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Pitney Bowes Meets Earnings Target for First Quarter 2003
STAMFORD, Conn., Apr 17, 2003 /PRNewswire-FirstCall via COMTEX/ -- Pitney Bowes Inc. (NYSE: PBI) today announced revenue and earnings for the first quarter 2003 that were in line with previous guidance.
Commenting on the quarter, Chairman and CEO Michael J. Critelli stated, "Once again the strength of our business model gives us the resilience to meet expectations in a challenging economic environment. Even though the economy was as difficult as we had feared it might be, we were able to grow both revenue and operating profit in our core businesses and meet our revenue and earnings targets."
Revenue for the quarter grew four percent to $1.09 billion and net income was $113.9 million or $.48 per diluted share. In January this year the company announced that it would take actions to execute long-term growth strategies, and as a result, expected to record approximately $100 million of after-tax charges over the next two years. During the quarter, the company took several actions as part of this restructuring and recorded an after-tax charge of $14 million or $.06 per diluted share. Diluted earnings per share excluding this charge were $.54. First quarter 2003 earnings per share included $.04 per diluted share from non-core Capital Services operations compared to $.06 per diluted share in the first quarter of 2002.
The company also generated $217 million in cash from operations during the quarter. Subtracting $68 million in capital expenditures and excluding $13 million in payments associated with restructuring initiatives, free cash flow was $161 million. The company repurchased 1.6 million shares during the quarter at an average price of $31.84, leaving $250 million of authorization for share repurchases in 2003 and 2004.
In the first quarter, revenue increased five percent and operating profit increased nine percent in the Global Mailing Segment. Global Mailing continued to experience good customer demand for its revolutionary digital mailing systems and related value added services. It benefited from strong growth in its small business operations, although the economy caused some delayed decision-making for upgrades and new equipment purchases at the high end of the product line. Additionally, PSI Group, Inc. added operations and customers during the quarter as the company's pre-sort or work sharing service network continued to expand in terms of reach and revenue contribution.
Within the Global Mailing segment, non-U.S. revenue grew at a double-digit rate as a result of favorable foreign currency exchange rates. Canada and Australia had good revenue growth in local currency, helped by the introduction of new digital mailing systems. France also experienced good revenue growth on a local currency basis, helped by the success of the Secap organization. In many other European countries revenue declined on a local currency basis due to economic weakness and reduced demand after meter migration. Economic conditions also caused a revenue decline in Japan during the period.
The Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and Document Messaging Technologies (DMT). The segment reported four percent revenue growth and an operating profit decline of 35 percent for the quarter.
PBMS reported revenue growth of four percent to $244 million when compared to the prior year, while operating profit declined 37 percent. The lingering economic malaise continues to contract the telecommunications, financial services and transaction-based legal services industries, with a resultant adverse impact on PBMS revenue growth and margins. PBMS continued to add new customers and has retained all of its large customers. Yet margins were adversely impacted by the initial lower margins, higher start-up costs and delayed implementation associated with new accounts, and the loss of higher margin business with long-term customers as they continued to downsize. PBMS remains focused on diversifying its customer base and providing higher value services to its existing customers, while enacting cost reduction and containment measures to address these margin pressures.
DMT reported revenue of $59 million for the quarter, an increase of three percent versus the prior year. Operating profit also rose three percent during the quarter. DMT continued to be adversely impacted by reduced capital spending by businesses.
Total Messaging Solutions, the combined results of the Global Mailing and Enterprise Solutions segments, showed a five percent increase in revenue and a six percent increase in operating profit.
Revenue for the quarter declined 14 percent and operating profit decreased 13 percent in the Capital Services Segment which is consistent with the company's previously announced decision to cease originating large-ticket, structured, third party financing of non-core assets. During the quarter, the company liquidated approximately $80 million of non-core assets, including $29 million of its assets held for sale, and continued to pursue the sale of other non-core lease assets on an economically advantageous basis.
The company anticipates that, in aggregate, the global economy will remain weak for at least the near term. Given this assumption, the company expects year-over-year revenue growth for the second quarter and the full year 2003 to be in the range of two to four percent. As previously announced, over the course of the next two years the company expects to incur $100 million of after-tax restructuring charges, inclusive of the $14 million in restructuring charges recorded during this quarter. The company is still finalizing plans related to future restructuring actions, a portion of which will be recorded in the second quarter of 2003. Therefore, earnings guidance is provided excluding the impact of these future charges. Diluted earnings per share are expected to be in the range of $.58 to $.60 for the second quarter 2003 and the company is reaffirming previous full year guidance of $2.38 to $2.45 exclusive of restructuring charges.
In year-over-year comparisons, first quarter 2003 revenue included $290.9 million from sales of equipment and supplies, down five percent; $214.3 million from rentals, up five percent; $134.4 million from core financing, up three percent; $29.8 million from non-core financing down 17 percent; $272.6 million from business services, up 16 percent; and $148.9 million from support services, up eight percent. Net income for the period was $113.9 million, or $.48 per diluted share, down 12 percent compared to the first quarter of 2002. Excluding the after tax impact of the $21 million restructuring charge, net income was $127.5 million or $.54 per diluted share in the first quarter of 2003.
Management of Pitney Bowes will discuss the company's financial results in a conference call today scheduled for 11 a.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 www.investorrelations.pitneybowes.com.
Pitney Bowes engineers the flow of communication. The company is a $4.4 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.
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.
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. In general, results are adjusted to exclude the impact of special items of a non-recurring nature, such as restructuring charges and write downs of assets, which materially impact the comparability of the Company's results of operations. The adjusted financial information is intended to be more indicative of the ongoing operations and economic results of the Company.
