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Pitney Bowes Meets 2003 Guidance
* Revenue Growth of 4%
* Cash from Operations Exceeds $850 Million for 2003
* 1.5 Million Shares Repurchased During Quarter
* Increased Dividend on Common Stock for 22nd Consecutive Year
STAMFORD, Conn., Feb. 2 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE:PBI) today reported fourth quarter and full year 2003 performance in line with previous revenue and earnings guidance.
In summarizing the company's financial performance during the year, Chairman and CEO Michael J. Critelli noted, "I am very pleased that in 2003 we were able to continue our transformation for long-term growth and still meet revenue and earnings growth guidance. We were able to produce these results by staying focused on our three strategic priorities: enhancing core businesses, streamlining infrastructure and executing our growth strategies. For example, during the year we continued to reduce our exposure to non-core financing, and are transitioning from direct manufacturing to assembly for most of our equipment. We accelerated our infrastructure improvement programs to position the company for growth and an improving economy. We acquired the DDD Company, which expanded our presence in the important government sector. We also significantly expanded our presort network from 12 sites when we acquired it to 23 sites throughout the U.S. currently. And finally, in December we announced the realignment of our organizational structure to enhance customer and shareholder value."
For the fourth quarter 2003, revenue increased four percent to $1.22 billion and net income from continuing operations was $143.6 million or $.61 per diluted share. In January of 2003, the company announced a two-year restructuring program to implement its growth plan. There were $13 million in after-tax charges during the quarter related to this program, bringing the total for the year to approximately $75 million after-tax for 2003. Excluding the quarter's after-tax restructuring charge of $.05 per diluted share, fourth quarter adjusted diluted earnings per share from continuing operations were $.66, which is in line with previous guidance.
Consistent with its previously announced strategy to reduce its exposure to non-core financing, the company's fourth quarter 2003 diluted earnings per share included $.04 per share from non-core Capital Services compared to $.05 in the fourth quarter 2002. For the full year 2003, diluted earnings per share included $.16 per share from non-core Capital Services compared to $.24 per share for the year 2002.
Other income in the fourth quarter included $6.4 million of after-tax income related to the expiration of award certificates provided in connection with the settlement of a class action lawsuit. Other income also included an after-tax charge of $6.3 million for contributions to establish two charitable foundations.
In addition, there was $3.3 million of income from discontinued operations in the quarter, or $.01 per diluted share, from the favorable resolution of certain contingent liabilities associated with the previous sales of Colonial Pacific Leasing Company in 1998 and Atlantic Mortgage & Investment Corporation in 2000.
The company also generated $175 million in cash from operations during the quarter, bringing the total to $851 million for the full year 2003. Subtracting $72 million in capital expenditures and excluding $50 million in contributions to the pension plan, $10 million in contributions to the charitable foundations, and $21 million in payments associated with the restructuring program, free cash flow was $185 million during the quarter. The company repurchased 1.5 million of its shares during the quarter for $60 million, leaving $100 million of authorization.
The board of directors of the company authorized an increase in the dividend on common stock to an annualized rate of $1.22 per share. This is the twenty-second consecutive year that the company has increased its dividend on common stock.
In the Global Mailstream Solutions Segment, revenue increased four percent and operating profit increased five percent when compared with the prior year. In the U.S. strong growth in small business mailing products and presort operations was offset by lower financing revenue from slower equipment sales in previous quarters. Customer acceptance of new digital mailing systems continued on track as placements are driven by the multiple cost saving opportunities and the remote access to value-added services such as delivery and signature confirmation provided by the networked systems. More than two- thirds of the meter base is now composed of digital equipment.
Outside of the U.S. revenue grew at a double-digit pace due primarily to favorable foreign exchange rates. On a local currency basis, revenue grew two percent as a result of improved performance in the UK, Germany, and the Nordic countries despite continuing weak economic conditions in Europe. Japan had excellent revenue growth during the quarter due to the recent introduction of the company's new digital mailing systems. Canada's revenue was down slightly on a local currency basis, due to a tough comparison with the prior year, which benefited from sales associated with a postal rate change and meter migration activity.
