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This excerpt taken from the PBI 10-Q filed Nov 8, 2007. (Unaudited; tabular dollars in thousands, except for per share data)
In July 2006, the FASB issued FASB Staff Position (FSP) No. FAS 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction, that provides guidance on how a change or a potential change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the accounting by a lessor for the lease. We adopted the provisions of FSP No. FAS 13-2 on January 1, 2007. Our adoption of this FSP did not have a material impact on our financial position, results of operations or cash flows. In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157), to define how the fair value of assets and liabilities should be measured in accounting standards where it is allowed or required. In addition to defining fair value, the statement establishes a framework within GAAP for measuring fair value and expands required disclosures surrounding fair value measurements. While it will change the way companies currently measure fair value, it does not establish any new instances where fair value measurement is required. SFAS 157 defines fair value as an amount that a company would receive if it sold an asset or paid to transfer a liability in a normal transaction between market participants in the same market where the company does business. It emphasizes that the value is based on assumptions that market participants would use, not necessarily only the company that might buy or sell the asset. In September 2007, the FASB decided to scope out SFAS No. 13, Accounting for Leases, from this standard on fair value measurement. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption allowed. We continue to evaluate the impact of adopting this Statement. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We continue to evaluate the impact of adopting this Statement. 4. Discontinued Operations On July 14, 2006, we completed the sale of our Capital Services external financing business to Cerberus Capital Management, L.P. (Cerberus) for approximately $747 million and the assumption of approximately $470 million of non-recourse debt and other liabilities. This sale resulted in the disposition of most of the external financing activity but we have retained certain leveraged leases in Canada, which are now included in our International Mailing segment. The proceeds received at closing were invested in short-term investments and were utilized to pay our tax obligations. See Note 15 for further discussion. In August 2006, we reached a settlement with the Internal Revenue Service (IRS) on all outstanding tax audit issues in dispute for tax years through 2000. In the second quarter of 2006, we had estimated the potential impact of this anticipated settlement and recorded $61 million of additional tax expense, with $41 million included in discontinued operations. The $41 million tax estimate was not affected by the final settlement agreement reached in August 2006. See Note 15 for further discussion. The following table shows selected financial information included in discontinued operations for the three and nine months ended September 30, 2007 and 2006, respectively:
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PITNEY BOWES INC. Net loss for the three and nine months ended September 30, 2007 relates primarily to the accrual of interest on uncertain tax positions. Interest expense included in discontinued operations was $1.4 million and $19.2 million for the three and nine months ended September 30, 2006, respectively. Interest expense recorded in discontinued operations in 2006 included only interest on third-party debt that was assumed by Cerberus. We have not allocated other consolidated interest expense to discontinued operations. This excerpt taken from the PBI 10-Q filed Aug 6, 2007. (Unaudited; tabular dollars in thousands, except for per share data)
Amortization expense for intangible assets for the three months ended June 30, 2007 and 2006 was $17.4 million and $12.1 million, respectively. Amortization expense for intangible assets for the six months ended June 30, 2007 and 2006 was $30.6 million and $24.1 million, respectively. Estimated intangible assets amortization expense for the remainder of 2007 and the next five years is as follows:
Changes in the carrying amount of goodwill by business segment for the six months ended June 30, 2007 are as follows:
“Other” includes the impact of post closing acquisition and foreign currency translation adjustments. This excerpt taken from the PBI 10-Q filed Aug 8, 2006. (Unaudited; tabular dollars in thousands, except for per share data)
Stock Options Under our stock plan, certain officers and employees are granted options at prices equal to the market value of our common shares at the date of grant. Options granted in 2004 and prior thereto generally become exercisable in three equal installments during the first three years following their grant and expire after ten years. Options granted in 2005 and thereafter generally become exercisable in four equal installments during the first four years following their grant and expire ten years from the date of grant. At June 30, 2006, there were 10,008,641 options available for future grants under this plan. The following table summarizes information about stock option transactions:
