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Pitney Bowes Reports Third Quarter Earnings
STAMFORD, Conn.--(BUSINESS WIRE)--Oct. 17, 2000--
-
Meets Revised Earnings Per Share Guidance
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Approximately $160 Million in Free Cash Flow
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Repurchase of 2.9 Million Shares During the Quarter
Pitney Bowes Inc. (NYSE: PBI) today reported third quarter results that included diluted earnings per share of 63 cents. Excluding one-time items from both periods, diluted earnings per share increased nine percent from the third quarter of 1999. Revenue in the quarter grew three percent to $1.1 billion and net income excluding one-time items, rose three percent to $160.6 million. Included as one-time items in the third quarter of 2000 are an after-tax charge of approximately $11 million related to the consolidation of information technology staff and infrastructure, as well as a $12 million tax benefit related to recent state tax law changes. The third quarter of 1999 included a one-time, net after-tax settlement of $29.5 million received from the U.S. Postal Service. The company generated approximately $160 million in free cash flow (defined as cash flow from operations less capital expenditures) during the quarter.
Pitney Bowes Chairman and Chief Executive Officer Michael J. Critelli commented on the third quarter results: "These results are in line with the revised guidance announced earlier this month, and reflect both the successes and challenges we experienced during the third quarter. Our Office Solutions segment reported its fifth consecutive quarter of higher year-over-year revenue growth. However, continuing pricing pressure in the highly competitive copier and facsimile markets has significantly reduced operating profit in the segment despite strong results in Pitney Bowes Management Services. In the Mailing and Integrated Logistics (MAIL) segment, core metering and mail finishing applications performed in line with expectations during the quarter. These results were offset by softer than anticipated results in the mail creation and logistics product lines as the weakening economic environment and slower customer decision-making for the higher-value, more-complex products adversely impacted revenue. This, combined with the sale of the credit card portfolio at the end of the second quarter 2000, resulted in lower than traditional revenue growth for the MAIL segment."
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 services and software. Revenue for the segment grew two percent and operating profit grew 12 percent. Operating profit benefited from improving rental and financing margins in the core mail finishing business.
International Mailing operations had strong local currency growth, particularly in European markets where the company continues to benefit from the changing needs and requirements of posts and businesses alike. However, the negative impact of foreign currency, principally related to the British Pound and the Euro, reduced MAIL segment revenue growth about one percent and consolidated revenue growth slightly less than one percent, compared to the third quarter of 1999.
The Office Solutions Segment includes Pitney Bowes Office Systems and Pitney Bowes Management Services. Even though the segment revenue improved for the fifth consecutive quarter to six percent, operating profit in the quarter declined 23 percent.
Office Systems' revenue grew six percent, while operating profit declined, due in part to significant competitive pricing pressure in the copier and facsimile markets. Margin impacts associated with the ongoing transition to a rental revenue model for large national accounts in the copier business and the relative value of the Yen also negatively impacted operating profit. While pricing pressure remained intense, our strategy for enhancing the business continued to yield benefits, as seen in the strong rental revenue growth for copier fleets in national accounts where established relationships between corporations and the facsimile account teams are being successfully leveraged. Marc C. Breslawsky, President and Chief Operating Officer commented: "The office products market in which Office Systems participates is obviously facing unprecedented competitive challenges. However, because of our existing customer relationships, excellent product line and financial flexibility, we believe we are uniquely positioned to take advantage of the opportunities that still exist in this market. We will do what it takes to position Office Systems to add shareholder value."
Pitney Bowes Management Services delivers advanced mailing, reprographic, document management and other high value outsourcing services to leading financial, legal and technology firms. Its strategy to pursue disciplined profitable growth once again produced double-digit operating profit growth as year-over-year revenue increased by seven percent, the fourth consecutive quarter of improved revenue growth.
Total Messaging Solutions, the combined results of the MAIL and Office Solutions segments, reported three-percent growth in revenue and four-percent growth in operating profit.
The Capital Services Segment includes primarily asset- and fee-based income generated by large ticket non-core asset transactions. This quarter, consistent with the company's stated strategy to concentrate on fee-based income opportunities, segment revenue decreased six percent, and operating profit increased 15 percent.
Mr. Critelli continued, "Our core business model remains strong, allowing us to continue to make focused investments for the future, while still generating substantial free cash flow. In fact, we generated approximately $160 million in free cash flow during the quarter of which approximately $73 million was distributed to shareholders in the form of dividends. We expect to generate similar levels of free cash flow in the future, which will be used for investments, dividends and share repurchases."
