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Q2 1998 Earnings
14th Consecutive Quarter of Double-Digit Earnings Per Share Growth
STAMFORD, Conn.--(BUSINESS WIRE)--July 21, 1998-- Pitney Bowes Inc. (NYSE:PBI) today reported record second quarter results with a 13.9-percent increase in diluted earnings per share to 51 cents per share, and net income growth of eight percent to $142.0 million. This marks 14 consecutive quarters of double-digit, year-over-year, diluted earnings-per-share growth from continuing operations. Revenue rose a strong nine percent, excluding the Commercial and Industrial Financing segment, and seven percent on a consolidated basis. The increases compare favorably to first quarter 1998 growth rates of eight percent excluding Commercial and Industrial Financing and five percent for consolidated revenue. Overall revenue growth was paced by 10 percent sales increases, excluding the impact of currency exchange. The strategic reduction of external lease assets and shift to fee-based revenue streams continued, resulting in the expected reduction in Commercial and Industrial Financing revenue.
Chairman and Chief Executive Officer Michael J. Critelli discussed the company's performance during the quarter: ''Our ongoing focus on applying technology to help customers improve the efficiency, reduce the costs and increase the impact of end-to-end messaging continues to yield benefits. This quarter's record performance is a result of our unwavering commitment to providing superior returns to shareholders through sustainable long-term profitable growth.
''We continued to experience expansion in operating profit margins in both the Business Equipment and Business Services segments. Overall, operating profit margin improvement was driven by a lower operating expense-to-revenue ratio versus second quarter 1997 and higher sales gross margins despite the continued strong growth of Business Services, which has a higher cost-of-sales ratio. These improvements were partially offset by a lower rental and financing gross margin resulting principally from shifting the mix of financing revenue to service and fee-based, which have a higher cost ratio but minimal interest expense.''
In the Business Equipment Segment, which includes mailing and office systems operations, revenue rose seven percent and operating profit increased 14 percent during the second quarter.
Mailing Systems' seven-percent revenue increase during the quarter, excluding foreign currency exchange impacts, was led by strong placements of advanced equipment solutions in all market segments, including high volume production mail systems at the upper end of the market. The positive revenue trend continued this quarter with a six-percent increase on a reported basis, up from a four-percent increase on a reported basis in this year's first quarter. Rental revenue again contributed to strong growth from recurring revenue streams versus the prior year quarter.
Pitney Bowes continued to lead the market conversion to more advanced technology, with electronic and digital meters comprising 81 percent of the installed base, up from 67 percent at the end of the second quarter of 1997. And, as planned, the company's base of mechanical meters continued to decline -- currently at 19 percent as compared to 33 percent at the end of the second quarter of 1997.
Office Systems' nine-percent revenue increase was driven by growth in both the facsimile and copier product lines. The company strengthened its solid positioning as the preeminent provider of advanced office systems with the recent introductions of the Smart Finish(TM) feature set on four copier models, and the latest 33.6 kps facsimile -- Model 9930.
Revenue growth in the Business Services Segment surged 23 percent with an operating profit increase of 60 percent. The segment includes Pitney Bowes Management Services and Atlantic Mortgage and Investment Corporation. Both businesses continued to successfully broaden the value proposition to existing customers and add new customers to their respective bases.
As planned, revenue and operating profit both declined 12 percent in the Commercial and Industrial Financing Segment as compared to second quarter 1997. The segment includes Pitney Bowes Capital Services and Colonial Pacific Leasing Corporation. The strategic disposition of earning assets at both units during 1997 and continued reduction in 1998 resulted in the anticipated revenue and operating profit declines. These reductions are part of the company's ongoing strategy to decrease 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 ongoing strength of the core business can be seen by the fact that the combined operating profit for the Business Equipment and Business Services segments grew 17 percent this quarter. We feel our shareholders will continue to see the benefits from our focus on profitable growth opportunities, improved operating efficiency, and the ongoing application of new technology to provide product, service and software solutions.''
The company previously announced an 11 million share repurchase program, with shares to be acquired with cash from future sales of external financing assets and cash from operations. A total of nearly 6.6 million shares were repurchased during the first half of 1998 under this program, including 5.4 million shares which were repurchased during the second quarter of 1998.
