UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549-1004 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 [FEE REQUIRED] For the year ended December 31, 1997 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____________to _______________ Commission file number 1-3579 PITNEY BOWES INC. State of Incorporation IRS Employer Identification No. Delaware 06-0495050 World Headquarters Stamford, Connecticut 06926-0700 Telephone Number: (203) 356-5000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------ Common Stock ($1 par value) New York Stock Exchange $2.12 Convertible Cumulative New York Stock Exchange Preference Stock (no par value) Preference Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: 4% Convertible Cumulative Preferred Stock ($50 par value) 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 ____ ---- Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock (common stock and $2.12 preference stock) held by non-affiliates of the Registrant as of March 13, 1998 is $13,864,709,736. Number of shares of common stock, $1 par value, outstanding as of March 13, 1998 is 279,334,236. DOCUMENTS INCORPORATED BY REFERENCE: 1. Only the following portions of the Pitney Bowes Inc. 1997 Annual Report to Stockholders are incorporated by reference into Parts I, II and IV of this Form 10-K Annual Report. (a) Financial Statements, pages 27 to 46. (b) Management's Discussion and Analysis of Results of Operations and Financial Condition and Summary of Selected Financial Data on pages 17 to 26 excluding the information on page 25 relating to Dividend Policy. (c) Stock Exchanges and Stock Information, on page 47. 2. Pitney Bowes Inc. Notice of the 1998 Annual Meeting and Proxy Statement dated April 3, 1998 pages 3, 4, 7, 8-13 and portions of pages 2, 6, 14, 17 and 18 are incorporated by reference into Part III of this Form 10-K Annual Report. PART I ------ Item 1. Business -------- Pitney Bowes Inc. and its subsidiaries (the company) operate within three industry segments: business equipment, business services, and commercial and industrial financing. The company operates in two geographic areas: the United States and outside the U.S. Financial information concerning revenue, operating profit and identifiable assets by industry segment and geographic area appears on pages 44 and 45 of the Pitney Bowes Inc. 1997 Annual Report to Stockholders and is incorporated herein by reference. Business Equipment. Business equipment consists of four product, supplies and - ------------------ service classes: mailing systems, copier systems, facsimile systems and related financing. The products are sold, rented or financed by the company, while supplies and services are sold. Some of the company's products are sold through dealers outside the U.S. Mailing systems include postage meters, mailing machines, address hygiene software, manifest systems, letter and parcel scales, mail openers, mailroom furniture, folders, and paper handling and shipping equipment. Copier systems include a wide range of copying systems and supplies. Facsimile systems include a wide range of facsimile systems and supplies. The company has recently combined its Copier Systems and Facsimile Systems businesses into a new Office Systems division. The financial services operations provide lease financing for the company's products in the U.S., Canada, the United Kingdom, Germany, France, Norway, Ireland and Australia. Consolidated financial services operations financed 36 percent of consolidated sales from continuing operations in 1997, and 39 percent in 1996 and 1995. The lower percentage of sales financed compared to 1995 and 1996 is due mainly to the impact of increased sales revenue from our facilities management business which does not use traditional financing services used by the other businesses within the company. Consolidated financial services operations financed approximately 77 percent of leasable sales in 1997, 1996 and 1995. The company sold its Dictaphone Corporation (Dictaphone) and Monarch Marking Systems, Inc. (Monarch) subsidiaries in 1995. Dictaphone and Monarch have been classified in the Consolidated Statements of Income as discontinued operations; revenue and income from continuing operations exclude the results of Dictaphone and Monarch for all periods 2 presented. (See Note 13, Discontinued operations, of the Notes to the Consolidated Financial Statements in the Pitney Bowes Inc. 1997 Annual Report to Stockholders.) Business Services. Business services consists of facilities management and - ----------------- mortgage servicing. Facilities management services are provided by the company's Pitney Bowes Management Services, Inc. subsidiary (P.B.M.S.). P.B.M.S. is a leader