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Pitney Bowes Announces 4th Quarter Results
STAMFORD, Conn., Feb. 2 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE: PBI) today reported fourth quarter and full year 2004 performance that exceeded previous revenue and earnings guidance.
In summarizing the company's financial performance during the quarter, Chairman and CEO Michael J. Critelli noted, "We had an exceptionally strong finish to the year. We enjoyed good demand worldwide for our mailing products and services and our strategy of focusing on targeted services in key vertical markets is proving successful in our management services business. We are pleased that our customers recognize the benefits of our integrated mail and document management products and services as they position themselves for growth."
For the fourth quarter 2004, revenue increased 12 percent to $1.36 billion, substantially above the company's previous revenue guidance of five to seven percent. The results were driven by stronger than expected worldwide demand for the company's mailing systems and services, improving trends in the management services business, and continued weakening of the U.S. dollar.
Net income for the quarter was $82.7 million or $.35 per diluted share versus $.61 per diluted share in the prior year. During the quarter, as previously announced, the company recorded a $13 million after-tax charge resulting from a nationwide settlement of the remaining lawsuits related to an equipment replacement program offered by its leasing subsidiary.
In addition, the company recorded an after-tax restructuring charge of $71 million. The charge included a $30 million non-cash, after-tax charge for the write-off of pre-implementation costs related to the company's decision not to proceed with certain systems development. This decision comes as a result of the company's changing business profile and organizational realignment. Also included were an $18 million after-tax charge for the anticipated closure of a manufacturing facility in Germany and a $23 million after-tax charge for other restructuring initiatives.
During 2005, the company expects to record an after-tax gain of approximately $18 million in connection with the sale of its 22-acre Main Plant site.
Excluding the impact of the charges noted above, the company's fourth quarter adjusted diluted earnings per share was $.71 versus $.66 per diluted share for the prior year on a comparable basis. For the full year 2004, diluted earnings per share from continuing operations was $2.05 versus $2.10 in 2003. Excluding the impact of restructuring charges in both periods and the company's legal settlement in the fourth quarter 2004, adjusted diluted earnings per share from continuing operations was $2.54 in 2004 versus $2.41 in 2003.
Non-core Capital Services financing contributed $.02 per diluted share in the fourth quarter 2004 versus $.04 per diluted share in the fourth quarter 2003. For the full year 2004, diluted earnings per share included $.09 per diluted share from non-core Capital Services compared with $.16 per diluted share for the full-year 2003.
The company generated $217 million in cash from operations during the quarter, bringing the total to $945 million for the full year 2004. Subtracting $317 million in capital expenditures and excluding $66 million in payments associated with the restructuring program, adjusted free cash flow for the full-year 2004 was $694 million.
The company used $25 million to repurchase 556 thousand of its shares during the quarter, bringing the totals for the year to $200 million and 4.7 million shares, for an average price of $42.60 per share. The company has $200 million of remaining authorization for future share repurchases.
The board of directors of the company authorized an increased dividend on its common stock to an annualized rate of $1.24 per share. This is the twenty- third consecutive year that the company has increased the dividend on its common stock.
In the Global Mailstream Solutions Segment, revenue increased 12 percent and earnings before interest and taxes (EBIT) increased eight percent when compared with the prior year. In the U.S., there continued to be strong revenue growth from small business mailing products, supplies, payment solutions and mail services. Mail services operations experienced very strong revenue growth from both existing and acquired sites. Also, the company enjoyed greater than expected demand for its networked digital mailing systems by medium-sized customers.
Outside of the U.S., revenue grew organically at a double-digit pace due primarily to strong growth in Europe, led by excellent results in the UK. This strong performance reflected an increase in production mail equipment placements with large customers and an increase in meter and mailing equipment placements with small businesses. Revenue growth also benefited from favorable foreign currency exchange rates.
In the Global Enterprise Solutions Segment, revenue increased 15 percent and EBIT increased 36 percent versus the prior year.
