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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
October 25, 2005, (October 24, 2005)
Date of Report (Date of earliest event reported)
Pitney Bowes Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-3579 06-0495050
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
World Headquarters
1 Elmcroft Road
Stamford, Connecticut 06926-0700
(Address of principal executive offices)
(203) 356-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following information is furnished pursuant to Item 2.02 Disclosure of
"Results of Operations and Financial Condition."
On October 24, 2005, the registrant issued a press release setting forth its
financial results, including consolidated statements of income, supplemental
information, and a reconciliation of reported results to adjusted results for
the three and nine months ended September 30, 2005 and 2004, and consolidated
balance sheets at September 30, 2005, June 30, 2005 and September 30, 2004. A
copy of the press release is attached hereto as Exhibit 99.1 and hereby
incorporated by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release of Pitney Bowes Inc. dated October 24, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pitney Bowes Inc.
October 25, 2005
/s/ B.P. Nolop
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B.P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ S.J. Green
--------------------------------------------
S.J. Green
Vice President - Finance and
Chief Accounting Officer
(Principal Accounting Officer)
EXHIBIT 99.1
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PITNEY BOWES ANNOUNCES THIRD QUARTER RESULTS
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STAMFORD, Conn., October 24, 2005 - Pitney Bowes Inc. (NYSE:PBI) today
reported third quarter performance characterized by strong growth in revenue,
earnings before interest and taxes (EBIT), and earnings per share. Revenue
increased 11 percent to $1.36 billion. EBIT rose 12 percent to $272 million
versus the third quarter of 2004. Net income for the quarter increased six
percent to $144 million or $.62 per diluted share versus $.58 per diluted share
in the prior year. Excluding the impact of restructuring charges, the company's
third quarter adjusted diluted earnings per share was $.66 versus $.63 in the
third quarter of 2004.
Commenting on the company's financial performance during the quarter,
Chairman and CEO Michael J. Critelli noted, "We are pleased with our broad-based
growth in equipment, software, supplies, financing, and services revenue during
the quarter. This reflects our success in executing our strategies for expanded
offerings throughout the mailstream.
"We are also pleased that we were able to grow our earnings per share
despite an increase in interest expense, a higher tax rate, and a reduced
earnings contribution from Capital Services compared with the third quarter of
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 $8
million or $.04 per diluted share.
The company generated $218 million in cash from operations during the
quarter. Free cash flow was $165 million. Free cash flow is equal to cash from
operations less capital expenditures and excludes the effects of the company's
restructuring program.
The company purchased approximately one million of its common shares during
the quarter for $41 million. The Board of Directors approved an additional $300
million authorization for the repurchase of shares over the next twelve to
twenty-four months. The company now has $310 million of remaining authorization
for future share repurchases.
Global 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; support services; payment solutions;
and mailing and customer communication software.
During the quarter Global Mailstream Solutions revenue and EBIT increased
nine percent to $949 million and $286 million, respectively, when compared with
the third quarter in the prior year.
In the U.S., the quarter's revenue growth was favorably impacted by
placements of networked digital mailing systems (especially small and mid-sized
systems), mail creation equipment, and supplies. The quarter's results also
included 26 percent revenue growth from Document Messaging Technologies, driven
by growth from Group 1 software and placements of the industry- leading Advanced
Productivity Systems (APS) and Flexible Productivity Systems (FPS).
Outside of the U.S., revenue grew 13 percent. These results include
increased placements of mailing equipment with small businesses and increased
sales of supplies in Europe. In addition, revenue growth benefited from the
fourth-quarter 2004 acquisition of Groupe Mag and favorable foreign currency
translation. Revenue growth for the quarter was adversely impacted by the timing
of production mail placements in Europe.
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 19
percent to $376 million and EBIT growth of 66 percent to $26 million compared
with the third quarter of the prior year.
The company's management services operation reported a two percent decline
in revenue and an EBIT margin improvement to seven percent. This reflects the
company's focus on enhancing profitability for this business.
Mail services revenue grew 129 percent versus the third quarter last year
as a result of the expansion of its network, growth in customer base, and the
acquisition of Imagitas during the second quarter 2005. EBIT margins were seven
percent, which was an improvement versus last year's third quarter even as the
company continued to invest in the growth of its presort and international mail
network and integrated recently acquired sites. Imagitas expanded its marketing
services for the motor vehicle registration process to a fifth state and
launched a catalog request form as an expanded offering in its move update kit.
Capital Services revenue for the quarter increased three percent to $31
million and EBIT declined 26 percent to $16 million primarily as a result of the
costs associated with the planned spin-off of this business.
Earlier in the year, the company announced that it had entered into a
definitive agreement to effect a sponsored spin-off of most of the Capital
Services assets, which contributed approximately $.03 per diluted share in the
third quarter 2005, about one cent less than the contribution to earnings in the
third quarter of the prior year. 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. The preparation of the regulatory
filings with respect to the new company has taken longer than anticipated.
