Pitney Bowes Inc. (NYSE:PBI) today reported first quarter 2009
financial results.
Revenue for the quarter was $1.38 billion compared with $1.57
billion in the prior year. Revenue declined 12 percent including a
6 percent negative currency impact. Adjusted earnings per diluted
share from continuing operations was $0.55 which compares with
$0.66 for the prior year.
On a Generally Accepted Accounting Principles (GAAP) basis,
earnings per diluted share was $0.50 compared with $0.56 for the
prior year. GAAP earnings per diluted share includes a $0.05
non-cash tax charge associated with out-of-the money stock options
that expired during the quarter and a $0.01 gain from discontinued
operations.
Free cash flow for the quarter increased 19 percent versus the
first quarter 2008 to $240 million while on a GAAP basis the
company generated $276 million in cash from operations. During the
quarter the company used $74 million of cash for dividends to
stockholders and reduced debt outstanding by about $95 million.
�I am encouraged by our results which reflect the profit
inherent in our underlying revenue streams and the achievement of
our cost management objectives, even while operating in one of the
toughest economic environments in recent history,� noted Pitney
Bowes Chairman, President and CEO Murray D. Martin. �Excluding the
negative currency impacts of $0.07 per share and $0.02 per share
from increased pension costs, our adjusted earnings per diluted
share declined only 3 percent despite a 6 percent decline in
revenue on a constant currency basis.
�During the quarter, we continued our focus on customer
retention, expense management, and cash flow generation to mitigate
these economic headwinds. Existing customer relationships play an
important role in future growth, which is why we are pleased with
our success in customer retention.
�We are realizing the benefits of the actions we have taken to
streamline our costs and expenses. Our selling, general and
administrative expenses declined by $53 million on a reported
basis, and we reduced our expenses by nearly $25 million on a
constant currency basis when compared with the prior year,
excluding incremental pension expenses. We also improved gross
margins related to both our software and support services revenues.
At the same time, we continued to invest in the long-term growth of
the business, including maintaining consistent year-over-year
investment in research and development. We continued to have robust
free cash flow as a result of our ongoing focus on the balance
sheet and capital expenditures.�
The company�s results for the quarter are further summarized in
the table below:
�
*Note -- The sum of the earnings
per share does not equal the totals below due to rounding.
�
� �
First Quarter* Adjusted EPS � $0.55
Tax
Adjustments � ($0.05)
GAAP EPS from Continuing
Operations � $0.49
Discontinued Operations � $0.01
GAAP EPS � $0.50
Business Segment Results
Mailstream Solutions revenue declined 8 percent on a
constant currency basis. On a reported basis, revenue declined 15
percent to $931 million and earnings before interest and taxes
(EBIT) declined 20 percent to $231 million when compared with the
prior year.
Within Mailstream Solutions:
U.S. Mailing revenue declined 8 percent to $509 million and EBIT
declined 14 percent to $193 million. The segment continued to
benefit from the anticipated higher number of customers with leases
becoming available for renewal and upgrade. U.S. Mailing had a 9
percent increase in the number of mail metering equipment sales
transactions, versus the prior year. In this challenging economic
environment, the company focused on customer retention by providing
customers with more options to extend their lease and keep their
existing equipment. As a result, the company experienced a
three-fold increase in the number of lease extensions of existing
equipment. These transactions benefit future periods� profitability
but have a less positive impact on revenue during the quarter than
new equipment placements. As in recent quarters, our business was
impacted as customers also continued to defer capital investments
in high-value table-top inserters and address printers. In
addition, revenue growth and EBIT were adversely affected by lower
financing revenue, meter rentals, and supplies sales because of
lower business activity levels.
International Mailing revenue declined only 5 percent on a
constant currency basis. On a reported basis, revenue was $237
million, a decline of 23 percent, which includes an adverse
currency impact of 18 percentage points. Norway and Latin America
experienced positive revenue growth on a constant currency basis,
while there was weaker revenue performance in France, Canada and
Asia Pacific. EBIT declined 38 percent to $31 million. Changes in
currency rates increased product costs which unfavorably impacted
EBIT for the quarter. On a constant currency basis, EBIT margins
improved in Europe, despite lower revenue, driven by the company�s
actions to reduce service and administrative costs.
