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Pitney Bowes Results in Line with Guidance for Third Quarter 2004
* Revenue Growth of 7%
* GAAP Earnings Per Share Growth of 16%
* Cash from Operations of $214 Million
* Acquisition of Ancora Capital Announced in October
STAMFORD, Conn., Oct. 25 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE: PBI) today announced third quarter 2004 revenue and earnings performance in line with previous guidance.
Commenting on the company's performance, Chairman and CEO Michael J. Critelli said, "During the quarter we continued to leverage near-term opportunities, while executing our longer-term strategies for sustained growth. We also continued our evolution toward a one-company approach to our customers by appointing a president and chief operating officer. "We lead the industry in providing advanced technologies for mailers of all sizes, having rebuilt virtually all of our product lines in the last five years in mail finishing, mail creation, production mail, and distribution solutions. As our new products sustained positive market acceptance worldwide, we continued to see good results in mail services, small business solutions, supplies, payment solutions, software, and international operations. At the same time, we laid the foundation for future growth with the ongoing integration of Group1's customer communication and address management software suite with our existing software and service capabilities, and the continued expansion of our national presort network with the announced acquisition of Ancora. By enhancing our core businesses and adding strategic acquisitions, we are on track to deliver greater shareholder and customer value now and in the future."
Revenue for the quarter grew seven percent to $1.22 billion and net income was $136.5 million or $.58 per diluted share, representing a 16 percent increase compared to the previous year. During the quarter, the company recorded an after-tax charge of $10 million as part of its previously announced restructuring program. Excluding this restructuring charge, net income was $146.5 million and diluted earnings per share were $.63. Non-core Capital Services financing contributed $.02 per diluted share this quarter compared to $.04 per diluted share in the third quarter of 2003.
The company generated $214 million in cash from operations during the quarter. Subtracting $79 million in capital expenditures and excluding $15 million in payments associated with restructuring initiatives, free cash flow was $149 million. During the quarter the company repurchased approximately 936,000 of its shares for $40 million, leaving $225 million of authorization for future share repurchases.
In the Global Mailstream Solutions Segment revenue and earnings before interest and taxes (EBIT) increased five percent during the quarter. Similar to previous quarters, revenue trends also reflect the ongoing changing mix of the product line, where a greater percentage of the revenue is coming from more fully featured smaller systems, supplies, payment solutions, software and services and less from larger systems sales.
Non-U.S. revenue again grew at a double-digit rate as a result of both organic growth throughout most of Europe and favorable foreign currency exchange rates. In particular, revenue in the UK increased at a double-digit rate on a local currency basis because of the positive customer reception to new digital mailing systems and strong placements of the company's industry leading Advanced Productivity System(TM) (APS) production mail equipment.
In the Global Enterprise Solutions Segment revenue grew 16 percent and EBIT increased one percent.
Pitney Bowes Management Services (PBMS) reported revenue of $264 million for the quarter, an increase of six percent compared with the prior year. Organic revenue was flat compared with the prior year as we continued to position the business to provide higher value services. EBIT and operating margin were comparable with the prior quarter and last year.
Document Messaging Technologies (DMT) reported revenue growth of 54 percent to $96 million for the quarter and EBIT grew two percent. Excluding the impact of the recently acquired Group1 Software, DMT revenue increased 11 percent, driven by continued solid placements and orders for its inserting equipment. As expected, the integration costs of the Group1 acquisition had a negative impact on reported margins during the quarter. The integration of Group1 has gone exceptionally well and customers are very receptive to Group1's document composition and mail management software, which can help them to target, communicate with and respond to their customers on a more meaningful and cost effective basis.
In the Capital Services Segment, revenue declined 29 percent and EBIT declined 21 percent, consistent with our cessation of long-term lease origination in this business. During the quarter, we generated $16 million in asset sales, including the sale of two leased commercial aircraft for approximately $8 million. These sales had no material effect on the company's revenue or earnings during the quarter.
The company expects year-over-year revenue growth for the fourth quarter to be in the range of five to seven 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 2004. Therefore, earnings guidance is provided excluding the impact of these charges. Diluted earnings per share are expected to be in the range of $.66 to $.68 for the fourth quarter 2004.