Consequently, the company now expects the spin-off to occur mid-year 2006.
The anticipated net after-tax restructuring charges for the fourth quarter
are in the range of $5 million to $20 million, or $.02 to $.09 per diluted
share. The restructuring charges relate to the continued realignment and
streamlining of the company's worldwide infrastructure requirements.
The company anticipates fourth quarter revenue growth in the range of five
to seven percent and diluted earnings per share in the range of $.64 to $.73.
Excluding the impact of
restructuring charges, the company expects adjusted diluted earnings per share
in the range of $.73 to $.75.
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 $5.4
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 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 fourth quarter and full year 2005, and our expected
diluted earnings per share for the fourth 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 September 30,
2005 and 2004, and consolidated balance sheets at September 30, 2005, June 30,
2005, and September 30, 2004, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
-----------
(Dollars in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------- -------------------------------------
2005 2004 (1) 2005 2004 (1)
---------------- ----------------- ---------------- -----------------
Revenue from:
Sales $ 394,754 $ 346,397 $ 1,162,768 $ 1,016,199
Rentals 198,894 199,768 606,029 601,841
Financing 159,582 147,599 478,244 443,821
Support services 196,162 177,480 588,393 495,839
Business services 376,409 316,462 1,094,041 926,829
Capital services 30,633 29,816 104,921 110,816
---------------- ----------------- ---------------- -----------------
Total revenue 1,356,434 1,217,522 4,034,396 3,595,345
---------------- ----------------- ---------------- -----------------
Costs and expenses:
Cost of sales 168,228 152,255 507,294 463,548
Cost of rentals 38,975 39,193 125,261 123,970
Cost of support services 103,198 89,923 306,369 260,660
Cost of business services 299,585 262,843 887,724 761,425
Cost of non-core financing - - - 13,017
Selling, general and administrative 421,115 371,056 1,245,158 1,096,315
Research and development 40,029 42,629 121,873 117,563
Restructuring charge 12,918 15,582 23,480 46,854
Charitable Contribution - - 10,000 -
Interest, net 54,144 43,403 151,374 127,386
---------------- ----------------- ---------------- -----------------
Total costs and expenses 1,138,192 1,016,884 3,378,533 3,010,738
---------------- ----------------- ---------------- -----------------
Income before income taxes 218,242 200,638 655,863 584,607
Provision for income taxes 73,943 64,122 222,929 186,779
---------------- ----------------- ---------------- -----------------
Net income $ 144,299 $ 136,516 $ 432,934 $ 397,828
================ ================= ================ =================
Basic earnings per share $ 0.63 $ 0.59 $ 1.89 $ 1.72
================ ================= ================ =================
Diluted earnings per share $ 0.62 $ 0.58 $ 1.86 $ 1.70
================ ================= ================ =================
Average common and potential common
shares outstanding 231,148,496 233,796,993 232,416,998 234,289,313
================ ================= ================ =================
(1) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
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(Dollars in thousands)
Assets 9/30/05 6/30/05 9/30/04
- ------
----------------- ----------------- ---------------
Current assets:
Cash and cash equivalents $ 294,527 $ 276,884 $ 346,522
Short-term investments 50,703 72,836 3,758
Accounts receivable, less allowances:
9/05 $47,726 6/05 $50,977 9/04 $37,632 637,054 617,066 495,414
Finance receivables, less allowances:
9/05 $65,680 6/05 $66,837 9/04 $69,382 1,361,381 1,342,058 1,355,727
Inventories 228,708 237,146 214,396
Other current assets and prepayments 214,087 210,791 199,912
----------------- ----------------- ---------------
Total current assets 2,786,460 2,756,781 2,615,729
----------------- ----------------- ---------------
Property, plant and equipment, net 626,737 633,991 680,048
Rental equipment and related inventories, net 484,600 481,852 458,604
Property leased under capital leases, net 3,667 2,572 2,243
Long-term finance receivables, less allowances:
9/05 $84,057 6/05 $86,360 9/04 $105,089 1,794,908 1,803,482 1,794,556
Investment in leveraged leases 1,574,760 1,558,000 1,554,844
Goodwill 1,623,505 1,609,849 1,298,944
Intangible assets, net 360,585 409,112 289,776
Other assets 900,046 906,828 850,267
----------------- ----------------- ---------------
Total assets $ 10,155,268 $ 10,162,467 $ 9,545,011
================= ================= ===============
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,458,522 $ 1,478,953 $ 1,320,799
Income taxes payable 135,684 116,290 205,363
Notes payable and current portion of
long-term obligations 931,685 1,459,078 1,097,551
Advance billings 467,522 483,344 404,012
----------------- ----------------- ---------------
Total current liabilities 2,993,413 3,537,665 3,027,725
----------------- ----------------- ---------------
Deferred taxes on income 1,787,556 1,750,902 1,760,054
Long-term debt 3,351,732 2,881,637 2,823,286
Other noncurrent liabilities 342,038 347,233 405,784
----------------- ----------------- ---------------
Total liabilities 8,474,739 8,517,437 8,016,849
----------------- ----------------- ---------------
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 1,160 1,173 1,255
Common stock, $1 par value 323,338 323,338 323,338
Retained earnings 4,452,852 4,381,273 4,223,052
Accumulated other comprehensive income 118,121 123,156 72,674
Treasury stock, at cost (3,524,959) (3,493,927) (3,402,176)
----------------- ----------------- ---------------
Total stockholders' equity 1,370,529 1,335,030 1,218,162
----------------- ----------------- ---------------
Total liabilities and stockholders' equity $ 10,155,268 $ 10,162,467 $ 9,545,011
================= ================= ===============
Pitney Bowes Inc.
