Item 1. Business
Pitney Bowes Inc. and its subsidiaries (the "company") operates in three industry segments: business equipment, business supplies and services, and financial services. The company's operations are in the following geographic areas: the United States, Europe, and Canada and other countries. Financial information concerning revenue, operating profit and identifiable assets by industry segment and geographic area appears on page 21 of the Pitney Bowes Inc. 1993 Annual Report to Stockholders and is incorporated herein by reference.
Business Equipment. Business equipment consists of three product classes: mailing systems, copying systems and voice processing systems. These products are sold, rented or leased (see "Financial Services") by the company and through dealers. Revenue for each product class is included in the financial information incorporated herein by reference.
Mailing systems include postage meters, parcel registers, mailing machines, manifest systems, letter and parcel scales, mail openers, mailroom furniture, folders, paper handling and shipping equipment, and facsimile machines.
Copying systems include a wide range of copying systems and supplies.
Voice processing systems include small work group and central dictation and voice processing systems, communications recorders and portable and desktop dictation units of the company's Dictaphone subsidiary.
Business Supplies and Services. Business supplies and services includes equipment and supplies used to encode and track price, content, item identification and other merchandise information manufactured and marketed by the company's Monarch Marking Systems, Inc. ("Monarch") subsidiary. In addition, this segment includes facilities management services for a variety of business support functions, including correspondence mail and reprographics management, high volume automated mail center management and related activities such as facsimile, supplies
distribution and records management provided by the company's Pitney Bowes Management Services subsidiary.
In October 1993, the company acquired all outstanding shares of Ameriscribe Corporation ("Ameriscribe"). Ameriscribe is a nationwide provider of on-site reprographics, mailroom and other office services to industrial corporations and professional service firms on a contract basis. The company consolidated this unit with its facilities management business operated through its wholly-owned subsidiary, Pitney Bowes Management Services, Inc.
In 1992, the company sold its Wheeler Group Inc. ("Wheeler") subsidiary, a direct mail marketer of office supplies. Wheeler has been classified in the Consolidated Statement of Income as a discontinued operation. (See Note 11, "Acquisitions and discontinued operations", of the Notes to Consolidated Financial Statements in the Pitney Bowes Inc. 1993 Annual Report to Stockholders which information is incorporated herein by reference).
Financial Services. The financial services segment includes the company's worldwide financing operations. The company provides lease financing for its products as well as other financial services for the commercial and industrial markets. Lease financing transactions and other financial services are executed through the company's wholly-owned subsidiaries: Pitney Bowes Credit Corporation, including Colonial Pacific Leasing Corporation, Pitney Bowes Real Estate Financing Corporation and Atlantic Mortgage & Investment Corporation in the United States; Pitney Bowes Finance PLC in the U.K.; Adrema Leasing in Germany; Pitney Bowes Finance S.A. in France and Pitney Bowes Credit Australia Ltd. The company's subsidiary, Pitney Bowes of Canada Ltd., also has a financing division through which leasing arrangements are made available to its customers. The finance operations financed 34 percent, 33 percent and 32 percent of consolidated sales in 1993, 1992 and 1991, respectively.
Since the first quarter of 1993, the company has continued to phase out the business of financing non-Pitney Bowes equipment outside the United States. The company is also continuing an inquiry and evaluation of the conduct by former management personnel of its German leasing business. The company expects to complete its inquiry by the end of the second quarter of 1994. (See Management's Discussion and Analysis in the Pitney Bowes Inc. 1993 Annual Report to Stockholders which information is incorporated herein by reference). In the United States the company continues to lease a broad range of other commercial and industrial products. Products financed include both commercial and non-commercial aircraft, over-the-road trucks and trailers, rail cars, and high- technology equipment such as data processing and communications equipment as well as commercial real estate properties. The finance operations have also participated, on a select basis, in certain other types of financing activities including syndication of certain lease transactions which do not satisfy financial services' investment criteria, senior secured loans in connection with acquisition, leveraged buyout and recapitalization financing and certain project financings as well as mortgage servicing.
Financial services' borrowing strategy is to use a balanced mix of debt maturities, variable- and fixed-rate debt and interest rate swap agreements to control its sensitivity to interest rate volatility. The
financial services segment may borrow through the sale of commercial paper, under its confirmed bank lines of credit and by private and public offerings of intermediate- or long-term debt securities. While the company's funding strategy may reduce sensitivity to interest rate changes over the long-term, effective interest costs have been and will continue to be impacted by interest rate changes. The company periodically adjusts prices on its new leasing and financing transactions to reflect changes in interest rates; however, the impact of these rate changes on revenue is usually less immediate than the impact on borrowing costs.