We invested about $30 million in Internet and new business initiatives during the quarter. In addition, the company incurred an after-tax charge of approximately $11 million (approximately $19 million pre-tax) or $0.04 per diluted share in the quarter primarily related to one-time expenses for the consolidation of information technology staff and infrastructure.
During the third quarter, the company also repurchased 2.9 million shares under an authorization to buy up to $300 million worth of shares of common stock. This resulted in a total of 12.9 million shares repurchased during the first nine months of 2000 and leaves approximately $126 million of authorization available for future share repurchase.
Third quarter 2000 revenue included $551.9 million from sales, up four percent from $529.6 million in the third quarter of 1999; $424.0 million from rentals and financing, up one percent from $420.8 million; and $145.4 million from support services, up four percent from $139.4 million.
Third quarter 2000 net income was $161.4 million, or 63 cents per diluted share, compared to $186.1 million, or 69 cents per diluted share, in 1999. Third quarter 1999 net income included a $29.5 million one-time net after-tax settlement from the U.S. Postal Service or 11 cents per diluted share.
For the nine-month period ended September 30, 2000, revenue was $3.38 billion, up four percent from $3.24 billion in 1999; and net income in 2000 was $478.9 million, or $1.84 per diluted share, compared to $458.1 million, or $1.68 cents per diluted share in 1999. The year-to-date net income for 1999 included a $29.5 million one-time net after-tax settlement from the U.S. Postal Service or 11 cents per diluted share, in addition to a $24.0 million net after-tax charge, or nine cents per diluted share, for discontinued operations.
Pitney Bowes is a global provider of total messaging solutions.
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 1999 Form 10-K Annual Report filed with the Securities and Exchange Commission.
| Note: | Consolidated statements of income for the three and nine |
|---|---|
| months ended September 30, 2000 and 1999 and consolidated balance | |
| sheets at September 30, 2000, June 30, 2000, and September 30, 1999, | |
| are attached. |
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenue from:
Sales $ 551,931 $ 529,550 $ 1,643,511 $ 1,586,302
Rentals and financing 423,982 420,836 1,303,949 1,245,334
Support services 145,399 139,439 436,853 412,945
--------- --------- --------- ---------
Total revenue 1,121,312 1,089,825 3,384,313 3,244,581
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 310,385 300,490 933,032 903,560
Cost of rentals and
financing 109,902 118,049 351,111 346,425
Selling, service and
administrative 402,234 375,462 1,170,310 1,109,622
Research and
development 27,640 25,105 87,679 78,707
Other income - (49,574) - (49,574)
Interest, net 51,917 41,256 152,440 133,694
--------- -------- --------- ---------
Total costs and
expenses 902,078 810,788 2,694,572 2,522,434
--------- -------- --------- ---------
Income from continuing
operations before
income taxes 219,234 279,037 689,741 722,147
Provision for income
taxes 57,801 92,960 210,798 240,091
--------- -------- --------- ---------
Income from continuing
operations 161,433 186,077 478,943 482,056
Discontinued operations - - - (23,967)
--------- -------- --------- ---------
Net income $ 161,433 $ 186,077 $ 478,943 $ 458,089
========= ======== ========= =========
Basic earnings
per share
Continuing operations $ 0.63 $ 0.70 $ 1.85 $ 1.80
Discontinued operations - - - (0.09)
--------- -------- --------- ---------
Net income $ 0.63 $ 0.70 $ 1.85 $ 1.71
========= ======== ========= =========
Diluted earnings
per share
Continuing operations $ 0.63 $ 0.69 $ 1.84 $ 1.77
Discontinued operations - - - (0.09)
--------- -------- --------- ---------
Net income $ 0.63 $ 0.69 $ 1.84 $ 1.68
========= ======== ========= =========
Average common and
potential common
shares outstanding 256,113,963 271,196,789 260,574,362 273,124,305
=========== =========== =========== ===========
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
Assets 9/30/00 6/30/00 9/30/99
------ ------- ------- -------
Current assets:
Cash and cash equivalents $ 265,403 $ 296,695 $ 152,057
Short-term investments,
at cost which
approximates market 3,740 2,811 873
Accounts receivable,
less allowances:
9/00 $25,629
6/00 $25,767
9/99 $25,493 438,657 435,749 404,720
Finance receivables,
less allowances:
9/00 $38,773
6/00 $40,927
9/99 $43,147 1,406,638 1,431,588 1,560,641
Inventories 287,451 260,668 242,678
Other current assets
