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Pitney Bowes Results in Line With Guidance For Third Quarter 2003
STAMFORD, Conn., Oct 23, 2003 /PRNewswire-FirstCall via COMTEX/ -- Pitney Bowes Inc. (NYSE: PBI) today announced third quarter 2003 revenue and earnings performance in line with previous guidance.
Commenting on the quarter, Chairman and CEO Michael J. Critelli said, "We are pleased with the financial results that we achieved in the midst of lingering economic sluggishness worldwide. The strength of our business model is the ability to generate consistent earnings and cash from operations even in an unpredictable economy. During the quarter, we continued to implement our strategic imperatives to enhance our core businesses, streamline our infrastructure and execute our growth strategy. Key actions to enhance our future growth included our acquisition of the DDD Company earlier today, and continued investment in infrastructure improvements, organizational transformation and research and development."
Revenue for the quarter grew two percent to $1.14 billion and net income was $118.5 million or $.50 per diluted share. In January this year the company announced a restructuring program to implement its growth plan and estimated a total of $100 million in after-tax charges over the 2003-2004 period. There were $28 million in after-tax charges associated with the program during the quarter, bringing the total to approximately $62 million in after-tax charges year-to-date. Excluding the quarter's after-tax restructuring charge of $.12 per diluted share, third quarter diluted earnings per share were $.62.
Consistent with its previously announced strategy to exit large-ticket, non-core financing activity, the company's third quarter 2003 diluted earnings per share included $.04 per share from non-core Capital Services operations compared to $.06 per diluted share in the third quarter of 2002.
The company also generated $250 million in cash from operations during the quarter. Subtracting $76 million in capital expenditures and excluding $18 million in payments associated with the restructuring program, free cash flow was $192 million during the quarter. The company repurchased 1.3 million of its shares during the quarter for $50 million, leaving $160 million of authorization for future share repurchases in 2003 and 2004.
In the Global Mailing Segment, revenue increased three percent and operating profit increased four percent. In the U.S., organic revenue growth was flat during the quarter. The continued effects of a sluggish economy were offset by favorable market acceptance of the productivity-enhancing digital mailing systems and good placements of mail creation products. The PSI Group celebrated its first year anniversary as a Pitney Bowes company in August. The company experienced continued operating profit improvement with the integration of previously acquired processing sites into its growing national network.
Non-U.S. revenue grew at a double-digit rate as a result of favorable foreign currency exchange rates, but was flat on a local currency basis. Canada continued to have good revenue and operating profit growth driven by increased leasing of equipment, improved service revenue, and strong placements of high-end production mail systems. France experienced another quarter of excellent operating profit growth due to continued success in the integration of the Secap organization. In contrast, deteriorating economic conditions contributed to declining revenue in parts of Europe, such as Germany, and Asia.
The Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and Document Messaging Technologies (DMT). The segment reported one percent decline in revenue while operating profit grew one percent versus the prior year.
PBMS reported flat revenue growth of $248 million when compared to the prior year, while operating profit grew one percent. During the quarter, PBMS continued its actions to offset economic sensitivity by reducing general and administrative expenses and diversifying into other market segments such as federal and state governments. The acquisition of the DDD Company demonstrates PBMS' strategy to accelerate diversification into the potentially lucrative government sector as well as to expand cross-selling opportunities.
DMT reported revenue of $60 million for the quarter, a decrease of four percent from the prior year, but an increase of three percent from the prior quarter. Operating profit improved versus the prior year and versus the prior quarter. Even though orders for inserter equipment have been strong over the last several months, realization of these sales has been delayed due to the long lead times required to manufacture and deliver this customized equipment to customers.
Total Messaging Solutions, the combined results of the Global Mailing and Enterprise Solutions segments, showed a two percent increase in revenue and a four percent increase in operating profit.
In the Capital Services Segment, revenue for the quarter declined one percent while operating profit grew three percent. The segment benefited from the relatively good performance of core Capital Services assets, the sales of selected non-core Capital Services assets and continued low interest rates. Excluding the positive impact of lower interest expense, the earnings before interest and taxes (EBIT) for the segment declined by five percent compared to prior year. During the quarter, the company liquidated approximately $45 million of its 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 $58 million of assets from the portfolio during the quarter.
The company expects year-over-year revenue growth for the fourth quarter to be in the range of two to four percent. The company is still finalizing future plans related to previously announced restructuring initiatives, a portion of which will be recorded in the fourth quarter of 2003. Therefore, earnings guidance is provided excluding the impact of these charges and the impact of any new accounting standards. Diluted earnings per share are expected to be in the range of $.65 to $.67 for the fourth quarter 2003.
