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Pitney Bowes Reports Strong Second Quarter Earnings
STAMFORD, Conn.--(BUSINESS WIRE)--July 20, 1999--
Highlights
- 18th Consecutive Quarter of Double-Digit Earnings Per Share
Growth
- Continued Strength in Mailing and Integrated Logistics (MAIL)
Segment
- Decision to Dispose of Mortgage Servicing Unit to Focus on Core
Businesses
Pitney Bowes Inc. (NYSE: PBI) today reported strong second
quarter results with a 21.5-percent increase in diluted earnings per
share from continuing operations to 58 cents. Revenue increased by
nine percent on a consolidated basis to $1.1 billion for the strongest
second quarter growth rate in nine years. Income from continuing
operations grew 19 percent to $157.4 million versus $132.8 million in
the second quarter 1998. The company has now recorded 18 consecutive
quarters of double-digit, year-on-year diluted earnings per share
growth from continuing operations. Net income, including a one-time
charge for discontinued operations attributable to the company's
decision to dispose of its mortgage servicing business, is $129.7
million or 48 cents per diluted share, versus $142.0 million or 51
cents per diluted share in the second quarter 1998.
Chairman and Chief Executive Officer Michael J. Critelli
discussed the company's performance during the quarter: "We are
pleased with this quarter's strong financial performance, which was
led by our Mailing and Integrated Logistics (MAIL) segment. The
segment continues to benefit from demand for our customized mail
creation and full range of shipping solutions, complementing our core
mailing and financing offerings. As a result, we have again
experienced excellent revenue growth and expanding operating profit
margin in our largest business segment."
Adds Mr. Critelli: "The underlying strength of our mailing and
shipping business has allowed us to accelerate our efforts to position
the Office Solutions segment for even greater future profitable
growth."
In segment performance for the quarter, Mailing and Integrated
Logistics posted strong revenue growth of 12 percent and a 22-percent
increase in operating profit. The segment includes revenues and
related expenses from the rental, sale and financing of mailing and
shipping equipment, related supplies and service, and software.
Contributors to growth included:
- The Internet's positive impact on package delivery and direct
mail volumes. Our multi-carrier, shipping and logistics systems
enable customers to rate shop for the most cost-effective and
efficient ways to ship overnight letters and packages with
systems which integrate with enterprise-wide resource planning
systems
- Customized, high-speed production mail equipment used in
Automated Document Factories and high-volume mailrooms
- Advanced, multi-functional mailing systems, such as ParagonTM and
the recently introduced digital GalaxyTM system, which enable
customers to process mid- to high volumes of mail quickly and
conveniently
- Demand for Mail Creation solutions, led by DocuMatchTM ,which
prints and prepares customized, one-to-one marketing materials
The U.S. Postal Service recently honored Pitney Bowes for helping
customers transition to advanced metering technologies by converting
98 percent of its meter unit base to electronic and digital systems.
In fact, with over 40 percent of our meter unit base now digital, the
company continues to lead in delivering the most advanced technologies
to the marketplace, while recognizing excellent supplies revenues and
reduced costs related to supporting new metering systems.
As the inventor of PC-based postage, Pitney Bowes is excited
about the potential benefits this innovative technology will deliver
for certain mailing applications of small businesses and entrepreneurs
who today use stamps. While several other companies are currently
testing products, Pitney Bowes is the only company that has two
versions of the PC-based postage product in the U.S. Postal Service
supervised beta product review and testing process:
- ClickStampTM Plus, that allows customers to print postage via the
computer without a constant connection to the Internet, and
- ClickStampTM Online, which is designed for customers who prefer
to maintain an Internet connection.
The extensive testing process consists of three beta phases with
limited quantities of product available in specific Zip codes. During
the limited launch testing phase, companies will be allowed to place
up to 10,000 units, with a review by the U.S. Postal Service, before
permission is given to distribute another 10,000 units. None of the
companies involved in the testing process have been given a timetable
for the unrestricted, national availability of this product.
The Office Solutions Segment includes Pitney Bowes Office Systems
and Pitney Bowes Management Services. Second-quarter performance in
this segment featured four- percent revenue growth and a five- percent
increase in operating profit.
During the quarter, Management Services revenues grew four
percent as the company continues to focus on profitable growth through
providing high value services, such as business recovery, to both new
and existing customers. The focus on profitability resulted in
double-digit operating profit growth.
Office Systems, featuring Copier and Facsimile, grew revenues
five percent for the quarter. The copier business remains solid,
posting strong sales growth. Additionally, the business continues the
transition from stand-alone analog copiers, to digital, networked
solutions while strengthening the ability to sell to national and
major accounts. Facsimile revenues were helped by strong unit
placements partly offset by ongoing price pressure in the market.
The Capital Services Segment includes primarily asset- and
fee-based income generated by large ticket external assets. During the
quarter, the segment's revenue decreased by two percent while its
operating profit increased five percent. This performance is
consistent with the company's previously announced strategy to shift
from asset-based income by lowering the asset base and concentrating
on fee-based income opportunities.
