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Pitney Bowes Announces Second Quarter Results
STAMFORD, Conn., July 25 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE: PBI) today reported second quarter performance that was driven by continued strong results in its core businesses. Revenue increased 13 percent to $1.36 billion. Net income for the quarter was $139 million or $.60 per diluted share versus $.58 per diluted share in the prior year. Excluding the impact of restructuring charges, the company's second quarter adjusted diluted earnings per share was $.67 versus $.62 in the prior year.
Commenting on the company's financial performance during the quarter, Chairman and CEO Michael J. Critelli noted, "This quarter we enjoyed continued success in executing our strategies for delivering sustainable value. We are particularly pleased with the positive momentum we are experiencing in our core businesses and our expectation for future growth through our strategic acquisitions.
"We are also pleased with the contributions from our strategic acquisitions as they are successfully integrated into our operations. We target acquisitions that allow us to expand in existing or adjacent growth markets that leverage our expertise, provide incremental near-term growth, and position us for stronger growth in the future. The recent acquisition of the marketing services company, Imagitas, Inc, is a good example. This transaction expands our presence in the growing marketing segment of the mailstream, provides immediate added value to our customers and shareholders, and strengthens our ability to provide longer-term value."
The results for the quarter were driven by ongoing strong worldwide demand for the company's mailing systems, mail services, and supplies for its broader base of digital products, as well as acquisitions completed within the prior twelve months.
Excluding the impact of restructuring charges, earnings before interest and taxes (EBIT) was $287 million and grew by 12 percent versus the second quarter of 2004. The growth in EBIT enabled the company to offset an increase in interest expense and a higher tax rate during the quarter compared with the prior year.
During the quarter, the company took several actions as part of its previously announced restructuring program and recorded after-tax charges of $17 million or $.07 per diluted share.
The company continues to pursue the spin-off of most of its Capital Services business, which contributed approximately $.04 per diluted share in the second quarter 2005, about equal to the contribution in the prior year.
The company generated $22 million in cash from operations during the quarter. Adjusted free cash flow was $167 million. Adjusted free cash flow reflects cash from operations after subtracting capital expenditures and excluding the effects from the company's restructuring program and a $200 million bond posted with the Internal Revenue Service (IRS). The company posted the bond in order to stop interest from accruing as we dispute potential tax liabilities.
The company purchased approximately two million of its common shares during the quarter for $85 million and has $51 million of remaining authorization for future share repurchases.
Effective as of the beginning of the year, the company revised its segments to reflect its product-based businesses separately from its service-based businesses. Global Mailstream Solutions includes worldwide revenue and related expenses from the sale, rental and financing of production mail and inserting equipment, mail finishing, mail creation and shipping equipment, related supplies and maintenance services, mailing and customer communication software and postal payment solutions.
During the quarter, Global Mailstream Solutions revenue increased 12 percent to $951 million and EBIT increased nine percent to $285 million, when compared with the prior year.
In the U.S., the quarter's revenue growth was favorably impacted by continued strong demand for networked digital mailing systems, especially for small and mid-sized systems, and for supplies for digital products. The quarter's results also included higher revenue from Document Messaging Technologies that was driven by the contribution of Group 1 Software, which was acquired in July 2004.
Outside of the U.S., revenue again grew at a double-digit rate. This reflected good revenue growth in virtually all of the company's markets, with the UK, Canada and Germany achieving significant revenue growth on a local currency basis. These results were based on strong demand for digital mailing systems, which are continuing to be introduced outside of the U.S., good growth in mailing equipment placements with small businesses, and increased supplies for digital products. In addition, revenue growth for the quarter benefited from the fourth-quarter 2004 acquisition of Groupe Mag and favorable foreign currency translation.
Global Business Services includes worldwide revenue and related expenses from facilities management contracts, reprographics, document management, and other value-added services to key vertical markets, and mail services operations, which include presort mail services, international outbound mail services and direct mail marketing services.
For the quarter, Global Business Services reported revenue growth of 20 percent to $369 million and EBIT growth of 46 percent to $23 million compared with the prior year.
The company's management services operation reported three percent revenue growth and double-digit EBIT growth for the quarter consistent with the ongoing focus on higher value service offerings and administrative cost reduction. The integration of Compulit, the litigation support business acquired last quarter to grow capabilities within the legal vertical market, continues to go well.
Mail services revenue more than doubled versus the prior year as a result of continued expansion into additional sites, growth in its customer base, and the acquisition of Imagitas during the quarter. EBIT margins improved versus the prior quarter and were comparable to the prior year as the company continued to invest in the expansion of its presort and international mail network and integrate recently acquired sites.
Capital Services revenue for the quarter declined 20 percent to $41 million and EBIT declined two percent to $26 million.
The quarter's EBIT was favorably impacted by the sale of assets in the portfolio. Earlier in the year, the company announced that it had entered into a definitive agreement with Cerberus Capital Management, L.P. for a sponsored spin-off of the Capital Services external leasing business. Subject to customary regulatory approvals, the new entity will be an independent, publicly traded company consisting of most of the assets in the Capital Services segment.
