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Pitney Bowes Results on Track for Second Quarter 2003
* Revenue Growth of 5%
* Cash from Operations of $209 Million
* 1.0 Million Shares Repurchased
STAMFORD, Conn., July 21 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE: PBI) today announced second quarter 2003 revenue and earnings performance in line with previous guidance. Commenting on the quarter, Chairman and CEO Michael J. Critelli said, "Our financial results met our expectations and were on target with previous guidance. During the quarter, we continued to make progress and are on track with our strategic imperatives to enhance our core businesses, streamline our infrastructure and execute our growth strategies."
Revenue for the quarter grew five percent to $1.13 billion and net income was $118.9 million or $.50 per diluted share. Excluding an after-tax charge of approximately $21 million, or $.09 per diluted share, as part of a previously announced restructuring program, second quarter diluted earnings per share were $.59. In January this year, the company announced that it would take actions to execute long-term growth strategies, and as a result, expected to record approximately $100 million of after-tax charges over the next two years. Including this quarter's charge, the company has taken a total of approximately $34 million in after-tax charges for this program thus far in 2003. Consistent with its previously announced strategy to exit large-ticket, non-core financing activity, the company's second quarter 2003 earnings per share included $.04 per diluted share from non-core Capital Services operations compared to $.06 per diluted share in the second quarter of 2002.
The company also generated $209 million in cash from operations during the quarter. Subtracting $70 million in capital expenditures and excluding $11 million in payments associated with the restructuring program, free cash flow was $150 million during the quarter. The company repurchased 1.0 million of its shares during the quarter for $40 million, leaving $210 million of authorization for future share repurchases in 2003 and 2004.
In the Global Mailing Segment revenue increased seven percent and operating profit increased five percent. The company achieved these results while increasing research and development spending for the next generation of low-end digital meters, and incurring incremental costs to integrate new PSI Group processing sites. Customer acceptance of the new digital mailing systems and their unique value added services continued to be positive. However, business and economic uncertainty caused some delayed decision making among U.S. customers to consider equipment upgrades or the purchase of new high-end systems.
Non-U.S. revenue within the segment grew at a double-digit rate primarily as a result of favorable foreign currency exchange rates. On a local currency basis Canada again had good revenue and operating profit growth driven by placements of new digital meter systems and high-end production mail systems. France also experienced another quarter of strong revenue and operating profit growth on a local currency basis due to the integration and success of the Secap organization. Some of Europe experienced declining revenue in local currency due to weak economic conditions. Japan and Australia also experienced declining revenue due to economic conditions.
The Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and Document Messaging Technologies (DMT). The segment reported four percent revenue growth while operating profit declined 27 percent versus the prior year.
PBMS reported revenue growth of five percent to $252 million when compared to the prior year, while operating profit declined 26 percent. PBMS improved its operating profit margin from the previous quarter through general and administrative expense reductions and ongoing diversification into other market segments such as federal and state governments. For example, the contract that the company signed to provide mail and document management services to a division of the Department of Justice during the quarter demonstrates the strategic diversification of the management services customer base.
DMT reported revenue of $58 million for the quarter, an increase of one percent from the prior year, with a decline in operating profit. Continued slow placements of high margin equipment and an increase in lower margin service revenue contributed to the decline in operating profit during the quarter. However, compared to first quarter 2003, the operating profit margin improved and customer demand for DMT solutions appears to be increasing.
Total Messaging Solutions, the combined results of the Global Mailing and Enterprise Solutions segments, showed a six percent increase in revenue and a two percent increase in operating profit.
In the Capital Services Segment, revenue for the quarter declined 17 percent and operating profit decreased 11 percent. These results are consistent with the company's previously announced decision to cease the origination of large-ticket, structured, third party financing of non-core assets. Excluding the positive impact of lower interest expense, the earnings before interest and taxes (EBIT) declined by 18 percent compared to prior year. During the quarter, the company liquidated approximately $71 million of its assets held for sale, and continued to pursue the sale of other non-core lease assets on an economically advantageous basis, which resulted in the sale of an additional $52 million of assets from the portfolio during the quarter.
The company expects year-over-year revenue growth for the third quarter and the full year 2003 to be in the range of two to four percent. The company is still finalizing future plans related to previously announced restructuring initiatives, a portion of which will be recorded in the third quarter of 2003. Therefore, earnings guidance is provided excluding the impact of these charges and the impact of any new accounting standards. Diluted earnings per share are expected to be in the range of $.61 to $.63 for the third quarter 2003 and the company is reaffirming previous full year guidance.
In year-over-year comparisons, second quarter 2003 revenue included $327.8 million from sales of equipment and supplies, flat with the prior year; $211.4 million from rentals, up four percent; $135.9 million from core financing, up four percent; $26.6 million from non-core financing down 25 percent; $279.3 million from business services, up 16 percent; and $152.8 million from support services, up seven percent. Net income for the quarter was $118.9 million, or $.50 per diluted share, down 17 percent compared to the second quarter of 2002. Included in net income for the period was a $32 million pre-tax restructuring charge. Excluding the after tax impact of this charge, net income was $139.4 million and diluted earnings per share were $.59 in the second quarter of 2003, equal to the prior year.
