, reflecting the results of Office
Systems in discontinued operations.
On February 1, 2001, the company filed a current report on Form 8-K pursuant to
Item 5 thereof, reporting the Press Release dated January 30, 2001 for the
quarter and year ended December 31, 2000.
Pitney Bowes Inc. - Form 10-Q
Three Months Ended March 31, 2001
Page 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.
May 11, 2001
/s/ B. P. Nolop
-------------------------------------
B. P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ A. F. Henock
-------------------------------------
A. F. Henock
Vice President - Finance
(Principal Accounting Officer)
Exhibit Index
-------------
Reg. S-K
Exhibits Description
-------- --------------------------------------
(10) 1996 Pitney Bowes Employee
Stock Purchase Plan
(12) Computation of ratio of
earnings to fixed charges
Exhibit (10)
1996 PITNEY BOWES EMPLOYEE STOCK PURCHASE PLAN
(as amended and restated in April 2001)
1996 PITNEY BOWES EMPLOYEE STOCK PURCHASE PLAN
1. Introduction
The Pitney Bowes Employee Stock Purchase Plan (the "Plan") is designed
to encourage employees to become part owners of Pitney Bowes Inc. (the
"Company") by the acquisition of shares of common stock of the Company,
("Common Stock"), thereby stimulating their personal and active interest in its
growth and prosperity.
It is the intention of the Company to have the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor provision thereto, and the Plan shall be
construed in accordance with such purpose.
2. Eligible Employees
An "Eligible Employee" is any person (i) who is an employee of (A) Pitney
Bowes Inc. or (B) a subsidiary designated as a "a participating subsidiary" by
the Committee, (ii) who has been employed for at least twenty (20) hours a week
continuously since the last day of the fourth month preceding the month in which
occurs the Initial Payroll Deduction Date (as defined below), and (iii) whose
customary employment is for more than five (5) months in any one calendar year.
An Eligible Employee shall be eligible to be offered options under this Plan.
Any provision of this Plan to the contrary notwithstanding, no Eligible
Employee shall be granted an option under this Plan:
(a) If, immediately after the grant such Eligible Employee would
own shares and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of
all classes of stock of the Company or of any subsidiary of the Company;
or
(b) Which permits the Eligible Employee's rights to purchase
shares under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds $25,000, in the aggregate (or
such greater amount as may be then permitted by Section 423, or any
successor provision, of the Code), of the fair market value of the shares
(determined at the time such option is granted) for each calendar year in
which such options outstanding at any time.
An Eligible Employee who elects to participate as provided in Paragraph 4
shall be a "Participating Employee."
3. Offering
The Company may make offering ("Offerings") of shares of its Common
Stock to Participating Employees. The Company may, if the Committee (as
defined below) so directs, make one or more Offerings in any calendar year. For
each Offering, Participating Employees will be granted rights to purchase stock
in amounts up to a maximum percentage of such Participating Employee's annual
compensation, which maximum percentage shall be 10% or such other percentage
determined with respect to an Offering by the Committee in its discretion and
shall apply uniformly to all participating Employees with respect to each such
Offering. "Compensation" shall be as defined by the Administrator and shall
apply to all participating Employees with respect to the applicable Offering.
The term of each Offering shall be one (1) year from July 1 (or such other
date as the Committee, in its discretion, shall designate) (the "Offering Date")
of the Offering year. For each Offering, the last business day of the term of
the Offering shall be the date of exercise ("Exercise Date") unless the
Committee determines otherwise. For each Offering the option price per share of
stock (the"Exercise Price") will be determined by the Committee, in its
discretion, but, unless the Committee determines otherwise and subject to the
first paragraph of Section 8, shall be expressed as a percentage (the
"Discount") of the average of the high and low price of the Common Stock on the
New York Stock Exchange (the "Average Price") on the Offering Date. In no event
shall the Committee determine an Exercise Price that is less than the lowest
price that employee stock purchase plans are permitted to establish under
Section 423 (or any successor provision) of the Code nor shall an option granted
under this Plan be exercisable for a period of time longer than that permitted
under Section 423 (or any successor provision) of the Code.
The Committee (or the Administrator if permitted by the terms of the Plan)
shall in its discretion determine the terms and conditions under which each
Offering shall be made and shall authorize and determine the number of shares of
Common Stock that may be issued pursuant to each Offering. The Administrator
shall determine the exact number of shares of Common Stock utilized in each
Offering and shall report such information to the Treasurer or his or her
delegate. The maximum number of shares of Common Stock that may be issued
pursuant to this Plan is 10,000,000.
2
4. Method of Participation
Unless the Administrator shall specify otherwise, an Eligible Employee may
become a Participating Employee in the Plan by filing on or before the Offering
Date a completed Stock Purchase form provided by the Company and applying for an
allotment of the number of shares purchasable, not to exceed the amounts
described below. Any such Stock Purchase form pursuant to this paragraph 4 shall
remain in effect for subsequent Offerings unless such Participating Employee
delivers a new Stock Purchase form applying for a different allotment, which
shall be applied to future Offerings until a further Stock Purchase form is
received by the Company pursuant to this paragraph 4. Unless the Administrator
shall specify otherwise, an Eligible Employee will also be required to agree to
payroll deductions to cover the purchase price of such shares in accordance with
paragraph 6.