Second quarter 1998 revenue included $492.3 million from sales, up nine percent from $449.8 million in the second quarter of 1997; $458.8 million from rentals and financing, up five percent from $436.1 million; and $128.5 million from support services, up seven percent from $120.2 million.
Second quarter 1998 net income was $142.0 million, or 51 cents per diluted share, compared to $131.1 million, or 45 cents per diluted share, in 1997.
For the six-month period ended June 30, 1998, revenue was $2.091 billion, up six percent from $1.967 billion in 1997; and net income in 1998 was $271.7 million, or 97 cents per diluted share, compared to $251.0 million, or 85 cents per diluted share, in 1997.
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 and six months ended June 30, 1998 and 1997, and consolidated balance sheets at June 30, 1998, March 31, 1998, and June 30, 1997, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended June 30,
-----------------------
1998 1997
----------- -----------
Revenue from:
Sales $ 492,310 $ 449,757
Rentals and financing 458,753 436,141
Support services 128,455 120,213
----------- -----------
Total revenue 1,079,518 1,006,111
----------- -----------
Costs and expenses:
Cost of sales 289,983 269,490
Cost of rentals and financing 145,831 128,041
Selling, service and
administrative 352,916 335,682
Research and development 25,065 21,835
Interest, net 48,870 50,953
----------- -----------
Total costs and expenses 862,665 806,001
----------- -----------
Income before income taxes 216,853 200,110
Provision for income taxes 74,836 69,039
----------- -----------
Net income $ 142,017 $ 131,071
=========== ===========
Basic earnings per share $ 0.52 $ 0.45
=========== ===========
Diluted earnings per share $ 0.51 $ 0.45
=========== ===========
Average common and potential
common shares outstanding 279,494,653 293,892,544
=========== ===========
Six Months Ended June 30,
-----------------------
1998 1997
----------- -----------
Revenue from:
Sales $ 942,735 $ 867,579
Rentals and financing 896,913 860,703
Support services 251,444 239,199
----------- -----------
Total revenue 2,091,092 1,967,481
----------- -----------
Costs and expenses:
Cost of sales 564,983 523,298
Cost of rentals and financing 284,210 255,715
Selling, service and
administrative 683,898 661,791
Research and development 48,696 42,483
Interest, net 94,455 100,449
----------- -----------
Total costs and expenses 1,676,242 1,583,736
----------- -----------
Income before income taxes 414,850 383,745
Provision for income taxes 143,146 132,729
----------- -----------
Net income $ 271,704 $ 251,016
=========== ===========
Basic earnings per share $ 0.98 $ 0.86
=========== ===========
Diluted earnings per share $ 0.97 $ 0.85
=========== ===========
Average common and potential
common shares outstanding 281,413,128 296,083,752
=========== ===========
-0-
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
------------------------------------
(Dollars in thousands except
per share data)
6/30/98 3/31/98 6/30/97
----------- ----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 115,322 $ 117,200 $ 130,743
Short-term investments, at cost
which approximates market 1,943 34,597 1,474
Accounts receivable,
less allowances: 6/98 $21,883;
3/98 $21,962; 6/97 $17,423 367,409 347,263 322,679
Finance receivables,
less allowances: 6/98 $61,867;
3/98 $57,519; 6/97 $43,514 1,681,062 1,726,328 1,423,859
Inventories 240,045 241,553 255,791
Other current assets and
prepayments 165,834 209,618 131,776
----------- ----------- ----------
Total current assets 2,571,615 2,676,559 2,266,322
----------- ----------- ----------
Property, plant and equipment, net 491,552 495,189 484,882
Rental equipment and related
inventories, net 823,530 799,377 821,851
Property leased under capital
leases, net 4,080 4,219 4,751
Long-term finance receivables,
less allowances: 6/98 $77,755;
3/98 $74,540; 6/97 $76,527 2,327,915 2,473,189 3,442,412
Investment in leveraged leases 776,930 758,932 661,036
Goodwill, net of amortization:
6/98 $44,208; 3/98 $42,522;
