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Pitney Bowes Meets Earnings Guidance for Second Quarter 2002
* Diluted Earnings Per Share of 59 Cents * Launch of New Digital Line of Mailing Systems * Definitive Agreement to Acquire PSI Group, Inc.
Pitney Bowes Inc. (NYSE: PBI) today announced second quarter 2002 results that included diluted earnings per share of 59 cents, compared to 58 cents from continuing operations for the second quarter of 2001, excluding special items.Revenue grew six percent to $1.08 billion and income from continuing operations for the quarter was $143.1 million. The income from continuing operations compares with $144.5 million in last year's second quarter excluding special items, and $187.9 million including special items.
During the quarter, the company repurchased 2.2 million of its shares outstanding, leaving $139 million of authorization for future share repurchases.
Free cash flow for the quarter was $80 million excluding payments related to special items, and $62 million including these payments. Free cash flow was affected by the timing of tax payments during the quarter as well as the build-up of receivables and inventory associated with the successful launch of new products and an increase in receivables related to the U.S. postal rate change. Year-to-date, free cash flow, excluding payments related to special items, was $269 million. Including payments for special items, free cash flow was $230 million.
As previously announced in June, the company signed a definitive agreement to acquire 100% of the stock of the PSI Group, Inc. (PSI), the nation's largest mail pre-sort company, for $130 million in cash. Subject to the completion of certain conditions, the company expects the transaction to close in the third quarter 2002.
Commenting on the quarter, Pitney Bowes Chairman and Chief Executive Officer Michael J. Critelli said, "This quarter was representative of our year thus far, where our underlying strength has enabled us to meet our earnings targets despite weakened economic conditions, while still taking actions to position us for continued, profitable growth into the future. Toward the end of the quarter, our sales force began selling the most comprehensive and technologically-advanced product line in Pitney Bowes' history. Currently launched in the U.S., the U.K. and Canada, our unique DM line of digital, networked mailing systems utilizes our patented Intellilink(TM) technology and provides our U.S. customers with convenient access to discounted special mailing services such as delivery confirmation and signature confirmation, among other benefits. These systems, based on a global architecture, will be available to the rest of the world shortly. We are very pleased with the reception they have already received from our customers in the brief time they have been available.
"The agreement to acquire PSI Group is part of our strategy to further expand our presence in the integrated mail and document management markets. The acquisition of this premier mail pre-sort business will allow us to offer new, value-added services to our customers and provide PSI customers access to the many Pitney Bowes products and services that can help them operate more cost-effectively.
"These actions, together with other pending initiatives, will further deliver shareholder and customer value as we strengthen our ability to provide leading-edge global, integrated mail and document management solutions to organizations of all sizes."
The Global Mailing Segment includes worldwide revenue and related expenses from the sale, rental and financing of mail finishing, mail creation and shipping equipment, related supplies and services, postal payment solutions, small business solutions and software. In the second quarter, Global Mailing revenue increased one percent while operating profit declined less than one percent. Excluding the revenue from the acquisition of Secap SA, Global Mailing revenue declined two percent for the quarter. Although results were impacted by a weak economy and a sales force that was in training to prepare for the launch of the new DM line late in the quarter, U.S. Global Mailing experienced strong demand for all of its products, including the new digital, networked mailing systems.
International Global Mailing experienced double-digit revenue growth, supported by acquisition revenue and improving business trends in the UK. Excluding the revenue from the acquisition of Secap SA, international Global Mailing revenue grew less than one percent despite the adverse impact of a weak global economy and a related continued slow-down in orders for mailing equipment in most of continental Europe.
The Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and Document Messaging Technologies (DMT). Revenue from Management Services includes facilities management contracts for advanced mailing, reprographic, document management and other value-added services to large enterprises. Revenue from DMT includes sales, service and financing of high speed, software-enabled production mail systems, sorting equipment, incoming mail systems, electronic statement, billing and payment solutions, and mailing software in the U.S. The Enterprise Solutions segment reported revenue growth of 21 percent and operating profit growth of 15 percent.
PBMS reported revenue growth of 38 percent to $241 million when compared to the prior year, and operating profit growth of 48 percent. Excluding the revenue from the acquisition of Danka Services International (DSI), PBMS revenue increased two percent for the quarter. The weak economy continues to have an adverse impact on some of our largest customers, which in turn resulted in reduced revenue growth opportunities for PBMS.
DMT reported revenue of $58 million for the quarter, a decline of 20 percent from the prior year, with a greater decline in operating profit. Continued slow placements of high margin equipment, an increase in lower margin service revenue and investments in new product development contributed to the decline in operating profit during the quarter.
The company's integrated mail and document management services offered by its Enterprise Solutions organizations are especially valued by many large enterprises in today's economic environment as a way to increase the impact and reduce the costs of their integrated mail and document flow. The multi- year agreement signed during the quarter with Aetna is an example of a company which turned to Pitney Bowes to provide services and expertise that will contribute to reductions in Aetna's operating costs for their document production.
