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Q1 1999 Earnings
Pitney Bowes Reports 17th Consecutive Quarter of Double-Digit Earnings Per Share Growth
STAMFORD, Conn.--(BUSINESS WIRE)--April 20, 1999--Pitney Bowes Inc. (NYSE: PBI) today announced first quarter results featuring a 15.7-percent growth in diluted earnings per share from continuing operations to 52 cents, and income from continuing operations growth of 12 percent to $142.3 million. This record performance represents the 17th consecutive quarter of double-digit, year-over-year diluted earnings per share growth from continuing operations. Revenue rose 11 percent to $1.1 billion during the quarter, which includes $10 million of revenue from the sale of PROM (memory) chips and scale charts associated with the United States Postal Service rate increase.Pitney Bowes Chairman and Chief Executive Officer Michael J.
Critelli assessed the company's first-quarter performance: "Our first
quarter performance reflects the strength of our core business and our
success in profitable expansion in new and existing markets. We are
pleased that our ongoing focus on enhancing shareholder value
continues to provide excellent financial results such as our
year-over-year improvement in operating and income margins from
continuing operations. We also experienced year-over-year operating
margin improvements in our two largest business segments -- Mailing
and Integrated Logistics and Office Solutions -- even as we continued
to invest in and refine our operations.
"Fortune Magazine's annual rankings provide additional evidence
of Pitney Bowes' consistent growth and superior returns, as we ranked
number one for the third consecutive year in 'profits as a percent of
revenue' in the Computers, Office Equipment Industry segment, and our
'profits as a percent of stockholders' equity' ranked 36 out of the
entire Fortune 500."
The Mailing and Integrated Logistics Segment includes revenues
and related expenses from the rental, sale and financing of mailing
and shipping equipment, related supplies and service, and software.
During the quarter, the segment posted strong revenue growth of 12
percent and a 20-percent increase in operating profit, which included
significant improvements in operating profit from international
operations. Excluding the sales of memory chips and scale charts
related to the U.S. postal rate increase, revenue grew 10 percent. The
market demand for Pitney Bowes' comprehensive portfolio of advanced
mailing and logistics systems for businesses of all sizes remains
strong. The value in providing solutions which address multiple parts
of the end-to-end mailing and shipping cycle -- from creation to
delivery -- was underscored by the contribution of several categories
to the segment's solid performance:
-- Mail Creation, led by the award-winning Pitney Bowes DocuMatch(TM), which prints and prepares customized, one-to-one marketing materials
-- Integrated Logistics, which recently introduced Conquest(TM), a software application for managing the integrated supply chain, and
-- The 3 Series(TM) Desktop Inserting System, which allows low- to mid-volume mailers to automate the collating, folding and inserting of mail.
During the quarter, Pitney Bowes continued to aggressively
leverage the opportunity presented by the U.S. Postal Service
requirement that customers migrate to more advanced technology. As a
result, Pitney Bowes leads the mailing industry in upgrading customers
to more advanced mailing systems, with approximately 95 percent of our
meter unit base now electronic or digital, as compared to 78 percent
of our meter unit base at the end of the first quarter 1998, and 90
percent of our meter unit base at year-end 1998. The company also
continues to be the undisputed leader in digital mailing systems, with
this category comprising almost 40 percent of our meter unit base.
This broadening population of digital meters, in turn, continued to
benefit the segment's performance because of the increasing stream of
recurring supplies revenues that it generates.
The Office Solutions Segment includes Pitney Bowes Office Systems
and Pitney Bowes Management Services. First-quarter performance in
this segment featured an eight percent growth in revenue and a
12-percent increase in operating profit.
During the quarter, Office Systems' revenue grew by eight percent
excluding the impact of foreign currency as operating profits
continued to increase at a double-digit rate. The organization
continues to leverage relationships with Fortune 1000 facsimile
customers to increase the mix of major and national accounts in its
copier base. To this end, the sales and service organizations are
accelerating their transition to support the digital and networked
products and systems these high-end customers require.
Pitney Bowes Management Services' revenue grew nine percent
during the quarter as the company pursued its strategy of disciplined,
profitable expansion, while providing superior customer service. These
efforts, in conjunction with improved operating efficiencies,
continued to drive operating profit growth at a faster pace than
revenue growth. Our primary business challenge continues to center on
account-by-account profitability.
The Mortgage Servicing Segment represents the operations of
Atlantic Mortgage and Investment Corporation (AMIC). In this segment,
revenue grew 39 percent while operating profit decreased 18 percent.
This quarter's performance reflects industry-wide conditions which
resulted in higher rates of mortgage pre-payments and associated
additional amortization costs compared to the first quarter of 1998.
As announced last quarter, the company continues to explore a range of
strategic options to address the changing profile of this business in
a way that maximizes shareholder value.
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 one percent and its
operating profit decreased two percent. The anticipated revenue and
operating profit declines relative to first quarter 1998 are
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.
Mr. Critelli concluded, "The momentum generated by the strength
of our core business, our investments and focus on profitable growth
in 1998, continued during the first quarter of this year. We continue
to deliver advanced technology solutions that increase the impact and
efficiency of mail and messaging with innovations such as: Galaxy(TM),
the first digital system for mid-volume mailers; the Universal
Access(TM) copier system, a technological breakthrough for workers
with disabilities; the Pitney Bowes 2050 facsimile system, with a
revolutionary touch screen user interface; and, ClickStamp(TM), a
PC-based metering system currently in Phase II Beta testing with the
United States Postal Service. This combination of factors underscores
our confidence that continued focus on maximizing customer and
shareholder value is the key to our future success."
As previously announced, the company initiated an 11.6-million
share repurchase program. During the first quarter 1999, the company
repurchased approximately 2.2 million shares on the open market under
this program.