6/97 $37,629 208,946 204,058 202,092
Other assets 868,400 902,075 405,151
----------- ---------- ----------
Total assets $ 8,072,968 $ 8,313,598 $8,288,497
=========== ========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $ 845,562 $ 937,532 $ 827,394
Income taxes payable 139,867 169,777 162,378
Notes payable and current
portion of long-term obligations 1,761,162 1,718,449 2,173,450
Advance billings 376,871 377,343 351,059
----------- ----------- ----------
Total current liabilities 3,123,462 3,203,101 3,514,281
----------- ----------- ----------
Deferred taxes on income 925,837 937,507 831,480
Long-term debt 1,627,127 1,626,870 1,172,053
Other noncurrent liabilities 368,039 368,906 381,852
----------- ----------- ----------
Total liabilities 6,044,465 6,136,384 5,899,666
----------- ----------- ----------
Preferred stockholders' equity in a
subsidiary company 300,000 300,000 300,000
Stockholders' equity:
Cumulative preferred stock,
$50 par value, 4% convertible 34 34 46
Cumulative preference stock,
no par value, $2.12 convertible 2,112 2,159 2,291
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 21,864 25,120 27,852
Retained earnings 2,892,080 2,811,675 2,583,936
Accumulated other comprehensive
income (74,630) (73,387) (52,477)
Treasury stock, at cost (1,436,295) (1,211,725) (796,155)
----------- ----------- ----------
Total stockholders' equity 1,728,503 1,877,214 2,088,831
----------- ----------- ----------
Total liabilities and
stockholders' equity $ 8,072,968 $8,313,598 $8,288,497
=========== =========== ==========
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Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 1998
(Unaudited)
(Dollars in thousands) %
1998 1997 Change
---- ---- ------
Second Quarter
--------------
Revenue
-------
Business Equipment $ 831,578 $ 779,364 7%
Business Services 169,691 137,461 23%
----------- ----------- ---------
1,001,269 916,825 9%
----------- ----------- ---------
Commercial and Industrial
Financing
Large-Ticket External 40,218 50,074 (20%)
Small-Ticket External 38,031 39,212 (3%)
----------- ----------- ---------
78,249 89,286 (12%)
----------- ----------- ---------
Total Revenue $ 1,079,518 $ 1,006,111 7%
=========== =========== =========
Operating Profit (1)
--------------------
Business Equipment $ 212,914 $ 186,617 14%
Business Services 18,917 11,791 60%
----------- ----------- ---------
231,831 198,408 17%
Commercial and Industrial
Financing 16,467 18,723 (12%)
----------- ----------- ---------
Total Operating Profit $ 248,298 $ 217,131 14%
=========== =========== =========
(1) Operating profit excludes general corporate expenses, income
taxes, and net interest other than that related to finance
operations.
-0-
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 1998
(Unaudited)
(Dollars in thousands) %
1998 1997 Change
----------- ----------- ------
Year to Date
------------
Revenue
-------
Business Equipment $ 1,616,242 $ 1,524,484 6%
Business Services 325,761 266,451 22%
----------- ---------- -----------
1,942,003 1,790,935 8%
----------- ----------- -----------
Commercial and Industrial
Financing
Large-Ticket External 73,966 99,625 (26%)
Small-Ticket External 75,123 76,921 (2%)
----------- ----------- -----------
149,089 176,546 (16%)
----------- ----------- -----------
Total Revenue $ 2,091,092 $ 1,967,481 6%
=========== =========== ===========
Operating Profit (1)
--------------------
Business Equipment $ 402,783 $ 356,028 13%
Business Services 32,840 22,279 47%
----------- ----------- -----------
435,623 378,307 15%
Commercial and Industrial
Financing 29,270 35,234 (17%)
----------- ----------- -----------
Total Operating Profit $ 464,893 $ 413,541 12%
=========== =========== ===========
(1) Operating profit excludes general corporate expenses, income
taxes, and net interest other than that related to finance
operations.
Contact:
Pitney Bowes Inc.
Sheryl Y. Battles
Exec. Director, External Affairs
(203) 351-6808
or
Financial -- Michael Monahan
Director, Investor Relations
(203) 351-6349
or
Website -- www.pitneybowes.com