In year-over-year comparisons, third quarter 2003 revenue included $322.1 million from sales of equipment and supplies, down three percent from the prior year; $214.7 million from rentals, up three percent; $134.6 million from core financing, flat with the prior year; $30.6 million from non-core financing down four percent; $275.8 million from business services, up six percent; and $159.3 million from support services, up eight percent. Net income for the quarter was $118.5 million, or $.50 per diluted share, down 18 percent compared to the third quarter of 2002. Included in net income for the period was a $43 million pre-tax restructuring charge. Excluding the after-tax impact of this charge, net income was $146.0 million and diluted earnings per share were $.62 in the third quarter of 2003, an increase of one percent compared to the prior year.
For the nine-month period ended September 30, 2003, total revenue was $3.36 billion, up four percent compared to 2002. Included in total revenue was $940.8 million from sales of equipment and supplies, down three percent; $640.4 million from rentals, up four percent; $404.9 million from core financing, up two percent; $87.0 million from non-core financing down 16 percent; $827.7 million from business services, up 12 percent; and $461.0 million from support services, up eight percent. Net income for the period was $351.3 million or $1.49 per diluted share down 14 percent compared to 2002. Included in net income for the period was $96 million in pre-tax restructuring charges. Excluding the after-tax impact of these charges, net income was $413.0 million and diluted earnings per share were $1.75, an increase of one percent versus the prior year.
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 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 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 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.
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.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 fourth quarter and full year 2003, and our expected diluted earnings per share for the fourth 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:
Sheryl Y. Battles
Vice President, External Affairs
203/351-6808
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Revenue from:
Sales $322,123 $332,298 $940,777 $966,566
Rentals 214,720 208,182 640,424 615,839
Core financing 134,611 134,271 404,903 395,236
Non-core financing 30,557 31,930 86,962 102,926
Business services 275,809 260,183 827,729 735,802
Support services 159,329 147,207 461,041 428,535
Total revenue 1,137,149 1,114,071 3,361,836 3,244,904
Costs and expenses:
Cost of sales 143,792 146,651 431,268 439,018
Cost of rentals 42,595 43,294 127,995 129,547
Cost of core financing 34,943 37,510 106,940 110,152
Cost of non-core
financing 11,869 10,278 32,109 32,055
Cost of business
services 227,821 210,102 680,143 591,659
Cost of support services 82,701 77,163 241,863 221,992
Selling, general and
administrative 302,420 300,173 899,693 873,942
Research and development 35,004 33,925 109,763 104,089
Restructuring charge 43,109 -- 96,465 --
Interest, net 41,101 41,190 124,560 131,815
Total costs
and expenses 965,355 900,286 2,850,799 2,634,269
Income before income
taxes 171,794 213,785 511,037 610,635
Provision for income
taxes 53,340 66,899 159,784 191,129
Net income $118,454 $146,886 $351,253 $419,506
Basic earnings per
share
Net income $0.51 $0.62 $1.50 $1.75
Restructuring
charge 0.12 -- 0.26 --
Net income excluding
restructuring
charge $0.63 $0.62 $1.76 $1.75
Diluted earnings per
share
Net income $0.50 $0.61 $1.49 $1.73
Restructuring
charge 0.12 -- 0.26 --
Net income excluding
restructuring
charge $0.62 $0.61 $1.75 $1.73
Average common and
potential common
shares outstanding 236,084,234 240,323,222 236,312,471 242,545,228
Note: 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 9/30/03 6/30/03 9/30/02
Current assets:
Cash and cash equivalents $285,254 $358,167 $268,487
Short-term investments, at
cost which approximates
market 5,677 7,464 12,631
Accounts receivable,
less allowances:
9/03 $36,791 6/03 $37,560 9/02 $34,064 420,100 417,157 423,160
Finance receivables,
less allowances:
9/03 $60,897 6/03 $65,939 9/02 $68,228 1,357,041 1,388,248 1,675,731
Inventories 228,513 231,425 206,498
Other current assets and prepayments 194,043 192,679 172,568
Total current assets 2,490,628 2,595,140 2,759,075
Property, plant and equipment, net 631,320 647,682 595,875