First quarter 1999 revenue included $510.4 million from sales, up
13 percent from $450.4 million in the first quarter of 1998; $438.2
million from rentals and financing, up nine percent from $403.7
million; and $133.2 million from support services, up eight percent
from $123.0 million. Net income for the period was $142.3 million, or
52 cents per diluted share, compared to first-quarter 1998 net income
of $129.7 million, or 46 cents per diluted share.
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 months
ended March 31, 1999 and 1998, and consolidated balance sheets as of
March 31, 1999, December 31, 1998, and March 31, 1998, are attached.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(a)
(Unaudited) (Unaudited)
Assets 3/31/99 12/31/98 3/31/98
Current assets:
Cash and cash equivalents $ 129,687 $ 125,684 $ 117,200
Short-term investments, at
cost which approximates market 1,654 3,302 34,597
Accounts receivable, less
allowances: 3/99 $25,667
12/98 $24,665 3/98 $21,962 419,002 382,406 347,263
Finance receivables, less
allowances: 3/99 $51,114
12/98 $51,232 3/98 $57,519 1,543,328 1,400,786 1,663,483
Inventories 260,727 266,734 241,553
Other current assets and
prepayments 350,659 330,051 376,447
-------- -------- --------
Total current assets 2,705,057 2,508,963 2,780,543
-------- -------- --------
Property, plant and equipment, net 474,985 477,476 495,189
Rental equipment and related
inventories, net 829,470 806,585 799,377
Property leased under capital
leases, net 3,418 3,743 4,219
Long-term finance receivables,
less allowances: 3/99 $78,816
12/98 $79,543 3/98 $74,540 1,941,355 1,999,339 2,473,189
Investment in leveraged leases 841,780 827,579 758,932
Goodwill, net of amortization:
3/99 $49,588 12/98 $47,514
3/98 $42,522 223,213 222,980 204,058
Other assets 823,025 814,374 798,091
-------- -------- --------
Total assets $7,842,303 $7,661,039 $8,313,598
======== ======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $ 830,084 $ 898,548 $ 937,532
Income taxes payable 224,865 194,443 169,777
Notes payable and current
portion of long-term
obligations 1,483,599 1,259,193 1,718,449
Advance billings 393,829 369,628 377,343
-------- -------- --------
Total current liabilities 2,932,377 2,721,812 3,203,101
-------- -------- --------
Deferred taxes on income 949,322 920,521 937,507
Long-term debt 1,710,427 1,712,937 1,626,870
Other noncurrent liabilities 354,801 347,670 368,906
-------- -------- --------
Total liabilities 5,946,927 5,702,940 6,136,384
-------- -------- --------
Preferred stockholders' equity
in a subsidiary company 310,000 310,097 300,000
Stockholders' equity:
Cumulative preferred stock,
$50 par value, 4% convertible 34 34 34
Cumulative preference stock,
no par value, $2.12 convertible 1,976 2,031 2,159
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 13,807 16,173 25,120
Retained earnings 3,146,946 3,073,839 2,811,675
Accumulated other comprehensive
income (88,665) (88,217) (73,387)
Treasury stock, at cost (1,812,060) (1,679,196) (1,211,725)
-------- -------- --------
Total stockholders' equity 1,585,376 1,648,002 1,877,214
-------- -------- --------
Total liabilities and stockholders'
equity $7,842,303 $7,661,039 $8,313,598
======== ======== ========
(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 March 31,
------------------------------
1999 1998
--------- ---------
Revenue from:
Sales $ 510,382 $ 450,425
Rentals and financing 438,223 403,683
Support services 133,217 122,989
--------- ---------
Total revenue 1,081,822 977,097
--------- ---------
Costs and expenses:
Cost of sales 296,719 275,000
Cost of rentals and financing 139,481 118,889
Selling, service and administrative 361,028 330,982
Research and development 25,904 23,631
Interest, net 43,610 35,056
--------- ---------
Total costs and expenses 866,742 783,558
--------- ---------
Income from continuing operations
before income taxes 215,080 193,539
Provision for income taxes 72,809 66,605
--------- ---------
Income from continuing operations 142,271 126,934
Discontinued operations - 2,753
--------- ---------
Net income $ 142,271 $ 129,687
========= =========
Basic earnings per share
Continuing operations $ 0.53 $ 0.45
Discontinued operations - 0.01
--------- ---------
$ 0.53 $ 0.46
========= =========
Diluted earnings per share
Continuing operations $ 0.52 $ 0.45
Discontinued operations - 0.01
--------- ---------
$ 0.52 $ 0.46
========= =========
Average common and potential
common shares outstanding 274,962,244 283,871,448
========= =========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
March 31, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
--------- --------- --------
First Quarter
Revenue
Mailing and Integrated Logistics $ 698,629 $ 626,240 12%
Office Solutions 314,580 291,182 8%
Mortgage Servicing 32,498 23,312 39%
Capital Services 36,115 36,363 (1%)
--------- --------- --------
Total Revenue $1,081,822 $ 977,097 11%
========= ========= ========
Operating Profit (1)
Mailing and Integrated Logistics $ 174,525 $ 144,979 20%
Office Solutions 58,545 52,459 12%
Mortgage Servicing 5,700 6,913 (18%)
Capital Services 8,182 8,345 (2%)
--------- --------- --------
Total Operating Profit $ 246,952 $ 212,696 16%
========= ========= ========
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
CONTACT: Media -- Sheryl Y. Battles
Exec. Director, External Affairs
203/351-6808
or
Financial -- Charles F. McBride
Exec. Director, Investor Relations
203/351-6349
Website -- www.pitneybowes.com