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Q4 1997 Earnings
STAMFORD, Conn.--(BUSINESS WIRE)--Feb. 3, 1998-- Pitney Bowes Inc. (NYSE: PBI - news) today announced a six-percent increase in full-year revenue to $4.1 billion in 1997, as compared to $3.9 billion in 1996. Full-year diluted earnings per share grew by 15 percent to $1.80 on income of $526.0 million, which increased 12 percent from the prior year. Prior to the two-for-one split of the common stock, with a record date of December 29, 1997, diluted earnings per share would have been $3.60 in 1997 compared to $3.12 in 1996.
Highlights of Pitney Bowes' fourth-quarter performance included a six-percent increase in revenue to $1.120 billion, up from $1.059 billion in 1996. Fourth-quarter revenue grew a strong nine percent after adjusting for the impacts of previously announced strategic actions in Australia, asset sale activity and the strategic shift of the external large-ticket business to more fee-based income sources. Diluted earnings per share rose 21 percent to 51 cents on a net income increase of 15 percent to $147.2 million. Pre-split diluted earnings per share would have been $1.03 in the fourth quarter of 1997 as compared to 85 cents in the fourth quarter of 1996.
Chairman and Chief Executive Officer Michael J. Critelli noted, "Our 1997 results reflect the success of our strategy to enhance shareholder value through: a focus on profitable growth, the ongoing refinement of our business operations and processes, and continuous application of new technology to add value to virtually every part of the end-to-end messaging process. These actions resulted in our fifth consecutive year of S,S&A expense-to-revenue ratio improvement and our eighth consecutive year of pre-tax profit margin increase. These ratio comparisons exclude the fourth-quarter 1996 charge related to our Australian operations.
"We feel our growing knowledge of the complex business communications environment, understanding of the business processes surrounding communications, expertise in applying paper and digital technologies to improve customers' operating efficiencies, and our advanced portfolio of software, systems and services, strengthens our position for future growth as well.
"As these solid fourth-quarter gains illustrate, our strong full-year results in 1997 were built one quarter at a time. We are pleased to note that we attained a 20-percent pre-tax margin for the first time in our history. This record margin was paced by a strong sales increase and improved year-over-year comparisons in sales gross margins for the seventh consecutive quarter, and improved S,S&A expense-to-revenue ratio for the fourth consecutive quarter. Revenue and operating profit growth for the Business Equipment and Business Services Segments remained strong, while revenue was down and operating profit up slightly in the Commercial and Industrial Financing Segment -- with the planned strategic reduction of the external financing assets."
The Business Equipment Segment includes mailing and office systems operations. Fourth-quarter performance in the segment featured a seven-percent increase in revenue and a 48-percent increase in operating profit. However, excluding the one-time charge for restructuring the Australian operation in fourth-quarter 1996, operating profit increased 22 percent on excellent profit growth in both U.S. and international operations.
Continued strength in the core mailing and production mail markets in the U.S. helped drive a six-percent revenue increase in Mailing Systems during the fourth quarter. Outside of the U.S., Canada improved its revenue growth and yielded a significant increase in operating profit.
The demand for productivity-enhancing metering and mail processing systems remains high because of Pitney Bowes' wide range of solutions for businesses of all sizes -- including convenient financing options -- and the U.S. Postal Service requirement that customers migrate to more advanced technology. In fact, the combination of migration to Pitney Bowes advanced electronic and digital metering solutions, and the company's aggressive expansion into the small office market, resulted in the largest net addition of new meters to Pitney Bowes' base of meters in use since 1971, when meter base information was first reported. It is also notable that as of year-end, digital and electronic meters now constitute 75 percent of Pitney Bowes' total base of meters, with mechanical meters only comprising 25 percent of its base. This represents a significant surge in the company's electronic and digital meter population compared to 60 percent at year-end 1996 and 49 percent at year-end 1995.