Nonrecurring Charges. In December 1989, the company announced a series of transition initiatives designed to improve the company's competitiveness, enhance business focus and allow for the transition to a new generation of advanced systems products. In support of these initiatives, the company recorded a one-time, pretax charge of $110 million against fourth-quarter 1989 earnings. The three-year transition program included a reduction in the company's worldwide workforce approximating 1,500 positions, a change of employee skill mix, a reduction in the number of product distribution centers and a streamlining of administrative systems and equipment service organizations. The company also established a dedicated United States Copier Division responsible for sourcing, selling, marketing, servicing and supporting the company's copier products.
In September 1990, the company changed its copier marketing strategy and announced plans to discontinue the remanufacture of used copier equipment. The copier organization now concentrates on new, higher- margin copiers consistent with its marketing strategy directed at serving large corporations and multi-unit installations. Due to this change in strategy and the resultant discontinuance of the equipment remanufacturing process, the company adjusted the estimated useful life of copiers from five years to three years and established a reserve for the disposal of copiers which previously would have been remanufactured, employee severance payments and facility closing costs. The aggregate one-time, pretax charge against 1990 third-quarter earnings was $86.5 million.
Support Services. The company maintains extensive field service organizations in the United States 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 15 percent of revenue in each of the last three years.
Marketing. The company's products and services are marketed through an extensive network of offices in the United States, 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 United States are in Australia, Canada, Hong Kong, Mexico, Switzerland, Singapore and 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, price marking supplies and equipment, and voice processing systems. However, in all three segments it has 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 some competition from products and services offered as alternative means of message communications. Also, the facilities management business, a market leader in providing mail and related support services to the corporate, financial 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 improving the economy and efficiency of its operations, including its production and service methods. Expenditures on research and development totaled $99.0 million, $101.6 million and $114.0 million in 1993, 1992 and 1991, 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 and Environmental Protection. 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 copying, facsimile, scales, desktop dictating and transcribing machines, and portable dictating machines primarily from Japanese suppliers. The company believes that it has adequate sources available to it for the foreseeable future for such products.
The company is subject to extensive and changing federal, state, local and other countries environmental laws and regulations, including those relating to the operations or ownership of real property and to the use, handling, storage, discharge and disposal of hazardous substances. Expenditures relating to environmental laws and regulations do not have,
and are not expected to have, a material adverse effect on capital expenditures, or on the company's financial position or results of operations.
Employee Relations. At December 31, 1993, 32,539 persons were employed by the company, 26,523 in the United States and 6,016 outside the United States. Employee relations are considered to be very 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.
Item 2. Properties
The company's World Headquarters and certain other office and manufacturing facilities are located in Stamford, Connecticut. The company maintains research and development operations in Stratford, Connecticut as well as near Dayton, Ohio and a corporate engineering and technology center in Shelton, Connecticut. A sales and service training center is located near Atlanta, Georgia. The company is building a new facility to house its Shipping and Weighing Systems Division in Shelton, Connecticut, which is expected to be completed in 1995. The company believes that its current and planned manufacturing, administrative and sales office properties are adequate for the needs of all three of its business segments.
Business Equipment. Business equipment products are manufactured in a number of plants principally in Connecticut, as well as in: Melbourne, Florida; Harlow, England; Pickering, Ontario, Canada; and Killwangen, Switzerland. Most of these facilities are owned by the company. Sales and support services offices, substantially all of which are leased, are located throughout the United States and in a number of other countries.
Business Supplies and Services. The company's Monarch subsidiary has executive offices and production facilities near Dayton, Ohio and facilities in: Pickering, Ontario, Canada; Mexico City, Mexico; Sydney, Australia; Singapore and Hong Kong. Production facilities of the Pitney Bowes Marking Systems Ltd. subsidiary are located in a leased office and manufacturing building in Harlow, England. A number of Monarch sales and support services offices, substantially all of which are leased, are located throughout the United States and in a number of other countries.
The company's Pitney Bowes Management Services subsidiary is headquartered in Stamford, Connecticut and leases facilities in 25 cities located throughout the United States as well as one leased facility in Toronto, Ontario, Canada.
Financial Services. Pitney Bowes Credit Corporation leases executive and administrative offices in Norwalk, Connecticut; Jacksonville, Florida; and Tualatin, Oregon. Executive and administrative offices of the financing operations outside the United States are maintained in London, England; Heppenheim, Germany; Paris, France; Mississauga, Ontario, Canada; and Chatswood, Australia. A number of leased regional and district sales offices are located throughout the United States, Canada and Germany.
Item 3.
