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Pitney Bowes Third Quarter 2002 Earnings In Line With Guidance
- Diluted Earnings Per Share of 61 Cents - 2.5 Million Shares Repurchased During The Quarter - Free Cash Flow of $127 Million
Pitney Bowes Inc. (NYSE: PBI) today announced third quarter results that include an eight percent increase in diluted earnings per share from continuing operations to 61 cents, which compares with 57 cents from continuing operations for the third quarter of 2001, excluding special items.Revenue grew seven percent to $1.11 billion and income from continuing operations was $146.9 million, which compares with income from continuing operations of $140.2 million in last year's third quarter excluding special items, and $122.1 million including special items.
Commenting on the quarter, Pitney Bowes Chairman and CEO Michael J. Critelli said, "We are pleased with our improved performance this quarter. We achieved positive organic revenue growth in all major business lines: Global Mailing, Management Services and Document Messaging Technologies. In addition, we completed our acquisition of PSI, which will enable us to better serve our customers by helping to reduce cost and speed the delivery of mail. This transaction is an important component of our expansion into the mail stream, and underscores the value of Pitney Bowes products, software and integrated business solutions in helping companies reduce the cost and enhance the efficiency of their communications flow.
"The success of our new product launches is a testament to the strength of the Pitney Bowes brand. Our revolutionary DM series of digital mailing systems featuring Intellilink technology has experienced customer satisfaction unparalleled in our history of new product launches. We will continue to leverage our brand strength to help engineer the flow of communications between posts and carriers and our mutual customers, and the flow of high value communications between large enterprises and their customers," Mr. Critelli continued.
The Global Mailing Segment includes worldwide revenue and related expenses from the sale, rental and financing of mail finishing, mail creation and shipping equipment, related supplies and services, presort mail services, postal payment solutions, small business solutions and software. With the launch of DeliverAbility(TM), the company is adding mail and package tracking and tracing capability at the desktop. In the third quarter, Global Mailing revenue and operating profit both increased ten percent when compared with the prior year. Excluding the revenue from the acquisitions of Secap SA and PSI Group Inc. and the impact of favorable foreign currency, Global Mailing revenue increased four percent. Global Mailing in the U.S. benefited from the placement of new digital mailing systems and improved demand for its mail creation and distribution solutions products.
Outside of the U.S., Global Mailing experienced double-digit revenue growth, supported by improved business trends in the UK and Canada, and revenue from the acquisition of Secap SA. Excluding the revenue from Secap SA and the favorable impact of foreign currency, Global Mailing's international revenue grew about two percent. This revenue growth was achieved despite lower revenue in Germany, where demand for mailing equipment has slowed in a post meter migration environment.
The Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and Document Messaging Technologies (DMT). Revenue from PBMS includes facilities management contracts for advanced mailing, reprographic, document management and other value-added services to large enterprises. Revenue from DMT includes sales, service and financing of high speed, software-enabled production mail systems, sorting equipment, incoming mail systems, electronic statement, billing and payment solutions, and mailing software. The Enterprise Solutions segment reported revenue growth of five percent and operating profit growth of three percent when compared with the prior year.
PBMS reported revenue growth of six percent to $247.4 million when compared with the prior year while operating profit declined 20 percent. PBMS continues to generate strong growth in new written business, but this growth is being partially offset by the continued contraction of large enterprise accounts, especially in the financial services and legal sectors. Operating profit was adversely impacted by the costs associated with acquiring new accounts that have not yet generated a full quarter of revenue as well as investments in product technology and infrastructure, especially in Europe.
DMT reported revenue of $62.4 million for the quarter, an increase of three percent from the prior year, with a greater improvement in operating profit. Worldwide demand for high-speed, software-enabled production mail equipment and mail processing software has remained slow, but appears to be stabilizing. Cost reduction programs initiated earlier in the year resulted in an increase in operating profit over the prior year.
Total Messaging Solutions, the combined results of the Global Mailing and Enterprise Solutions segments, reported an eight percent increase in revenue and a nine percent increase in operating profit.
The Capital Services Segment includes primarily asset- and fee-based income generated by financing or arranging transactions of critical large-ticket customer assets. Revenue for the quarter decreased 24 percent and operating profit decreased 17 percent when compared with the third quarter 2001, which included incremental revenue from asset sales and related fee income. Its operating margins improved due to the decline in interest rate levels.
During the quarter, the company repurchased 2.5 million of its shares outstanding, at a net cost of $89 million. Free cash flow, excluding payments related to special items, was $127 million for the third quarter of 2002. Including payments for special items, free cash flow was $117 million.
The company expects revenue growth for the full year 2002 to be in the range of six to seven percent. Diluted earnings per share from continuing operations are expected to be in the range of 64 to 65 cents for the fourth quarter 2002, and in the range of $2.37 to $2.38 for the full year 2002. The company is continuing its discussions with U.S. Air and has recently begun discussions with United Airlines concerning its leased planes and believes its range of potential exposure for both U.S. Air and United Airlines is still consistent with that disclosed in its last Form 10-Q filing.
