STAMFORD, Conn.--(BUSINESS WIRE)--Nov. 3, 2009-- Pitney Bowes Inc. (NYSE:PBI) today reported third quarter 2009 financial results.

Revenue for the quarter was $1.36 billion compared with $1.55 billion in the prior year, a decline of 12 percent. A stronger dollar reduced revenue by 2 percent year-over-year. Adjusted earnings per diluted share from continuing operations was $0.55, compared with $0.67 in the prior year. Earnings reflect the negative impacts of $0.01 per diluted share associated with currency and $0.01 per diluted share from incremental pension costs when compared with the prior year.

On a Generally Accepted Accounting Principles (GAAP) basis, earnings per diluted share was $0.50 compared with $0.47 for the prior year. GAAP earnings per diluted share for this quarter includes a $0.01 loss associated with discontinued operations and a $0.04 charge for restructuring costs associated with our strategic transformation initiatives.

Free cash flow was $223 million for the quarter while on a GAAP basis the company generated $249 million in cash from operations. Free cash flow benefited from lower capital expenditures and lower levels of finance receivables. During the quarter the company paid $75 million of dividends to common shareholders.

Year-to-date, the company has generated $666 million in free cash flow and on a GAAP basis $732 million in cash from operations, which was partially used to reduce debt by $298 million.

The company’s results for the quarter and year-to-date are summarized below:

		Third Quarter			Year-to-date
Adjusted EPS		$0.55			$1.64
Restructuring		($0.04	)		($0.04	)
Tax Adjustments		N/M			($0.06	)
GAAP EPS from Continuing Operations		$0.51			$1.54
Discontinued Operations		($0.01	)		$0.03
GAAP EPS		$0.50			$1.57

“We have been aggressively implementing a series of actions to help mitigate the impact of a challenging business environment characterized by ongoing economic pressures, depressed mail volumes, and evolving customer behaviors,” noted Pitney Bowes Chairman, President and CEO Murray D. Martin. “To enhance long-term growth and value creation in this changing environment, we introduced new solutions to the marketplace, we entered new partnerships to deliver more value to our customers worldwide, and we initiated a comprehensive program to transform our business processes and operations.

“We also continued to take significant actions to reduce costs and enhance productivity. The benefits from our earlier actions are again visible in our sequential results as EBIT and EBIT margins improved in 6 of our 7 business segments compared with the second quarter 2009.

“We generated significant free cash flow and saw a sequential improvement in our supplies and rental revenue streams, even as equipment sales continued to be tempered by the economic environment.

“We believe that our strategic transformation process will help us navigate the current environment and enhance our positioning for long-term growth when the economy rebounds. We are analyzing a wide range of opportunities for process and operational improvements in areas such as our global customer interactions and product development processes.

“Currently, we are targeting annualized benefits, net of investments, from our strategic transformation initiatives in the range of at least $150 to $200 million on a pre-tax basis. We expect the full benefit run rate to be achieved by 2012. The restructuring charge in the current quarter represents costs associated with initial actions identified as part of the diagnostic phase of this project. Starting in the fourth quarter, there will be additional ongoing costs associated with achieving these benefits, and both the benefits and costs will be recognized as different actions are approved and implemented.

“Based upon our results year-to-date and our expectations for the remainder of the year, we are narrowing the range for adjusted and GAAP earnings per diluted share. We now expect adjusted earnings per diluted share will be in the range of $2.19 to $2.31 and GAAP earnings per diluted share will be in the range of $2.09 to $2.21. We are also increasing our guidance range for cash flow and slightly reducing our revenue expectations.”

Business Segment Results

Mailstream Solutions revenue declined 12 percent on a constant currency basis compared with the prior year. On a reported basis, revenue declined 14 percent to $925 million and earnings before interest and taxes (EBIT) declined 21 percent to $227 million compared with the prior year.