For the full year, the company expects to record net after-tax restructuring charges in the range of $13 million to $26 million, or $.06 to $.11 per diluted share, net of the after-tax gain on the sale of its Main Plant site, completed in the first quarter 2005. The restructuring charges relate to the continued realignment and streamlining of the company's worldwide infrastructure requirements. The timing of some of these restructuring activities is uncertain and not completely within the company's control.
For the full year, the company expects revenue growth in the range of nine to 11 percent and diluted earnings per share in the range of $2.52 to $2.64. Excluding the impact of net restructuring charges and a charitable contribution made in the first quarter, the company expects adjusted diluted earnings per share in the range of $2.66 to $2.72.
The company anticipates third quarter revenue growth in the range of 10 to 12 percent and diluted earnings per share in the range of $.57 to $.65. Excluding the impact of restructuring charges, the company expects adjusted diluted earnings per share in the range of $.65 to $.67.
Management of Pitney Bowes will discuss the company's results in a conference call today at 5:00 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.pb.com/investorrelations.
Pitney Bowes engineers the flow of communication. The company is a $5.3 billion global leader of integrated mail and document management solutions headquartered in Stamford, Connecticut. For more information about the company, its products, services and solutions, visit http://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, the earnings per share and free cash flow results are adjusted to exclude the impact of special items such as restructuring charges and write downs of assets, which materially impact the comparability of the company's results of operations. Restructuring charges often reflect retooling of the business in an episodic way. Although they represent actual expenses to the company, these episodic charges might mask the periodic income associated with our business had there not been a retooling. 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 adds back long-term commitments such as capital expenditures, as well as special items like cash used for restructuring charges. Of course, each of these items uses 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 http://www.pb.com/investorrelations in the Investor Relations section.
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," "anticipates," "intends" and other similar words. Such forward-looking statements include, but are not limited to, statements about possible restructuring charges and our future guidance, including our expected revenue in the third quarter and full year 2005, and our expected diluted earnings per share for the third quarter and for the full year 2005. 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, 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 2004 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 business spin-offs. 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 months ended June 30, 2005 and 2004, and consolidated balance sheets at June 30, 2005, March 31, 2005, and June 30, 2004, are attached.
Contacts: Editorial - Sheryl Y. Battles
VP, Corp. Communications
203/351-6808
Website - http://www.pitneybowes.com
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 (1) 2005 2004 (1)
Revenue from:
Sales $386,587 $338,442 $768,014 $669,802
Rentals 205,494 200,635 407,135 402,073
Financing 161,387 147,993 318,662 296,222
Support services 197,297 159,946 392,231 318,359
Business services 368,529 307,576 717,632 610,367
Capital services 40,880 51,309 74,288 81,000
Total revenue 1,360,174 1,205,901 2,677,962 2,377,823
Costs and expenses:
Cost of sales 171,289 151,918 339,066 311,293
Cost of rentals 43,969 43,077 86,286 84,777
Cost of support services 102,997 85,114 203,171 170,737
Cost of business
services 299,297 252,690 588,139 498,582
Cost of capital services - 13,017 - 13,017
Selling, general and
administrative 415,659 364,440 824,043 725,259
Research and development 40,295 38,930 81,844 74,934
Restructuring 26,402 16,229 10,562 31,272
Charitable contribution - - 10,000 -
Interest, net 50,414 42,538 97,230 83,983
Total costs
and expenses 1,150,322 1,007,953 2,240,341 1,993,854
Income before income
taxes 209,852 197,948 437,621 383,969
Provision for income taxes 70,821 63,230 148,986 122,657
Net income $139,031 $134,718 $288,635 $261,312
Basic earnings per share $0.61 $0.58 $1.25 $1.13
Diluted earnings per share $0.60 $0.58 $1.24 $1.11
Average common and
potential common
shares outstanding 232,500,409 234,122,702 232,993,622 234,521,468
(1) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
Assets 6/30/05 3/31/05 6/30/04
Current assets:
Cash and cash equivalents $276,884 $322,544 $328,282
Short-term investments, at cost
which approximates market 72,836 13,706 1,951
Accounts receivable, less
allowances: 6/05 $50,977
3/05 $49,353 6/04 $38,096 617,066 596,435 480,314
Finance receivables, less
allowances: 6/05 $66,837
3/05 $69,260 6/04 $69,449 1,342,058 1,357,906 1,339,262
Inventories 237,146 224,095 207,950
Other current assets and
prepayments 210,791 201,748 198,011
Total current assets 2,756,781 2,716,434 2,555,770
Property, plant and equipment, net 633,991 638,811 662,011
Rental equipment and related
inventories, net 481,852 487,703 453,855
Property leased under capital leases,
net 2,572 2,897 2,176
Long-term finance receivables, less
allowances: 6/05 $86,360
3/05 $93,240 6/04 $111,111 1,803,482 1,795,644 1,799,073
Investment in leveraged leases 1,558,000 1,551,035 1,541,186
Goodwill 1,609,849 1,437,679 1,003,002
Intangible assets, net 409,112 315,593 208,611
Other assets 906,828 872,924 856,682
Total assets $10,162,467 $9,818,720 $9,082,366
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $1,478,953 $1,419,783 $1,312,469
Income taxes payable 116,290 259,897 187,838
Notes payable and current portion
of long-term obligations 1,459,078 747,268 1,151,359
Advance billings 483,344 466,329 383,856
Total current liabilities 3,537,665 2,893,277 3,035,522
Deferred taxes on income 1,750,902 1,756,189 1,715,412
Long-term debt 2,881,637 3,176,025 2,463,928
Other noncurrent liabilities 347,233 360,657 421,769
Total liabilities 8,517,437 8,186,148 7,636,631
Preferred stockholders' equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par
value, 4% convertible 17 17 19
Cumulative preference stock, no par
value, $2.12 convertible 1,173 1,235 1,268
Common stock, $1 par value 323,338 323,338 323,338
Retained earnings 4,381,273 4,316,613 4,161,616
Accumulated other comprehensive
income 123,156 121,540 38,588
Treasury stock, at cost (3,493,927) (3,440,171) (3,389,094)
Total stockholders' equity 1,335,030 1,322,572 1,135,735
Total liabilities and stockholders'
equity $10,162,467 $9,818,720 $9,082,366
Pitney Bowes Inc.