Unless the Committee shall specify otherwise, on the Offering Date each
Participating Employee will be granted an allotment for the number of shares of
Common Stock which are purchasable, computed as the aggregate amount designated
by such Participating Employee on such Participating Employee's Stock Purchase
form to be deducted during the term of the Offering divided by the Exercise
Price or for such reduced amount as permitted under paragraph 5 below. If such
amount does not result in a whole number of shares, the number of shares will be
decreased to the next lowest whole number.
Notice of the Offering will be given to each Participating Employee with
full details as to the aggregate number of shares offered, the Exercise Price,
the number of shares allotted to the Participating Employee, the amount of
payroll deductions to be made and any pro rata reduction in accordance with
paragraph 5.
5. Oversubscriptions
In the event the number of shares for which subscriptions are received
exceeds the number of shares offered as determined under paragraph 3, the
number of shares allotted to each Participating Employee will be proportionately
reduced.
6. Payroll Deductions
Unless the Administrator shall specify otherwise, the purchase price of
each share of Common Stock for which a Participating Employee has a right to
purchase will be deducted over a one (1) year period (or such shorter period as
may be determined by the Administrator) in substantially equal installments
(weekly, biweekly, semi-monthly or monthly, depending on the normal pay period
3
of such Participating Employee). Unless the Administrator shall specify
otherwise, deductions shall begin in the first pay period commencing after the
Offering Date (the "Initial Payroll Deduction Date"). All payroll deduction may
be used by the Company for general corporate purposes. A separate bookkeeping
account for each Participating Employee shall be maintained by the Company and
the amount of each Participating Employee's payroll deductions shall be credited
to such account.
7. Rights as a Stockholder
A Participating Employee will have none of the rights or privileges of a
stockholder of the Company until the full purchase price of such Participating
Employee's shares has been paid and such shares of Common Stock have been
issued to the Participating Employee.
8. Issuance of Stock
Unless a Participating Employee cancels such Participating Employee's right
to purchase as provided below, it will be exercised and become an obligation
to take the shares of Common Stock as of the Exercise Date. Within a reasonable
time after the Exercise Date, the number of shares purchased by a Participating
Employee will be credited to such Participating Employee. Unless the Committee
shall specify otherwise, if the Discount times the Average Price of the Common
Stock on the Exercise Date yields a purchase price per share (the "New Price")
less than the Exercise Price, then the New Price shall be used for any purchase
for such Offering and the Participating Employee shall also receive an amount
equal to the difference between the New Price and the Exercise Price times the
number of shares so purchased for such Participating Employee.
The shares will be issued in the name of the employee or, upon such
employee's request, jointly in such employee's name and that of a family member
as specified on such employee's Stock Purchase Registration form.
The Committee, in its discretion, may impose restrictions on the
transferability of shares of Common Stock acquired pursuant to this Plan, and
may cause to be placed on all stock certificates, or other evidences of
ownership, legends or other indicators setting forth any such restrictions on
transferability instructing the transfer agent to notify the Company of any
transfer of such shares. Such restrictions, if any, shall apply uniformly to all
Participating Employees with respect to any Offering.
4
9. Right to Cancel
At such time prior to the final payroll deduction to be made pursuant to
any Offering as may be specified by the Administrator, a Participating Employee
may cancel all or any part of such Participating Employee's right to purchase by
filing a notice of cancellation with the Company. Promptly after the Company's
receipt of such notice, the Participating Employee will receive the proportional
amount withheld from such Participating Employee's compensation in respect of
that portion of such Participating Employee's allotment which is canceled, with
interest thereon at a rate to be determined as provided under paragraph 10,
computed on the average balance to the credit of the Participating Employee
during the period when payroll deductions were made. Rights to purchase which
have been canceled pursuant to this section may not be reinstated at a later
date.
10. Termination of Employment
If a Participating Employee dies or retires prior to such Participating
Employee's final payroll deduction for an Offering, such Participating Employee
or such Participating Employee's legal representative may, within a period of
three (3) months thereafter, either:
(a) cancel all of such Participating Employee's right to
purchase and request payment in cash of the entire amount which has been
deducted under the Plan plus interest as computed below, or
(b) receive the number of full shares of Common Stock which
the payroll deductions will purchase, at the Exercise Price, and receive the
balance, if any, in cash.
Notice of choice between (a) and (b) above shall be given to the Company
in writing and if such notice is not received within the prescribed period, the
Company shall act in accordance with (a) above.
If a Participating Employee's employment is otherwise terminated, such
Participating Employee's only right will be to receive in cash the amount which
has been deducted under the Plan, together with interest, at the average
passbook rate, or such other rate as the Committee shall determine, during the
period up to that time.