Pitney Bowes is in the process of integrating its facsimile and copier businesses into a single Office Systems division. This new structure will help the company leverage the respective strengths of its facsimile and copier organizations and position Pitney Bowes for the future as products and applications in the office environment continue to converge. The company took the first step toward this strategic structure at the end of the quarter with previously announced management assignments.
Office Systems' strong fourth-quarter revenue growth of 10 percent was driven by the continued market demand for the company's advanced facsimile and copier systems and network applications. The Office Systems division experienced its strongest growth of the year in both sales and rentals with award-winning systems in both the facsimile and copier product lines.
In the Business Services Segment revenue grew 17 percent and operating profit grew 34 percent during the quarter. This segment includes Pitney Bowes Management Services (PBMS) and Atlantic Mortgage and Investment Corporation (AMIC). The segment's growth was driven by increases in the customer base of both businesses, and operating profit benefited from leveraging operating efficiencies. Management Services is expanding its successful focus on selling Pitney Bowes core mail and messaging expertise from providing a few services at a single site, to providing a more complex mix of physical and electronic services on both an on-site and an off-site basis. Pitney Bowes' newly opened Litigation Imaging Center in New York is a good example of its expanding off-site service offerings.
The Commercial and Industrial Financing Segment includes Pitney Bowes Capital Services and Colonial Pacific Leasing Corporation. As planned, during the quarter the segment's revenue declined nine percent while its operating profit increased two percent. The revenue decline is principally due to the lower level of asset sales during the quarter as compared to fourth-quarter 1996, as well as the loss of revenue related to the strategic reduction of the external large-ticket financial services portfolio through an asset transaction previously announced in August 1997. At that time, the company entered into an agreement with GATX Capital, which upon completion is expected to reduce the Pitney Bowes large-ticket external finance portfolio by approximately $1.1 billion. By year end, Pitney Bowes had received approximately $800 million of the approximately $900 million in cash it expects to receive. The transaction is expected to be completed by the end of February 1998. The company will also retain approximately $200 million of equity investment in a limited liability company along with GATX.
Mr. Critelli summarized the quarter's results by concluding, "The combined strength of the Business Equipment and Business Services segments remained as strong as it had been throughout the year, with a solid 23-percent increase in combined operating profit, excluding the charge for restructuring Australian operations."
On a post-split basis, during 1997 the Board of Directors authorized the repurchase of 24.8 million shares. The company repurchased 5.1 million shares on the open market in the fourth quarter, for a total of nearly 18 million shares repurchased under this program.
On October 6, 1997, the Board of Directors declared a two-for-one split of the company's common stock subject to approval by stockholders of an amendment of the company's Restated Certificate of Incorporation. The split was effected through a dividend of one share of common stock for each common share outstanding. The proposed amendment was approved by stockholders of record as of October 24, 1997, at a special stockholders meeting December 18, 1997. The company distributed the stock dividend on or about January 16, 1998, for each share held of record at the close of business December 29, 1997.
n January 13, 1998, the company's Pitney Bowes Credit Corporation subsidiary issued $250 million aggregate principal amount of 5.65 percent notes maturing January 2003 to be used for financing needs over the next 12 months. In addition, on January 28, 1998, the company issued $300 million aggregate principal amount of 5.95-percent notes maturing February 2005 to be used for general corporate purposes, including the payment of short-term debt.
Mr. Critelli concluded, "As we look toward 1998 and beyond, there has never been a greater need for knowledge-based mail and messaging management to help customers grow their businesses, and Pitney Bowes has never been better positioned to help meet that market need. We will continue investing in ongoing research, development and application of technology; diversifying our distribution channels to make our solutions more accessible to all market segments; improving operating leverage; and expanding profitably in global markets."
Fourth-quarter 1997 revenue included $516.6 million from sales, up eight percent from $476.2 million; $480.0 million from rentals and financing, up four percent from $463.6 million; and $123.7 million from support services, up four percent from $118.8 million, compared with the same period in 1996.
