<< Back
Pitney Bowes Announces Second Quarter Results
STAMFORD, Conn.--(BUSINESS WIRE)--July 30, 2007--Pitney Bowes Inc. (NYSE:PBI) today reported second quarter 2007 financial results.
Revenue increased 11 percent to $1.5 billion compared with the same period last year, reaching the high end of the revenue guidance range of 8 percent to 11 percent.
Income from continuing operations on a Generally Accepted Accounting Principles (GAAP) basis increased 27 percent, when compared to the prior year, to $154 million. As discussed last quarter, income from continuing operations reflects the alignment of MapInfo's accounting treatment for software revenue recognition with the company's policies. Excluding this accounting alignment, adjusted income from continuing operations was $159 million, which was a 10% increase from the prior year.
Earnings per share from continuing operations on a GAAP basis grew 28 percent to $.69 per diluted share from $.54 a year ago. Excluding the accounting alignment for MapInfo, adjusted earnings per share from continuing operations was $.71 per diluted share. This was an 11 percent increase as compared with the prior year's adjusted earnings per share and was at the high end of the company's guidance range of $.68 to $.72.
The company generated $187 million in cash from operations during the quarter. Free cash flow was $155 million. The company used $73 million for dividends and $85 million to repurchase 1.8 million of its shares during the quarter. The remaining authorization for future share repurchases is $266 million.
Commenting on the quarter, President and CEO Murray D. Martin noted, "We are pleased with our strong second quarter performance which underscores our ability to deliver value to shareholders and customers. This quarter's results were led by the U.S. Mailing, Software and Mail Services segments. The U.S. Mailing segment benefited from sales of equipment that help customers comply with the provisions of the recently-enacted U.S. postal rate case, which require that postage be based on shape as well as weight. Our expanding Software business and our Mail Services operations also had excellent results in the quarter. Lower equipment sales in Europe, as well as weak performance in the legal solutions portion of our Management Services segment, partially offset these positive results. We have put in place marketing programs in Europe that we believe will improve the performance for the remainder of the year. At Management Services we had excellent new written business and we are realigning our legal solutions management and operations, which we expect will improve revenue growth and EBIT margins for the remainder of the year."
Mr. Martin noted that other highlights for the quarter included the completion of the acquisition of MapInfo, a leading company in location intelligence solutions, and growth of the company's operations in the Asia-Pacific region.
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 second quarter, Mailstream Solutions revenue increased 12 percent to $1.1 billion and earnings before interest and taxes (EBIT) increased 12 percent to $334 million, when compared with the prior year.
Within Mailstream Solutions:
U.S. Mailing operations revenue grew 12 percent to $633 million, and EBIT grew 12 percent to $262 million. The segment's results for the quarter were favorably impacted by growth in supplies and payment solutions as well as sales of equipment related to shape-based pricing. The company does not anticipate the benefits from shape-based pricing to continue for the remainder of the year. Therefore, the company expects full year revenue growth in U.S. Mailing within a normalized range.
International Mailing revenue grew 1 percent to $252 million while EBIT decreased 14 percent to $37 million. International Mailing revenue growth benefited by about 5 percent from favorable currency translation, but was adversely affected by lower equipment sales and rentals in Europe. The company's continued investments for growth in sales and marketing channels in Europe, as well as expenses related to the company's European back office operations, negatively impacted the segment's EBIT margin.
Worldwide revenue for Production Mail grew 5 percent to $140 million and EBIT increased 19 percent to $18 million. Revenue growth was driven by broad-based equipment placements in the U.S. and the Asia-Pacific region and favorable currency translation, which contributed about 2 percent to growth. However, lower equipment sales in Europe partially offset this growth. The segment's EBIT margin benefited from net legal recoveries in Europe amounting to approximately $3 million.
Software revenue increased 85 percent to $88 million and EBIT increased 226 percent to $17 million. Results for the quarter were driven by the acquisition of MapInfo, which increased revenue by about 57 percent, and strong worldwide demand for the company's software solutions that help customers develop, target, customize, address and print their critical customer communications.
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 cross-border mail services; and marketing services.
For the quarter, Mailstream Services reported revenue growth of 10 percent to $430 million, while EBIT declined 15 percent to $29 million, versus the prior year.