Within Mailstream Solutions:

U.S. Mailing revenue declined 12 percent to $491 million and EBIT declined 19 percent to $178 million compared with the prior year. Revenue declined by 4 percent and EBIT declined by 8 percent compared with the second quarter. Sequential revenue comparisons are negatively impacted by an increase in the number of customers renewing leases on equipment rather than upgrading; absence of a postal rate increase which generates sales; and, a seasonal impact on the equipment sales cycle.

The company continued its focus on customer retention, as many customers continued to take advantage of the option to extend leases on existing equipment. The quarter’s revenue and EBIT also reflect lower levels of high-margin financing revenue as a result of reduced equipment sales in both the current and prior quarters. In October the company continued to enhance its product line with the launch of the new fully-featured mid-market DM475 mail and metering solution.

International Mailing revenue declined 11 percent on a constant currency basis compared with the prior year. On a reported basis, revenue declined 17 percent to $225 million with more than 6 points of this decline due to adverse currency impact, and EBIT declined 29 percent to $29 million when compared with the prior year. Reported revenue increased by 3 percent, EBIT increased by 8 percent and EBIT margin improved by 60 basis points, when compared with the second quarter of 2009.

Similar to the U.S., results have been impacted by lower recurring revenue streams such as financing and supplies, as a result of weak demand throughout the economic downturn. At the end of the third quarter the company began to see signs of stabilization of business trends in Canada, Asia Pacific, and parts of Europe, despite generally weak economic conditions.

Worldwide Production Mail revenue declined 16 percent on a constant currency basis compared with the prior year. On a reported basis, revenue declined 18 percent to $126 million with 2 points of the decline due to adverse currency impact. EBIT declined 50 percent to $11 million compared with the prior year. Reported revenue declined 3 percent while EBIT increased 10 percent and EBIT margin improved 110 basis points when compared with the second quarter.

Production Mail again achieved sequential growth and margin improvement in service revenue, despite lower equipment sales as a result of customers around the world keeping existing equipment longer than usual. One example of how the company is positioning itself to provide incremental value to its customers is through a partnership announced during the quarter with Hewlett Packard. The company will sell Hewlett Packard’s digital high-speed color printer as part of an integrated solution with Pitney Bowes’ inserting equipment.

Software revenue declined 9 percent on a constant currency basis compared with the prior year. On a reported basis, revenue declined 13 percent to $82 million while EBIT increased 160 percent to $8 million, compared with the prior year. Reported revenue was essentially flat and EBIT increased 58 percent compared with the second quarter 2009. EBIT margin reached 10 percent in the quarter, more than double the prior year.

The company has taken significant actions to integrate acquired businesses, focus the product line and rebrand its software offerings. Despite worldwide consolidation in the financial services industry and weakness in the retail sector impacting software sales, the company’s actions have resulted in substantial EBIT margin improvements versus the prior year. This is expected to benefit EBIT growth in the seasonally more significant fourth quarter.

Mailstream Services revenue declined 6 percent on a constant currency basis compared with the prior year. On a reported basis, revenue declined 8 percent to $432 million and EBIT increased 26 percent to $50 million compared with the prior year.

Within Mailstream Services:

Management Services revenue declined 8 percent on a constant currency basis compared with the prior year. On a reported basis, revenue declined 10 percent to $259 million while EBIT improved 21 percent to $20 million compared with the prior year. Reported revenue declined 2 percent and EBIT increased 21 percent compared with the second quarter.

In the U.S., EBIT as a percentage of revenue remained above 10 percent, comparable to the first half of the year. The company has implemented a more variable cost infrastructure that allows it to align costs with changing volumes. This flexibility helped drive EBIT improvements despite lower business activity. Outside the U.S., the company instituted similar productivity enhancements that have improved profitability despite lower print and transaction volumes due to the economy. This will provide the international operations with increased leverage as the economy improves and revenue rebounds.

Mail Services revenue declined 3 percent on a constant currency basis. On a reported basis, revenue declined 4 percent to $134 million while EBIT increased 49 percent to $23 million compared with the prior year. Reported revenue declined 3 percent while EBIT increased 6 percent and EBIT margin improved by 150 basis points when compared with the second quarter of 2009.

