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Pitney Bowes Results on Target for Second Quarter 2004
* Revenue Growth of 6%
* GAAP Earnings per Share Growth of 14%
-- Adjusted Earnings per Share Growth of 5%
* Cash from Operations of $239 Million
* Acquisition of Group 1 Completed in July
STAMFORD, Conn., July 26 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE: PBI) today announced second quarter 2004 revenue and earnings performance in line with previous guidance. Commenting on the quarter, Chairman and CEO Michael J. Critelli said, "We are pleased that our financial performance was on target during the quarter. The quarter's results included good market acceptance of new products by small and mid-size, international, and document messaging technologies customers and ongoing integration of acquisitions such as DDD Company and International Mail Express. This is consistent with our plan to grow by enhancing the core businesses and expanding our market presence through strategic acquisitions. The acquisition of Group 1 Software, which was completed last week, is the latest example of our strategy to grow our share of the $250 billion global mail and document management markets. This acquisition will help us expand our global reach; grow our mailstream participation; and lay the foundation for profitable expansion into the customer communication market."
Revenue for the quarter grew six percent to $1.21 billion and net income was $134.7 million or $.58 per diluted share, representing a 14 percent increase compared to the previous year. Diluted earnings per share, excluding a charge for the company's restructuring program, were $.62. During the quarter, the company took several actions as part of its previously announced restructuring program and recorded an after-tax charge of $10 million or $.04 per diluted share. Excluding this charge, net income was $145.1 million. Consistent with the company's strategy to transition out of external financing activity, non-core Capital Services contributed $.03 per diluted share this quarter compared to $.04 per diluted share in the second quarter of 2003.
The company generated $239 million in cash from operations during the quarter. Subtracting $72 million in capital expenditures and excluding $14 million in payments associated with restructuring initiatives, free cash flow was $180 million. In addition, the company generated approximately $31 million in cash from the sale of non-core Capital Services assets. During the quarter the company repurchased approximately 892,000 of its shares for $39 million, leaving $265 million of authorization for future share repurchases.
In the Global Mailstream Solutions Segment revenue increased five percent and earnings before interest and taxes (EBIT) increased four percent during the quarter. Revenue was characterized by continued strong growth in small business solutions and double-digit growth in supplies and presort mail services. The company has recently introduced a program to offer presort services to a broader range of its customers. The quarter's 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. operations again experienced good organic revenue growth and also benefited from favorable foreign currency exchange rates, although to a lesser extent than in the first quarter of the year. Overall, the introduction of new digital mailing systems continues to be well received by customers worldwide. All of the major markets in Asia and Europe had positive revenue growth in the quarter, including Germany, which has experienced improving business trends.
In the Global Enterprise Solutions Segment revenue grew seven percent and EBIT increased 15 percent during the quarter.
Pitney Bowes Management Services (PBMS) reported revenue of $264 million, a five- percent increase compared to the prior year, with improved margins on a sequential basis. PBMS continued its process of identifying and delivering focused document management solutions to customers on a cost-effective basis. There appeared to be improving demand during the quarter for document management services in several key vertical markets, including the government, legal and financial markets.
Document Messaging Technologies (DMT) reported revenue growth of 15 percent to $70 million for the quarter, with improved margins over the prior year. DMT benefited from the large backlog of orders generated in previous quarters, in addition to the ongoing customer demand for the company's industry leading inserting systems, such as APS(TM) and Flowmaster(TM) inserters. There was also strong growth during the quarter in software solutions offerings.
In the Capital Services Segment, revenue increased 35 percent and EBIT increased one percent. Revenue and EBIT for the quarter were favorably affected by the sale of non-core assets. Excluding these asset sales, Capital Services revenue would have declined six percent and EBIT would have declined eight percent compared to prior year.
Including the recently completed acquisition of Group 1, the company expects year-over-year revenue growth for the third quarter 2004 to be in the range of seven to nine percent and for the full year 2004 to be in the range of six to seven percent. As previously announced, over the remainder 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 third and fourth quarters. Therefore, earnings guidance is provided excluding the impact of these future charges, which have not yet been determined. The company expects diluted earnings per share to be in the range of $.62 to $.64 for the third quarter 2004 and reaffirms its full-year diluted earnings per share range of $2.44 to $2.51.