Within Mailstream Services:
Management Services revenue increased 3 percent to $275 million for the quarter while EBIT declined 27 percent to $16 million. The segment's revenue growth for the quarter was helped by acquisitions and favorable currency translation, but adversely affected by non-recurring print contracts in the prior year. The decline in the segment's EBIT margin was due principally to continued investments for growth in sales and marketing channels, weakness in legal solutions, and the lower volume of offsite print contracts.
Mail Services revenue grew 26 percent to $114 million and EBIT grew 40 percent to $13 million. Revenue growth was driven by both presort and cross-border mail services, while EBIT benefited from the ongoing successful integration of new sites and increased operating efficiencies. Additionally, the segment was positively impacted by the recently enacted postal rate case, which increased the worksharing discounts available to large mailers.
Marketing Services revenue increased 22 percent to $40 million, while EBIT declined 83 percent to $1 million. Recent acquisitions and the continued expansion of marketing services programs supported the segment's results, but lower revenue in the company's motor vehicle registration services had an adverse effect on the segment's revenue and EBIT.
Outlook
The company anticipates third quarter revenue growth in the range of 8 percent to 11 percent and revenue growth in the range of 7 percent to 10 percent for the full year.
The company expects earnings per share from continuing operations on a GAAP basis in the range of $0.68 to $0.72 for the third quarter and $2.85 to $2.93 for the full year. Excluding the effect of the accounting alignment for MapInfo, the company expects adjusted earnings per share from continuing operations in the range of $0.70 to $0.74 for the third quarter and continues to expect $2.90 to $2.98 for the full year.
3Q07 3Q06 Full Year 2007 Full Year 2006
----------------------------------------------------------------------
Adjusted EPS $0.70 to $0.74 $0.66 $2.90 to $2.98 $2.69
Percent Change 6% to 12% 8% to 11%
----------------------------------------------------------------------
MapInfo Accounting ($0.02) N/A ($0.05) N/A
----------------------------------------------------------------------
Restructuring N/A ($0.02) N/A ($0.10)
----------------------------------------------------------------------
Tax Reserve
Increase N/A N/A N/A ($0.09)
----------------------------------------------------------------------
Other Income N/A N/A N/A $0.01
----------------------------------------------------------------------
GAAP EPS $0.68 to $0.72 $0.64 $2.85 to $2.93 $2.51
Percent Change 6% to 13% 14% to 17%
----------------------------------------------------------------------
Management of Pitney Bowes will discuss the company's results in a broadcast over the Internet today at 5:00 p.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 $5.9 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 June 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 third quarter and full year 2007, and our expected diluted earnings per share for the third 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 June 30, 2007 and 2006, and consolidated balance sheets at June 30, 2007 and March 31, 2007 are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
----------------------------------------------------------------------
(Dollars in thousands, except per share data)
Three Months Ended June Six Months Ended June 30,
30,
------------------------- -------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenue from:
Equipment sales $ 360,361 $ 319,635 $ 653,971 $ 622,392
Supplies 96,398 82,873 196,700 165,684
Software 88,242 47,640 131,324 89,635
Rentals 180,911 197,226 368,981 394,038
Financing 194,837 174,447 385,417 352,592
Support services 192,773 176,339 379,077 347,105
Business services 429,512 391,050 841,801 779,409
------------ ------------ ------------ ------------
Total revenue 1,543,034 1,389,210 2,957,271 2,750,855
------------ ------------ ------------ ------------
Costs and
expenses:
Cost of equipment
sales 168,958 159,780 317,214 312,760
Cost of supplies 24,725 19,796 50,848 40,404
Cost of software 21,076 11,103 32,624 21,282
Cost of rentals 43,261 42,300 85,682 85,839
Cost of support
services 107,317 98,453 212,821 194,749
Cost of business
services 339,972 303,583 663,623 609,907
Selling, general
and
administrative 488,115 432,531 913,517 850,193
Research and
development 47,104 40,980 90,673 82,516
Interest, net 62,541 55,070 119,268 108,638
Restructuring
charge - 5,041 - 10,638
------------ ------------ ------------ ------------
Total costs and
expenses 1,303,069 1,168,637 2,486,270 2,316,926
------------ ------------ ------------ ------------
Income from
continuing
operations before
income taxes 239,965 220,573 471,001 433,929
Provision for
income taxes 81,588 96,077 161,294 169,657
Minority interest 4,796 3,244 9,542 6,161
------------ ------------ ------------ ------------
Income from
continuing
operations 153,581 121,252 300,165 258,111
Discontinued
operations (1,342) (477,326) (3,130) (460,657)
------------ ------------ ------------ ------------
Net income $ 152,239 $ (356,074) $ 297,035 $ (202,546)
============ ============ ============ ============
Basic earnings per
share
Continuing
operations $ 0.70 $ 0.55 $ 1.37 $ 1.15
Discontinued
operations (0.01) (2.15) (0.01) (2.06)
------------ ------------ ------------ ------------
Net income $ 0.69 $ (1.61) $ 1.35 $ (0.91)
============ ============ ============ ============
Diluted earnings
per share
Continuing
operations $ 0.69 $ 0.54 $ 1.35 $ 1.14
Discontinued
operations (0.01) (2.13) (0.01) (2.03)
------------ ------------ ------------ ------------
Net income $ 0.68 $ (1.59) $ 1.33 $ (0.89)
============ ============ ============ ============
Average common and
potential common
shares
outstanding 222,481,360 224,414,042 222,968,478 226,580,915
============ ============ ============ ============
Note: The sum of the earnings per share amounts may not equal the
totals above due to rounding.