Mail Services continues to capture significant new customers even as mail volume per customer has declined as a result of overall trends in mail volumes. The company achieved improved EBIT margin contributions versus last year from the integration of mail services sites acquired in 2008 and the ongoing automation and productivity initiatives taken by the business.

Marketing Services revenue declined 6 percent to $39 million and EBIT declined 8 percent to $7 million compared with the prior year. Revenue increased 11 percent and EBIT increased 32 percent compared with the second quarter of 2009, benefiting partially from a seasonal increase in household moves during the summer.

On a year-over-year basis, revenue was negatively affected by fewer household moves which resulted in the need for fewer change of address kits. Ongoing production efficiencies resulted in EBIT margin improvement on a sequential basis.

2009 Guidance

The company is modifying its 2009 annual guidance as follows:

• The company is narrowing its range for adjusted and GAAP earnings per diluted share from continuing operations. The adjusted earnings per diluted share range for 2009 is now $2.19 to $2.31. Adjusted earnings per diluted share from continuing operations excludes an estimated 6 cents per diluted share non-cash tax charge associated with out-of-the-money stock options that was primarily recorded in the first half of 2009. Adjusted earnings per diluted share also excludes a $0.04 per share restructuring charge recorded in the third quarter. The company’s current 2009 expectations for diluted earnings per share on a GAAP basis include the restructuring charges recorded in the third quarter, but do not include any potential restructuring charges in the fourth quarter. The company expects earnings per diluted share from continuing operations on a GAAP basis for the year will be in the range of $2.09 to $2.21.
• Revenue for the year is now expected to decline by 5 to 8 percent on a constant currency basis and 8 to 11 percent on a reported basis.
• Based on strong cash flow performance year-to-date, the company is increasing its free cash flow guidance for 2009 by $50 million to a range of $750 million to $850 million.

The 2009 earnings guidance is summarized in the table below:

		Full Year 2009
Adjusted EPS		$2.19 to $2.31
Tax Adjustments		($0.06)
Restructuring		($0.04)
GAAP EPS from Continuing Operations		$2.09 to $2.21

Mr. Martin concluded, “We are committed to making the most of the opportunities we have to transform the way we operate as a global company so that we can build sustainable long-term value for shareholders and customers. That is why we are excited about the prospects of our strategic transformation initiative. The expected improvements to our business practices, processes and operating model will move us toward a more integrated global business with enhanced go-to-market options and a flexible and variable cost infrastructure.”

Management of Pitney Bowes will discuss the company’s results in a broadcast over the Internet today at 5:00 p.m. EST. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the company’s web site at www.pb.com/investorrelations.

Pitney Bowes is a $6.3 billion global technology leader whose products, services and solutions deliver value within the mailstream and beyond. For more information about the company, its products, services and solutions, visit www.pitneybowes.com.

The company's financial results are reported in accordance with generally accepted accounting principles (GAAP). However, earnings per share, income from continuing operations, and free cash flow results are adjusted to exclude the impact of special items such as transformation initiatives, restructuring charges, tax adjustments, accounting adjustments and write downs of assets. Although these charges represent actual expenses to the company, these charges might mask the periodic income and financial and operating trends associated with our business. The use of free cash flow has limitations. GAAP cash flow has the advantage of including all cash available to the company after actual expenditures for all purposes. Free cash flow permits a shareholder insight into the amount of cash that management could have available for other discretionary uses. It adjusts for long-term commitments such as capital expenditures, as well as special items like cash used for restructuring charges, unusual tax payments and contributions to its pension funds. These items use cash that is not otherwise available to the company and are important expenditures. Management compensates for these limitations by using a combination of GAAP cash flow and free cash flow in doing its planning.