Item 3. Legal Proceedings
The company is a defendant in a number of lawsuits, none of which will, in the opinion of management and legal counsel, have a material adverse effect on the company's financial position or results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Executive Officer Name Age Title Since
George B. Harvey 62 Chairman, President and 1967 Chief Executive Officer
Carmine F. Adimando 49 Vice President - Finance 1982 and Administration, and Treasurer
Marc C. Breslawsky 51 President, Pitney Bowes 1985 Office Systems, a division
Michael J. Critelli 45 President - Pitney Bowes 1988 Financial Services, a division
Steven J. Green 42 Vice President - Controller 1988
Hiro R. Hiranandani 56 President - Pitney Bowes 1981 Mailing Systems, a division
Paul Reece 57 Vice President - Operations 1987 and Technology
Douglas A. Riggs 49 Vice President - Communications, 1988 Planning, Secretary and General Counsel
Carole F. St. Mark 51 President - Pitney Bowes 1985 Logistics Systems and Business Services, a division
Johnna G. Torsone 43 Vice President - Personnel 1993
There is no family relationship among the above officers, all of whom have served in various corporate, division or subsidiary positions with the company for at least the past five years except for Johnna G. Torsone. Prior to joining the company in October 1990, Ms. Torsone was a partner with the New York law firm of Parker, Chapin, Flattau & Klimpl where she practiced employment and labor law for 14 years.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholders' Matters
The sections entitled "Stock Information" and "Stock Exchanges" on the inside back cover of the Pitney Bowes Inc. 1993 Annual Report to Stockholders are incorporated herein by reference. At December 31, 1993, the company had 31,189 common stockholders of record.
Item 6.
Item 6. Selected Financial Data
The section entitled "Summary of Selected Financial Data" on page 26 of the Pitney Bowes Inc. 1993 Annual Report to Stockholders is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The section entitled "Management's Discussion and Analysis" on pages 21 to 25 of the Pitney Bowes Inc. 1993 Annual Report to Stockholders is incorporated herein by reference, except for the section on page 25 relating to "Dividend Policy."
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of Price Waterhouse dated February 1, 1994, appearing on pages 27 to 39 of the Pitney Bowes Inc. 1993 Annual Report to Stockholders are incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None. PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Except for the information regarding the company's executive officers (see "Executive Officers of the Registrant" on page 7), 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 6 of the Pitney Bowes Inc. Notice of the 1994 Annual Meeting and Proxy Statement.
Item 11.
Item 11. Executive Compensation
The sections entitled "Directors' Compensation", "Executive Officer Compensation", "Severance and Change of Control Arrangements" and "Pension Benefits" on pages 7 to 13, and 17 to 19 of the Pitney Bowes Inc. Notice of the 1994 Annual Meeting and Proxy Statement are incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The section entitled "Security Ownership of Directors and Executive Officers" on pages 6 and 7 of the Pitney Bowes Inc. Notice of the 1994 Annual Meeting and Proxy Statement is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial statements - see Item 8 on page 8 and "Index to Financial Statements and Schedules" on page 16.
2. Financial statement schedules - see "Index to Financial Statements and Schedules" on page 16.
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 Incorporation, as amended Exhibit (3a) to Form 10-K as filed with the Commission on March 30, 1993. (Commission file number 1-3579)
(b) By-laws Incorporated by reference to Exhibit (1) to Form 8-K as filed with the Commission on March 13, 1993. (Commission file number 1-3579)
(4)(a) Form of Indenture dated as Incorporated by reference to of November 15, 1987 Exhibit (4a) to Form 10-K as between the company and filed with the Commission on Chemical Bank, as trustee March 24, 1988. (Commission file number 1-3579)
(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 Indenture dated as of Exhibit (1) to Form 8-K as June 1, 1989 between the filed with the Commission on company and Chemical Bank, June 16, 1989. (Commission as Trustee file number 1-3579)
(d) Form of Indenture dated as Incorporated by reference to of April 15, 1990 between Exhibit (4.1) to Registration the company and Chemical Statement on Form S-3 Bank, as successor to (No. 33-33948) as filed with Manufacturers Hanover the Commission on March 28, Trust Company, as Trustee 1990.
(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 of May 1, 1985 between Exhibit (4a) to Registration Pitney Bowes Credit Statement on Form S-3 Corporation and Bankers (No. 2-97411) as filed with the Trust Company, as Trustee Commission on May 1, 1985.
(g) Letter Agreement between Incorporated by reference to Pitney Bowes Inc. and Exhibit (4b) to Registration Bankers Trust Company, as Statement on Form S-3 Trustee (No. 2-97411) as filed with the Commission on May 1, 1985.