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
June 30, 2007
(Unaudited)
----------------------------------------------------------------------
(Dollars in thousands)
%
2007 2006 Change
----------- ----------- --------
Second Quarter
-------------------------------------
Revenue
---------------------------------
U.S. Mailing $ 633,076 $ 567,766 12%
International Mailing 252,390 249,490 1%
Production Mail 139,814 133,264 5%
Software 88,242 47,640 85%
----------- ----------- --------
Mailstream Solutions 1,113,522 998,160 12%
Management Services 275,052 267,548 3%
Mail Services 114,424 90,749 26%
Marketing Services 40,036 32,753 22%
----------- ----------- --------
Mailstream Services 429,512 391,050 10%
----------- ----------- --------
Total Revenue $1,543,034 $1,389,210 11%
----------- ----------- --------
EBIT (1)
---------------------------------
U.S. Mailing $ 262,108 $ 234,104 12%
International Mailing 36,621 42,379 (14%)
Production Mail 18,225 15,281 19%
Software 16,994 5,207 226%
----------- ----------- --------
Mailstream Solutions 333,948 296,971 12%
Management Services 16,005 21,860 (27%)
Mail Services 12,582 8,970 40%
Marketing Services 619 3,616 (83%)
----------- ----------- --------
Mailstream Services 29,206 34,446 (15%)
----------- ----------- --------
Total EBIT $ 363,154 $ 331,417 10%
----------- ----------- --------
Unallocated amounts:
Interest, net (62,541) (55,070)
Corporate expense (52,748) (50,733)
Restructuring charges - (5,041)
MapInfo purchase accounting (7,900) -
----------- -----------
Income before income taxes $ 239,965 $ 220,573
=========== ===========
(1) Earnings before interest and taxes (EBIT) excludes general
corporate expenses, restructuring charges and the MapInfo
purchase accounting alignment.