EBIT excludes interest payments and taxes, both cash expenses to the company, and as a result, has the effect of showing a greater amount of earnings than net income. The company uses EBIT for purposes of measuring the performance of its management team. The interest rates and tax rates applicable to the company generally are outside the control of management, and it can be useful to judge performance independent of those variables. Financial results on a constant currency basis exclude the impact of changes in foreign currency exchange rates since the prior period under comparison and are calculated using the average of the rates in effect during that period. Constant currency measures are intended to help investors better understand the underlying operational performance of the business excluding the impacts of shifts in currency exchange rates over the intervening period.

Pitney Bowes has provided a quantitative reconciliation to GAAP in supplemental schedules. This information may also be found at the company's web site www.pb.com/investorrelations in the Investor Relations section.

This document contains “forward-looking statements” about our expected future business and financial performance. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments. For us forward-looking statements include, but are not limited to, statements about possible transformation initiatives; restructuring charges and our future revenue and earnings guidance. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: the uncertain economic environment, including adverse impacts on customer demand; changes in foreign currency exchange rates; and changes in postal regulations, as more fully outlined in the company's 2008 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission.

Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three and nine months ended September 30, 2009 and 2008, and consolidated balance sheets at September 30, 2009 and June 30, 2009 are attached.

Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
			Three Months Ended September 30,									Nine Months Ended September 30,
			2009				2008					2009				2008
Revenue:
	Equipment sales		$	225,759			$	296,520				$	714,780			$	910,883
	Supplies			83,464				96,864					253,466				305,750
	Software			87,295				100,092					254,401				314,617
	Rentals			163,711				182,850					487,992				553,658
	Financing			171,228				195,632					528,534				591,834
	Support services			177,607				193,516					531,200				579,996
	Business services			447,756				482,199					1,344,493				1,452,978
	Total revenue			1,356,820				1,547,673					4,114,866				4,709,716
Costs and expenses:
	Cost of equipment sales			124,819				157,593					387,674				484,988
	Cost of supplies			23,785				26,382					68,495				80,673
	Cost of software			19,413				25,917					60,480				80,107
	Cost of rentals			40,508				36,252					114,372				114,227
	Financing interest expense			23,975				27,702					73,865				85,630
	Cost of support services			100,541				113,581					300,090				343,507
	Cost of business services			335,406				370,213					1,033,933				1,120,193
	Selling, general and administrative			435,931				484,650					1,317,410				1,491,154
	Research and development			45,052				53,008					138,623				156,176
	Restructuring charges and asset impairments			12,845				49,229					12,845				85,137
	Other interest expense			27,244				30,037					84,548				91,565
	Interest income			(668	)			(3,179	)				(3,153	)			(9,731	)
	Total costs and expenses			1,188,851				1,371,385					3,589,182				4,123,626
Income from continuing operations before income taxes				167,969				176,288					525,684				586,090
Provision for income taxes				57,691				69,456					192,375				215,389
Income from continuing operations				110,278				106,832					333,309				370,701
Gain (loss) from discontinued operations, net of income tax				(2,429	)			(2,063	)				5,296				(8,726	)
Net income before attribution of noncontrolling interests				107,849				104,769					338,605				361,975
Less: Preferred stock dividends of subsidiaries attributable to   noncontrolling interests				4,622				6,540					13,714				16,134
Pitney Bowes Inc. net income			$	103,227			$	98,229				$	324,891			$	345,841
Amounts attributable to Pitney Bowes Inc. common stockholders:
	Income from continuing operations		$	105,656			$	100,292				$	319,595			$	354,567
	Gain (loss) from discontinued operations			(2,429	)			(2,063	)				5,296				(8,726	)
	Pitney Bowes Inc. net income		$	103,227			$	98,229				$	324,891			$	345,841
Basic earnings per share of common stock attributable to
Pitney Bowes Inc. common stockholders (1):
	Continuing operations		$	0.51			$	0.48				$	1.55			$	1.70
	Discontinued operations			(0.01	)			(0.01	)				0.03				(0.04	)
	Net income		$	0.50			$	0.47				$	1.57			$	1.65
Diluted earnings per share of common stock attributable to
Pitney Bowes Inc. common stockholders (1):
	Continuing operations		$	0.51			$	0.48				$	1.54			$	1.68
	Discontinued operations			(0.01	)			(0.01	)				0.03				(0.04	)
	Net income		$	0.50			$	0.47				$	1.57			$	1.64
Average common and potential common shares outstanding				207,643,504				208,655,671					207,198,120				210,586,568
(1) The sum of the earnings per share amounts may not equal the totals above due to rounding.

Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
Assets														09/30/09				06/30/09
Current assets:
	Cash and cash equivalents													$	441,128			$	445,262
	Short-term investments														17,660				23,399
	Accounts receivable, less allowances:
		09/09		$46,312		06/09		$46,647							772,077				796,119
	Finance receivables, less allowances:
		09/09		$43,333		06/09		$42,814							1,365,631				1,365,188
	Inventories														176,626				171,267
	Current income taxes														73,386				91,465
	Other current assets and prepayments														98,736				102,911
		Total current assets													2,945,244				2,995,611
Property, plant and equipment, net															529,079				546,805
Rental property and equipment, net															374,021				365,852
Long-term finance receivables, less allowances:
		09/09		$25,547		06/09		$25,091							1,370,460				1,382,681
Investment in leveraged leases															231,088				212,235
Goodwill															2,294,594				2,276,151
Intangible assets, net															319,040				341,612
Non-current income taxes															66,280				58,044
Other assets															414,215				389,188
Total assets														$	8,544,021			$	8,568,179
Liabilities, noncontrolling interests and stockholders' equity (deficit)
Current liabilities:
	Accounts payable and accrued liabilities													$	1,693,697			$	1,722,404
	Current income taxes														112,908				103,042
	Notes payable and current portion of long-term obligations														170,783				292,869
	Advance billings														452,380				491,073
		Total current liabilities													2,429,768				2,609,388
Deferred taxes on income															366,721				320,842
Tax uncertainties and other income tax liabilities															293,476				296,711
Long-term debt															4,218,646				4,209,129
Other non-current liabilities															783,750				788,244
		Total liabilities													8,092,361				8,224,314
Noncontrolling interests (Preferred stockholders' equity in subsidiaries)															374,165				374,165
Stockholders' equity (deficit):
	Cumulative preferred stock, $50 par value, 4% convertible														4				7
	Cumulative preference stock, no par value, $2.12 convertible														876				969
	Common stock, $1 par value														323,338				323,338
	Additional paid-in capital														251,273				249,312
	Retained earnings														4,380,513				4,351,845
	Accumulated other comprehensive loss														(461,550	)			(533,571	)
	Treasury stock, at cost														(4,416,959	)			(4,422,200	)
		Total Pitney Bowes Inc. stockholders' equity (deficit)													77,495				(30,300	)
Total liabilities, noncontrolling interests and stockholders' equity (deficit)														$	8,544,021			$	8,568,179

Pitney Bowes Inc.
Revenue and EBIT
Business Segments
September 30, 2009
(Unaudited)
(Dollars in thousands)
				Three Months Ended September 30,
												%
				2009				2008				Change
	Revenue
	U.S. Mailing			$	491,036			$	558,038			(12	%)
	International Mailing				224,681				271,727			(17	%)
	Production Mail				126,434				154,554			(18	%)
	Software				82,361				94,221			(13	%)
	Mailstream Solutions				924,512				1,078,540			(14	%)
	Management Services				259,370				287,989			(10	%)
	Mail Services				134,042				139,689			(4	%)
	Marketing Services				38,896				41,455			(6	%)
	Mailstream Services				432,308				469,133			(8	%)
	Total revenue			$	1,356,820			$	1,547,673			(12	%)
	EBIT (1)
	U.S. Mailing			$	178,066			$	221,179			(19	%)
	International Mailing				29,193				41,123			(29	%)
	Production Mail				11,494				23,183			(50	%)
	Software				8,241				3,167			160	%
	Mailstream Solutions				226,994				288,652			(21	%)
	Management Services				19,517				16,064			21	%
	Mail Services				23,024				15,467			49	%
	Marketing Services				7,448				8,088			(8	%)
	Mailstream Services				49,989				39,619			26	%
	Total EBIT			$	276,983			$	328,271			(16	%)
	Unallocated amounts:
	Interest, net				(50,551	)			(54,560	)
	Corporate expense				(45,618	)			(48,194	)
	Restructuring charges and asset impairments				(12,845	)			(49,229	)
	Income from continuing operations before income taxes			$	167,969			$	176,288
(1) Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges and asset impairments.