Total Messaging Solutions, the combined results of the Global Mailing and Enterprise Solutions segments, showed a six percent increase in revenue and a marginal increase in operating profit.
The Capital Services Segment includes primarily asset- and fee-based income generated by financing or arranging transactions for the acquisition of non-Pitney Bowes equipment. Revenue for the quarter declined four percent and operating profit increased 12 percent due to lower interest costs versus the prior year.
The company expects revenue growth for the third quarter to be in a range of five to seven percent and six to seven percent for the full year. Diluted earnings per share are expected to be in the range of 60 to 62 cents for the third quarter 2002 and $2.37 to $2.40 for the full year.
Second quarter 2002 revenue included $568.7 million from sales, up nine percent from $522.4 million in the second quarter of 2001; $369.5 million from rentals and financing, up one percent from $365.1 million; and $143.2 million from support services, up seven percent from $133.3 million. Net income for the period was $143.1 million, or 59 cents per diluted share. Income from continuing operations for the second quarter 2001 was $187.9 million or 76 cents per diluted share which included the following special gains and charges: a $362 million net pre-tax gain as a result of settling a lawsuit with Hewlett-Packard; a $248 million pre-tax charge associated with the company's transition to the next generation of networked technology; and a $29 million pre-tax charge related to initiatives associated with a restructuring plan. Excluding these special gains and charges, second quarter 2001 income from continuing operations was $144.5 million or 58 cents per diluted share and net income was $133.7 million or 54 cents per diluted share. Second quarter 2001 net income included a loss of $10.8 million from discontinued operations or approximately four cents per diluted share.
For the six-month period ended June 30, 2002, revenue was $2.131 billion, up seven percent from $1.987 billion in 2001. Net income for 2002 was $272.6 million or $1.12 per diluted share compared to income from continuing operations for 2001 which, excluding special gains and charges, was $276.1 million, or $1.11 per diluted share. Year-to-date pre-tax restructuring charges for 2001 totaled approximately $104 million, of which $71 million was related to continuing operations. Year-to-date net income for 2001, including special gains and charges, was $281.0 million or $1.13 per diluted share. The year-to-date net income for 2001 included a loss of $10.8 million from discontinued operations, or four cents per diluted share.
Management of Pitney Bowes will discuss the company's financial results in a conference call today scheduled for 5:00 p.m. EDT. Instructions for listening to the conference call over the Web are available on the Investor Relations page of the company's web site at http://www.investorrelations.pitneybowes.com.
Pitney Bowes is a $4 billion global provider of integrated mail, messaging and document management solutions headquartered in Stamford, Connecticut. The company serves over 2 million businesses of all sizes through dealer and direct operations in more than 130 countries. For additional information on the company, its products and solutions visit http://www.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 pending and possible acquisitions, restructuring charges and our future guidance, including our expected revenue for the third quarter and full year 2002, and our expected diluted earnings per share for the third quarter and full year 2002. 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 further 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 2001 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 or proposed 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 six months ended June 30, 2002 and 2001, and consolidated balance sheets at June 30, 2002, March 31, 2002, and June 30, 2001, are attached.
Editorial -- Sheryl Y. Battles
Vice President, External Affairs
203/351-6808
Website -- http://www.pitneybowes.com
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Revenue from:
Sales and management
services $568,688 $522,434 $1,109,887 $993,906
Rentals and
financing 369,466 365,098 739,618 733,090
Support services 143,171 133,332 281,328 260,191
Total revenue 1,081,325 1,020,864 2,130,833 1,987,187
Costs and expenses:
Cost of sales and
management services 339,654 303,961 673,924 582,311
Cost of rentals and
financing 90,005 90,227 180,672 181,060
Cost of meter
transition (*) -- 247,700 -- 247,700
Selling, service and
administrative 361,930 336,137 718,598 659,040
Research and
development 36,095 34,865 70,164 66,467
Other income (*) -- (362,172) -- (362,172)
Interest, net 45,327 44,301 90,625 94,886
Restructuring
charges (*) -- 27,609 -- 70,760
Total costs
and expenses 873,011 722,628 1,733,983 1,540,052
Income from
continuing operations
before income taxes 208,314 298,236 396,850 447,135
Provision for income
taxes 65,211 110,380 124,230 155,342
Income from
continuing
operations 143,103 187,856 272,620 291,793
Discontinued
operations -- (10,827) -- (10,827)
Net income $143,103 $177,029 $272,620 $280,966
Basic earnings per
share
Continuing
operations $0.60 $0.76 $1.13 $1.18
Discontinued
operations -- (0.04) -- (0.04)
Net income 0.60 0.72 1.13 1.14
Special items
after-tax (*) -- (0.17) -- (0.06)
Discontinued
operations -- 0.04 -- 0.04
Income from continuing
operations excluding
special items $0.60 $0.59 $1.13 $1.12
Diluted earnings per
share
Continuing
operations $0.59 $0.76 $1.12 $1.17
Discontinued
operations -- (0.04) -- (0.04)
Net income 0.59 0.71 1.12 1.13
Special items
after-tax (*) -- (0.17) -- (0.06)
Discontinued
operations -- 0.04 -- 0.04
Income from continuing
operations excluding
special items $0.59 $0.58 $1.12 $1.11
Average common and
potential common
shares outstanding 242,968,251 248,420,347 243,733,950 249,146,896
Note: Special items are indicated by the asterisks above or are otherwise
explained in the press release. Special items for the three and six
months ended June 30, 2001 resulted in a net after-tax gain of
$43,306 and $15,689, respectively.