Revenue and EBIT
Supplemental Information
September 30, 2005
(Unaudited)
-----------
(Dollars in thousands)
%
2005 2004 (2) Change
----------------- ------------------ ------------
Third Quarter
- -------------
Revenue
-------
Global Mailstream Solutions $ 949,392 $ 871,244 9%
Global Business Services 376,409 316,462 19%
Capital Services 30,633 29,816 3%
----------------- ------------------ ------------
Total Revenue $ 1,356,434 $ 1,217,522 11%
================= ================== ============
EBIT (1)
----
Global Mailstream Solutions $ 285,794 $ 262,935 9%
Global Business Services 25,825 15,523 66%
Capital Services 16,266 22,108 (26%)
----------------- ------------------ ------------
Total EBIT 327,886 300,566 9%
Unallocated amounts:
Interest, net (54,144) (43,403)
Corporate expense (42,582) (40,943)
Restructuring charge (12,918) (15,582)
----------------- ------------------
Income before income taxes $ 218,242 $ 200,638
================= ==================
(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
Supplemental Information
September 30, 2005
(Unaudited)
-----------
(Dollars in thousands)
%
2005 2004 (2) Change
----------------- ------------------ ------------
Year to Date
- ------------
Revenue
-------
Global Mailstream Solutions $ 2,835,434 $ 2,557,700 11%
Global Business Services 1,094,041 926,829 18%
Capital Services 104,921 110,816 (5%)
----------------- ------------------ -----------
Total Revenue $ 4,034,396 $ 3,595,345 12%
================= ================== ===========
EBIT (1)
----
Global Mailstream Solutions $ 844,287 $ 772,172 9%
Global Business Services 67,186 47,179 42%
Capital Services 61,794 69,825 (12%)
----------------- ------------------ -----------
Total EBIT 973,267 889,176 9%
Unallocated amounts:
Interest, net (151,374) (127,386)
Corporate expense (132,550) (130,329)
Charitable Contribution (10,000) -
Restructuring charge (23,480) (46,854)
----------------- ------------------
Income before income taxes $ 655,863 $ 584,607
================= ==================
(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 Sept. 30, Nine months ended Sept. 30,
------------------------------- -------------------------------
2005 2004 2005 2004
------------- -------------- -------------- -------------
GAAP income before income taxes, as reported $ 218,242 $ 200,638 $ 655,863 $ 584,607
Restructuring 12,918 15,582 23,480 46,854
Charitable contribution - - 10,000 -
------------- -------------- -------------- -------------
Income before income taxes, as adjusted 231,160 216,220 689,343 631,461
Provision for income taxes, as adjusted 78,593 69,728 234,375 203,642
------------- -------------- -------------- -------------
Income, as adjusted $ 152,567 $ 146,492 $ 454,968 $ 427,819
============= ============== ============== =============
GAAP diluted earnings per share, as reported $ 0.62 $ 0.58 $ 1.86 $ 1.70
Restructuring 0.04 0.04 0.06 0.13
Charitable contribution - - 0.03 -
------------- -------------- -------------- -------------
Diluted earnings per share, as adjusted $ 0.66 $ 0.63 $ 1.96 $ 1.83
============= ============== ============== =============
GAAP net cash provided by operating activities,
as reported $ 218,490 $ 213,856 $ 432,599 $ 727,818
Capital expenditures (67,766) (79,378) (215,446) (226,225)
Restructuring payments 14,396 14,684 48,922 44,848
Charitable contribution - - 10,000 -
IRS bond payment - - 200,000 -
------------- -------------- -------------- -------------
Free cash flow, as adjusted $ 165,120 $ 149,162 $ 476,075 $ 546,441
============= ============== ============== =============
GAAP income before income taxes, as reported $ 218,242 $ 200,638 $ 655,863 $ 584,607
Interest, net 54,144 43,403 151,374 127,386
------------- -------------- -------------- -------------
Earnings before interest and taxes (EBIT) 272,386 244,041 807,237 711,993
Restructuring 12,918 15,582 23,480 46,854
Charitable contribution - - 10,000 -
------------- -------------- -------------- -------------
EBIT, as adjusted $ 285,304 $ 259,623 $ 840,717 $ 758,847
============= ============== ============== =============