(h) Form of First Supplemental Incorporated by reference to Indenture dated as of Exhibit (4b) to Registration December 1, 1986 between Statement on Form S-3 Pitney Bowes Credit (No. 33-10766) as filed with the Corporation and Bankers Commission on December 12, 1986. Trust Company, as Trustee
(i) Form of Second Incorporated by reference to Supplemental Indenture Exhibit (4c) to Registration dated as of February 15, Statement on Form S-3 1989 between Pitney Bowes (No. 33-27244) as filed with the Credit Corporation and Commission on February 24, 1989. Bankers Trust Company, as Trustee
(j) Form of Third Supplemental Incorporated by reference to Indenture dated as of Exhibit (1) to Form 8-K as May 1, 1989 between Pitney filed with the Commission on Bowes Credit Corporation May 16, 1989. (Commission and Bankers Trust Company, file number 1-3579) as Trustee
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 Incorporated by reference to Directors of Pitney Exhibit (10a) to Form 10-K as Bowes Inc. filed with the Commission on March 30, 1993. (Commission file number 1-3579)
(b) Deferred Compensation Incorporated by reference to Plan for Directors Exhibit (10b) to Form 10-K as filed with the Commission on March 30, 1993. (Commission file number 1-3579)
(c) Pitney Bowes Inc. Incorporated by reference to Directors' Stock Plan Exhibit (10a) to Form 10-K as filed with the Commission on March 25, 1992. (Commission file number 1-3579)
(d) Pitney Bowes 1991 Stock Incorporated by reference to Plan Exhibit (10b) to Form 10-K as filed with the Commission on March 25, 1992. (Commission file number 1-3579)
(e) Pitney Bowes Inc. Key Incorporated by reference to Employees' Incentive Plan Exhibit (10c) to Form 10-K as (as amended and restated) filed with the Commission on March 25, 1992. (Commission file number 1-3579)
(f) 1979 Pitney Bowes Stock Incorporated by reference to Option Plan (as amended Exhibit (10d) to Form 10-K as and restated) filed with the Commission on March 25, 1992. (Commission file number 1-3579)
(g) Pitney Bowes Severance Incorporated by reference to Plan, as amended, dated Exhibit (10) to Form 10-K as December 12, 1988 filed with the Commission on March 23, 1989. (Commission file number 1-3579)
(11) Statement re computation Exhibit (i) of per share earnings
(12) Computation of ratio of Exhibit (ii) earnings to fixed charges
(13) Portions of annual report Exhibit (iii) to security holders
(21) Subsidiaries of the Exhibit (iv) registrant
(23) Consent of experts and Exhibit (v) counsel
(b) No reports on Form 8-K were filed for the three months ended December 31, 1993.
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/ George B. Harvey (George B. Harvey) Chairman, President and Chief Executive Officer
Date March 30, 1994
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/ George B. Harvey Chairman, President March 30, 1994 George B. Harvey and Chief Executive Officer - Director
/s/ Carmine F. Adimando Vice President-Finance March 30, 1994 Carmine F. Adimando and Administration, and Treasurer (principal financial officer)
/s/ Steven J. Green Vice President-Controller March 30, 1994 Steven J. Green (principal accounting officer)
/s/ Linda G. Alvarado Director March 30, 1994 Linda G. Alvarado
/s/ William E. Butler Director March 30, 1994 William E. Butler
/s/ Colin G. Campbell Director March 30, 1994 Colin G. Campbell
/s/ John C. Emery, Jr. Director March 30, 1994 John C. Emery, Jr.
/s/ Charles E. Hugel Director March 30, 1994 Charles E. Hugel
/s/ David T. Kimball Director March 30, 1994 David T. Kimball
Signature Title Date
Director March 30, 1994 Leroy D. Nunery
/s/ Phyllis S. Sewell Director March 30, 1994 Phyllis S. Sewell
/s/ Arthur R. Taylor Director March 30, 1994 Arthur R. Taylor
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The additional financial data should be read in conjunction with the financial statements in the Pitney Bowes Inc. 1993 Annual Report to Stockholders. Schedules not included with this additional financial data 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.
ADDITIONAL FINANCIAL DATA
Page Pitney Bowes Inc.:
Report of independent accountants on financial statement schedules 17
Financial statement schedules for the years 1991 - 1993:
Valuation and qualifying accounts and reserves (Schedule VIII) 18
Short-term borrowings (Schedule IX) 19
Supplementary income statement information (Schedule X) 20
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Pitney Bowes Inc.
Our audits of the consolidated financial statements referred to in our report dated February 1, 1994 appearing on page 39 of the Pitney Bowes Inc. 1993 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 schedules listed by reference in Item 14(a)2 of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Price Waterhouse
Stamford, Connecticut February 1, 1994
PITNEY BOWES INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1991 TO 1993
PITNEY BOWES INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1991 TO 1993
PITNEY BOWES INC. SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1991 TO 1993
(Dollars in thousands)
Charged to costs and expenses
Item 1993 1992 1991
Maintenance (1) $53,279 $47,387 $41,736
(1) Excludes costs associated with equipment maintenance agreements sold to customers.