in providing on-and off-site services which help customers manage the creation, processing, storage, retrieval, distribution and tracking of documents and messages in both paper and digital form. P.B.M.S. provides customers with a variety of business support services to manage mail, copy and reprographic centers, facsimile, electronic printing and imaging services, and records management. Mortgage servicing is provided by Atlantic Mortgage & Investment Corporation (A.M.I.C.), a wholly-owned subsidiary of Pitney Bowes Credit Corporation. A.M.I.C. provides billing, collecting and processing services for major investors in residential first mortgages. Commercial and Industrial Financing. The commercial and industrial financing - ----------------------------------- segment, which is shifting its strategic focus to fee-based financial services, provides large-ticket financing programs, covering a broad range of products, and other financial services to the commercial and industrial markets in the U.S. Products financed include both commercial and non-commercial aircraft, over-the-road trucks and trailers, locomotives, railcars, rail and bus facilities and high-technology equipment such as data processing and communications equipment. The finance operations have also participated, on a select basis, in certain other types of financial transactions including: sales of lease transactions, senior secured loans in connection with acquisitions, leveraged buyout and recapitalization financings and certain project financings. The company also provides small-ticket lease financing services to small and medium-sized businesses throughout the United States, marketing exclusively through a nationwide network of brokers and independent lessors. Support Services. The company maintains extensive field service organizations - ---------------- in the U.S. and certain other countries to provide support services to customers who have rented, leased or purchased equipment. Such support services, provided primarily on the basis of annual maintenance contracts, accounted for approximately 12 percent of revenue in 1997, 1996 and 1995. Marketing. The company's products and services are marketed through an - --------- extensive network of offices in the U.S. and through a number of subsidiaries and independent distributors and dealers in many countries throughout the world as well as through direct marketing and outbound telemarketing. The company sells to a variety of business, governmental, institutional and other organizations. It has a broad base of customers, and is not dependent upon any one customer or type of customer for a significant part of its business. The company does not have significant backlog or seasonality relating to its businesses. Operations Outside the United States. The company's manufacturing operations - ------------------------------------ outside the U.S. are in the United Kingdom. Competition. The company has historically been a leading supplier of certain - ----------- products and services in its business segments, particularly postage meters and mailing machines. However, all segments have strong competition from a number of companies. In particular, it is facing competition in many countries for new placements from several postage meter and mailing machine suppliers, and its mailing systems products face competition from products and services offered as alternative means of message communications. P.B.M.S., a market leader in providing mail and related support services to the corporate, financial 3 services, and professional services markets, competes against national, regional and local firms specializing in facilities management. The company believes that its long experience and reputation for product quality, and its sales and support service organizations are important factors in influencing customer choices with respect to its products and services. The financing business is highly competitive with aggressive rate competition. Leasing companies, commercial finance companies, commercial banks and other financial institutions compete, in varying degrees, in the several markets in which the finance operations do business and range from very large, diversified financial institutions to many small, specialized firms. In view of the market fragmentation and absence of any dominant competitors which result from such competition, it is not possible to provide a meaningful description of the finance operations' competitive position in these markets. Research and Development/Patents. The company has research and development - -------------------------------- programs that are directed towards developing new products and service methods. Expenditures on