Rental equipment and related inventories,
net 419,008 426,996 428,934
Property leased under capital leases, net 2,191 2,245 1,719
Long-term finance receivables, less
allowances:
9/03 $80,202 6/03 $77,131 9/02 $66,395 1,608,752 1,637,674 1,799,052
Investment in leveraged leases 1,499,123 1,542,640 1,438,484
Goodwill 899,023 911,347 809,690
Other assets 1,101,664 1,108,596 923,622
Total assets $8,651,709 $8,872,320 $8,756,451
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $1,338,237 $1,319,719 $1,313,603
Income taxes payable 195,428 170,863 231,115
Notes payable and current portion of
long-term obligations 565,124 582,203 1,568,571
Advance billings 369,504 373,697 336,598
Total current liabilities 2,468,293 2,446,482 3,449,887
Deferred taxes on income 1,569,744 1,556,269 1,340,809
Long-term debt 3,004,287 3,240,110 2,379,565
Other noncurrent liabilities
342,081 349,487 358,340
Total liabilities 7,384,405 7,592,348 7,528,601
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 1,344 1,368 1,475
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value -- -- --
Retained earnings 3,977,074 3,930,970 3,864,245
Accumulated other comprehensive income (57,737) (40,474) (119,403)
Treasury stock, at cost (3,286,734)(3,245,249)(3,151,829)
Total stockholders' equity 957,304 969,972 917,850
Total liabilities and stockholders'
equity $8,651,709 $8,872,320 $8,756,451
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
Third Quarter
Revenue
Global Mailing $788,135 $762,630 3%
Enterprise Solutions 307,803 309,797 (1%)
Total Messaging Solutions 1,095,938 1,072,427 2%
Non-core 30,557 31,930 (4%)
Core 10,654 9,714 10%
Capital Services 41,211 41,644 (1%)
Total Revenue $1,137,149 $1,114,071 2%
Operating Profit (1)
Global Mailing $236,268 $226,121 4%
Enterprise Solutions 19,056 18,914 1%
Total Messaging Solutions 255,324 245,035 4%
Non-core 13,365 13,820 (3%)
Core 5,443 4,409 23%
Capital Services 18,808 18,229 3%
Total Operating Profit 274,132 263,264 4%
Unallocated amounts:
Net interest (corporate
interest expense, net of
intercompany transactions) (27,248) (20,227)
Corporate expense (31,981) (29,252)
Restructuring charge (43,109) --
Income before income taxes $171,794 $213,785
(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
September 30, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
Year to Date
Revenue
Global Mailing $2,321,961 $2,211,924 5%
Enterprise Solutions 921,653 900,318 2%
Total Messaging Solutions 3,243,614 3,112,242 4%
Non-core 86,962 102,926 (16%)
Core 31,260 29,736 5%
Capital Services 118,222 132,662 (11%)
Total Revenue $3,361,836 $3,244,904 4%
Operating Profit (1)
Global Mailing $692,939 $652,789 6%
Enterprise Solutions 46,729 58,849 (21%)
Total Messaging Solutions 739,668 711,638 4%
Non-core 37,721 45,323 (17%)
Core 15,941 12,472 28%
Capital Services 53,662 57,795 (7%)
Total Operating Profit 793,330 769,433 3%
Unallocated amounts:
Net interest (corporate
interest expense,
net of intercompany
transactions) (79,803) (63,386)
Corporate expense (106,025) (95,412)
Restructuring charge (96,465) --
Income before income taxes $511,037 $610,635
(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 Nine months
ended ended
September 30, September 30,
2003 2003
GAAP income before income taxes, as
reported $171,794 $511,037
Restructuring charge 43,109 96,465
Income before income taxes, as
adjusted 214,903 607,502
Provision for income taxes, as
adjusted 68,859 194,511
Net income, as adjusted $146,044 $412,991
GAAP diluted earnings per share, as
reported $0.50 $1.49
Restructuring charge 0.12 0.26
Diluted earnings per share, as
adjusted $0.62 $1.75
GAAP net cash provided by operating
activities, as reported $250,007 $675,843
Net investment in fixed assets (75,783) (214,138)
Free cash flow 174,224 461,705
Payments related to
restructuring charge 18,032 41,754
Free cash flow excluding
restructuring payments $192,256 $503,459
Three months Nine months
ended ended
September 30, September 30,
2003 2002
GAAP Capital Services operating
profit, as reported $18,808 $18,229
Capital Services interest
expense 7,362 9,395
Earnings before interest and taxes
(EBIT) $26,170 $27,624
Note: The sum of the earnings per share amounts may not equal the totals
above due to rounding.
SOURCE Pitney Bowes Inc.
Sheryl Y. Battles, Vice President, External Affairs, +1-203-351-6808, or Charles F. McBride, Exec. Director, Investor Relations, +1-203-351-6349, both of Pitney Bowes Inc.
http://www.pitneybowes.com