The weighted-average remaining contractual life of the options outstanding and exercisable at June 30, 2006 was 6.8 years and 5.9 years, respectively. The intrinsic value of the options outstanding and exercisable at June 30, 2006 was $82.6 million and $80.9 million, respectively. Beginning in 1997, certain employees eligible for performance-based compensation may defer up to 100% of their annual awards, subject to the terms and conditions of the Pitney Bowes Deferred Incentive Savings Plan. Participants may allocate deferred compensation among specified investment choices. Previously the investment choices offered included stock options under the U.S. stock option plan. Stock options acquired under this plan were generally exercisable three years following their grant and expired after a period not to exceed ten years from the date of grant. There were 277,297 options outstanding under this plan at June 30, 2006, which are included in outstanding options under the U.S. stock option plan. Beginning with the 2004 plan year, options were not offered as an investment choice and therefore there were no options granted in 2004 and thereafter. We estimate the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS 123(R), SEC Staff Accounting Bulletin No. 107 and our prior period pro forma disclosures of net earnings, including stock-based compensation (determined under a fair value method as prescribed by SFAS 123(R)). Key input assumptions used to estimate the fair value of stock options include the volatility of our stock, the risk-free interest rate and our dividend yield. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in estimating the fair value of our stock option grants. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value we made under SFAS 123(R). The fair value of stock options granted during the six months ended June 30, 2006 and 2005 and related assumptions were as follows:
1 – Our estimates of expected stock price volatility are based on historical price changes of our stock. 2 – The risk-free interest rate is based on U.S. Treasuries with a term equal to the expected option term. 3 – The expected life is based on historical experience. 18 PITNEY BOWES INC. Restricted Stock and Restricted Stock Units Our stock plan permits the issuance of restricted stock and restricted stock units. Restricted stock (units) are stock awards that are granted to employees and entitle the holder to shares of common stock as the award vests, typically over a four year period. The fair value of the awards is determined on the grant date based on our stock price at that date. Restricted stock awards are subject to one or more restrictions, which may include continued employment over a specified period or the attainment of specified financial performance goals. Where a restricted stock award is subject to both tenure and attainment of financial performance goals, the restrictions would be released, in total or in part, only if the executive is still employed by us at the end of the performance period and if the performance objectives are achieved. Where the sole restriction of a restricted stock award is continued employment over a specified period, such period may not be less than three years. The compensation expense for each award is recognized over the performance period. The following table summarizes information about restricted stock (units) transactions:
Employee Stock Purchase Plans The U.S. Employee Stock Purchase Plan enables substantially all U.S. and Canadian employees to purchase shares of our common stock at a discounted offering price and is considered a compensatory plan in accordance with SFAS 123(R). In 2006, the offering price was 85% of the average price of our common stock on the New York Stock Exchange on the offering date. At no time will the exercise price be less than the lowest price permitted under Section 423 of the Internal Revenue Code. The U.K.S.A.Y.E. Plan also enables eligible employees of our participating U.K. subsidiaries to purchase shares of our stock at a discounted offering price which, in 2005, was 90% of the average closing price of our common stock on the New York Stock Exchange for the three business days preceding the offering date. We may grant rights to purchase up to 7,073,684 common shares to our regular employees under the U.S. and U.K. Plans. Compensation expense relating to the U.S. Plan is recognized over a twelve month participation period. Compensation expense for the U.K. Plan is recognized over participation periods of three or five years. Directors’ Stock Plan Under this plan, each non-employee director is granted 1,400 shares of restricted common stock annually. Shares granted at no cost to the directors were 14,000 in 2006 and 13,563 in 2005. Compensation expense, net of taxes, was $0.4 million for each of the quarters ended June 30, 2006, and 2005. The shares carry full voting and dividend rights but, except as provided herein, may not be transferred or alienated until the later of (1) termination of service as a director, or, if earlier, the date of a change of control, or (2) the expiration of the six-month period following the grant of such shares. If a director terminates service as a director prior to the expiration of the six-month period following a grant of restricted stock, that award will be forfeited. The Directors’ Stock Plan permits certain limited dispositions of restricted common stock to family members, family trusts or partnerships, as well as donations to charity after the expiration of the six-month holding period, provided the director retains a minimum of 7,500 shares of restricted common stock. Beginning in 1997, non-employee directors may defer up to 100% of their eligible compensation, subject to the terms and conditions of the Pitney Bowes Deferred Incentive Savings Plan for directors. Participants may allocate deferred compensation among specified investment choices. Previously the investment choices offered included stock options under the Directors’ Stock Plan. Stock options acquired under this plan were generally exercisable three years following their grant and expired after a period not to exceed ten years. There were 45,130 and 49,255 options outstanding under this plan at June 30, 2006, and 2005, respectively. Beginning with the 2004 plan year, options were not offered as an investment choice and therefore there were no options granted in 2004 and thereafter. 19 PITNEY BOWES INC. | EXCERPTS ON THIS PAGE:
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