research and development totaled $89.5 million, $81.7 million, and $81.8 million in 1997, 1996 and 1995, respectively. As a result of its research and development efforts, the company has been awarded a number of patents with respect to several of its existing and planned products. However, the company believes its businesses are not materially dependent on any one patent or any group of related patents. The company also believes its businesses are not materially dependent on any one license or any group of related licenses. Material Supplies. The company believes it has adequate sources for most parts - ----------------- and materials for the products it manufactures. However, products manufactured by the company rely to an increasing extent on microelectronic components, and temporary shortages of these components have occurred from time to time due to the demands by many users of such components. The company purchases copiers, facsimile equipment and scales primarily from Japanese suppliers. The company believes that it has adequate sources available to it for the foreseeable future for such products. Environmental Regulation. The company is subject to federal, state and local - ------------------------ laws and regulations relating to the environment and is currently named as a member of various groups of potentially responsible parties in administrative or court proceedings. As we previously announced, in 1996 the Environmental Protection Agency (EPA) issued an administrative order directing the company to be part of a soil cleanup program at the Sarney Farm site in Amenia, New York. The site was operated as a landfill between the years 1968 and 1970 by parties unrelated to the company, and wastes from a number of industrial sources were disposed of there. The company does not concede liability for the condition of the site, but is working with the EPA to identify, and then seek reimbursement from, other potentially responsible parties. The company estimates the total cost of our remediation effort to be in the range of $3 million to $5 million for the soil remediation program. The administrative and court proceedings referred to above are in different states. It is impossible to estimate with any certainty the total cost of remediating, the timing or extent of remedial actions which may be required by governmental authorities, or the amount of liability, if any. If and when it is possible to make a reasonable estimate of the liability in any of these matters, a provision will be made as appropriate. Based on the facts presently known, the company believes that the outcome of any current proceeding will not have a material adverse effect on its financial condition or results of operations. 4 Regulatory Matters. In June 1995, the United States Postal Service (U.S.P.S.) - ------------------ finalized and issued regulations governing the manufacture, distribution and use of postage meters. These regulations cover four general categories: meter security, administrative controls, Computerized Meter Resetting Systems and other issues. The company continues to comply with these regulations in its ongoing postage meter operations. In May 1996, the U.S.P.S. issued a proposed schedule for the phaseout of mechanical meters in the U.S. Between May 1996 and March 1997 the company worked with the U.S.P.S. to negotiate a revised mechanical meter migration schedule which better reflected the needs of existing mechanical meter users and minimized any potential negative financial impact on the company. The final schedule agreed to with the U.S.P.S. is as follows: . as of June 1, 1996, new placements of mechanical meters would no longer be permitted; replacements of mechanical meters previously licensed to customers would be permitted prior to the applicable suspension date for that category of mechanical meter . as of March 1, 1997, use of mechanical meters by persons or firms who process mail for a fee would be suspended and would have to be removed from service . as of December 31, 1998, use of mechanical meters that interface with mail machines or processors ("systems meters") would be suspended and would have to be removed from service . as of March 1, 1999, use of all other mechanical meters ("stand-alone meters") would be suspended and have to be removed from service Based on the foregoing schedule, the company believes that the phaseout of mechanical meters will not cause a material adverse financial impact on the company. As a result of the company's aggressive efforts to meet the U.S.P.S. mechanical meter migration schedule combined with the company's ongoing and continuing investment in advanced postage evidencing technologies, mechanical meters represented 