The Global Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and U.S. Document Messaging Technologies (DMT). The segment reported 10 percent revenue growth and a 15 percent increase in operating profit versus the prior year. PBMS reported revenue growth of four percent to $261.4 million when compared with the prior year while operating profit declined nine percent. However, PBMS continued to improve its operating profit margin sequentially through ongoing administrative cost reduction measures. The successful integration of DDD Company enhances the company's capabilities to expand its presence in the important state and federal government market segment. The diversification of its customer base will help offset the weakness that still exists in many other customer segments.
DMT reported revenue of $87.0 million for the quarter, an increase of 31 percent from the prior year while operating profit increased 73 percent. Companies appear to have gradually increased their capital spending to prepare for an improving economy. As a result, enterprises are investing in DMT's leading edge, information based inserting and sortation equipment that will help large enterprises market to and support their customers more effectively.
Total Messaging Solutions, the combined results of the Global Mailstream Solutions and Global Enterprise Solutions segments, reported a six percent increase in revenue and operating profit.
In the Capital Services Segment revenue for the quarter decreased 32 percent and there was a one percent decline in operating profit as the company continued to reduce its exposure to non-core, long-term financing. The segment continues to benefit from lower interest rates and the sale of selected non-core Capital Services assets. Excluding the positive impact of lower interest expense, the earnings before interest and taxes (EBIT) for the segment declined 23 percent compared to the prior year. During the quarter, the company liquidated approximately $18 million in assets held for sale, and continued to pursue the sale of other non-core lease assets on an economically advantageous basis, which resulted in the sale of an additional $13 million of assets from the portfolio during the quarter.
Revenue growth is expected to be in the range of three to five percent for the first quarter and for the full year 2004. During the year, the company expects to continue its restructuring initiatives related to realigned infrastructure requirements and reduced manufacturing needs for digital equipment, similar to 2003. However, the company is still finalizing its plans for the first quarter and for the remainder of the year and therefore earnings guidance is provided excluding the impact of these charges and the impact of any new accounting standards. Adjusted diluted earnings per share are expected to be in the range of $.55 to $.57 for the first quarter and in the range of $2.44 to $2.51 for the full year 2004.
As noted above, the board of directors declared a quarterly cash dividend of the company's common stock of 30.5 cents per share, payable March 12, 2004, to stockholders of record on February 20, 2004. The board also declared a quarterly cash dividend of 53 cents per share on the company's $2.12 convertible preference stock, payable April 1, 2004, to stockholders of record on March 15, 2004, and a quarterly cash dividend of 50 cents per share on the company's 4% convertible cumulative preferred stock, payable May 1, 2004 to stockholders of record on April 15, 2004.
Management of Pitney Bowes will discuss the company's financial results in a conference call today scheduled for 5:00 p.m. EST. Instructions for listening to the conference call over the WEB are available on the Investor Relations page of the company's web site at www.investorrelations.pitneybowes.com.
Pitney Bowes engineers the flow of communication. The company is a $4.6 billion global leader of integrated mail and document management solutions headquartered in Stamford, Connecticut. For more information about the company, its products, services and solutions, visit www.pitneybowes.com. Additional information about the global mailing industry can be found at www.postinsight.com.
Pitney Bowes has presented in this earnings release net income and diluted earnings per share on an adjusted basis. Also, management has included a presentation of free cash flow on an adjusted basis and earnings before interest and taxes (EBIT). Management believes this presentation provides a reasonable basis on which to present the adjusted financial information, and is provided to assist in investors' understanding of the Company's results of operations. The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP). However, the earnings per share and free cash flow results are adjusted to exclude the impact of special items such as restructuring charges and write downs of assets, which materially impact the comparability of the Company's results of operations. The use of free cash flows 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 discretionary uses if it made different decisions about employing its cash. It adds back long-term commitments such as capital expenditures and pension plan contributions, as well as special items like charitable contributions and cash used for restructuring charges. Of course, each of 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.
