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Pitney Bowes Reports Strong First Quarter Results
STAMFORD, Conn., Apr 26, 2004 /PRNewswire-FirstCall via COMTEX/ -- Pitney Bowes Inc. (NYSE: PBI) today announced first quarter 2004 results that exceeded previous revenue and diluted earnings per share guidance.
Commenting on the quarter, Chairman and CEO Michael J. Critelli stated, "We are very pleased that the year is off to a robust start as we grow our existing businesses and continue to execute our long-term growth strategies. The quarter featured good organic growth largely driven by increased global demand for our mailing solutions and services by customers of all sizes.
"We are also pleased to see that our growth strategies are gaining traction. We are expanding our participation in the mail stream and diversifying our customer base with the continued growth in small business solutions, the enlargement of our pre-sort network, and the growing use of our advanced technologies to process consumer originated mail in retail outlets and on eBay. We are positioning ourselves to provide higher value document management solutions with our definitive agreement to acquire Group 1 Software and build our customer communication management capability. And, our international presence is growing as a result of strong customer acceptance of our new digital mailing solutions."
Revenue for the quarter grew seven percent to $1.17 billion and net income was $126.6 million. Diluted earnings per share, excluding a charge as part of the company's restructuring program, were $.58. This amount exceeded previous guidance because of strong organic growth in the Global Mailstream Solutions segment and favorable currency translation. During the quarter, the company took several actions as part of its previously announced restructuring program and recorded an after-tax charge of $9.6 million or $.04 per diluted share. Including this charge, fully diluted earnings per share for the first quarter were $.54. First quarter 2004 earnings per share included $.02 per diluted share from non-core Capital Services operations compared to $.04 per diluted share in the first quarter of 2003.
The company generated $275 million in cash from operations during the quarter. Subtracting $75 million in capital expenditures and excluding $17 million in payments associated with restructuring initiatives, free cash flow was $217 million. During the quarter the company repurchased 2.3 million shares for $ 96 million.
In the first quarter, revenue increased nine percent and earnings before interest and taxes (EBIT) increased seven percent in the Global Mailstream Solutions segment. Global Mailstream continued to experience good customer demand worldwide for its revolutionary digital mailing systems, mail creation products and distribution solutions applications.
The segment also benefited from strong growth in its small business operations and in its supplies revenue. Additionally, its pre-sort operations continued to expand during the quarter and again grew revenue at a double- digit pace.
Non-U.S. revenue experienced strong organic growth and favorable foreign currency exchange rates. The UK, Canada and Japan all had double-digit revenue growth in local currency, helped by the recent introduction of new digital mailing systems. Germany was the only European country in which revenue did not grow on a local currency basis.
The Global Enterprise Solutions segment reported eight percent revenue growth and two percent EBIT growth for the quarter.
Pitney Bowes Management Services (PBMS) reported revenue of $265 million, an eight-percent increase over the prior year and margins consistent with the prior year. The company continues to focus on strategies for enhancing value to its customers and working more efficiently and cost-effectively. The Government Solutions operations continued to grow as the integration of DDD Company progressed.
Document Messaging Technologies reported revenue of $64 million for the quarter, an increase of four percent versus the prior year. Overall business trends are positive with a good backlog and ongoing success with the APSTM Series Advanced Productivity System platform. Margins declined slightly because of a lower level of customer financing during the quarter.
In the Capital Services segment revenue declined 26 percent and EBIT declined 24 percent as the result of the ongoing planned strategy to reduce exposure to non-core, long-term financing.
Based on existing economic and business conditions and the expected acquisition of Group 1 Software in the third quarter, the company anticipates second quarter revenue growth in the range of four percent to six percent and full year revenue growth in the range of five percent to seven percent. As previously announced, over the course of this year the company expects to incur additional restructuring charges. The company is still finalizing plans related to future restructuring actions, a portion of which will be recorded in the second quarter of 2004. Therefore, earnings guidance is provided excluding the impact of these future charges. The company expects diluted earnings per share to be in the range of $.60 to $.62 for the second quarter 2004 and reaffirms its full year guidance of diluted earnings per share in the range of $2.44 to $2.51, exclusive of restructuring charges, but inclusive of the expected impacts from the proposed acquisition of Group 1 Software.
In year-over-year comparisons, first quarter 2004 revenue included $331.4 million from sales of equipment and supplies, up 14 percent; $201.4 million from rentals, up three percent; $158.4 million from core financing, up four percent; $19.5 million from non-core financing down 36 percent; $300.7 million from business services, up 10 percent; and $160.5 million from support services, up eight percent. Net income for the period was $126.6 million, or $.54 per diluted share, up twelve percent compared to the first quarter of 2003. Excluding the after-tax impact of the $15 million restructuring charge, net income was $136.2 million or $.58 per diluted share in the first quarter of 2004.
Management of Pitney Bowes will discuss the company's financial results in a conference call today scheduled for 5 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 www.pitneybowes.com/InvestorRelations. Additional reconciliation of adjusted financial measures to financial measures calculated and presented in accordance with GAAP may also be found in the Investor Relations section of the company's web site.
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.
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 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, acquisitions and our future guidance, including our expected revenue in the second quarter and full year 2004, and our expected diluted earnings per share for the second 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 2003 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 months ended March
31, 2004 and 2003, and consolidated balance sheets at March 31, 2004,
December 31, 2003, and March 31, 2003, are attached.