25% of the company's installed U.S. meter base at December 31, 1997, compared with 40% at December 31, 1996. At December 31, 1997, 75% of the company's installed U.S. meter base was electronic or digital, compared to 60% at December 31, 1996. In May 1995, the U.S.P.S. publicly announced its concept of its Information Based Indicia Program (IBIP) for future postage evidencing devices. As initially stated by the U.S.P.S., the purpose of the program was to develop a new standard for future digital postage evidencing devices which significantly enhanced postal revenue security and supported expanded U.S.P.S. value-added services to mailers. The program would consist of the development of four separate specifications: . the Indicium specification - the technical specifications for the indicium to be printed . a Postal Security Device specification - the technical specification for the device that would contain the accounting and security features of the system . a Host specification . a Vendor Infrastructure specification 5 In July 1996, the U.S.P.S. 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, including the recommendation that IBIP apply only to the personal computer (PC) environment and not apply at the present time to other digital postage evidencing systems. The company submitted comments to these revised specifications. Also, in March 1997 the U.S.P.S. published for public comment the Vendor Infrastructure specification to which the company responded on June 27, 1997. As of December 31, 1997, the U.S.P.S. had not yet finalized the four IBIP specifications; however, the company has developed a PC product which satisfies the proposed IBIP specifications. This product is currently undergoing testing by the U.S.P.S. and is expected to be ready for market when final approval of the specifications is issued. Employee Relations. At December 31, 1997, 25,351 persons were employed by the - ------------------ company in the U.S. and 4,550 outside the U.S. Employee relations are considered to be satisfactory. The great majority of employees are not represented by any labor union. Management follows the policy of keeping employees informed of its decisions, and encourages and implements employee suggestions whenever practicable. Item 2. Properties ---------- The company's World Headquarters and certain other office and manufacturing facilities are located in Stamford, Connecticut. Additional office facilities are located in Shelton, Connecticut. The company maintains research and development operations at a corporate engineering and technology center in Shelton, Connecticut. A sales and service training center is located near Atlanta, Georgia. The company believes that its current manufacturing, administrative and sales office properties are adequate for the needs of all of its business segments. Business Equipment. Business equipment products are manufactured in a number of - ------------------ plants principally in Connecticut, as well as in Harlow, England. Most of these facilities are owned by the company. At December 31, 1997, there were 173 sales, support services, and finance offices, substantially all of which are leased, located throughout the U.S. and in a number of other countries. Executive and administrative offices of the financing operations within the U.S. are located in Shelton, Connecticut. Offices of the financing operations outside the U.S. are maintained in London, England; Heppenheim, Germany; Paris, France; Mississauga, Ontario, Canada; French's Forest, Australia; Oslo, Norway; and Dublin, Ireland. Business Services. The company's P.B.M.S. subsidiary is headquartered in - ----------------- Stamford, Connecticut and leases facilities in 27 cities located throughout the U.S. as well as in Toronto, Ontario, Canada; and London, England. The Atlantic Mortgage and Investment Corporation operates in Jacksonville, Florida. Commercial and Industrial Financing. Pitney Bowes Credit Corporation leases - ----------------------------------- executive and administrative offices in Shelton, Connecticut and Portland, Oregon. The executive and administrative office in Shelton, Connecticut is owned by Pitney Bowes Inc. There are ten leased regional and district sales offices located throughout the U.S. 6 Item 3. Legal Proceedings ----------------- In the course of normal business, the company is occasionally party to lawsuits. These may involve litigation by or against the company relating to, among other things: . contractual rights under vendor, insurance or other contracts . intellectual property or patent rights . equipment, service or payment disputes with customers . disputes with employees The company is currently a defendant in a number of