Worldwide Production Mail revenue declined 12 percent on a
constant currency basis. On a reported basis revenue declined 19
percent to $109 million and EBIT declined 41 percent to $5 million.
As anticipated, customers in many regions continued to defer making
large capital investments and are keeping existing equipment longer
than usual. This resulted in increased service revenue on a
constant currency basis, which partially mitigated lower equipment
sales revenue. Service margins improved because of greater resource
efficiency and higher revenue on longer-service equipment. The
company continued to see solid demand in Canada and Latin America
for its high-speed, intelligent inserting systems. However, in the
U.S., Europe and Asia credit constraints and prolonged economic
challenges in key vertical markets resulted in lower equipment
sales.
Software revenue declined 13 percent on a constant currency
basis. On a reported basis revenue declined 24 percent to $75
million and EBIT declined 60 percent to $3 million. Consistent with
other large-ticket business segments and the trends from last
quarter, there were fewer enterprise-level software licensing deals
than the prior year as customers continued to defer capital
investments. The company continued investments in new product
development and integration of its global software engineering
organization.
Mailstream Services revenue declined 3 percent on a
constant currency basis, as Mail Services continued growth was
offset by reduced activity in outsourced services in Management
Services. On a reported basis, revenue declined 6 percent to $449
million and EBIT declined 12 percent to $34 million when compared
with the prior year.
Within Mailstream Services:
Management Services revenue declined 7 percent on a constant
currency basis. On a reported basis revenue declined by 12 percent
to $267 million and EBIT declined 27 percent to $14 million. In the
U.S., despite declining transaction volumes, the company improved
EBIT as a percentage of revenue by about 80 basis points to 10
percent when compared with the prior year. This result reflects the
ongoing actions to reduce the fixed cost structure of the business,
while allowing the company to flex its costs with changing customer
demand. For Management Services businesses outside the U.S., the
company experienced lower print and transaction volumes, especially
in Europe, which resulted in an overall decline in the segment�s
EBIT.
Mail Services revenue increased 14 percent on a constant
currency basis. With the recent expansion into the UK, currency now
has an impact on revenue and reduced growth during the quarter by
about one percentage point. On a reported basis, revenue increased
13 percent to $141 million and EBIT increased one percent to $19
million. Solid growth in the volume of mail processed contributed
to underlying revenue growth. While the benefits from operating
leverage have been temporarily offset by the integration costs
associated with acquisitions made in the U.S. and UK in 2008, the
quarter�s results reflect improvement in EBIT margin from these
sites.
Marketing Services revenue declined 17 percent to $41 million
while EBIT increased 15 percent to $2 million. Revenue benefited
from the strong performance of the postal change of address
marketing program, but was negatively affected by the loss of
revenue from the planned exit of the company�s motor vehicle
registration services program. Cost reduction initiatives and the
exit from the motor vehicle registration services program resulted
in EBIT margin improvement.
2009 Guidance
The company is adjusting the guidance it provided on February 5,
2009. The severity of the current economic environment has changed
some customer behavior and has caused greater deferral of office
technology capital investments. However, the company maintains a
high percentage of contractual business, which provides recurring
revenue, earnings and cash flow. In addition, the company�s recent
restructuring initiatives have reduced its fixed cost base and the
company continues to take actions to further reduce its operating
costs.
On a constant currency basis, the company expects 2009 revenue
to decline in the range of 1 percent to 4 percent. On a reported
basis, the company expects revenue to decline in the range of 6
percent to 9 percent, which includes an estimated negative 5
percent impact from currency when compared with 2008. The company
expects adjusted earnings per diluted share from continuing
operations for the year will be in the range of $2.40 to $2.60.
This range includes the expected negative impact of $0.30 to $0.35
per diluted share from currency and incremental pension expense.
Adjusted earnings per diluted share from continuing operations
excludes an annual estimated 6 cents per share non-cash tax charge
associated with out-of-the-money stock options that expire
principally in the first quarter of 2009. On a GAAP basis, the
company expects earnings per diluted share from continuing
operations for the year will be in the range of $2.34 to $2.54.
The company is reaffirming its free cash flow guidance in the
range of $700 million to $800 million for the year, based on its
strong cash flow performance in the first quarter.