A Participating Employee who remains an employee, but whose name is
temporarily taken off the payroll because of leave of absence, temporary
disability, temporary layoff, military service, or for service with another
organization which is to the mutual benefit of the Company and the employee,
5
may cancel such Participating Employee's right to purchase and receive the
amounts accumulated to such Participating Employee's credit, or make special
arrangements to continue payments, or to suspend them. In the event of
suspension of payments, full payment must be made not later than the Date of
Exercise.
11. Rights not Transferable
No right under this Plan (other than stock issued pursuant to the terms of
the Plan not otherwise subject to restrictions on transfer ("Released Stock"))
shall be assignable, alienable, saleable, or transferable by a Participating
Employee other than by will or by the laws of descent and distribution. Each
right under this Plan shall be exercisable during the Participating Employee's
lifetime only by the Participating Employee, or, if permissible under applicable
law, by the Participating Employee's guardian or legal representative. No right
hereunder (other than Released Stock) may be pledged, alienated, attached, or
otherwise encumbered and any purported pledge, alienation, attachment, or
encumbrance thereof shall be void and unenforceable against the Company or any
affiliate.
12. Administration
The Plan shall be administered by a committee (the "Committee")
designated by the Board of Directors of the Company to administer the Plan,
which committee shall be composed of persons then serving as Directors of the
Company. The Committee shall have full authority to establish rules for the
administration of the Plan, to make administrative decisions regarding the Plan
and to make the determinations to be made by the Committee under the Plan. The
Administrator, which shall be the Corporate Secretary or Assistant Corporate
Secretary of the Company, may also make administrative decisions and perform
functions regarding the Plan as provided in the Plan, except that the
designation of Eligible Employees and decisions concerning the timing, pricing
and amount of participation shall be made by the Committee, subject to the other
terms of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan, any participation hereunder, or any participation agreement or
certificate, shall be with and in the sole discretion of the Committee or the
Administrator, as the case may be, may be made at any time, and shall be final,
conclusive, and binding upon all persons, including the Company, any affiliate,
any Participating Employee, any holder or beneficiary of any right of
participation, and any employee of the Company or of any affiliate.
6
In the event a stock dividend, extraordinary cash dividend, spin-off,
split-up, combination, exchange of shares, merger, consolidation,
reorganization, recapitalization, or other similar corporate event affects the
Common Stock such that an adjustment is required in order to preserve the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in its sole discretion, and in such manner as the
Committee may deem equitable, adjust the maximum number of shares available
under the Plan, the number and kind of shares subject to outstanding rights to
purchase, and the terms relating to the purchase price with respect to such
outstanding rights and take such other actions as the Committee, in its opinion,
deems appropriate under the circumstances.
The Board of Directors of the Company may, from time to time amend,
suspend or discontinue this Plan for the purpose of meeting any changes in legal
requirements or for any other purpose permitted by law and the Committee may
also amend or alter the Plan from time to time in a manner not inconsistent with
the Board's power to amend, suspend or discontinue the Plan; provided, however,
that, except for any adjustment authorized by the immediately preceding
paragraph, the maximum number of shares that may be offered under this Plan
may not be increased without appropriate stockholder approval.
7
Exhibit (12)
------------
Pitney Bowes Inc.
Computation of Ratio of Earnings to Fixed Charges (1)
(Dollars in thousands)
Three Months Ended March 31,
----------------------------
2001 (2) 2000 (2)
---------- ----------
Income from continuing operations before income
taxes................................................ $ 148,899 $ 194,691
Add:
Interest expense...................................... 52,788 46,508
Portion of rents
representative of the
interest factor..................................... 10,266 10,607
Amortization of capitalized
interest............................................ 243 243
Minority interest
in the income of
subsidiary with
fixed charges....................................... 3,361 3,282
---------- ----------
Income as adjusted...................................... $ 215,557 $ 255,331
========== ==========
Fixed charges:
Interest expense...................................... $ 52,788 $ 46,508
Capitalized interest.................................. - 539
Portion of rents
representative of the
interest factor..................................... 10,266 10,607
Minority interest, excluding
taxes, in the income of
subsidiary with fixed
charges............................................. 4,815 4,788
---------- ----------
Total fixed charges..................................... $ 67,869 $ 62,442
========== ==========
Ratio of earnings to fixed
charges.............................................. 3.18 4.09
========== ==========
Ratio of earnings to fixed
charges excluding minority
interest............................................ 3.37 4.37
========== ==========
<FN>
(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.
(2) Interest expense and the portion of rents representative of the interest
factor of the discontinued operations of Office Systems and AMIC have been
excluded from fixed charges in the computation.
Including these amounts in fixed charges, the ratio of earnings to fixed
charges would be 3.09 and 3.97 for the three months ended March 31, 2001
and March 31, 2000, respectively. The ratio of earnings to fixed charges
excluding minority interest would be 3.26 and 4.23 for the three months
ended March 31, 2001 and March 31, 2000, respectively.
</FN>