lawsuits, none of which should have, in the opinion of management and legal counsel, a material adverse effect on the company's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Below are the final results of the voting at the special meeting of shareholders held on December 18, 1997: Proposal: Amendment of the company's Restated Certificate of Incorporation increasing authorized shares of common stock from 240 million to 480 million, and correspondingly reducing the par value of the common stock per share from $2.00 to $1.00 in order to effect a two-for-one split of the company's common stock. FOR AGAINST ABSTAIN - ----------- --------------- ------------- 122,885,507 163,418 412,386 7 Executive Officers of the Registrant - ------------------------------------ Executive Officer Name Age Title Since - ----------------------------------- --- ----------------------------------- ------- Michael J. Critelli 49 Chairman and Chief 1988 Executive Officer Marc C. Breslawsky 55 President and Chief 1985 Operating Officer Amy C. Corn 44 Corporate Secretary and Senior 1996 Associate General Counsel Meredith B. Fischer 45 Vice President, Corporate Marketing 1996 and Chief Communications Officer Arlen F. Henock 41 Vice President - Controller and 1996 Chief Tax Counsel Matthew S. Kissner 43 President, Pitney Bowes 1997 Financial Services Murray D. Martin 50 President, Pitney Bowes 1998 International John N. D. Moody 53 President, U.S. Mailing Systems 1997 Sara E. Moss 51 Vice President and General Counsel 1996 Murray L. Reichenstein 60 Vice President and Chief 1996 Financial Officer Douglas A. Riggs 53 Vice President and Chief Corporate 1988 Affairs Officer Dennis M. Roney 55 President, Pitney Bowes 1998 Office Systems Johnna G. Torsone 47 Vice President and Chief 1993 Personnel Officer Joseph E. Wall 46 Vice President and Chief Technology 1996 Officer There is no family relationship among the above officers, all of which have served in various corporate, division or subsidiary positions with the company for at least the past five years except M.S. Kissner, S.E. Moss, M.L. Reichenstein and J.E. Wall. 8 Mr. Kissner, who was President, Pitney Bowes Credit Corporation since 1995, joined the company from Bankers Trust Company where he had been Managing Director since 1993. Mr. Kissner assumed his duties as President, Pitney Bowes Financial Services effective June, 1997. Ms. Moss joined the company from the New York law firm of Howard, Darby & Levin, where she had been a Senior Partner since 1985. Before joining Howard, Darby & Levin, Ms. Moss was an Assistant United States Attorney in the Southern District of New York. Ms. Moss served as a law clerk for the Honorable Constance Baker Motley, United States District Judge, Southern District of New York. Mr. Reichenstein joined the company with over 31 years of experience with Ford Motor Company. During his time with Ford he held a variety of positions of increasing responsibility in the U.S. and Europe, including Director of Manufacturing Services, Vice President, Car Product Planning, and Chief Financial Officer, Ford Europe; Vice President & Controller of Ford Automotive Operations Worldwide; and Vice President & Controller of Ford Motor Company. Dr. Wall was most recently the Vice President - Technology of Emerson Electric, which he joined in 1986 as Director of Research and Development for its since- divested Rosemount Aerospace Division. Prior to joining Emerson, Dr. Wall held positions of increasing responsibility at Honeywell, including Section Chief and Senior Principal Research Engineer. PART II ------- Item 5. Market for the Registrant's Common Stock and Related Stockholders' ------------------------------------------------------------------ Matters ------- The sections entitled "Stock Exchanges" and "Stock Information" on page 47 of the Pitney Bowes Inc. 1997 Annual Report to Stockholders are incorporated herein by reference. At December 31, 1997, the company had 31,092 common stockholders of record. Item 6. Selected Financial Data ----------------------- The section entitled "Summary of Selected Financial Data" on page 26 of the Pitney Bowes Inc. 1997 Annual Report to Stockholders is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- The section entitled "Management's Discussion and Analysis" on pages 17 to 25 of the Pitney Bowes Inc. 1997 Annual Report to Stockholders is incorporated herein by reference, except for the section on page 25 relating to "Dividend Policy". The section under "Legal, Environmental and Regulatory Matters" titled "Regulation" on page 24 of the "Management's Discussion and Analysis" incorporated herein by reference as mentioned above should be read in conjunction with the discussion