This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with generally accepted accounting principles (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.pitneybowes.com in the Investor Relations section.
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 second quarter and full year 2003, and our expected diluted earnings per share for the second quarter and for the full year 2003. 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.
CONTACT:
Editorial - Sheryl Y. Battles
Vice President, External Affairs
203/351-6808
Note: Consolidated statements of income for the three months ended March 31, 2003 and 2002, and consolidated balance sheets at March 31, 2003, December 31, 2002, and March 31, 2002, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
2003 2002
Revenue from:
Sales $290,850 $306,802
Rentals 214,301 203,783
Core financing 134,361 130,701
Non-core financing 29,756 35,668
Business services 272,620 234,397
Support services 148,921 138,157
Total revenue 1,090,809 1,049,508
Costs and expenses:
Cost of sales 139,927 146,419
Cost of rentals 41,608 43,105
Cost of core financing 35,193 36,486
Cost of non-core financing 11,267 11,076
Cost of business services 222,793 187,851
Cost of support services 78,299 71,603
Selling, general and administrative 295,150 285,065
Research and development 35,751 34,069
Restructuring charge 21,265 --
Interest, net 43,281 45,298
Total costs and expenses 924,534 860,972
Income before income taxes 166,275 188,536
Provision for income taxes 52,372 59,019
Net income $113,903 $129,517
Basic earnings per share
Net income $0.48 $0.54
Restructuring charge 0.06 --
Net income excluding
restructuring charge $0.54 $0.54
Diluted earnings per share
Net income $0.48 $0.53
Restructuring charge 0.06 --
Net income excluding
restructuring charge $0.54 $0.53
Average common and potential common
shares outstanding 236,522,184 244,288,147
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited) (Unaudited)
Assets 3/31/03 12/31/02 3/31/02
Current assets:
Cash and cash equivalents $375,653 $315,156 $264,323
Short-term investments, at
cost which approximates
market 8,411 3,491 10,545
Accounts receivable, less allowances:
3/03 $37,191
12/02 $35,139
3/02 $32,199 428,340 404,366 394,692
Finance receivables, less allowances:
3/03 $70,538
12/02 $71,373
3/02 $64,427 1,433,848 1,446,460 1,598,463
Inventories 230,009 210,888 172,804
Other current assets and
prepayments 179,347 172,264 148,063
Total current assets 2,655,608 2,552,625 2,588,890
Property, plant and
equipment, net 638,152 622,244 537,850
Rental equipment and related
inventories, net 421,841 422,717 450,582
Property leased under capital
leases, net 2,057 1,974 1,193
Long-term finance receivables, less allowances:
3/03 $80,839
12/02 $82,635
3/02 $66,913 1,651,509 1,686,168 1,816,210
Investment in leveraged
leases 1,530,720 1,559,915 1,368,729
Goodwill 892,096 827,241 668,908
Other assets 1,056,956 1,059,430 818,002
Total assets $8,848,939 $8,732,314 $8,250,364
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $1,280,359 $1,248,337 $1,367,091
Income taxes payable 155,301 98,897 290,024
Notes payable and current
portion of long-term
obligations 1,533,078 1,647,338 1,234,773
Advance billings 375,799 355,737 321,264
Total current liabilities 3,344,537 3,350,309 3,213,152
Deferred taxes on income 1,522,996 1,535,618 1,260,820
Long-term debt 2,422,424 2,316,844 2,233,844
Other noncurrent liabilities 353,373 366,216 347,136
Total liabilities 7,643,330 7,568,987 7,054,952
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 1,417 1,432 1,552
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value -- -- 2,013
Retained earnings 3,889,447 3,848,562 3,716,613
Accumulated other
comprehensive income (81,736) (121,615) (154,304)
Treasury stock, at cost (3,236,881) (3,198,414) (3,003,824)
Total stockholders'
equity 895,609 853,327 885,412
Total liabilities and
stockholders' equity $8,848,939 $8,732,314 $8,250,364
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
March 31, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
First Quarter
Revenue
Global Mailing $747,941 $712,091 5%
Enterprise Solutions 303,209 291,390 4%
Total Messaging Solutions 1,051,150 1,003,481 5%
Non-core 29,756 35,668 (17%)
Core 9,903 10,359 (4%)
Capital Services 39,659 46,027 (14%)
Total Revenue $1,090,809 $1,049,508 4%
Operating Profit (1)
Global Mailing $220,577 $201,581 9%
Enterprise Solutions 11,364 17,581 (35%)
Total Messaging Solutions 231,941 219,162 6%
Non-core 12,025 15,380 (22%)
Core 5,071 4,327 17%
Capital Services 17,096 19,707 (13%)
Total Operating Profit 249,037 238,869 4%
Unallocated amounts:
Net interest (corporate interest
expense, net of
intercompany transactions) (26,193) (20,245)
Corporate expense (35,304) (30,088)
Restructuring charge (21,265) --
Income before income taxes $166,275 $188,536
(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
March 31, 2003
GAAP income before income taxes, as reported $166,275
Restructuring charge 21,265
Income before income taxes, as adjusted 187,540
Provision for income taxes, as adjusted 60,027
Net income, as adjusted $127,513
GAAP diluted earnings per share, as reported $0.48
Restructuring charge 0.06
Diluted earnings per share, as adjusted $0.54
GAAP net cash provided by operating
activities, as reported $216,848
Net investment in fixed assets (68,342)
Free cash flow 148,506
Payments related to restructuring charge 12,835
Free cash flow excluding
restructuring payments $161,341
SOURCE Pitney Bowes
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
http://www.pitneybowes.com