Editorial - Sheryl Y. Battles
Vice President, Corp. Communications
203/351-6808
Pitney Bowes Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
2004 2003 (1)
Revenue from:
Sales $331,360 $290,850
Rentals 201,438 196,288
Business services 300,705 272,620
Support services 160,499 148,921
Core financing 158,389 151,669
Non-core financing 19,531 30,461
Total revenue 1,171,922 1,090,809
Costs and expenses:
Cost of sales 159,375 139,927
Cost of rentals 41,700 41,465
Cost of business services 245,892 222,793
Cost of support services 85,623 78,299
Selling, general and
administrative 361,728 341,753
Research and development 36,004 35,751
Restructuring charge 15,043 21,265
Interest, net 40,536 43,281
Total costs and expenses 985,901 924,534
Income before income taxes 186,021 166,275
Provision for income taxes 59,427 52,372
Net income $126,594 $113,903
Basic earnings per share $0.55 $0.48
Diluted earnings per share $0.54 $0.48
Average common and potential common
shares outstanding 234,746,785 236,522,184
(1) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
March 31, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003 (2) Change
First Quarter
Revenue
Global Mailstream Solutions $813,613 $744,795 9%
Global Enterprise Solutions 328,618 305,650 8%
Capital Services 29,691 40,364 (26%)
Total Revenue $1,171,922 $1,090,809 7%
EBIT (1)
Global Mailstream Solutions $249,877 $233,337 7%
Global Enterprise Solutions 14,960 14,673 2%
Capital Services 19,210 25,396 (24%)
Total EBIT 284,047 273,406 4%
Unallocated amounts:
Interest, net (40,536) (43,281)
Corporate expense (42,447) (42,585)
Restructuring charge (15,043) (21,265)
Income before income taxes $186,021 $166,275
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited) (Unaudited)
Assets 3/31/04 12/31/03 3/31/03
Current assets:
Cash and cash equivalents $298,711 $293,812 $375,653
Short-term investments,
at cost which approximates
market 2,180 28 8,411
Accounts receivable, less
allowances:
3/04 $41,165 12/03 $39,778
3/03 $37,191 478,905 459,106 428,340
Finance receivables, less
allowances:
3/04 $69,160 12/03 $62,269
3/03 $70,538 1,374,784 1,358,691 1,433,848
Inventories 215,036 209,527 230,009
Other current assets and
prepayments 204,487 192,011 179,347
Total current assets 2,574,103 2,513,175 2,655,608
Property, plant and equipment,
net 667,887 653,661 638,152
Rental equipment and related
inventories, net 480,520 414,341 421,841
Property leased under capital
leases, net 2,171 2,230 2,057
Long-term finance receivables,
less allowances:
3/04 $106,027 12/03 $78,915
3/03 $80,839 1,819,967 1,654,419 1,651,509
Investment in leveraged
leases 1,534,570 1,534,864 1,530,720
Goodwill 995,029 956,284 892,096
Intangible assets, net 206,145 203,606 173,458
Other assets 901,540 958,808 883,498
Total assets $9,181,932 $8,891,388 $8,848,939
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $1,390,119 $1,392,597 $1,280,359
Income taxes payable 191,296 154,799 155,301
Notes payable and current
portion of long-term
obligations 955,416 728,658 1,533,078
Advance billings 398,129 370,915 375,799
Total current
liabilities 2,934,960 2,646,969 3,344,537
Deferred taxes on income 1,686,223 1,659,226 1,522,996
Long-term debt 2,553,043 2,840,943 2,422,424
Other noncurrent liabilities 553,352 346,888 353,373
Total liabilities 7,727,578 7,494,026 7,643,330
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 1,292 1,315 1,417
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of
par value - - -
Retained earnings 4,103,860 4,057,654 3,889,447
Accumulated other
comprehensive income 94,732 18,063 (81,736)
Treasury stock, at cost (3,378,887) (3,313,027) (3,236,881)
Total stockholders' equity 1,144,354 1,087,362 895,609
Total liabilities and
stockholders' equity $9,181,932 $8,891,388 $8,848,939
Pitney Bowes Inc.
Reconciliation of GAAP Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share data)
Three months ended March 31,
2004 2003
GAAP income before income taxes, as reported $186,021 $166,275
Restructuring charge 15,043 21,265
Income before income taxes, as adjusted 201,064 187,540
Provision for income taxes, as adjusted 64,842 60,027
Income, as adjusted $136,222 $127,513
GAAP diluted earnings per share, as reported $0.54 $0.48
Restructuring charge 0.04 0.06
Diluted earnings per share, as adjusted $0.58 $0.54
GAAP net cash provided by operating
activities, as reported $274,978 $216,848
Net investment in fixed assets (74,469) (68,342)
Free cash flow 200,509 148,506
Payments related to restructuring charge 16,552 12,835
Free cash flow, as adjusted $217,061 $161,341
SOURCE Pitney Bowes Inc.
Editorial - Sheryl Y. Battles, Vice President, Corp. Communications, +1-203-351-6808, or Financial - Charles F. McBride, Vice President, Investor Relations, +1-203-351-6349
http://www.pitneybowes.com