under "Regulatory Matters" in Part I, Item 1 on page 5 of this Annual Report on Form 10-K. 9 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-K or made by company management involve risks and uncertainties which may change based on various important factors. Some of the factors which could cause future financial performance to differ materially from the expectations as expressed in any forward-looking statement made by or on behalf of the company include: . changes in postal regulations . timely development and acceptance of new products . success in gaining product approval in new markets where regulatory approval is required . successful entry into new markets . mailer's utilization of alternative means of communication or competitors' products . the company's success at managing customer credit risk Item 8. Financial Statements and Supplementary Data ------------------------------------------- The financial statements, together with the report thereon of Price Waterhouse LLP dated January 26, 1998, appearing on pages 27 to 46 of the Pitney Bowes Inc. 1997 Annual Report to Stockholders are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and --------------------------------------------------------------- Financial Disclosure -------------------- None. PART III -------- Item 10. Directors and Executive Officers of the Registrant -------------------------------------------------- Except for information regarding the company's executive officers (see "Executive Officers of the Registrant" on page 8 of this Form 10-K), the information called for by this Item is incorporated herein by reference to the sections entitled "Election of Directors" and "Security Ownership of Directors and Executive Officers" on pages 2 to 4 and 6 to 7 of the Pitney Bowes Inc. Notice of the 1998 Annual Meeting and Proxy Statement. Item 11. Executive Compensation ---------------------- The sections entitled "Directors' Compensation", "Stock Performance Graph", "Executive Officer Compensation", "Severance and Change of Control Arrangements" and "Pension Benefits" on pages 8 to 14 and 17 to 18 of the Pitney Bowes Inc. Notice of the 1998 Annual Meeting and Proxy Statement are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- The section entitled "Security Ownership of Directors and Executive Officers" on pages 6 to 7 of the Pitney Bowes Inc. Notice of the 1998 Annual Meeting and Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- None. 10 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K --------------------------------------------------------------- (a) 1. Financial statements - see Item 8 on page 10 and "Index to Financial Schedules" on page 17. 2. Financial statement schedules - see "Index to Financial Schedules" on page 17. 3. Exhibits (numbered in accordance with Item 601 of Regulation S-K). Reg. S-K Status or Incorporation Exhibits Description by Reference - -------- ------------------------- ----------------------------------------- (3)(a) Restated Certificate of Incorporated by reference to Exhibit (3a) Incorporation, as amended to Form 10-K as filed with the Commission on March 30, 1993. (Commission file number 1-3579) (a.1) Certificate of Amendment Exhibit (i) to the Restated Certifi- cate of Incorporation (as amended May 29, 1996) (b) By-laws, as amended Incorporated by reference to Exhibit (3b) to Form 10-K as filed with the Commission on April 1, 1996. (Commission file number 1-3579) (4)(a) Form of Indenture dated Incorporated by reference to Exhibit (4a) as of November 15, 1987 to Form 10-K as filed with the Commission between the company and on March 24, 1988. (Commission file number Chemical Bank, as 1-3579) Trustee (b) Form of Debt Securities Incorporated by reference to Exhibit (4b) to Form 10-K as filed with the Commission on March 24, 1988. (Commission file number 1-3579) (c) Form of First Supplemental Incorporated by reference to Exhibit (1) Indenture dated as of June 1, to Form 8-K as filed with the Commission on 1989 between the company and June 16, 1989. (Commission file number 1-3579) Chemical Bank, as Trustee (d) Form of Indenture dated as Incorporated by reference to Exhibit (4.1) of April 15, 1990 between to Registration Statement on Form S-3 the company and Chemical (No. 33-33948) as filed with the Commission Bank, as successor to Man- on March 28, 1990. ufacturers Hanover Trust Company, as Trustee 11 (e) Forms of Debt Securities Incorporated by reference to Exhibit (4) to Form 10-Q as filed with the Commission on May 14, 1990. (Commission file number 1-3579) (f) Form of Indenture dated as Incorporated by reference to Exhibit (4a) of May 1, 1985 between Pitney to Registration Statement on Form S-3 Bowes Credit Corporation and (No. 