Pitney Bowes Inc.
Revenue and EBIT
Business Segments
September 30, 2009
(Unaudited)
(Dollars in thousands)			Nine Months Ended September 30,
											%
			2009				2008				Change
	Revenue
	U.S. Mailing		$	1,517,377			$	1,687,229			(10	%)
	International Mailing			679,893				882,145			(23	%)
	Production Mail			366,000				439,358			(17	%)
	Software			240,559				296,134			(19	%)
	Mailstream Solutions			2,803,829				3,304,866			(15	%)
	Management Services			789,635				891,078			(11	%)
	Mail Services			413,891				399,875			4	%
	Marketing Services			107,511				113,897			(6	%)
	Mailstream Services			1,311,037				1,404,850			(7	%)
	Total revenue		$	4,114,866			$	4,709,716			(13	%)
	EBIT (1)
	U.S. Mailing		$	561,232			$	663,469			(15	%)
	International Mailing			87,201				142,520			(39	%)
	Production Mail			26,974				47,116			(43	%)
	Software			16,064				15,962			1	%
	Mailstream Solutions			691,471				869,067			(20	%)
	Management Services			49,294				52,931			(7	%)
	Mail Services			63,322				49,836			27	%
	Marketing Services			17,323				15,558			11	%
	Mailstream Services			129,939				118,325			10	%
	Total EBIT		$	821,410			$	987,392			(17	%)
	Unallocated amounts:
	Interest, net			(155,260	)			(167,464	)
	Corporate expense			(127,621	)			(148,701	)
	Restructuring charges and asset impairments			(12,845	)			(85,137	)
	Income from continuing operations before income taxes		$	525,684			$	586,090
(1) Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges and asset impairments.

Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share data)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2009				2008				2009				2008
GAAP income from continuing operations
after income taxes, as reported	$	105,656			$	100,292			$	319,595			$	354,567
Restructuring charges and asset impairments		8,300				39,117				8,300				61,862
Tax adjustment		216				-				12,204				6,480
MapInfo purchase accounting		-				-				-				322
Income from continuing operations
after income taxes, as adjusted	$	114,172			$	139,409			$	340,099			$	423,231
GAAP diluted earnings per share from
continuing operations, as reported	$	0.51			$	0.48			$	1.54			$	1.68
Restructuring charges and asset impairments		0.04				0.19				0.04				0.29
Tax adjustment		0.00				-				0.06				0.03
MapInfo purchase accounting		-				-				-				0.00
Diluted earnings per share from continuing
operations, as adjusted	$	0.55			$	0.67			$	1.64			$	2.01
GAAP net cash provided by operating activities,
as reported	$	249,038			$	285,611			$	732,424			$	756,059
Capital expenditures		(36,319	)			(54,632	)			(126,509	)			(169,978	)
Restructuring payments and discontinued operations		17,647				28,941				66,757				66,451
Reserve account deposits		(7,768	)			(1,835	)			(6,236	)			16,617
Free cash flow, as adjusted	$	222,598			$	258,085			$	666,436			$	669,149
Note: The sum of the earnings per share amounts may not equal the totals above due to rounding.

Source: Pitney Bowes, Inc.

Editorial:
Sheryl Y. Battles, 203-351-6808
VP, Corp. Communications
or
Financial:
Charles F. McBride, 203-351-6349
VP, Investor Relations
Website: www.pitneybowes.com