Pitney Bowes Management Services (PBMS) reported revenue of $273 million for the quarter, an increase of four percent and a significantly greater percentage increase in EBIT when compared with the prior year. Its EBIT margin improved versus the prior quarter and the prior year, helped by a focus on higher margin service offerings and ongoing administrative cost reduction initiatives. During the quarter PBMS experienced strong new business and a continued improvement in transactional reprographic volumes. Also, the consolidation and reduction of business with existing accounts continues to subside.
Document Messaging Technologies (DMT) reported revenue growth of 46 percent to $131 million for the quarter and EBIT grew at a similar rate. These results reflect the continued successful integration of Group 1 Software and ongoing demand for DMT's leading edge, information-based inserting and sortation equipment. Group 1 Software, which provides industry leading document composition and mail hygiene software, experienced strong demand for its software products and services during the quarter.
In the Capital Services Segment, revenue for the quarter declined eight percent and EBIT declined 29 percent due to a smaller asset base. During the quarter, the company announced that it intends to pursue a sponsored spin-off of its external financing business. The new entity would be an independent, publicly traded company consisting of most of the assets in the Capital Services segment, including assets related to Imagistics International, Inc.
In 2005, the company expects revenue growth in the range of nine to eleven percent for the first quarter and seven to nine percent for the full year.
During the year, the company expects to record additional after-tax restructuring charges in the range of $13 million to $26 million, or $.06 to $.11 per diluted share, net of the anticipated gain on the sale of its Main Plant site. These charges relate to the continued realignment and streamlining of the company's worldwide infrastructure requirements.
Including these net restructuring charges, the company expects diluted earnings per share to be in the range of $2.51 to $2.64 for the full year 2005. Excluding these charges, adjusted diluted earnings per share is expected to be in the range of $2.62 to $2.70 for the full year 2005 and in the range of $.60 to $.62 for the first quarter of the year. The company is not able to give quarterly guidance inclusive of restructuring charges at this time because the timing of some of the restructuring activities is uncertain and not completely within our control.
In July of 2005, the company expects to adopt Statement of Financial Accounting Standards No. 123 for share-based payments. The annual impact on diluted earnings per share of this new accounting pronouncement, which is not included in the estimates noted above, is expected to be in the range of $.07 to $.09, which is comparable with 2004.
As noted above, the board of directors declared a quarterly cash dividend of the company's common stock of 31 cents per share, payable March 12, 2005, to stockholders of record on February 18, 2005. The board also declared a quarterly cash dividend of 53 cents per share on the company's $2.12 convertible preference stock, payable April 1, 2005, to stockholders of record on March 15, 2005, and a quarterly cash dividend of 50 cents per share on the company's 4% convertible cumulative preferred stock, payable May 1, 2005 to stockholders of record on April 15, 2005.
Management of Pitney Bowes will discuss the company's financial results in a conference call today scheduled for 8:00 a.m. EST. 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 $5.0 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. 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 believes that interest payments and taxes, though important, do not reflect the management effectiveness as these items are largely outside of their control. In assessing performance, the company uses both EBIT and net income.
This adjusted financial information should not be construed as an alternative to our reported results determined 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 first quarter and full year 2005, and our expected diluted earnings per share for the first 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 2003 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.