The results from Mortgage Servicing have been excluded from
continuing operations. Pitney Bowes decided to dispose of Atlantic
Mortgage & Investment Corporation (AMIC) after an extensive review of
various strategic options to determine how best to enhance shareholder
value. This decision will also allow the company to actively market
the business and focus on its core businesses. The company has
recorded a $27.7 million after-tax charge, which includes costs
associated with:
- Net loss from mortgage servicing operations of $2.7 million for
the second quarter primarily attributable to increased
amortization of mortgage servicing rights
- Expected loss of $34.3 million after-tax on the disposal of AMIC
offset by gains of $9.3 million from the company's sale of
Colonial Pacific Leasing Corporation (CPLC) completed in 1998
The company commenced its review of AMIC earlier this year. The
process was consistent with earlier reviews of its financial services
businesses, which resulted in the GATX transaction in 1997 and the
CPLC transaction in 1998. The strategic review was undertaken to
address the changing profile of the mortgage servicing industry, the
dynamic interest rate environment and the potential impact of
fluctuating interest rates and prepayment patterns on the business in
the future.
Mr. Critelli concluded, "This quarter we continued to take
actions that will maximize long-term shareholder value. While we have
decided to exit the mortgage servicing business, the quarter's
performance underscores the ongoing demand for advanced business
messaging solutions worldwide. We will continue to invest in research
and development and provide innovative products and services that
reduce the cost, increase the efficiency and enhance the productivity
of mail and messaging. The outlook for our business remains very
positive."
The company previously announced an 11.6-million share repurchase
program. During the second quarter the company repurchased
approximately 1.9 million shares on the open market under this
program, for a total of 4.1 million shares repurchased year-to-date.
Second quarter 1999 revenue included $546.4 million from sales,
up 11 percent from $492.3 million in the second quarter of 1998;
$418.8 million from rentals and financing, up six percent from $393.8
million; and $140.3 million from support services, up nine percent
from $128.5 million.
Second quarter 1999 net income was $129.7 million, or 48 cents
per diluted share, compared to $142.0 million, or 51 cents per diluted
share, in 1998. Second quarter net income included a $27.7 million
charge, or 10 cents per diluted share related to discontinued
operations, compared to $9.2 million of income, or three cents per
diluted share, in 1998.
For the six-month period ended June 30, 1999 revenue was $2.155
billion, up nine percent from $1.968 billion in 1998; and net income
in 1999 was $272.0 million, or 99 cents per diluted share, compared to
$271.7 million, or 97 cents per diluted share in 1998. The
year-to-date net income included a $24.0 million net after-tax charge,
or nine cents per diluted share, for discontinued operations compared
to $16.6 million of income, or six cents per diluted share, in 1998.
Pitney Bowes is a global provider of informed mail and messaging
management.
The forward-looking statements contained in this news release
involve risks and uncertainties, and are subject to change based on
various important factors including timely development and acceptance
of new products, 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 1998 Form 10-K Annual Report
filed with the Securities and Exchange Commission.
Note: Consolidated statements of income for the three and six months ended June 30, 1999 and 1998 and consolidated balance sheets at June 30, 1999, December 31, 1998, and June 30, 1998 are attached.
Pitney Bowes Inc.
Consolidated Balance Sheets
---------------------------
(Dollars in thousands, except per share data)
(a)
(Unaudited) (Unaudited)
Assets 6/30/99 12/31/98 6/30/98
------ --------- --------- ---------
Current assets:
Cash and cash equivalents $ 132,693 $ 125,684 $ 115,322
Short-term investments, at cost which
approximates market 949 3,302 1,943
Accounts receivable, less allowances:
6/99 $24,983
12/98 $24,665 6/98 $21,883 416,302 382,406 367,409
Finance receivables, less allowances:
6/99 $48,642 12/98 $51,232
6/98 $61,867 1,498,531 1,400,786 1,646,627
Inventories 259,858 266,734 240,045
Other current assets and prepayments 83,173 330,051 282,931
Net assets of discontinued operations 156,507 - -
-------- ------- -------
Total current assets 2,548,013 2,508,963 2,654,277
---------- ---------- ---------
Property, plant and equipment, net 467,013 477,476 491,552
Rental equipment and related
inventories, net 842,176 806,585 823,530
Property leased under
capital leases, net 3,269 3,743 4,080
Long-term finance receivables,
less allowances:
6/99 $76,291 12/98 $79,543
6/98 $77,755 1,954,990 1,999,339 2,327,915
Investment in leveraged leases 962,531 827,579 776,930
Goodwill, net of amortization:
6/99 $51,425 12/98 $47,514
6/98 $44,208 227,874 222,980 208,946
Other assets 454,198 814,374 785,738
Net assets of discontinued operations 313,063 - -