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
June 30, 2007
(Unaudited)
----------------------------------------------------------------------
(Dollars in thousands)
%
2007 2006 Change
----------- ----------- ------
Year To Date
--------------------------------------
Revenue
----------------------------------
U.S. Mailing $1,209,322 $1,142,757 6%
International Mailing 510,240 488,998 4%
Production Mail 264,584 250,056 6%
Software 131,324 89,635 47%
----------- ----------- ------
Mailstream Solutions 2,115,470 1,971,446 7%
Management Services 547,711 535,051 2%
Mail Services 218,783 184,847 18%
Marketing Services 75,307 59,511 27%
----------- ----------- ------
Mailstream Services 841,801 779,409 8%
----------- ----------- ------
Total Revenue $2,957,271 $2,750,855 8%
----------- ----------- ------
EBIT (1)
----------------------------------
U.S. Mailing $ 504,259 $ 465,479 8%
International Mailing 82,887 87,722 (6%)
Production Mail 25,940 18,844 38%
Software 19,419 9,617 102%
----------- ----------- ------
Mailstream Solutions 632,505 581,662 9%
Management Services 36,789 42,391 (13%)
Mail Services 26,658 20,656 29%
Marketing Services 1,139 5,716 (80%)
----------- ----------- ------
Mailstream Services 64,586 68,763 (6%)
----------- ----------- ------
Total EBIT $ 697,091 $ 650,425 7%
----------- ----------- ------
Unallocated amounts:
Interest, net (119,268) (108,638)
Corporate expense (98,922) (97,220)
Restructuring charges - (10,638)
MapInfo purchase accounting (7,900) -
----------- -----------
Income before income taxes $ 471,001 $ 433,929
=========== ===========
(1) Earnings before interest and taxes (EBIT) excludes general
corporate expenses, restructuring charges and the MapInfo
purchase accounting alignment.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
----------------------------------------------------------------------
(Dollars in thousands, except per share data)
Assets 06/30/07 03/31/07
-------------------------------------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 251,967 $ 232,245
Short-term investments, at cost which
approximates market 97,842 63,770
Accounts receivable, less allowances:
06/07 $46,736 03/07 $43,459 795,873 747,533
Finance receivables, less allowances:
06/07 $40,923 03/07 $41,748 1,453,391 1,392,992
Inventories 248,588 248,617
Other current assets and prepayments 246,650 228,745
------------ ------------
Total current assets 3,094,311 2,913,902
------------ ------------
Property, plant and equipment, net 626,576 605,962
Rental property and equipment, net 504,213 502,095
Long-term finance receivables, less
allowances:
06/07 $33,179 03/07 $34,826 1,557,005 1,518,482
Investment in leveraged leases 226,824 210,684
Goodwill 2,140,810 1,812,022
Intangible assets, net 492,795 363,511
Other assets 548,341 547,845
------------ ------------
Total assets $ 9,190,875 $ 8,474,503
============ ============
Liabilities and stockholders' equity
--------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,613,887 $ 1,534,864
Income taxes payable 107,202 91,376
Notes payable and current portion of
long-term obligations 1,180,815 577,361
Advance billings 556,004 527,881
------------ ------------
Total current liabilities 3,457,908 2,731,482
------------ ------------
Deferred taxes on income 507,671 517,302
Long-term debt 3,636,998 3,738,074
Other noncurrent liabilities 436,090 436,980
------------ ------------
Total liabilities 8,038,667 7,423,838
------------ ------------
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 1,043 1,059
Common stock, $1 par value 323,338 323,338
Capital in excess of par value 244,700 241,149
Retained earnings 4,207,572 4,127,834
Accumulated other comprehensive income (53,770) (117,773)
Treasury stock, at cost (3,954,847) (3,909,114)
------------ ------------
Total stockholders' equity 768,043 666,500
------------ ------------
Total liabilities and stockholders' equity $ 9,190,875 $ 8,474,503
============ ============
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
June 30, 30,
------------------- ---------------------
2007 2006 2007 2006
--------- --------- ---------- ----------
GAAP income from continuing
operations after income
taxes, as reported $153,581 $121,252 $ 300,165 $ 258,111
Restructuring charge - 3,227 - 6,809
MapInfo Purchase
accounting 5,214 - 5,214 -
Tax settlement - 20,000 - 20,000
--------- --------- ---------- ----------
Income from continuing
operations before income
taxes, as adjusted $158,795 $144,479 $ 305,379 $ 284,920
========= ========= ========== ==========
GAAP diluted earnings per
share from continuing
operations, as reported $ 0.69 $ 0.54 $ 1.35 $ 1.14
Restructuring charge - 0.01 - 0.03
MapInfo Purchase
accounting 0.02 - 0.02 -
Tax settlement - 0.09 - 0.09
--------- --------- ---------- ----------
Diluted earnings per share
from continuing operations,
as adjusted $ 0.71 $ 0.64 $ 1.37 $ 1.26
========= ========= ========== ==========
GAAP net cash provided by
operating activities, as
reported $186,751 $110,110 $ 406,976 $ 396,345
Capital expenditures (60,850) (79,413) (128,421) (162,428)
Restructuring payments and
discontinued operations 8,983 36,003 22,389 23,389
Reserve account deposits 20,456 23,300 9,504 -
--------- --------- ---------- ----------
Free cash flow, as adjusted $155,340 $ 90,000 $ 310,448 $ 257,306
========= ========= ========== ==========
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
or
Financial:
Charles F. McBride, VP, Investor Relations
203-351-6349
www.pitneybowes.com
SOURCE: Pitney Bowes Inc.