Fourth-quarter 1997 net income was $147.2 million, or 51 cents per diluted share, up from $127.7 million, or 43 cents per diluted share, in 1996.
Full-year 1997 revenue included $1.834 billion from sales, up nine percent from $1.675 billion; $1.783 billion from rentals and financing, up four percent from $1.718 billion; and $483.6 million from support services, up four percent from $465.8 million, compared with the same period in 1996.
The company's full-year 1997 net income was $526.0 million, or $1.80 per diluted share, compared to $469.4 million, or $1.56 per diluted share in 1996.
Pitney Bowes is a global provider of informed mail and messaging management. For more information about Pitney Bowes visit our website at www.pitneybowes.com.
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 1996 Form 10-K Annual Report filed with the Securities and Exchange Commission.
Note: Consolidated statements of income for the three and twelve months ended December 31, 1997 and 1996, and consolidated balance sheets at December 31, 1997, September 30, 1997, and December 31, 1996, are attached.
Pitney Bowes Inc.
Consolidated Statement of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenue from:
Sales $516,574 $476,243 $1,834,057 $1,675,090
Rentals and
financing 479,995 463,640 1,782,851 1,717,738
Support services 123,686 118,780 483,556 465,751
Total revenue 1,120,255 1,058,663 4,100,464 3,858,579
Costs and expenses:
Cost of sales 292,676 279,690 1,081,537 1,025,250
Cost of rentals
and financing 162,380 156,299 557,769 529,740
Selling, service and
administrative 366,354 385,615 1,367,862 1,340,276
Research and
development 25,402 23,239 89,463 81,726
Interest, net 49,260 51,522 200,735 197,204
Total costs and
expenses 896,072 896,365 3,297,366 3,174,196
Income before income
taxes 224,183 162,298 803,098 684,383
Provision for income
taxes 76,977 34,632 277,071 214,970
Net income $147,206 $127,666 $526,027 $469,413
Basic earnings per
share $0.52 $0.43 $1.82 $1.57
Diluted earnings per
share $0.51 $0.43 $1.80 $1.56
Average common and
potential common
shares
outstanding 286,571,156 299,814,556 292,517,116 301,303,356
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Pitney Bowes Inc.
Consolidated Balance Sheet
(Dollars in thousands) (Unaudited)
12/31/97 9/30/97 12/31/96
Assets
Current assets:
Cash and cash equivalents $137,073 $125,140 $135,271
Short-term investments, at
cost which approximates market 1,722 1,955 1,500
Accounts receivable, less
allowances:
12/97, $21,129; 9/97, $19,532;
12/96, $16,160 348,792 328,194 340,730
Finance receivables, less
allowances:
12/97, $54,170; 9/97, $45,205;
12/96, $40,176 1,546,542 1,569,114 1,339,286
Inventories 249,207 251,287 281,942
Other current assets and
prepayments 180,179 143,327 123,337
Total current assets 2,463,515 2,419,017 2,222,066
Property, plant and equipment,
net 497,261 484,995 486,029
Rental equipment and related
inventories, net 788,035 822,121 815,306
Property leased under capital
leases, net 4,396 4,569 5,848
Long-term finance receivables,
less allowances:
12/97, $78,138; 9/97 $72,576;
12/96, $73,561 2,581,349 3,201,266 3,450,231
Investment in leveraged leases 727,783 678,889 633,682
Goodwill, net of amortization:
12/97, $40,912; 9/97, $39,268;
12/96, $34,372 203,419 200,681 205,802
Other assets 627,631 430,756 336,758
Total assets $7,893,389 $8,242,294 $8,155,722
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable and accrued
liabilities $878,759 $866,995 $849,789
Income taxes payable 147,921 128,447 212,155
Notes payable and current