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 6/30/02 3/31/02 6/30/01
Current assets:
Cash and cash equivalents $240,643 $264,323 $199,609
Short-term investments,
at cost which
approximates market 11,946 10,545 3,472
Accounts receivable,
less allowances:
6/02 $33,392 3/02
$32,199 6/01 $30,356 414,322 394,692 385,799
Finance receivables,
less allowances:
6/02 $66,991 3/02
$64,427 6/01 $56,779 1,622,835 1,598,463 1,463,061
Inventories 193,533 172,804 166,917
Other current assets
and prepayments 161,117 148,063 157,086
Net assets of discontinued
operations -- -- 223,578
Total current assets 2,644,396 2,588,890 2,599,522
Property, plant and
equipment, net 554,489 537,850 516,943
Rental equipment and
related inventories, net 450,508 450,582 477,230
Property leased under
capital leases, net 1,006 1,193 2,121
Long-term finance
receivables, less
allowances:
6/02 $66,143 3/02
$66,913 6/01 $67,491 1,780,539 1,816,210 1,849,533
Investment in
leveraged leases 1,388,732 1,368,729 1,221,143
Goodwill 668,552 668,908 568,258
Other assets 818,336 818,002 652,192
Net assets of discontinued
operations -- -- 216,802
Total assets $8,306,558 $8,250,364 $8,103,744
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable and
accrued liabilities $1,280,707 $1,367,091 $1,171,173
Income taxes payable 237,225 290,024 386,201
Notes payable and
current portion of
long-term obligations 1,459,165 1,234,773 1,109,459
Advance billings 339,587 321,264 343,218
Total current
liabilities 3,316,684 3,213,152 3,010,051
Deferred taxes on income 1,284,301 1,260,820 1,159,810
Long-term debt 2,129,027 2,233,844 2,006,964
Other noncurrent liabilities 353,638 347,136 325,015
Total liabilities 7,083,650 7,054,952 6,501,840
Preferred stockholders'
equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred
stock, $50 par value,
4% convertible 24 24 24
Cumulative preference
stock, no par value,
$2.12 convertible 1,539 1,552 1,632
Common stock, $1
par value 323,338 323,338 323,338
Capital in excess
of par value 960 2,013 5,033
Retained earnings 3,788,916 3,716,613 3,904,437
Accumulated other
comprehensive income (132,796) (154,304) (146,917)
Treasury stock, at cost (3,069,073) (3,003,824) (2,795,643)
Total stockholders'
equity 912,908 885,412 1,291,904
Total liabilities and
stockholders' equity $8,306,558 $8,250,364 $8,103,744
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 2002
(Unaudited)
(Dollars in thousands)
%
2002 2001 (2) Change
Second Quarter
Revenue
Global Mailing $737,203 $727,265 1%
Enterprise Solutions 299,131 246,882 21%
Total Messaging Solutions 1,036,334 974,147 6%
Capital Services 44,991 46,717 (4%)
Total Revenue $1,081,325 $1,020,864 6%
Operating Profit (1)
Global Mailing $225,087 $227,207 (1%)
Enterprise Solutions 22,354 19,405 15%
Total Messaging Solutions 247,441 246,612 --
Capital Services 19,859 17,657 12%
Total Operating Profit $267,300 $264,269 1%
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 2002
(Unaudited)
(Dollars in thousands)
%
2002 2001 (2) Change
Year to Date
Revenue
Global Mailing $1,449,294 $1,415,489 2%
Enterprise Solutions 590,521 477,472 24%
Total Messaging Solutions 2,039,815 1,892,961 8%
Capital Services 91,018 94,226 (3%)
Total Revenue $2,130,833 $1,987,187 7%
Operating Profit (1)
Global Mailing $426,668 $431,536 (1%)
Enterprise Solutions 39,935 38,224 4%
Total Messaging Solutions 466,603 469,760 (1%)
Capital Services 39,566 35,204 12%
Total Operating Profit $506,169 $504,964 --
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
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SOURCE Pitney Bowes Inc.
CONTACT: Editorial - Sheryl Y. Battles, Vice President, External
Affairs, +1-203-351-6808, or Financial - Charles F. McBride, Exec. Director,
Investor Relations, +1-203-351-6349, both of Pitney Bowes Inc.
URL: http://www.pitneybowes.com
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