Editorial - Sheryl Y. Battles
VP, Corp. Communications
203/351-6808
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003(1) 2004 2003(1)
Revenue from:
Sales $446,768 $384,713 $1,462,967 $1,325,490
Rentals 202,510 198,707 804,351 785,130
Business services 343,284 291,417 1,268,027 1,119,146
Support services 184,863 156,759 682,788 617,800
Core financing 164,987 159,723 640,184 616,414
Non-core financing 19,683 23,698 99,123 112,873
Total revenue 1,362,095 1,215,017 4,957,440 4,576,853
Costs and expenses:
Cost of sales 200,036 180,352 663,584 611,620
Cost of rentals 40,104 42,990 164,074 170,557
Cost of business
services 285,322 240,884 1,046,747 921,027
Cost of support
services 92,998 81,416 353,658 323,279
Cost of non-core
financing - - 13,017 -
Selling, general and
administrative 411,557 361,310 1,511,031 1,400,480
Research and
development 42,272 37,499 159,835 147,262
Restructuring charge 110,780 20,248 157,634 116,713
Other expense
(income) 19,666 (117) 19,666 (117)
Interest, net 44,519 40,381 168,746 164,941
Total costs and
expenses 1,247,254 1,004,963 4,257,992 3,855,762
Income from continuing
operations before
income taxes 114,841 210,054 699,448 721,091
Provision for income
taxes 32,143 66,460 218,922 226,244
Income from continuing
operations 82,698 143,594 480,526 494,847
Discontinued operations - 3,270 - 3,270
Net income $82,698 $146,864 $480,526 $498,117
Basic earnings per share
Continuing operations $0.36 $0.62 $2.08 $2.12
Discontinued operations - 0.01 - 0.01
Net income $0.36 $0.63 $2.08 $2.13
Diluted earnings per share
Continuing operations $0.35 $0.61 $2.05 $2.10
Discontinued operations - 0.01 - 0.01
Net income $0.35 $0.62 $2.05 $2.11
Average common and
potential common
shares outstanding 233,596,974 235,667,044 234,133,211 236,165,024
(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 12/31/04 9/30/04 12/31/03
Current assets:
Cash and cash equivalents $316,217 $346,522 $293,812
Short-term investments, at cost
which approximates market 3,933 3,758 28
Accounts receivable, less
allowances:
12/04 $50,254 9/04 $37,632
12/03 $39,778 567,772 495,414 459,106
Finance receivables, less
allowances:
12/04 $71,001 9/04 $69,382
12/03 $62,269 1,400,593 1,355,727 1,358,691
Inventories 206,697 214,396 209,527
Other current assets and
prepayments 197,874 199,912 192,011
Total current assets 2,693,086 2,615,729 2,513,175
Property, plant and equipment,
net 644,495 680,048 653,661
Rental equipment and related
inventories, net 475,905 458,604 414,341
Property leased under capital
leases, net 3,081 2,243 2,230
Long-term finance receivables,
less allowances:
12/04 $102,074 9/04 $105,089
12/03 $78,915 1,820,733 1,794,556 1,654,419
Investment in leveraged leases 1,585,030 1,554,844 1,534,864
Goodwill 1,411,381 1,298,944 956,284
Intangible assets, net 323,737 289,776 203,606
Other assets 863,132 850,267 958,808
Total assets $9,820,580 $9,545,011 $8,891,388
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $1,475,107 $1,320,799 $1,392,597
Income taxes payable 218,605 205,363 154,799
Notes payable and current
portion of long-term
obligations 1,068,946 1,097,551 728,658
Advance billings 421,819 404,012 370,915
Total current liabilities 3,184,477 3,027,725 2,646,969
Deferred taxes on income 1,771,825 1,760,054 1,659,226
Long-term debt 2,908,894 2,823,286 2,840,943
Other noncurrent liabilities 355,303 405,784 346,888
Total liabilities 8,220,499 8,016,849 7,494,026
Preferred stockholders' equity
in a subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50
par value, 4% convertible 19 19 19
Cumulative preference stock,
no par value, $2.12 convertible 1,252 1,255 1,315
Common stock, $1 par value 323,338 323,338 323,338
Retained earnings 4,243,404 4,223,052 4,057,654