In year-over-year comparisons, third quarter 2004 revenue included $346.4 million from sales of equipment and supplies, up eight percent from the prior year; $199.8 million from rentals, up two percent; $158.2 million from core financing, up four percent; $19.2 million from non-core financing down 39 percent; $316.5 million from business services, up 15 percent; and $177.5 million from support services, up 11 percent. Net income for the quarter was $136.5 million, or $0.58 per diluted share, up 16 percent compared to the third quarter of 2003. Included in net income for the period was a $16 million pre-tax restructuring charge. Excluding the after-tax impact of this charge, net income was $146.5 million and diluted earnings per share were $.63 in the third quarter of 2004, an increase of one percent compared to the prior year.
For the nine-month period ended September 30, 2004, total revenue was $3.60 billion, up seven percent compared to the same period in 2003. Included in total revenue was $1,016.2 million from sales of equipment and supplies, up eight percent; $601.8 million from rentals, up three percent; $475.2 million from core financing, up four percent; $79.4 million from non-core financing down 11 percent; $924.7 million from business services, up 12 percent; and $497.9 million from support services, up eight percent. Net income for the period was $397.8 million or $1.70 per diluted share up 14 percent compared to 2003. Included in net income for the period was $47 million in pre-tax restructuring charges. Excluding the after-tax impact of these charges, net income was $427.8 million and diluted earnings per share were $1.83, an increase of four 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 http://www.pb.com/investorrelations.
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 http://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 reconciliations of adjusted financial measures to financial measures calculated and presented in accordance with GAAP may be found at the Company's web site in the Investor Relations section at http://www.pb.com/investorrelations .
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 2004, and our expected diluted earnings per share for the fourth 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 and nine months ended September 30, 2004 and 2003, and consolidated balance sheets at September 30, 2004, June 30, 2004, and September 30, 2003, 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 Nine Months Ended
September 30, September 30,
2004 2003 (1) 2004 2003 (1)
Revenue from:
Sales $346,397 $322,123 $1,016,199 $940,777
Rentals 199,768 196,442 601,841 586,423
Business services 316,462 275,809 924,743 827,729
Support services 177,480 159,329 497,925 461,041
Core financing 158,181 152,134 475,197 456,691
Non-core financing 19,234 31,312 79,440 89,175
Total revenue 1,217,522 1,137,149 3,595,345 3,361,836
Costs and expenses:
Cost of sales 152,255 143,792 463,548 431,268
Cost of rentals 39,193 42,459 123,970 127,567
Cost of business
services 262,843 227,821 761,425 680,143
Cost of support
services 89,923 82,701 260,660 241,863
Cost of non-core
financing -- -- 13,017 --
Selling, general and
administrative 372,424 349,368 1,099,474 1,039,170
Research and
development 42,629 35,004 117,563 109,763
Restructuring charge 15,582 43,109 46,854 96,465
Interest, net 42,035 41,101 124,227 124,560
Total costs
and expenses 1,016,884 965,355 3,010,738 2,850,799
Income before
income taxes 200,638 171,794 584,607 511,037
Provision for
income taxes 64,122 53,340 186,779 159,784
Net income $136,516 $118,454 $397,828 $351,253
Basic earnings
per share $0.59 $0.51 $1.72 $1.50
Diluted earnings
per share $0.58 $0.50 $1.70 $1.49
Average common and
potential common
shares outstanding 233,796,993 236,084,234 234,289,313 236,312,471
(1) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
Assets 9/30/04 6/30/04 9/30/03
Current assets:
Cash and cash equivalents $346,522 $328,282 $285,254
Short-term investments, at
cost which approximates market 3,758 1,951 5,677
Accounts receivable,
less allowances: 9/04 $37,632
6/04 $38,096 9/03 $36,791 495,414 480,314 420,100
Finance receivables,
less allowances: 9/04 $69,382
6/04 $69,449 9/03 $60,897 1,355,727 1,339,262 1,357,041
Inventories 214,396 207,950 228,513
Other current assets
and prepayments 199,912 198,011 194,043
Total current assets 2,615,729 2,555,770 2,490,628