Mr. Critelli noted, "As we look to solidify our outlook for 2003, we are evaluating the potential impact of a number of factors. First, we are finalizing plans associated with our growth strategy, which will be presented to our Board of Directors in November. Second, we are reviewing possible actions to reduce our overall exposure in Capital Services to focus exclusively on transactions related to our postal and document-related financing business. Third, we have preliminarily estimated that incremental pension and retiree medical costs for 2003 will be about 12 cents per share. Fourth, we are still evaluating other incremental cost factors such as infrastructure investments, and are continuing to review infrastructure needs. And finally, like most other companies, we are factoring in the risks and opportunities associated with an uncertain economy. We anticipate providing earnings guidance for 2003 as part of our fourth quarter earnings announcement."
Mr. Critelli concluded, "By balancing our short-term and long-term plans, we believe that a combination of on-going cost containment initiatives and continued investment in industry-leading products and services will help us deliver consistently greater shareholder value."
Third quarter 2002 revenue included $592.5 million from sales, up nine percent from $541.9 million in the third quarter of 2001; $374.4 million from rentals and financing, up two percent from $365.7 million; and $147.2 million from support services, up eight percent from $136.8 million. Net income for the period was $146.9 million, or 61 cents per diluted share. Income from continuing operations for the third quarter 2001 was $122.1 million or 49 cents per diluted share which included the following special items: a $10 million pre-tax charge associated with the company's transition to the next generation of networked technology; and an $18 million pre-tax charge related to initiatives associated with a restructuring plan. Excluding these special charges, third quarter 2001 income from continuing operations was $140.2 million, or 57 cents per diluted share and net income was $135.3 million, or 55 cents per diluted share. Third quarter 2001 net income includes a loss of $4.9 million from discontinued operations or two cents per diluted share.
For the nine-month period ended September 30, 2002, revenue was $3.245 billion, up seven percent from $3.032 billion in 2001. Net income for year-to-date 2002 was $419.5 million or $1.73 per diluted share compared to income from continuing operations for the same period of 2001 which, excluding special items, was $416.3 million, or $1.68 per diluted share. Year-to-date pre-tax restructuring charges for 2001 totaled approximately $122 million of which $89 million was related to continuing operations. Year-to-date net income for 2001, which also included a net pre-tax gain of $362 million from settling a lawsuit with Hewlett-Packard and a pre-tax charge of $258 million associated with the company's transition to the next generation of networked technology, was $398.2 million or $1.60 per diluted share. The year-to-date net income for 2001 included a loss of $15.7 million from discontinued operations, or approximately six cents per diluted share.
Pitney Bowes senior management 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 http://www.pitneybowes.com
Pitney Bowes is a $4 billion global provider of integrated mail and document management solutions headquartered in Stamford, Connecticut. The company serves over 2 million businesses of all sizes through direct and dealer operations in more than 130 countries. For additional information on the company, its products and solutions visit http://www.pitneybowes.com.
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," "projects," "estimates," "anticipates," "intends" and other similar words. Such forward-looking statements include, but are not limited to, statements about business reach and customer demand, pending and possible acquisitions, restructuring charges, preliminary estimated 2003 pension and medical costs and our preliminary future outlook, including our expected revenue for the fourth quarter and full year 2002, and our expected diluted earnings per share for the fourth quarter and for the full year 2002 and preliminary outlook of factors for 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, changes in international or national political or economic conditions, including terrorist attacks, 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 2001 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 or possible restructuring or other one-time or special items. 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, 2002 and 2001, and consolidated balance sheets at September 30, 2002, June 30, 2002, and September 30, 2001, are attached.
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,
2002 2001 2002 2001
Revenue from:
Sales and management
services $592,481 $541,947 $1,702,368 $1,535,853
Rentals and
financing 374,383 365,684 1,114,001 1,098,774
Support services 147,207 136,849 428,535 397,040
Total revenue 1,114,071 1,044,480 3,244,904 3,031,667
Costs and expenses:
Cost of sales and
management services 356,753 332,909 1,030,677 915,220
Cost of rentals and
financing 91,082 85,169 271,754 266,229
Cost of meter
transition (*) - 10,300 - 258,000
Selling, service and
administrative 377,336 344,850 1,095,934 1,003,890
Research and
development 33,925 31,554 104,089 98,021
Other income (*) - - - (362,172)
Interest, net 41,190 45,315 131,815 140,201
Restructuring
charges (*) - 17,879 - 88,639
Total costs
and expenses 900,286 867,976 2,634,269 2,408,028
Income from
continuing
operations
before income taxes 213,785 176,504 610,635 623,639
Provision for income
taxes 66,899 54,406 191,129 209,748
Income from
continuing
operations 146,886 122,098 419,506 413,891
Discontinued
operations - (4,884) - (15,711)
Net income $146,886 $117,214 $419,506 $398,180
Basic earnings per
share
Continuing
operations $0.62 $0.50 $1.75 $1.68
Discontinued
operations - (0.02) - (0.06)
Net income 0.62 0.48 1.75 1.61
Special items
after-tax (*) - 0.07 - 0.01
Discontinued
operations - 0.02 - 0.06
Income from
continuing
operations
excluding
special items $0.62 $0.57 $1.75 $1.69
Diluted earnings per
share
Continuing
operations $0.61 $0.49 $1.73 $1.67
Discontinued
operations - (0.02) - (0.06)
Net income 0.61 0.47 1.73 1.60
Special items
after-tax (*) - 0.07 - 0.01
Discontinued
operations - 0.02 - 0.06
Income from
continuing
operations
excluding
special items $0.61 $0.57 $1.73 $1.68
Average common and
potential common
shares outstanding 240,323,222 247,279,863 242,545,228 248,527,220
Note: Special items are indicated by the asterisks above or are otherwise
explained in the press release. Special items for the three and nine
months ended September 30, 2001 resulted in a net after-tax charge of
$18,110 and $2,421, respectively.