The adjusted financial information and certain financial measures such as EBIT are intended to be more indicative of the ongoing operations and economic results of the Company. EBIT excludes interest payments and taxes, both cash items, and as a result, has the effect of showing a greater amount of earnings than net income. The company believes that interest payments and taxes, though important, do not reflect the management effectiveness as these items are largely outside of their control. In assessing performance, the company uses both EBIT and net income.
This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with (GAAP). Further, our definition of this adjusted financial information may differ from similarly titled measures used by other companies.
Pitney Bowes has provided in supplemental schedules attached for reference adjusted financial information and a quantitative reconciliation of the differences between the adjusted financial measures with the financial measures calculated and presented in accordance with GAAP, except with respect to our guidance because it would not be meaningful. Additional reconciliation of adjusted financial measures to financial measures calculated and presented in accordance with GAAP may be found at the Company's web site www.investorrelations.pitneybowes.com .
The statements contained in this news release that are not purely historical are forward-looking statements with the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements may be identified by their use of forward-looking terminology such as the words "expects," "anticipates," "intends" and other similar words. Such forward-looking statements include, but are not limited to, statements about possible restructuring charges and our future guidance, including our expected revenue in the first quarter and full year 2004, and our expected diluted earnings per share for the first quarter and for the full year 2004. Such 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: severe adverse changes in the economic environment, timely development and acceptance of new products or gaining product approval; successful entry into new markets; changes in interest rates; and changes in postal regulations, as more fully outlined in the company's 2002 Form 10-K Annual Report filed with the Securities and Exchange Commission. In addition, the forward-looking statements are subject to change based on the timing and specific terms of any announced acquisitions. The forward-looking statements contained in this news release are made as of the date hereof and we do not assume any obligation to update the reasons why actual results could differ materially from those projected in the forward-looking statements.
Note: Consolidated statements of income for the three and twelve months ended December 31, 2003 and 2002, and consolidated balance sheets at December 31, 2003, September 30, 2003, and December 31, 2002, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
Revenue from:
Sales $384,713 $342,776 $1,325,490 $1,309,342
Rentals 219,359 212,257 859,783 828,096
Core financing 140,035 144,640 544,938 539,876
Non-core financing 22,734 36,941 109,696 139,867
Business services 291,417 275,110 1,119,146 1,010,912
Support services 156,759 153,130 617,800 581,665
Total revenue 1,215,017 1,164,854 4,576,853 4,409,758
Costs and expenses:
Cost of sales 180,352 154,145 611,620 593,163
Cost of rentals 43,124 44,756 171,119 174,303
Cost of core
financing 34,088 34,923 141,028 145,075
Cost of non-core
financing 6,908 14,445 39,017 46,500
Cost of business
services 240,884 222,528 921,027 814,187
Cost of support
services 81,416 75,283 323,279 297,275
Capital services
charges - 213,182 - 213,182
Selling, general and
administrative 320,180 312,263 1,219,873 1,186,205
Research and
development 37,499 37,180 147,262 141,269
Restructuring charge 20,248 - 116,713 -
Other income (117) - (117) -
Interest, net 40,381 47,339 164,941 179,154
Total costs
and expenses 1,004,963 1,156,044 3,855,762 3,790,313
Income from continuing
operations
before income taxes 210,054 8,810 721,091 619,445
Provision for income
taxes 66,460 (9,390) 226,244 181,739
Income from continuing
operations 143,594 18,200 494,847 437,706
Discontinued
operations 3,270 38,044 3,270 38,044
Net income $146,864 $56,244 $498,117 $475,750
Basic earnings per share
Continuing operations $0.62 $0.08 $2.12 $1.83
Discontinued operations 0.01 0.16 0.01 0.16
Net income 0.63 0.24 2.13 1.99
Capital services
charges - 0.57 - 0.56
Restructuring
charge 0.06 - 0.32 -
Other income - - - -
Discontinued operations (0.01) (0.16) (0.01) (0.16)
Income from continuing
operations, as adjusted $0.67 $0.65 $2.44 $2.39
Diluted earnings per share
Continuing operations $0.61 $0.08 $2.10 $1.81
Discontinued operations 0.01 0.16 0.01 0.16
Net income 0.62 0.24 2.11 1.97
Capital services
charges - 0.56 - 0.56
Restructuring charge 0.05 - 0.32 -
Other income - - - -
Discontinued operations (0.01) (0.16) (0.01) (0.16)
Income from continuing
operations, as adjusted $0.66 $0.64 $2.41 $2.37
Average common and
potential common
shares outstanding 235,667,044 238,114,574 236,165,024 241,483,539
Note: Other income includes income from a legal settlement net of
contributions to charitable foundations as explained in the press
release.
