<< Back
Pitney Bowes Announces First Quarter Results
STAMFORD, Conn.--(BUSINESS WIRE)--April 30, 2007--Pitney Bowes Inc. (NYSE:PBI) today reported first quarter 2007 financial results.
Revenue increased four percent to $1.4 billion and earnings per share from continuing operations grew to $.66 per diluted share.
The company generated $220 million in cash from operations during the quarter. Free cash flow was $155 million. The company used $90 million to repurchase 1.9 million of its shares during the quarter and has $351 million of remaining authorization for future share repurchases. The company's total debt decreased by $22 million during the quarter.
Commenting on the quarter, Chairman and CEO Michael J. Critelli noted, "The underlying trends in our business remain solid. However, our revenue growth this quarter was softer than anticipated due to delays in orders for mailing equipment and software in the U.S. and weaker sales in Europe. We are confident about our performance going forward, especially since the recently approved U.S. postal rate case is currently providing stimulus for growth, and as finally approved, is more favorable than we anticipated at the beginning of the year. We remain comfortable with our outlook for the year."
In addition Mr. Critelli said, "We took another step this quarter to further position the company for sustainable growth. We announced our acquisition of MapInfo, our largest transaction to date, which continues to build our portfolio in the information-based software market. This acquisition enhances and expands our capabilities in fast growing location intelligence solutions, which uses information such as geographic coordinates to help businesses market, assess risk and manage assets."
Business Segment Results
Mailstream Solutions includes worldwide revenue and related expenses from the sale, rental, and financing of mail finishing, mail creation, shipping, and production mail equipment; supplies; mailing and multi-vendor support services; payment solutions; and mailing and customer communication software.
In the first quarter, Mailstream Solutions revenue increased three percent to $1.0 billion and earnings before interest and taxes (EBIT) increased five percent to $299 million, when compared with the prior year.
Within Mailstream Solutions:
U.S. Mailing operations revenue was flat for the quarter at $576 million, while EBIT grew five percent to $242 million. Revenue comparisons for the quarter were affected by two factors. First, as noted previously, the prior year included postal rate case revenue. Second, customers delayed placing orders due to uncertainties about the content and timing of the new rate case. Since the approval and publication of the new postal rates on March 19, the company is experiencing a strong pickup in orders. The segment's EBIT margin increased during the quarter due to favorable product margins, growth in supplies and payment solutions, and benefits from productivity initiatives.
International Mailing revenue grew eight percent to $258 million while EBIT increased two percent to $46 million. International Mailing revenue benefited from favorable foreign currency translation, double-digit growth in supplies, and placements of mailing equipment with small businesses. This growth was partially offset by lower sales of mailing equipment in the U.K. In addition, incremental investments to expand marketing channels in Europe affected International Mailing's EBIT margin.
Worldwide revenue for Production Mail grew seven percent to $125 million and EBIT increased 117 percent to $8 million. Revenue grew from broad-based equipment placements in the U.S., but was partially offset by lower sales in Europe. The segment's EBIT margin benefited from the positive mix of higher margin equipment sales in the U.S.
Software revenue increased three percent to $43 million, while EBIT declined 45 percent to $2 million. Revenue growth for the quarter was affected by delays in signing several large contracts. Also, the segment's EBIT margin was impacted by continued investments in expanding sales and marketing channels to drive long-term growth and profitability.
Mailstream Services includes worldwide revenue and related expenses from facilities management contracts, reprographics, document management, and other value-added services for targeted customer markets; mail services operations, which include presort mail services and international outbound mail services; and marketing services.
For the quarter, Mailstream Services reported revenue growth of six percent to $412 million and EBIT growth of three percent to $35 million, versus the prior year.
Within Mailstream Services:
Management Services revenue increased two percent to $273 million for the quarter while EBIT increased one percent to $21 million. Revenue comparisons for the quarter were helped by favorable currency translation, but adversely affected by large non-recurring print contracts in the prior year.