In year-over-year comparisons, second quarter 2004 revenue included $338.4 million from sales of equipment and supplies, up three percent versus the prior year; $200.6 million from rentals, up four percent; $158.6 million from core financing, up four percent; $40.7 million from non-core financing, up 48 percent; $307.6 million from business services, up ten percent; and $159.9 million from support services, up five percent.
For the six-month period ended June 30, 2004, revenue was $2.38 billion, up seven percent compared to 2003. Included in revenue was $669.8 million from sales of equipment and supplies, up eight percent; $402.1 million from rentals, up three percent; $317.0 million from core financing, up four percent; $60.2 million from non-core financing, up four percent; $608.3 million from business services, up ten percent; and $320.4 million from support services, up six percent. Net income for the period was $261.3 million or $1.11 per diluted share up 13 percent compared to 2003. Included in net income for the period was $31.3 million in pre-tax restructuring charges. Excluding the after tax impact of these charges, net income was $281.3 million and diluted earnings per share were $1.20, an increase of six 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.
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 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 third quarter and full year 2004, and our expected diluted earnings per share for the third 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 six months ended June 30, 2004 and 2003, and consolidated balance sheets at June 30, 2004, March 31, 2004, and June 30, 2003, are attached.
CONTACTS:
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 June 30, Six Months Ended June 30,
2004 2003 (1) 2004 2003 (1)
Revenue from:
Sales $338,442 $327,804 $669,802 $618,654
Rentals 200,635 193,693 402,073 389,981
Business services 307,576 279,300 608,281 551,920
Support services 159,946 152,791 320,445 301,712
Core financing 158,627 152,888 317,016 304,557
Non-core financing 40,675 27,402 60,206 57,863
Total revenue 1,205,901 1,133,878 2,377,823 2,224,687
Costs and expenses:
Cost of sales 151,918 147,549 311,293 287,476
Cost of rentals 43,077 43,643 84,777 85,108
Cost of business
services 252,690 229,529 498,582 452,322
Cost of support
services 85,114 80,863 170,737 159,162
Cost of non-core
financing 13,017 - 13,017 -
Selling, general and
administrative 365,322 348,049 727,050 689,802
Research and
development 38,930 39,008 74,934 74,759
Restructuring charge 16,229 32,091 31,272 53,356
Interest, net 41,656 40,178 82,192 83,459
Total costs
and expenses 1,007,953 960,910 1,993,854 1,885,444
Income before income
taxes 197,948 172,968 383,969 339,243
Provision for income
taxes 63,230 54,072 122,657 106,444
Net income $134,718 $118,896 $261,312 $232,799
Basic earnings per
share $0.58 $0.51 $1.13 $0.99
Diluted earnings per
share $0.58 $0.50 $1.11 $0.98
Average common and
potential common
shares outstanding 234,122,702 236,136,087 234,521,468 236,421,147
(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 6/30/04 3/31/04 6/30/03
Current assets:
Cash and cash equivalents $328,282 $298,711 $358,167
Short-term investments, at cost
which approximates market 1,951 2,180 7,464
Accounts receivable, less
allowances:
06/04 $38,096 03/04 $41,165
06/03 $37,560 480,314 478,905 417,157
Finance receivables, less
allowances:
06/04 $69,449 03/04 $69,160
06/03 $65,939 1,339,262 1,374,784 1,388,248
Inventories 207,950 215,036 231,425
Other current assets and
prepayments 198,011 204,487 192,679
Total current assets 2,555,770 2,574,103 2,595,140
Property, plant and equipment, net 662,011 667,887 647,682
Rental equipment and related
inventories, net 453,855 480,520 426,996
Property leased under capital leases,
net 2,176 2,171 2,245