Property, plant and equipment, net 680,048 662,011 631,320
Rental equipment and
related inventories, net 458,604 453,855 419,008
Property leased under
capital leases, net 2,243 2,176 2,191
Long-term finance receivables,
less allowances: 9/04 $105,089
6/04 $111,111 9/03 $80,202 1,794,556 1,799,073 1,608,752
Investment in leveraged leases 1,554,844 1,541,186 1,499,123
Goodwill 1,298,944 1,003,002 899,023
Intangible assets, net 289,776 208,611 184,919
Other assets 850,267 856,682 916,745
Total assets $9,545,011 $9,082,366 $8,651,709
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable and
accrued liabilities $1,320,799 $1,312,469 $1,338,237
Income taxes payable 205,363 187,838 195,428
Notes payable and current
portion of long-term
obligations 1,097,551 1,151,359 565,124
Advance billings 404,012 383,856 369,504
Total current liabilities 3,027,725 3,035,522 2,468,293
Deferred taxes on income 1,760,054 1,715,412 1,569,744
Long-term debt 2,823,286 2,463,928 3,004,287
Other noncurrent liabilities 405,784 421,769 342,081
Total liabilities 8,016,849 7,636,631 7,384,405
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 19
Cumulative preference stock,
no par value, $2.12 convertible 1,255 1,268 1,344
Common stock, $1 par value 323,338 323,338 323,338
Retained earnings 4,223,052 4,161,616 3,977,074
Accumulated other
comprehensive income 72,674 38,588 ` (57,737)
Treasury stock, at cost (3,402,176) (3,389,094) (3,286,734)
Total stockholders' equity 1,218,162 1,135,735 957,304
Total liabilities and
stockholders' equity $9,545,011 $9,082,366 $8,651,709
Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
September 30, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003 (2) Change
Third Quarter
Revenue
Global Mailstream Solutions $827,708 $784,888 5%
Global Enterprise Solutions 359,998 310,295 16%
Capital Services 29,816 41,966 (29%)
Total Revenue $1,217,522 $1,137,149 7%
EBIT (1)
Global Mailstream Solutions $259,396 $247,218 5%
Global Enterprise Solutions 20,084 19,903 1%
Capital Services 20,457 25,864 (21%)
Total EBIT 299,937 292,985 2%
Unallocated amounts:
Interest, net (42,035) (41,101)
Corporate expense (41,682) (36,981)
Restructuring charge (15,582) (43,109)
Income before income taxes $200,638 $171,794
(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.
Revenue and EBIT
By Business Segment
September 30, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003 (2) Change
Year to Date
Revenue
Global Mailstream Solutions $2,461,730 $2,312,431 6%
Global Enterprise Solutions 1,022,799 928,970 10%
Capital Services 110,816 120,435 (8%)
Total Revenue $3,595,345 $3,361,836 7%
EBIT (1)
Global Mailstream Solutions $765,631 $726,871 5%
Global Enterprise Solutions 56,306 53,132 6%
Capital Services 64,899 76,271 (15%)
Total EBIT 886,836 856,274 4%
Unallocated amounts:
Interest, net (124,227) (124,560)
Corporate expense (131,148) (124,212)
Restructuring charge (46,854) (96,465)
Income before income taxes $584,607 $511,037
(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.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
GAAP income before income taxes,
as reported $200,638 $171,794 $584,607 $511,037
Restructuring charge 15,582 43,109 46,854 96,465
Income before income taxes,
as adjusted 216,220 214,903 631,461 607,502
Provision for income taxes,
as adjusted 69,728 68,859 203,642 194,511
Income, as adjusted $146,492 $146,044 $427,819 $412,991
GAAP diluted earnings per share,
as reported $0.58 $0.50 $1.70 $1.49
Restructuring charge 0.04 0.12 0.13 0.26
Diluted earnings per share,
as adjusted $0.63 $0.62 $1.83 $1.75
GAAP net cash provided by
operating activities,
as reported $213,856 $250,007 $727,818 $675,843
Capital expenditures (79,378) (75,783) (226,225) (214,138)
Free cash flow 134,478 174,224 501,593 461,705
Payments related to
restructuring charge 14,684 18,032 44,848 41,754
Free cash flow, as adjusted $149,162 $192,256 $546,441 $503,459
Note: The sum of the earnings per share amounts may not equal the totals
above due to rounding.
SOURCE Pitney Bowes Inc.
-0- 10/25/2004
/CONTACT: Editorial, Sheryl Y. Battles, Vice President, External Affairs,
+1-203-351-6808, or Financial, Charles F. McBride, Vice President, Investor
Relations, +1-203-351-6349, both of Pitney Bowes Inc. /
/Web site: http://www.pitneybowes.com
http://www.pb.com/investorrelations /
(PBI)
CO: Pitney Bowes Inc.
ST: Connecticut
IN: OFP
SU: ERN CCA
AL
-- NYM223 --
3656 10/25/2004 16:01 EDT http://www>prnewswire.com