Mail Services revenue grew 11 percent to $104 million and EBIT grew 20 percent to $14 million. Revenue growth was driven by both presort and international mail services, while EBIT benefited from the ongoing successful integration of new sites and increased operating efficiencies.
Marketing Services revenue increased 32 percent to $35 million, while EBIT declined 75 percent to $1 million. The segment's results benefited from recent acquisitions and the continued expansion of marketing services programs, but were adversely affected by lower revenue in the company's motor vehicle registration services.
Outlook
The company anticipates second quarter revenue growth in the range of eight to 11 percent and revenue growth in the range of seven to 10 percent for the full year.
The company expects earnings per share from continuing operations on a Generally Accepted Accounting Principles (GAAP) basis in the range of $0.66 to $0.70 for the second quarter and $2.85 to $2.93 for the full year. Excluding the effect of acquisition purchase accounting for MapInfo, the company expects adjusted earnings per share from continuing operations in the range of $0.68 to $0.72 for the second quarter and continues to expect $2.90 to $2.98 for the full year.
2Q07 2Q06 Full Year 2007 Full Year 2006
----------------------------------------------------------------------
Adjusted EPS $0.68 to $0.72 $0.64 $2.90 to $2.98 $2.69
Percent 6% to 13% 8% to 11%
Change
----------------------------------------------------------------------
MapInfo
Purchase
Accounting ($0.02) N/A ($0.05) N/A
----------------------------------------------------------------------
Restructuring N/A ($0.01) N/A ($0.10)
----------------------------------------------------------------------
Tax Reserve
Increase N/A ($0.09) N/A ($0.09)
----------------------------------------------------------------------
Other Income N/A N/A N/A $0.01
----------------------------------------------------------------------
GAAP EPS $0.66 to $0.70 $0.54 $2.85 to $2.93 $2.51
Percent 22% to 30% 14% to 17%
Change
----------------------------------------------------------------------
Management of Pitney Bowes will discuss the company's results in a broadcast over the Internet today at 8:00 a.m. EDT. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the company's web site at www.pb.com/investorrelations.
Pitney Bowes engineers the flow of communication. The company is a $5.8 billion global leader of mailstream solutions headquartered in Stamford, Connecticut. For more information about the company, its products, services and solutions, visit www.pitneybowes.com.
Pitney Bowes has presented in this earnings release diluted earnings per share on an adjusted basis.. Also, management has included a presentation of free cash flow on an adjusted basis and earnings before interest and taxes (EBIT). 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. The company's financial results are reported in accordance with generally accepted accounting principles (GAAP). However, earnings per share and free cash flow results are adjusted to exclude the impact of special items such as restructuring charges, accounting adjustments and write downs of assets, which materially impact the comparability of the company's results of operations. Restructuring charges are infrequent or episodic charges. Although they represent actual expenses to the company, these episodic charges might mask the periodic income and financial and operating trends associated with our business. The use of free cash flow has limitations. GAAP cash flow has the advantage of including all cash available to the company after actual expenditures for all purposes. Free cash flow permits a shareholder insight into the amount of cash that management could have available for discretionary uses if it made different decisions about employing its cash. It adjusts for long-term commitments such as capital expenditures, as well as special items like cash used for restructuring charges, unusual tax payments and contributions to its pension funds. Of course, these items use cash that is not otherwise available to the company and are important expenditures. Management compensates for these limitations by using a combination of GAAP cash flow and free cash flow in doing its planning.
The adjusted financial information and certain financial measures such as EBIT are intended to be more indicative of the ongoing operations and economic results of the company. EBIT excludes interest payments and taxes, both cash items, and as a result, has the effect of showing a greater amount of earnings than net income. The company uses EBIT, in addition to net income, for purposes of measuring the performance of its unit management team. The interest rates and tax rates applicable to the company generally are outside the control of management, and it can be useful to judge performance independent of those variables.