For the six-month period ended June 30, 2003, total revenue was $2.22 billion, up four percent compared to 2002. Included in total revenue was $618.7 million from sales of equipment and supplies, down two percent; $425.7 million from rentals, up four percent; $270.3 million from core financing, up four percent; $56.4 million from non-core financing down 21 percent; $551.9 million from business services, up 16 percent; and $301.7 million from support services, up seven percent. Net income for the period was $232.8 million or $0.98 per diluted share down 15 percent compared to 2002. Included in net income for the period was $53 million in pre-tax restructuring charges. Excluding the after tax impact of these charges, net income was $266.9 million and diluted earnings per share were $1.13, an increase of one percent versus the prior year.
Management of Pitney Bowes will discuss the company's financial results in a conference call today scheduled for 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 www.investorrelations.pitneybowes.com.
Pitney Bowes engineers the flow of communication. The company is a $4.4 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 www.pitneybowes.com
Pitney Bowes has presented in this earnings release net income and diluted earnings per share on an adjusted basis. Also, management has included a presentation of free cash flow on an adjusted basis.
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. In general, results are adjusted to exclude the impact of special items of a non-recurring nature, such as restructuring charges and write downs of assets, which materially impact the comparability of the Company's results of operations. 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.
This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with generally accepted accounting principles (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.pitneybowes.com 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 2003, and our expected diluted earnings per share for the third quarter and for the full year 2003. 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 2002 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. 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 and six months ended June 30, 2003 and 2002, and consolidated balance sheets at June 30, 2003, March 31, 2003, and June 30, 2002, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
Revenue from:
Sales $327,804 $327,466 $618,654 $634,268
Rentals 211,403 203,874 425,704 407,657
Core financing 135,931 130,264 270,292 260,965
Non-core financing 26,649 35,328 56,405 70,996
Business services 279,300 241,222 551,920 475,619
Support services 152,791 143,171 301,712 281,328
Total revenue 1,133,878 1,081,325 2,224,687 2,130,833
Costs and expenses:
Cost of sales 147,549 145,948 287,476 292,367
Cost of rentals 43,792 43,148 85,400 86,253
Cost of core
financing 36,804 36,156 71,997 72,642
Cost of non-core
financing 8,973 10,701 20,240 21,777
Cost of business
services 229,529 193,706 452,322 381,557
Cost of support
services 80,863 73,226 159,162 144,829
Selling, general and
administrative 302,123 288,704 597,273 573,769
Research and
development 39,008 36,095 74,759 70,164
Restructuring charge 32,091 -- 53,356 --
Interest, net 40,178 45,327 83,459 90,625
Total costs
and expenses 960,910 873,011 1,885,444 1,733,983
Income before income
taxes 172,968 208,314 339,243 396,850
Provision for income
taxes 54,072 65,211 106,444 124,230
Net income $118,896 $143,103 $232,799 $272,620
Basic earnings per share
Net income $0.51 $0.60 $0.99 $1.13
Restructuring
charge 0.09 -- 0.15 --
Net income excluding
restructuring charge $0.60 $0.60 $1.14 $1.13
Diluted earnings per share
Net income $0.50 $0.59 $0.98 $1.12
Restructuring charge 0.09 -- 0.14 --
Net income excluding
restructuring charge $0.59 $0.59 $1.13 $1.12
Average common and
potential common
shares outstanding 236,136,087 242,968,251 236,421,147 243,733,950
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 6/30/03 3/31/03 6/30/02
Current assets:
Cash and cash equivalents $358,167 $375,653 $240,643
Short-term investments, at cost which
approximates market 7,464 8,411 11,946
Accounts receivable, less allowances:
6/03 $37,560 3/03 $37,191
6/02 $33,392 417,157 428,340 414,322
Finance receivables, less allowances:
6/03 $65,939 3/03 $70,538
6/02 $66,991 1,388,248 1,433,848 1,622,835
Inventories 231,425 230,009 193,533
Other current assets and prepayments 192,679 179,347 161,117
Total current assets 2,595,140 2,655,608 2,644,396
Property, plant and equipment, net 647,682 638,152 554,489
Rental equipment and related
inventories, net 426,996 421,841 450,508
Property leased under capital
leases, net 2,245 2,057 1,006
Long-term finance receivables,
less allowances:
6/03 $77,131 3/03 $80,839
6/02 $66,143 1,637,674 1,651,509 1,780,539
Investment in leveraged leases 1,542,640 1,530,720 1,388,732
Goodwill 911,347 892,096 668,552
Other assets 1,108,596 1,056,956 818,336
Total assets $8,872,320 $8,848,939 $8,306,558
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and
accrued liabilities $1,319,719$1,280,359 $1,280,707
Income taxes payable 170,863 155,301 237,225
Notes payable and current portion
of long-term obligations 582,203 1,533,078 1,459,165
Advance billings 373,697 375,799 339,587
Total current liabilities 2,446,482 3,344,537 3,316,684
Deferred taxes on income 1,556,269 1,522,996 1,284,301
Long-term debt 3,240,110 2,422,424 2,129,027
Other noncurrent liabilities 349,487 353,373 353,638
Total liabilities 7,592,348 7,643,330 7,083,650
Preferred stockholders' equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock,
$50 par value, 4% convertible 19 24 24
Cumulative preference stock,
no par value, $2.12 convertible 1,368 1,417 1,539
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value -- -- 960
Retained earnings 3,930,970 3,889,447 3,788,916
Accumulated other comprehensive
income (40,474) (81,736) (132,796)
Treasury stock, at cost (3,245,249)(3,236,881)(3,069,073)
Total stockholders' equity 969,972 895,609 912,908
Total liabilities and stockholders'
equity $8,872,320 $8,848,939 $8,306,558 Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
Second Quarter
Revenue
Global Mailing $785,885 $737,203 7%
Enterprise Solutions 310,641 299,131 4%
Total Messaging Solutions 1,096,526 1,036,334 6%
Non-core 26,649 35,328 (25%)
Core 10,703 9,663 11%
Capital Services 37,352 44,991 (17%)
Total Revenue $1,133,878 $1,081,325 5%
Operating Profit (1)
Global Mailing $236,094 $225,087 5%
Enterprise Solutions 16,309 22,354 (27%)
Total Messaging Solutions 252,403 247,441 2%
Non-core 12,331 16,123 (24%)
Core 5,427 3,736 45%
Capital Services 17,758 19,859 (11%)
Total Operating Profit 270,161 267,300 1%
Unallocated amounts:
Net interest (corporate interest
expense, net of intercompany
transactions) (26,362) (22,914)
Corporate expense (38,740) (36,072)
Restructuring charge (32,091) --
Income before income taxes $172,968 $208,314
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
Year to Date
Revenue
Global Mailing $1,533,826 $1,449,294 6%
Enterprise Solutions 613,850 590,521 4%
Total Messaging Solutions 2,147,676 2,039,815 5%
Non-core 56,405 70,996 (21%)
Core 20,606 20,022 3%
Capital Services 77,011 91,018 (15%)
Total Revenue $2,224,687 $2,130,833 4%
Operating Profit (1)
Global Mailing $456,671 $426,668 7%
Enterprise Solutions 27,673 39,935 (31%)
Total Messaging Solutions 484,344 466,603 4%
Non-core 24,356 31,503 (23%)
Core 10,498 8,063 30%
Capital Services 34,854 39,566 (12%)
Total Operating Profit 519,198 506,169 3%
Unallocated amounts:
Net interest (corporate interest
expense, net of intercompany
transactions) (52,555) (43,159)
Corporate expense (74,044) (66,160)
Restructuring charge (53,356) --
Income before income taxes $339,243 $396,850
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
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, 2003 June 30, 2003
GAAP income before income taxes, as
reported $172,968 $339,243
Restructuring charge 32,091 53,356
Income before income taxes, as
adjusted 205,059 392,599
Provision for income taxes, as
adjusted 65,625 125,652
Net income, as adjusted $139,434 $266,947
GAAP diluted earnings per share, as
reported $0.50 $0.98
Restructuring charge 0.09 0.14
Diluted earnings per share, as
adjusted $0.59 $1.13
GAAP net cash provided by operating
activities, as reported $208,988 $425,836
Net investment in fixed assets (70,013) (138,355)
Free cash flow 138,975 287,481
Payments related to
restructuring charge 10,887 23,722
Free cash flow excluding
restructuring payments $149,862 $311,203
Three months ended Three months ended
June 30, 2003 June 30, 2002
GAAP Capital Services operating
profit, as reported $17,758 $19,859
Capital Services interest expense 7,333 10,591
Earnings before interest and taxes(EBIT) $25,091 $30,450
Note: The sum of the earnings per share amounts may not equal the totals
above due to rounding.
Editorial - Sheryl Y. Battles
Vice President, External Affairs
203/351-6808
Financial - Charles F. McBride
Exec. Director, Investor Relations
203/351-6349
SOURCE Pitney Bowes Inc.
-0- 07/21/2003
/CONTACT: Editorial - Sheryl Y. Battles, Vice President, External
Affairs, +1-203-351-6808, Financial - Charles F. McBride, Exec. Director,
Investor Relations, +1-203-351-6349, both of Pitney Bowes Inc./
/Web site: http://www.pitneybowes.com http://www.investorrelations.pitneybowes.com /
(PBI)
CO: Pitney Bowes Inc.
ST: Connecticut, Japan, Australia
IN: OFP
SU: ERN CCA MAV
AP
-- NYM137 --
1838 07/21/2003 16:03 EDT http://www.prnewswire.com