The sum of the earnings per share amounts may not equal the totals
above due to rounding.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
Assets 12/31/03 9/30/03 12/31/02
Current assets:
Cash and cash equivalents $293,812 $285,254 $315,156
Short-term investments, at cost which
approximates market 28 5,677 3,491
Accounts receivable, less allowances:
12/03 $39,778 9/03 $36,971
12/02 $35,139 459,106 420,100 404,366
Finance receivables, less allowances:
12/03 $62,269 9/03 $60,897
12/02 $71,373 1,358,691 1,357,041 1,446,460
Inventories 209,527 228,513 210,888
Other current assets and prepayments 192,011 194,043 172,264
Total current assets 2,513,175 2,490,628 2,552,625
Property, plant and equipment, net 653,661 631,320 622,244
Rental equipment and related
inventories, net 414,341 419,008 422,717
Property leased under capital leases,
net 2,230 2,191 1,974
Long-term finance receivables, less
allowances:
12/03 $78,915 9/03 $80,202
12/02 $82,635 1,654,419 1,608,752 1,686,168
Investment in
leveraged leases 1,534,864 1,499,123 1,559,915
Goodwill 956,284 899,023 827,241
Other assets 1,162,414 1,101,664 1,059,430
Total assets $8,891,388 $8,651,709 $8,732,314
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and
accrued liabilities $1,392,597 $1,338,237 $1,248,337
Income taxes payable 154,799 195,428 98,897
Notes payable and current portion
of long-term obligations 728,658 565,124 1,647,338
Advance billings 370,915 369,504 355,737
Total current liabilities 2,646,969 2,468,293 3,350,309
Deferred taxes on income 1,659,226 1,569,744 1,535,618
Long-term debt 2,840,943 3,004,287 2,316,844
Other noncurrent liabilities 346,888 342,081 366,216
Total liabilities 7,494,026 7,384,405 7,568,987
Preferred stockholders' equity
in a subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock,
$50 par value, 4% convertible 19 19 24
Cumulative preference stock,
no par value, $2.12 convertible 1,315 1,344 1,432
Common stock, $1 par value 323,338 323,338 323,338
Retained earnings 4,057,654 3,977,074 3,848,562
Accumulated other comprehensive income 18,063 (57,737) (121,615)
Treasury stock, at cost (3,313,027)(3,286,734)(3,198,414)
Total stockholders' equity 1,087,362 957,304 853,327
Total liabilities and
stockholders' equity $8,891,388 $8,651,709 $8,732,314
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
Fourth Quarter
Revenue
Global Mailstream Solutions $834,293 $799,454 4%
Global Enterprise Solutions 348,410 317,973 10%
Total Messaging Solutions 1,182,703 1,117,427 6%
Non-core 22,734 36,941 (39%)
Core 9,580 10,486 (9%)
Capital Services 32,314 47,427 (32%)
Total Revenue $1,215,017 $1,164,854 4%
Operating Profit (1)
Global Mailstream Solutions $254,435 $241,361 5%
Global Enterprise Solutions 28,068 24,303 15%
Total Messaging Solutions 282,503 265,664 6%
Non-core 12,360 12,890 (4%)
Core 4,980 4,711 6%
Capital Services 17,340 17,601 (1%)
Total Operating Profit 299,843 283,265 6%
Unallocated amounts:
Net interest (corporate
interest expense, net of
intercompany transactions) (28,688) (24,536)
Corporate expense (40,970) (36,737)
Restructuring charge (20,248) -
Capital services charges - (213,182)
Other income 117 -
Income before income taxes $210,054 $8,810
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
Year To Date
Revenue
Global Mailstream Solutions $3,156,254 $3,011,378 5%