The adjusted financial information should be viewed as a supplement to, rather than a replacement for, the financial results reported in accordance with 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 www.pb.com/investorrelations in the Investor Relations section.
The information contained in this document is as of April 30, 2007. Quarterly results are preliminary and unaudited. This document contains "forward-looking statements" about our expected future business and financial performance. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," and similar expressions may identify forward-looking statements. For us forward-looking statements include, but are not limited to, statements about possible restructuring charges and our future guidance, including our expected revenue in the second quarter and full year 2007, and our expected diluted earnings per share for the second quarter and for the full year 2007. 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: negative developments in economic conditions, including adverse impacts on customer demand, 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 2006 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 dispositions.
Note: Consolidated statements of income for the three months ended March 31, 2007 and 2006, and consolidated balance sheets at March 31, 2007 and December 31, 2006 are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
----------------------------------------------------------------------
(Dollars in thousands, except per share data)
Three Months Ended March 31,
-----------------------------
2007 2006
--------------- -------------
Revenue from:
Equipment sales $ 293,610 $ 302,757
Supplies 100,302 82,811
Software 43,082 41,995
Rentals 188,070 196,812
Financing 190,580 178,145
Support services 186,304 170,766
Business services 412,289 388,360
--------------- -------------
Total revenue 1,414,237 1,361,646
--------------- -------------
Costs and expenses:
Cost of equipment sales 148,256 152,980
Cost of supplies 26,123 20,608
Cost of software 11,548 10,179
Cost of rentals 42,421 43,539
Cost of support services 105,504 96,296
Cost of business services 323,651 306,324
Selling, general and administrative 425,402 417,663
Research and development 43,569 41,535
Restructuring charge - 5,597
Interest, net 56,727 53,569
--------------- -------------
Total costs and expenses 1,183,201 1,148,290
--------------- -------------
Income from continuing operations
before income taxes 231,036 213,356
Provision for income taxes 79,706 73,580
Minority interest 4,746 2,917
--------------- -------------
Income from continuing operations 146,584 136,859
Discontinued operations (1,788) 16,669
--------------- -------------
Net income $ 144,796 $ 153,528
=============== =============
Basic earnings per share
Continuing operations $ 0.67 $ 0.61
Discontinued operations (0.01) 0.07
--------------- -------------
Net income $ 0.66 $ 0.68
=============== =============
Diluted earnings per share
Continuing operations $ 0.66 $ 0.60
Discontinued operations (0.01) 0.07
--------------- -------------
Net income $ 0.65 $ 0.67
=============== =============
Average common and potential common
shares outstanding 223,382,724 228,921,497
=============== =============
Note: 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 03/31/07 12/31/06
------------ ------------ ------------
Current assets:
Cash and cash equivalents $ 232,245 $ 239,102
Short-term investments, at cost which
approximates market 63,770 62,512
Accounts receivable, less allowances:
03/07 $43,459; 12/06 $50,052 747,533 744,073
Finance receivables, less allowances:
03/07 $ 41,748; 12/06 $ 45,643 1,392,992 1,404,070
Inventories 248,617 237,817
Other current assets and prepayments 228,745 231,096
------------ ------------
Total current assets 2,913,902 2,918,670
------------ ------------
Property, plant and equipment, net 605,962 612,640
Rental property and equipment, net 502,095 503,911
Long-term finance receivables, less
allowances:
03/07 $ 34,826; 12/06 $ 36,856 1,518,482 1,530,153
Investment in leveraged leases 210,684 215,371
Goodwill 1,812,022 1,791,157
Intangible assets, net 363,511 365,192
