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Q1 1998 Earnings
Commenting on the company's first-quarter performance, Chairman and Chief Executive Officer Michael J. Critelli noted, "This quarter's performance marks another milestone in our ongoing focus on providing superior returns to shareholders through sustainable long-term profitable growth. Our broad-based success in this area featured expansion in operating profit margin in both the Business Equipment and Business Services segments -- driven principally by a lower operating expense-to-revenue ratio versus first quarter 1997. Our success is reflected in Pitney Bowes' second consecutive, number one ranking on an annual basis in terms of profits as a percent of revenues among the 14 companies in the Computers, Office Equipment Industry group of The Fortune 1000."
In the Business Equipment Segment, which includes mailing, and office systems operations, revenue grew five percent and operating profit increased 12 percent during the first quarter. Mailing Systems' revenue grew five percent, excluding foreign currency exchange impacts, and four percent on a reported basis. The quarter's revenue comparison was also tempered by a large production mail order in the first quarter 1997. Growth was driven by strong placements of mailing equipment such as the Personal Post Office, as the company continued to help customers make a successful transition to advanced electronic and digital metering, and introduced new customers to the benefits of metering. In fact, rental revenue growth has increased for the fifth consecutive quarter on a year-over-year comparison to seven percent in the first quarter of 1998. By the end of the quarter, electronic and digital meters grew to 78 percent of Pitney Bowes' meter base from 63 percent at the end of the first quarter of 1997.
Outside the U.S., our focus on profitable growth resulted in significant operating profit growth from the U.K., Canada and Australia on solid local currency revenue growth.
During the quarter, Office Systems' revenue grew a strong 10 percent on continued demand for the company s advanced facsimile and copier systems and network applications. This performance was paced by double-digit sales growth in both product lines, and the highest ever quarterly order level in the Facsimile business, which will contribute to the sustained growth of supply and rental revenue streams in the future.
Revenue grew a very strong 21 percent and operating profit was up 33 percent in the Business Services Segment during the quarter. The segment includes Pitney Bowes Management Services and Atlantic Mortgage and Investment Corporation. The segment's excellent revenue growth was driven by continued expansion of the customer base within the segment, as well as broadening the service offerings to existing customers. Operating profit benefited from leveraging the existing infrastructure as well as ongoing programs to enhance customer service and competitiveness.
As planned, revenue and operating profit in the Commercial and Industrial Financing Segment were down 19 percent and 22 percent, respectively. The segment includes Pitney Bowes Capital Services and Colonial Pacific Leasing Corporation. The strategic reduction of earning assets at both units during 1997 resulted in the anticipated revenue and operating profit declines relative to first quarter 1997. These reductions were part of the company s ongoing strategy to reduce the level of capital committed to asset financing while maintaining the ability to provide a full range of financial services to customers.
Mr. Critelli concluded, "The combined results of the Business Equipment and Business Services segments yielded a 13 percent growth in operating profit for the quarter. This excellent start to 1998 underscores our confidence that continued focus on enhancing customer and shareholder value and sustainable long-term profitable growth will drive future success. We will further penetrate new and existing markets with advanced products, services and software; broaden our distribution channels; improve operating leverage; and capitalize on the opportunities surrounding meter migration."
As previously announced, the company has initiated an 11 million share repurchase program, with shares to be acquired with cash from future sales of external financing assets and cash from operations. During the first quarter 1998, the company repurchased approximately 1.2 million shares on the open market under this program.
First quarter 1998 revenue included $450.4 million from sales, up eight percent from $417.8 million in the first quarter of 1997; $438.2 million from rentals and financing, up three percent from $424.6 million; and $123.0 million from support services, up three percent from $119.0 million. Net income for the period was $129.7 million or 46 cents per diluted share, compared to first-quarter 1997 net income of $119.9 million, or 40 cents per diluted share.
Pitney Bowes is a global provider of informed mail and messaging management.
The forward-looking statements contained in this news release involve risks and uncertainties, and are subject to change based on various important factors including timely development and acceptance of new products, gaining product approval, successful entry into new markets, and changes in postal regulations, as more fully outlined in the company's 1997 Form 10-K Annual Report filed with the Securities and Exchange Commission.
Note: Consolidated statements of income for the three months ended March 31, 1998 and 1997, and consolidated balance sheets as of March 31, 1998, December 31, 1997, and March 31, 1997, are attached.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands except per share data)
(Unaudited) (Unaudited)
Assets 3/31/98 12/31/97 3/31/97
Current assets:
Cash and cash equivalents $ 117,200 $ 137,073 $ 142,718
Short-term investments, at cost
which approximates market 34,597 1,722 12,336
Accounts receivable,
less allowances: 3/98 $21,962
12/97 $21,129 3/97 $15,952 347,263 348,792 326,709
Finance receivables,
less allowances: 3/98 $57,519
12/97 $54,170 3/97 $42,597 1,726,328 1,546,542 1,402,870
Inventories 241,553 249,207 263,947
Other current assets
and prepayments 209,618 180,179 135,244
Total current assets 2,676,559 2,463,515 2,283,824
Property, plant and equipment,
net 495,189 497,261 482,703
Rental equipment and related
inventories, net 799,377 788,035 809,752
Property leased under capital
leases, net 4,219 4,396 5,037
Long-term finance receivables,
less allowances: 3/98 $74,540
12/97 $78,138 3/97 $73,910 2,473,189 2,581,349 3,396,834
Investment in leveraged
leases 758,932 727,783 640,113
Goodwill, net of amortization:
3/98 $42,522 12/97 $40,912
3/97 $36,001 204,058 203,419 204,188
Other assets 902,075 627,631 362,343
Total assets $ 8,313,598 $ 7,893,389 $ 8,184,794
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $ 937,532 $ 878,759 $ 850,954
Income taxes payable 169,777 147,921 182,599
Notes payable and current
portion of long-term
obligations 1,718,449 1,982,988 1,986,193
Advance billings 377,343 363,565 343,369
Total current liabilities 3,203,101 3,373,233 3,363,115
Deferred taxes on income 937,507 905,768 800,653
Long-term debt 1,626,870 1,068,395 1,299,155
Other noncurrent liabilities 368,906 373,416 385,358
Total liabilities 6,136,384 5,720,812 5,848,281
Preferred stockholders '
equity in a subsidiary
company 300,000 300,000 200,000
Stockholders' equity:
Cumulative preferred stock,
$50 par value, 4% convertible 34 39 46
Cumulative preference stock,
no par value, $2.12
convertible 2,159 2,220 2,329
Common stock, $1 par
value 323,338 323,338 323,338
Capital in excess of par
value 25,120 28,028 29,504
Retained earnings 2,811,675 2,744,929 2,511,055
Cumulative translation
adjustments (73,387) (63,348) (54,088)
Treasury stock, at cost (1,211,725) (1,162,629) (675,671)
Total stockholders'
equity 1,877,214 1,872,577 2,136,513
Total liabilities and
stockholders' equity $ 8,313,598 $ 7,893,389 $ 8,184,794