Long-term finance receivables, less
allowances:
06/04 $111,111 03/04 $106,027
06/03 $77,131 1,799,073 1,819,967 1,637,674
Investment in leveraged leases 1,541,186 1,534,570 1,542,640
Goodwill 1,003,002 995,029 911,347
Intangible assets, net 208,611 206,145 192,119
Other assets 856,682 901,540 916,477
Total assets $9,082,366 $9,181,932 $8,872,320
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $1,312,469 $1,350,379 $1,319,719
Income taxes payable 187,838 191,296 170,863
Notes payable and current portion
of long-term obligations 1,151,359 995,156 582,203
Advance billings 383,856 398,129 373,697
Total current liabilities 3,035,522 2,934,960 2,446,482
Deferred taxes on income 1,715,412 1,686,223 1,556,269
Long-term debt 2,463,928 2,691,094 3,240,110
Other noncurrent liabilities 421,769 415,301 349,487
Total liabilities 7,636,631 7,727,578 7,592,348
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 1,268 1,292 1,368
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value - - -
Retained earnings 4,161,616 4,103,860 3,930,970
Accumulated other comprehensive
income 38,588 94,732 (40,474)
Treasury stock, at cost (3,389,094) (3,378,887) (3,245,249)
Total stockholders' equity 1,135,735 1,144,354 969,972
Total liabilities and stockholders'
equity $9,082,366 $9,181,932 $8,872,320
Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
June 30, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003 (2) Change
Second Quarter
Revenue
Global Mailstream Solutions $820,409 $782,748 5%
Global Enterprise Solutions 334,183 313,025 7%
Capital Services 51,309 38,105 35%
Total Revenue $1,205,901 $1,133,878 6%
EBIT (1)
Global Mailstream Solutions $256,358 $246,316 4%
Global Enterprise Solutions 21,262 18,556 15%
Capital Services 25,232 25,011 1%
Total EBIT 302,852 289,883 4%
Unallocated amounts:
Interest, net (41,656) (40,178)
Corporate expense (47,019) (44,646)
Restructuring charge (16,229) (32,091)
Income before income taxes $197,948 $172,968
(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
June 30, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003 (2) Change
Year to Date
Revenue
Global Mailstream Solutions $1,634,022 $1,527,543 7%
Global Enterprise Solutions 662,801 618,675 7%
Capital Services 81,000 78,469 3%
Total Revenue $2,377,823 $2,224,687 7%
EBIT (1)
Global Mailstream Solutions $506,235 $479,653 6%
Global Enterprise Solutions 36,222 33,229 9%
Capital Services 44,442 50,407 (12%)
Total EBIT 586,899 563,289 4%
Unallocated amounts:
Interest, net (82,192) (83,459)
Corporate expense (89,466) (87,231)
Restructuring charge (31,272) (53,356)
Income before income taxes $383,969 $339,243
(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 Six months ended
June 30, June 30,
2004 2003 2004 2003
GAAP income before income taxes,
as reported $197,948 $172,968 $383,969 $339,243
Restructuring charge 16,229 32,091 31,272 53,356
Income before income taxes, as
adjusted 214,177 205,059 415,241 392,599
Provision for income taxes, as
adjusted 69,072 65,625 133,914 125,652
Income, as adjusted $145,105 $139,434 $281,327 $266,947
GAAP diluted earnings per share,
as reported $0.58 $0.50 $1.11 $0.98
Restructuring charge 0.04 0.09 0.09 0.14
Diluted earnings per share, as
adjusted $0.62 $0.59 $1.20 $1.13
GAAP net cash provided by
operating activities,
as reported $238,984 $208,988 $513,962 $425,836
Capital expenditures (72,378) (70,013) (146,847) (138,355)
Free cash flow 166,606 138,975 367,115 287,481
Payments related to
restructuring charge 13,612 10,887 30,164 23,722
Free cash flow, as adjusted $180,218 $149,862 $397,279 $311,203
Note: The sum of the earnings per share amounts may not equal the totals
above due to rounding.
SOURCE Pitney Bowes Inc.
-0- 07/26/2004
/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
JL
-- NYM117 --
2240 07/26/2004 16:01 EDT http://www.prnewswire.com