Other assets 547,845 543,326
------------ ------------
Total assets $ 8,474,503 $ 8,480,420
============ ============
Liabilities and stockholders' equity
---------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities $ 1,534,864 $ 1,677,501
Income taxes payable 91,376 112,930
Notes payable and current portion of
long-term obligations 577,361 490,540
Advance billings 527,881 465,862
------------ ------------
Total current liabilities 2,731,482 2,746,833
------------ ------------
Deferred taxes on income 517,302 356,310
Long-term debt 3,738,074 3,847,617
Other noncurrent liabilities 436,980 446,306
------------ ------------
Total liabilities 7,423,838 7,397,066
------------ ------------
Preferred stockholders' equity in a
subsidiary company 384,165 384,165
Stockholders' equity:
Cumulative preferred stock, $50 par
value, 4% convertible 7 7
Cumulative preference stock, no par
value, $2.12 convertible 1,059 1,068
Common stock, $1 par value 323,338 323,338
Capital in excess of par value 241,149 235,558
Retained earnings 4,127,834 4,140,128
Accumulated other comprehensive
income (117,773) (131,744)
Treasury stock, at cost (3,909,114) (3,869,166)
------------ ------------
Total stockholders' equity 666,500 699,189
------------ ------------
Total liabilities and stockholders'
equity $ 8,474,503 $ 8,480,420
============ ============
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
March 31, 2007
(Unaudited)
----------------------------------------------------------------------
(Dollars in thousands)
%
2007 2006 Change
----------- ----------- ------
First Quarter
------------------------
Revenue
---------------------
U.S. Mailing $ 576,246 $ 574,991 -
International Mailing 257,850 239,508 8%
Production Mail 124,770 116,792 7%
Software 43,082 41,995 3%
----------- ----------- ------
Mailstream Solutions 1,001,948 973,286 3%
Management Services 272,659 267,503 2%
Mail Services 104,359 94,099 11%
Marketing Services 35,271 26,758 32%
----------- ----------- ------
Mailstream Services 412,289 388,360 6%
----------- ----------- ------
Total Revenue $1,414,237 $1,361,646 4%
----------- ----------- ------
EBIT (1)
---------------------
U.S. Mailing $ 242,151 $ 231,375 5%
International Mailing 46,266 45,343 2%
Production Mail 7,715 3,563 117%
Software 2,425 4,410 (45%)
----------- ----------- ------
Mailstream Solutions 298,557 284,691 5%
Management Services 20,784 20,531 1%
Mail Services 14,076 11,686 20%
Marketing Services 520 2,100 (75%)
----------- ----------- ------
Mailstream Services 35,380 34,317 3%
----------- ----------- ------
Total EBIT $ 333,937 $ 319,008 5%
----------- ----------- ------
Unallocated amounts:
Interest, net (56,727) (53,569)
Corporate expense (46,174) (46,486)
Restructuring charge - (5,597)
----------- -----------
Income before income taxes $ 231,036 $ 213,356
=========== ===========
(1) Earnings before interest and taxes (EBIT) excludes general
corporate expenses.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share amounts)
Three months ended
March 31,
----------------------
2007 2006
------------ ---------
GAAP income from continuing operations after
income taxes, as reported $146,584 $136,859
Restructuring charge - 3,582
------------ ---------
Income from continuing operations after income
taxes, as adjusted $146,584 $140,441
============ =========
GAAP diluted earnings per share from continuing
operations, as reported $ 0.66 $ 0.60
Restructuring charge - 0.02
------------ ---------
Diluted earnings per share from continuing
operations, as adjusted $ 0.66 $ 0.61
============ =========
GAAP net cash provided by operating activities,
as reported $220,225 $286,234
Capital expenditures (67,571) (83,015)
Reserve account deposits (10,952) (23,300)
Restructuring payments and discontinued
operations 13,407 (12,612)
------------ ---------
Free cash flow, as adjusted $155,109 $167,307
============ =========
Note: The sum of the earnings per share amounts may not equal the
totals above due to rounding.
CONTACT: Pitney Bowes Inc.
Editorial:
Sheryl Y. Battles, VP, Corp. Communications
203-351-6808
Financial:
Charles F. McBride, VP, Investor Relations
203-351-6349
www.pitneybowes.com
SOURCE: Pitney Bowes Inc.