2-97411) as filed with the Commission Bankers Trust Company, as on May 1, 1985. Trustee (g) Letter Agreement between Incorporated by reference to Exhibit (4b) Pitney Bowes Inc. and Bankers to Registration Statement on Form S-3 Trust Company, as Trustee (No. 2-97411) as filed with the Commission on May 1, 1985. (h) Form of First Supplemental Incorporated by reference to Exhibit (4b) Indenture dated as of to Registration Statement on Form S-3 December 1, 1986 between (No. 33-10766) as filed with the Commission Pitney Bowes Credit Corp- on December 12, 1986. oration and Bankers Trust Company, as Trustee (i) Form of Second Supp- Incorporated by reference to Exhibit (4c) to Registration lemental Indenture dated Statement on Form S-3 (No. 33-27244) as filed with the as of February 15, 1989 Commission on February 24, 1989. between Pitney Bowes Credit Corporation and Bankers Trust Company, as Trustee (j) Form of Third Supplemental Incorporated by reference to Exhibit (1) to Form 8-K as filed with Indenture dated as of May 1, the Commission on May 16, 1989. (Commission file number 1-3579) 1989 between Pitney Bowes Credit Corporation and Bankers Trust Company, as Trustee (k) Indenture dated as of Incorporated by reference to Exhibit (4a) to Amendment No. 1 to November 1, 1995 between Registration Statement on Form S-3 (No. 33-62485) as filed with the company and Chemical Bank, the Commission on November 2, 1995. as Trustee (l) Preference Share Purchase Incorporated by reference to Exhibit (4) to Form 8-K as filed with Rights Agreement dated the Commission on March 13, 1996. (Commission file number 1-3579) December 11, 1995 between the company and Chemical Mellon Shareholder Services, LLC., as Rights Agent 12 The company has outstanding certain other long-term indebtedness. Such long-term indebtedness does not exceed 10% of the total assets of the company; therefore, copies of instruments defining the rights of holders of such indebtedness are not included as exhibits. The company agrees to furnish copies of such instruments to the Securities and Exchange Commission upon request. Executive Compensation Plans: - ---------------------------- (10)(a) Retirement Plan for Directors of Pitney Incorporated by reference to Exhibit (10a) to Form 10-K as filed Bowes Inc. with the Commission on March 30, 1993. (Commission file number 1-3579) (b) Pitney Bowes Inc. Directors' Stock Plan Incorporated by reference to Exhibit (i) to Form 10-K as filed (as amended and restated 1997) with the Commission on March 31, 1997. (Commission file number 1-3579) (c) Pitney Bowes 1991 Stock Plan Incorporated by reference to Exhibit (10b) to Form 10-K as filed with the Commission on March 25, 1992. (Commission file number 1-3579) (c.1) First Amendment to Pitney Bowes 1991 Stock Incorporated by reference to Exhibit (ii) to Form 10-K as filed Plan with the Commission on March 31, 1997. (Commission file 1-3579) (c.2) Second Amendment to Pitney Bowes 1991 Stock Incorporated by reference to Exhibit (i) to Form 10-Q as filed Plan with the Commission on November 13, 1997. (Commission file number 1-3579) (d) Pitney Bowes Inc. Key Employees' Incentive Incorporated by reference to Exhibit (10c) to Form 10-K as filed Plan (as amended and restated) with the Commission on March 25, 1992. (Commission file number 1-3579) (d.1) First Amendment to Pitney Bowes Inc. Key Incorporated by reference to Exhibit (iii) to Form 10-K as filed Employees' Incentive Plan (as amended and with the Commission on March 31, 1997. (Commission file number restated June 10, 1991) 1-3579) (e) 1979 Pitney Bowes Stock Option Plan (as Incorporated by reference to Exhibit (10d) to Form 10-K as filed amended and restated) with the Commission on March 25, 1992. (Commission file number 1-3579) 13 (f) Pitney Bowes Severance Plan, as amended, Incorporated by reference to Exhibit (10) to Form 10-K as filed dated December 12, 1988 with the Commission on March 23, 1989. (Commission file number 1-3579) (g) Pitney Bowes Executive Severance Policy, Incorporated by reference to Exhibit (10h) to Form 10-K as filed adopted December 11, 1995 with the Commission on April 1, 1996. (Commission file number 1-3579) (h) Pitney Bowes Inc. Deferred Incentive Sav- Incorporated by reference to Exhibit (i) to Form 10-Q as filed ings Plan for the Board of Directors with the Commission on May 15, 1997. (Commission file number 1-3579) (i) Pitney Bowes Inc. Deferred Incentive Incorporated by reference to Exhibit (v) to Form 10-K as filed Savings Plan with the Commission on March 31, 1997. (Commission file number 1-3579) (12) Computation of ratio of earnings to fixed Exhibit (ii) charges (13) Portions of annual report to security hol- Exhibit (iii) ders (21) Subsidiaries of the registrant Exhibit (iv) (23) Consent of experts and counsel Exhibit (v) (27) Financial Data Schedule Exhibit (vi) (b) No reports on Form 8-K were filed for the three months ended December 31, 1997. 