and prepayments 138,740 173,013 131,433
Net assets of discontinued
operations - - 137,869
-- -- -------
Total current assets 2,540,629 2,600,524 2,630,271
---------- ---------- ---------
Property, plant and
equipment, net 491,661 486,140 473,558
Rental equipment and
related inventories, net 777,360 789,369 825,946
Property leased under
capital leases, net 2,498 2,640 3,097
Long-term finance
receivables,
less allowances:
9/00 $55,394
6/00 $58,777
9/99 $57,197 2,027,359 1,983,529 1,925,891
Investment in leveraged leases 1,086,556 1,043,118 979,910
Goodwill, net of amortization:
9/00 $60,239
6/00 $58,426
9/99 $53,057 227,557 229,039 227,507
Other assets 615,280 624,830 495,998
Net assets of discontinued
operations - - 319,248
-- -- -------
Total assets $7,768,900 $7,759,189 $7,881,426
========== ========== ==========
Liabilities and stockholders' equity
------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities $ 937,159 $ 825,341 $ 825,622
Income taxes payable 267,723 217,665 230,347
Notes payable and current
portion of
long-term obligations 955,707 956,925 1,315,316
Advance billings 380,899 376,022 374,512
-------- -------- -------
Total current
liabilities 2,541,488 2,375,953 2,745,797
---------- ---------- ---------
Deferred taxes on income 1,171,575 1,182,766 1,061,686
Long-term debt 2,070,058 2,201,591 1,847,808
Other noncurrent liabilities 325,998 326,588 348,292
-------- -------- -------
Total liabilities 6,109,119 6,086,898 6,003,583
---------- ---------- ---------
Preferred stockholders'
equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred
stock, $50 par value,
4% convertible 29 29 29
Cumulative preference
stock, no par value,
$2.12 convertible 1,776 1,796 1,901
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 9,936 11,067 10,330
Retained earnings 3,694,940 3,606,430 3,326,639
Accumulated other
comprehensive income (113,687) (114,798) (93,456)
Treasury stock, at cost (2,566,551) (2,465,571) (2,000,938)
----------- ----------- -----------
Total stockholders' equity 1,349,781 1,362,291 1,567,843
---------- ---------- ---------
Total liabilities and
stockholders' equity $7,768,900 $7,759,189 7,881,426
=========== =========== =========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2000
(Unaudited)
(Dollars in thousands)
%
2000 1999 Change
---------- ---------- -----
Third Quarter
-------------
Revenue
-------
Mailing and Integrated Logistics $ 752,298 $ 736,945 2%
Office Solutions 330,763 312,063 6%
---------- ---------- -----
Total Messaging Solutions 1,083,061 1,049,008 3%
---------- ---------- -----
Capital Services 38,251 40,817 (6%)
---------- ---------- -----
Total Revenue $1,121,312 $1,089,825 3%
========== ========== =====
Operating Profit (1)
Mailing and Integrated Logistics $ 218,389 $ 194,928(2) 12%
Office Solutions 46,801 60,526 (23%)
---------- ---------- -----
Total Messaging Solutions 265,190 255,454 4%
---------- ---------- -----
Capital Services 13,679 11,908 15%
---------- ---------- -----
Total Operating Profit $ 278,869 $ 267,362 4%
========== ========== =====
(1) Operating profit excludes general corporate expenses, income taxes
and net interest other than that related to finance operations.
(2) Prior year amount has been reclassified to conform with the
current year presentation.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2000
(Unaudited)
(Dollars in thousands)
%
2000 1999 Change
--------- ------- -------
Year to Date
------------
Revenue
-------
Mailing and Integrated Logistics $2,283,357 $2,182,526 5%
Office Solutions 988,367 943,396 5%
---------- ---------- -------
Total Messaging Solutions 3,271,724 3,125,922 5%
---------- ---------- -------
Capital Services 112,589 118,659 (5%)
---------- ---------- -------
Total Revenue $3,384,313 $3,244,581 4%
========== ========== =======
Operating Profit (1)
-------------------
Mailing and Integrated Logistics $ 640,430 $ 563,565 (2) 14%
Office Solutions 155,080 179,727 (14%)
---------- ---------- --------
Total Messaging Solutions 795,510 743,292 7%
---------- ---------- --------
Capital Services 33,371 32,874 2%
---------- ---------- --------
Total Operating Profit $ 828,881 $ 776,166 7%
========== ========== ========
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
(2) Prior year amount has been reclassified to conform with the
current year presentation.
--30--cl/ny*
| CONTACT: | Pitney Bowes Inc. |
|---|---|
| Editorial - | |
| Sheryl Y. Battles, 203/351-6808 | |
| Exec. Director, External Affairs | |
| or | |
| Financial - | |
| Charles F. McBride, 203/351-6349 | |
| Exec. Director, Investor Relations | |
| Website - www.pitneybowes.com | |