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: 9/30/02 6/30/02 9/30/01
Current assets:
Cash and cash equivalents $268,487 $240,643 $292,312
Short-term investments,
at cost which
approximates market 12,631 11,946 8,107
Accounts receivable,
less allowances:
9/02 $34,064
6/02 $33,392
9/01 $30,349 423,160 414,322 386,885
Finance receivables,
less allowances:
9/02 $68,228
6/02 $66,991
9/01 $57,825 1,675,731 1,622,835 1,486,910
Inventories 206,498 193,533 164,630
Other current assets
and prepayments 172,568 161,117 151,398
Net assets of
discontinued operations - - 230,789
Total current assets 2,759,075 2,644,396 2,721,031
Property, plant and equipment,
net 595,875 554,489 509,850
Rental equipment and related
inventories, net 428,934 450,508 469,387
Property leased under
capital leases, net 1,719 1,006 1,691
Long-term finance receivables,
less allowances:
9/02 $66,395
6/02 $66,143
9/01 $67,879 1,799,052 1,780,539 1,790,647
Investment in
leveraged leases 1,438,484 1,388,732 1,260,955
Goodwill 809,690 668,552 566,075
Other assets 923,622 818,336 691,149
Net assets of
discontinued operations - - 219,121
Total assets $8,756,451 $8,306,558 $8,229,906
Liabilities and
stockholders' equity:
Current liabilities:
Accounts payable and
accrued liabilities $1,313,603 $1,280,707 $1,191,435
Income taxes payable 231,115 237,225 378,926
Notes payable
and current portion of
long-term obligations 1,568,571 1,459,165 756,579
Advance billings 336,598 339,587 333,532
Total current
liabilities 3,449,887 3,316,684 2,660,472
Deferred taxes on income 1,340,809 1,284,301 1,218,881
Long-term debt 2,379,565 2,129,027 2,436,358
Other noncurrent liabilities 358,340 353,638 338,076
Total liabilities 7,528,601 7,083,650 6,653,787
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 1,475 1,539 1,609
Common stock,
$1 par value 323,338 323,338 323,338
Capital in excess
of par value - 960 3,471
Retained earnings 3,864,245 3,788,916 3,950,435
Accumulated other
comprehensive income (119,403) (132,796) (148,132)
Treasury stock,
at cost (3,151,829) (3,069,073) (2,864,626)
Total stockholders'
equity 917,850 912,908 1,266,119
Total liabilities and
stockholders' equity $8,756,451 $8,306,558 $8,229,906
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2002
(Unaudited)
(Dollars in thousands)
%
2002 2001 (2) Change
Third Quarter
Revenue
Global Mailing $762,630 $694,805 10%
Enterprise Solutions 309,797 294,881 5%
Total Messaging Solutions 1,072,427 989,686 8%
Capital Services 41,644 54,794 (24%)
Total Revenue $1,114,071 $1,044,480 7%
Operating Profit (1)
Global Mailing $226,121 $206,403 10%
Enterprise Solutions 18,914 18,332 3%
Total Messaging Solutions 245,035 224,735 9%
Capital Services 18,229 22,045 (17%)
Total Operating Profit $263,264 $246,780 7%
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2002
(Unaudited)
(Dollars in thousands)
%
2002 2001 (2) Change
Year to Date
Revenue
Global Mailing $2,211,924 $2,110,294 5%
Enterprise Solutions 900,318 772,353 17%
Total Messaging Solutions 3,112,242 2,882,647 8%
Capital Services 132,662 149,020 (11%)
Total Revenue $3,244,904 $3,031,667 7%
Operating Profit (1)
Global Mailing $652,789 $637,939 2%
Enterprise Solutions 58,849 56,556 4%
Total Messaging Solutions 711,638 694,495 2%
Capital Services 57,795 57,249 1%
Total Operating Profit $769,433 $751,744 2%
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
Editorial - Sheryl Y. Battles
Vice President, External Affairs
203-351-6808
Web site: http://www.pitneybowes.com
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SOURCE Pitney Bowes, Inc.
CONTACT: 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
URL: http://www.pitneybowes.com
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