Revenue and EBIT
By Segment Group
June 30, 2005
(Unaudited)
(Dollars in thousands)
%
2005 2004(2) Change
Second Quarter
Revenue
Global Mailstream Solutions $950,765 $847,016 12%
Global Business Services 368,529 307,576 20%
Capital Services 40,880 51,309 (20%)
Total Revenue $1,360,174 $1,205,901 13%
EBIT (1)
Global Mailstream Solutions $284,810 $261,162 9%
Global Business Services 23,133 15,829 46%
Capital Services 26,024 26,535 (2%)
Total EBIT 333,967 303,526 10%
Unallocated amounts:
Interest, net (50,414) (42,538)
Corporate expense (47,299) (46,811)
Restructuring (26,402) (16,229)
Income before income taxes $209,852 $197,948
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Revenue and EBIT
By Segment Group
June 30, 2005
(Unaudited)
(Dollars in thousands)
2005 2004(2) % Change
Year to Date
Revenue
Global Mailstream Solutions $1,886,042 $1,686,456 12%
Global Business Services 717,632 610,367 18%
Capital Services 74,288 81,000 (8%)
Total Revenue $2,677,962 $2,377,823 13%
EBIT(1)
Global Mailstream Solutions $558,492 $509,237 10%
Global Business Services 41,361 31,656 31%
Capital Services 45,528 47,717 (5%)
Total EBIT 645,381 588,610 10%
Unallocated amounts:
Interest, net (97,230) (83,983)
Corporate expense (89,968) (89,386)
Charitable contribution (10,000) -
Restructuring (10,562) (31,272)
Income before income taxes $437,621 $383,969
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses.
(2) Prior year amounts have been reclassified to conform with the current
year presentation.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
GAAP income before income taxes,
as reported $209,852 $197,948 $437,621 $383,969
Restructuring 26,402 16,229 10,562 31,272
Charitable contribution - - 10,000 -
Income before income taxes, as
adjusted 236,254 214,177 458,183 415,241
Provision for income taxes, as
adjusted 80,326 69,072 155,782 133,914
Income, as adjusted $155,928 $145,105 $302,401 $281,327
GAAP diluted earnings per share,
as reported $0.60 $0.58 $1.24 $1.11
Restructuring 0.07 0.04 0.03 0.09
Charitable contribution - - 0.03 -
Diluted earnings per share, as
adjusted $0.67 $0.62 $1.30 $1.20
GAAP net cash provided by
operating activities,
as reported $21,750 $238,984 $214,109 $513,962
Capital expenditures (68,141) (72,378) (147,680) (146,847)
Free cash flow (46,391) 166,606 66,429 367,115
Restructuring payments 13,234 13,612 34,526 30,164
Charitable contribution - - 10,000 -
IRS bond payment 200,000 - 200,000 -
Free cash flow, as adjusted $166,843 $180,218 $310,955 $397,279
GAAP income before income taxes,
as reported $209,852 $197,948 $437,621 $383,969
Interest, net 50,414 42,538 97,230 83,983
Earnings before interest and taxes
(EBIT) 260,266 240,486 534,851 467,952
Restructuring 26,402 16,229 10,562 31,272
Charitable contribution - - 10,000 -
EBIT, as adjusted $286,668 $256,715 $555,413 $499,224
SOURCE Pitney Bowes
-0- 07/25/2005
/CONTACT: Sheryl Y. Battles, VP, Corp. Communications, +1-203-351-6808,
or Charles F. McBride, VP, Investor Relations, +1-203-351-6349, both of Pitney
Bowes/
/Web site: http://www.pb.com
http://www.pb.com/investorrelations /
(PBI)
CO: Pitney Bowes
ST: Connecticut
IN: OFP
SU: ERN CCA
MJ
-- NYM043 --
7582 07/25/2005 16:15 EDT http://www.prnewswire.com