portion of long-term
obligations 1,982,988 2,176,026 1,911,481
Advance billings 363,565 342,281 331,864
Total current liabilities 3,373,233 3,513,749 3,305,289
Deferred taxes on income 905,768 890,542 720,840
Long-term debt 1,068,395 1,171,301 1,300,434
Other noncurrent liabilities 373,416 377,907 390,113
Total liabilities 5,720,812 5,953,499 5,716,676
Preferred stockholders' equity in
a subsidiary company 300,000 300,000 200,000
Stockholders' equity:
Cumulative preferred stock, $50
par value, 4% convertible 39 41 46
Cumulative preference stock, no
par value, $2.12 convertible 2,220 2,250 2,369
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 28,028 26,217 30,260
Retained earnings 2,744,929 2,654,122 2,450,294
Cumulative translation
adjustments (63,348) (65,890) (31,297)
Treasury stock, at cost (1,162,629) (951,283) (535,964)
Total stockholders' equity 1,872,577 1,988,795 2,239,046
Total liabilities and
stockholders' equity $7,893,389 $8,242,294 $8,155,722
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 1997
(Unaudited)
(Dollars in thousands)
%
1997 1996 Change
Fourth Quarter
Revenue
Business Equipment $852,706 $800,514 7%
Business Services 148,864 127,297 17%
Commercial and Industrial
Financing
Large-Ticket External 46,298 81,139 -43%
Small-Ticket External 72,387 49,713 46%
Total 118,685 130,852 -9%
Total Revenue $1,120,255 $1,058,663 6%
Operating Profit (1)
Business Equipment $212,125 $143,564 48%
Business Services 14,502 10,813 34%
Commercial and Industrial
Financing 26,954 26,516 2%
Total Operating Profit $253,581 $180,893 40%
(1) Operating profit excludes general corporate expenses, income
taxes, and net interest other than that related to finance operations.
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Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 1997
(Dollars in thousands)
%
1997 1996 Change
Year Ended December 31,
Revenue
Business Equipment $3,156,862 $2,955,887 7%
Business Services 557,585 481,517 16%
Commercial and Industrial
Financing
Large-Ticket External 195,369 234,921 -17%
Small-Ticket External 190,648 186,254 2%
Total 386,017 421,175 -8%
Total Revenue $4,100,464 $3,858,579 6%
Operating Profit (1)
Business Equipment $754,589 $620,641 22%
Business Services 50,194 39,590 27%
Commercial and Industrial
Financing 75,510 87,529 -14%
Total Operating Profit $880,293 $747,760 18%
(1) Operating profit excludes general corporate expenses, income
taxes, and net interest other than that related to finance operations.
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U.S. METERS AND REGISTERS (1)
PLACEMENTS
(UNAUDITED)
Number Change from Prior Year
Year In Service Number Percent
1971 544,042 23,842 4.6%
1972 565,835 21,793 4.0
1973 596,126 30,291 5.4
1974 625,104 28,978 4.9
1975 643,630 18,526 3.0
1976 680,007 36,377 5.7
1977 717,036 37,029 5.4
1978 763,095 46,059 6.4
1979 807,337 44,242 5.8
1980 841,980 34,643 4.3
1981 875,386 33,406 4.0
1982 892,626 17,240 2.0
1983 923,521 30,895 3.5
1984 967,554 44,033 4.8
1985 1,009,319 41,765 4.3
1986 1,045,795 36,476 3.6
1987 1,075,496 29,701 2.8
1988 1,124,876 49,380 4.6
1989 1,160,084 35,208 3.1
1990 1,182,160 22,076 1.9
1991 1,186,504 4,344 0.4
1992 1,206,394 19,890 1.7
1993 1,236,328 29,934 2.5
1994 1,269,000 32,672 2.6
1995 1,305,480 36,480 2.9
1996 1,286,395 (19,085) (1.5)
1997 1,362,529 76,134 5.9
(1) Includes postage meters, UPS registers and tax meters.
Contact:
Sheryl Y. Battles
Exec. Director, External Affairs
(203) 351-6808
Financial -- Michael Monahan
Director, Investor Relations
(203) 351-6349
Website -- www.pitneybowes.com