-------- ------- -------
Total assets $7,773,127 $7,661,039 $8,072,968
=========== ========== ==========
Liabilities and stockholders' equity
------------------------------------
Current liabilities:
Accounts payable and
accrued liabilities $ 776,665 $ 898,548 $ 845,562
Income taxes payable 186,279 194,443 139,867
Notes payable and current portion of
long-term obligations 1,273,197 1,259,193 1,761,162
Advance billings 391,103 369,628 376,871
-------- -------- -------
Total current liabilities 2,627,244 2,721,812 3,123,462
---------- ---------- ---------
Deferred taxes on income 1,029,923 920,521 925,837
Long-term debt 1,898,942 1,712,937 1,627,127
Other noncurrent liabilities 352,911 347,670 368,039
-------- -------- -------
Total liabilities 5,909,020 5,702,940 6,044,465
---------- ---------- ---------
Preferred stockholders' equity in a
subsidiary company 310,000 310,097 300,000
Stockholders' equity:
Cumulative preferred stock, $50 par value,
4% convertible 29 34 34
Cumulative preference stock, no par value,
$2.12 convertible 1,945 2,031 2,112
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 11,927 16,173 21,864
Retained earnings 3,208,052 3,073,839 2,892,080
Accumulated other
comprehensive income (85,851) (88,217) (74,630)
Treasury stock, at cost (1,905,333)(1,679,196)(1,436,295)
----------- ----------- ---------
Total stockholders' equity 1,554,107 1,648,002 1,728,503
---------- ---------- ---------
Total liabilities and
stockholders' equity $7,773,127 $7,661,039 $8,072,968
========= ========= =========
(a) Certain prior year amounts have been reclassified to conform
with the current year presentation.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
-------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenue from:
Sales $ 546,370 $ 492,310 $ 1,056,752 $ 942,735
Rentals and financing 418,773 393,825 824,498 774,196
Support services 140,289 128,455 273,506 251,444
--------- --------- ----------- ---------
Total revenue 1,105,432 1,014,590 2,154,756 1,968,375
--------- --------- ----------- ---------
Costs and expenses:
Cost of sales 306,351 289,983 603,070 564,983
Cost of rentals and
financing 117,443 104,355 228,376 206,976
Selling, service and
administrative 373,132 352,916 734,160 683,898
Research and development 27,698 25,065 53,602 48,696
Interest, net 46,938 40,451 92,438 75,948
--------- --------- ----------- ---------
Total costs and
expenses 871,562 812,770 1,711,646 1,580,501
--------- --------- ----------- ---------
Income from continuing
operations before income
taxes 233,870 201,820 443,110 387,874
Provision for income taxes 76,462 69,051 147,131 132,770
--------- --------- ----------- ---------
Income from continuing
operations 157,408 132,769 295,979 255,104
Discontinued operations (27,667) 9,248 (23,967) 16,600
--------- --------- ----------- ---------
Net income $ 129,741 $ 142,017 $ 272,012 $ 271,704
========= ========= =========== =========
Basic earnings per share
Continuing
operations $ 0.58 $ 0.49 $ 1.10 $ 0.92
Discontinued
operations (0.10) 0.03 (0.09) 0.06
--------- --------- ----------- ---------
$ 0.48 $ 0.52 $ 1.01 $ 0.98
========= ========= =========== =========
Diluted earnings per
share
Continuing operations $ 0.58 $ 0.48 $ 1.08 $ 0.91
Discontinued
operations (0.10) 0.03 (0.09) 0.06
--------- --------- ----------- ---------
$ 0.48 $ 0.51 $ 0.99 $ 0.97
========= ========= =========== =========
Average common and
potential common
shares outstanding 273,016,885 279,494,653 274,073,691 281,413,128
=========== =========== =========== ===========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
------ ------ --------
Second Quarter
--------------
Revenue
-------
Mailing and Integrated
Logistics $ 746,952 $ 668,281 12%
Office Solutions 316,753 303,682 4%
Capital Services 41,727 42,627 (2%)
---------- ---------- ------
Total Revenue $1,105,432 $1,014,590 9%
========== ========== ======
Operating Profit (1)
----------------
Mailing and Integrated
Logistics $ 200,654 $ 164,223 22%
Office Solutions 60,656 57,610 5%
Capital Services 12,784 12,202 5%
---------- ---------- ------
Total Operating Profit $ 274,094 $ 234,035 17%
========== ========== ======
(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, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
------- -------- --------
Year to Date
------------
Revenue
-------
Mailing and Integrated Logistics $1,445,581 $1,294,521 12%
Office Solutions 631,333 594,864 6%
Capital Services 77,842 78,990 (1%)
---------- ---------- ------
Total Revenue $2,154,756 $1,968,375 9%
========== ========== ======
Operating Profit (1)
----------------
Mailing and Integrated Logistics $ 375,039 $ 308,630 22%
Office Solutions 119,201 110,069 8%
Capital Services 20,966 20,547 2%
---------- ---------- ------
Total Operating Profit $ 515,206 $ 439,246 17%
========== ========== ======
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
--30--jrw/ny* sdg/ny bh/ny flb/ny
CONTACT: Pitney Bowes Inc.
Media - Sheryl Y. Battles
Exec. Director, External Affairs
(203) 351-6808
Financial - Charles F. McBride
Exec. Director, Investor Relations
(203) 351-6349
Website - www.pitneybowes.com
KEYWORD: CONNECTICUT
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS COMED EARNINGS