Global Enterprise Solutions 1,270,063 1,218,291 4%
Total Messaging Solutions 4,426,317 4,229,669 5%
Non-core 109,696 139,867 (22%)
Core 40,840 40,222 2%
Capital Services 150,536 180,089 (16%)
Total Revenue $4,576,853 $4,409,758 4%
Operating Profit (1)
Global Mailstream Solutions $947,374 $894,150 6%
Global Enterprise Solutions 74,797 83,152 (10%)
Total Messaging Solutions 1,022,171 977,302 5%
Non-core 50,081 58,213 (14%)
Core 20,921 17,183 22%
Capital Services 71,002 75,396 (6%)
Total Operating Profit 1,093,173 1,052,698 4%
Unallocated amounts:
Net interest (corporate
interest expense, net of
intercompany transactions) (108,491) (87,922)
Corporate expense (146,995) (132,149)
Restructuring charge (116,713) -
Capital services charges - (213,182)
Other income 117 -
Income before income taxes $721,091 $619,445
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
GAAP income from continuing
operations before income
taxes, as reported $210,054 $8,810 $721,091 $619,445
Capital services charges - 213,182 - 213,182
Contributions to charitable
foundations 10,000 - 10,000 -
Legal settlement (10,117) - (10,117) -
Restructuring charge 20,248 - 116,713 -
Income from continuing operations
before income taxes, as adjusted 230,185 221,992 837,687 832,627
Provision for income
taxes, as adjusted 73,705 69,487 268,216 260,616
Income from continuing
operations, as adjusted $156,480 $152,505 $569,471 $572,011
GAAP diluted earnings per share,
as reported $0.62 $0.24 $2.11 $1.97
Income from discontinued
operations (0.01) (0.16) (0.01) (0.16)
GAAP diluted earnings per share
from continuing
operations, as reported $0.61 $0.08 $2.10 $1.81
Capital services charges - 0.56 - 0.56
Contributions to charitable
foundations 0.03 - 0.03 -
Legal settlement (0.03) - (0.03) -
Restructuring charge 0.05 - 0.32 -
Diluted earnings per share from
continuing operations, as adjusted $0.66 $0.64 $2.41 $2.37
GAAP net cash provided by
operating activities,
as reported $175,418 $851,261
Net investment
in fixed assets (71,543) (285,681)
Free cash flow 103,875 565,580
Pension plan investment 50,000 50,000
Contributions related to
charitable foundations 10,000 10,000
Payments related to
restructuring charge 20,997 62,751
Free cash flow, as adjusted $184,872 $688,331
Three months ended Twelve months ended
December 31, December 31,
2003 2002 2003 2002
GAAP Capital Services operating
profit, as reported $17,340 $17,601 $71,002 $75,396
Capital Services
interest expense 5,440 12,146 28,567 43,465
Earnings before interest
and taxes (EBIT) $22,780 $29,747 $99,569 $118,861
Note: The sum of the earnings per share amounts may not equal the totals
above due to rounding.
In making adjusted diluted earnings per share projections for 2004,
as one might expect, the company excludes from its calculations
restructuring charges, as well as any other contingency that it
cannot foresee.
SOURCE Pitney Bowes Inc.
-0- 02/02/2004
/CONTACT: Editorial - Sheryl Y. Battles, Vice President of External
Affairs, +1-203-351-6808, or Financial - Charles F. McBride, Exec. Director,
Investor Relations, +1-203-351-6349, both of Pitney Bowes Inc./
/Web site: http://www.pitneybowes.com
http://www.postinsight.com /
(PBI)
CO: Pitney Bowes Inc.
ST: Connecticut
IN: OFP
SU: CCA ERN
GS
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1511 02/02/2004 16:17 EST http://www.prnewswire.com