14 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Pitney Bowes Inc. By /s/ Michael J. Critelli ----------------------- (Michael J. Critelli) Chairman and Chief Executive Officer Date March 27, 1998 ------------------ 15 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Michael J. Critelli Chairman and Chief March 27, 1998 - ---------------------------- Executive Officer - Director -------------- Michael J. Critelli /s/ Marc C. Breslawsky President and Chief March 27, 1998 - ---------------------------- Operating Officer - Director -------------- Marc C. Breslawsky /s/ Murray L. Reichenstein Vice President and Chief March 27, 1998 - ---------------------------- Financial Officer (principal -------------- Murray L. Reichenstein financial officer) /s/ Arlen F. Henock Vice President - Controller March 27, 1998 - ---------------------------- and Chief Tax Counsel -------------- Arlen F. Henock (principal accounting officer) /s/ Linda G. Alvarado Director March 27, 1998 - ---------------------------- -------------- Linda G. Alvarado /s/ William E. Butler Director March 27, 1998 - ---------------------------- -------------- William E. Butler /s/ Colin G. Campbell Director March 27, 1998 - ---------------------------- -------------- Colin G. Campbell /s/ Ernie Green Director March 27, 1998 - ---------------------------- -------------- Ernie Green /s/ Charles E. Hugel Director March 27, 1998 - ---------------------------- -------------- Charles E. Hugel /s/ David T. Kimball Director March 27, 1998 - ---------------------------- -------------- David T. Kimball /s/ Michael I. Roth Director March 27, 1998 - ---------------------------- -------------- Michael I. Roth /s/ Phyllis S. Sewell Director March 27, 1998 - ---------------------------- -------------- Phyllis S. Sewell 16 INDEX TO FINANCIAL SCHEDULES ---------------------------- The financial schedules should be read in conjunction with the financial statements in the Pitney Bowes Inc. 1997 Annual Report to Stockholders. Schedules not included herein have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Also, separate financial statements of less than 100 percent owned companies, which are accounted for by the equity method, have been omitted because they do not constitute significant subsidiaries. Page ---- Pitney Bowes Inc.: Report of independent accountants on financial statement schedule 18 Financial statement schedule for the years 1995 - 1997: Valuation and qualifying accounts and reserves (Schedule II) 19 17 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Pitney Bowes Inc. Our audits of the consolidated financial statements referred to in our report dated January 26, 1998 appearing on page 46 of the Pitney Bowes Inc. 1997 Annual Report to Stockholders (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)2 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Price Waterhouse LLP Stamford, Connecticut January 26, 1998 18 PITNEY BOWES INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31, 1995 TO 1997 (Dollars in thousands) Additions Balance at charged to Balance beginning of costs and at end Description year expenses Deductions of year - -------------------- ---------------------- ---------------------- ---------------------- ---------------------- Allowance for doubtful accounts - ------------------------------- 1997 $16,160 $ 9,269 $ 4,300 (3) $ 21,129 1996 $13,050 $ 9,894 $ 6,784 (3) $ 16,160 1995 $16,909 $ 4,126 (1) $ 7,985(2)(3) $ 13,050 Allowance for credit losses on finance receivables - -------------------------------------------------- 1997 $113,737 $ 85,628 $67,057 (3) $132,308 1996 $113,506 $ 74,785 $74,554 (3) $113,737 1995 $113,091 $ 68,275 $67,860 (3) $113,506 Reserve for transition costs (4) - ---------------------------- 1997 $ 5,728 $ - $ 5,728 $ - 1996 $ 22,986 $ - $17,258 (5) $ 5,728 (6) 1995 $ 64,893 $ 5,145 $47,052 (5) $ 22,986 Valuation allowance for deferred tax asset (4) - ------------------------------------------ 1997 $ 46,601 $ 1,233 $ 6,533 $ 41,301 1996 $ 48,693 $ 3,066 $ 5,158 $ 46,601 1995 $ 37,532 $ 12,076 $ 915 $ 48,693 (1) Includes $382 of additions applicable to a business at acquisition. (2) Includes $2,406 of deductions applicable to a business disposition. (3) Principally uncollectible accounts written off. (4) Included in balance sheet as a liability. (5) Includes amounts for asset write downs and amounts paid as well as reclassifications. (6) Remaining amount represents $4 million and $2 million for separation and benefit costs and other. 19