Accumulated other comprehensive
income 135,526 72,674 18,063
Treasury stock, at cost (3,413,458) (3,402,176) (3,313,027)
Total stockholders' equity 1,290,081 1,218,162 1,087,362
Total liabilities and
stockholders' equity $9,820,580 $9,545,011 $8,891,388
Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
December 31, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003(2) Change
Fourth Quarter
Revenue
Global Mailstream Solutions $927,849 $830,800 12%
Global Enterprise Solutions 403,547 350,939 15%
Capital Services 30,699 33,278 (8%)
Total Revenue $1,362,095 $1,215,017 12%
EBIT(1)
Global Mailstream Solutions $285,741 $264,941 8%
Global Enterprise Solutions 37,961 28,007 36%
Capital Services 15,984 22,385 (29%)
Total EBIT 339,686 315,333 8%
Unallocated amounts:
Interest, net (44,519) (40,381)
Corporate expense (49,880) (44,767)
Restructuring charge (110,780) (20,248)
Other (expense) income (19,666) 117
Income before income taxes $114,841 $210,054
(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 Business Segment
December 31, 2004
(Unaudited)
(Dollars in thousands)
%
2004 2003(2) Change
Year to Date
Revenue
Global Mailstream Solutions $3,389,579 $3,143,231 8%
Global Enterprise Solutions 1,426,346 1,279,909 11%
Capital Services 141,515 153,713 (8%)
Total Revenue $4,957,440 $4,576,853 8%
EBIT(1)
Global Mailstream Solutions $1,051,372 $991,812 6%
Global Enterprise Solutions 94,267 81,139 16%
Capital Services 80,883 98,656 (18%)
Total EBIT 1,226,522 1,171,607 5%
Unallocated amounts:
Interest, net (168,746) (164,941)
Corporate expense (181,028) (168,979)
Restructuring charge (157,634) (116,713)
Other (expense) income (19,666) 117
Income before income taxes $699,448 $721,091
(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 Twelve months ended
December 31, December 31,
2004 2003 2004 2003
GAAP income from continuing
operations before income taxes,
as reported $114,841 $210,054 $699,448 $721,091
Restructuring charge 110,780 20,248 157,634 116,713
Legal settlements 19,666 (10,117) 19,666 (10,117)
Contributions to charitable
foundations - 10,000 - 10,000
Income from continuing operations
before income taxes, as adjusted 245,287 230,185 876,748 837,687
Provision for income taxes, as
adjusted 79,107 73,705 282,749 268,216
Income from continuing operations,
as adjusted $166,180 $156,480 $593,999 $569,471
GAAP diluted earnings per share,
as reported $0.35 $0.62 $2.05 $2.11
Income from discontinued
operations - (0.01) - (0.01)
GAAP diluted earnings per share
from continuing operations,
as reported $0.35 $0.61 $2.05 $2.10
Restructuring charge 0.30 0.05 0.43 0.32
Legal settlements 0.05 (0.03) 0.05 (0.03)
Contributions to charitable
foundations - 0.03 - 0.03
Diluted earnings per share from
continuing operations, as
adjusted $0.71 $0.66 $2.54 $2.41
GAAP net cash provided by
operating activities, as
reported $216,821 $175,418 $944,639 $851,261
Capital expenditures (90,757) (71,543) (316,982) (285,681)
Free cash flow 126,064 103,875 627,657 565,580
Payments related to
restructuring charge 21,207 20,997 66,055 62,751
Pension plan investment - 50,000 - 50,000
Contributions related to
charitable foundations - 10,000 - 10,000
Free cash flow, as adjusted $147,271 $184,872 $693,712 $688,331
Note: The sum of the earnings per share amounts may not equal the totals
above due to rounding.
SOURCE Pitney Bowes Inc.
-0- 02/02/2005
/CONTACT: Editorial - Sheryl Y. Battles, VP, Corp. Communications,
+1-203-351-6808, or Financial - Charles F. McBride, VP, Investor Relations,
+1-203-351-6349/
/Web site: http://www.pitneybowes.com
http://www.pb.com/investorrelations /
(PBI)
CO: Pitney Bowes Inc.
ST: Connecticut
IN: CPR HRD STW OFP
SU: ERN CCA
AS
-- NYW019A --
4650 02/02/2005 07:00 EST http://www.prnewswire.com