In closing Mr. Martin noted, �We remain committed to enhancing
our operational efficiency and reinvesting a portion of the savings
from our cost reduction initiatives in future growth and enhanced
customer value. We also have great confidence in our ability to
deliver excellent cash flow. That is why we have maintained a high
level of investment even as we have further reduced our operating
costs across our businesses. We are focused on strengthening our
position for long-term value creation and believe we are poised to
generate strong, profitable growth when the economy begins to
improve.�
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 is a $6.3 billion global technology leader whose
products, services and solutions deliver value within the
mailstream and beyond. 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,
adjusted income from continuing operations, 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,
income from continuing operations, and free cash flow results are
adjusted to exclude the impact of special items such as transition
initiatives, restructuring charges, tax adjustments, accounting
adjustments and write downs of assets, which materially impact the
comparability of the company's results of operations. Although
these charges represent actual expenses to the company, these
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 expenses to the
company, 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 and income from continuing operations, for
purposes of measuring the performance of its 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. Financial results
on a constant currency basis exclude the impact of changes in
foreign currency exchange rates since the prior period under
comparison and are calculated using the average of the rates in
effect during that period. Constant currency measures are intended
to help investors better understand the underlying operational
performance of the business excluding the impacts of shifts in
currency exchange rates over the intervening period.
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 March 31,
2009. 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, and our expected diluted
earnings per share for the full year 2009. 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: the uncertain
economic environment, 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; changes in foreign currency exchange rates; changes
in tax rates; and changes in postal regulations, as more fully
outlined in the company's 2008 Form 10-K Annual Report and other
reports 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; revenue and EBIT by business segment; and reconciliation
of GAAP to non-GAAP measures for the three months ended March 31,
2009 and 2008, and consolidated balance sheets at March 31, 2009
and December 31, 2008 are attached.
�
Pitney Bowes Inc. Consolidated Statements of Income
(Unaudited)
� (Dollars in thousands, except per share data) � � Three Months
Ended March 31, 2009 � 2008 Revenue: Equipment sales $ 231,825 $
302,713 Supplies 88,029 107,600 Software 79,726 105,405 Rentals
168,130 184,953 Financing 182,798 198,939 Support services 174,347
191,525 Business services � 454,729 � � 482,822 � � Total revenue �
1,379,584 � � 1,573,957 � � Costs and expenses: Cost of equipment
sales 123,085 161,113 Cost of supplies 23,341 27,872 Cost of
software 19,497 27,737 Cost of rentals 35,851 38,304 Cost of
support services 98,326 113,995 Cost of business services 359,907
379,291 Selling, general and administrative 443,528 496,495
Research and development 46,949 50,000 Restructuring charges and
asset impairments - 17,093 Interest expense 52,203 61,767 Interest
income � (1,552 ) � (2,990 ) � Total costs and expenses � 1,201,135
� � 1,370,677 � � Income from continuing operations before income
taxes 178,449 203,280 � Provision for income taxes � 72,149 � �
75,547 � � Income from continuing operations 106,300 127,733 � Gain
(loss) from discontinued operations, net of income tax � 2,623 � �
(3,832 ) � Net income before attribution of noncontrolling
interests 108,923 123,901 � Less: Preferred stock dividends of
subsidiaries attributable to noncontrolling interests � 4,521 � �
4,798 � � Pitney Bowes Inc. net income $ 104,402 � $ 119,103 � � �
� Amounts attributable to Pitney Bowes Inc. common stockholders:
Income from continuing operations $ 101,779 $ 122,935 Gain (loss)
from discontinued operations � 2,623 � � (3,832 ) � Pitney Bowes
Inc. net income $ 104,402 � $ 119,103 � � Basic earnings per share
of common stock attributable to Pitney Bowes Inc. common
stockholders (1): Continuing operations $ 0.49 $ 0.58 Discontinued
operations � 0.01 � � (0.02 ) � Net income $ 0.51 � $ 0.56 � �
Diluted earnings per share of common stock attributable to Pitney
Bowes Inc. common stockholders (1):
Continuing operations
$ 0.49 $ 0.58 Discontinued operations � 0.01 � � (0.02 ) � Net
income $ 0.50 � $ 0.56 � � Average common and potential common
shares outstanding � 206,857,503 � � 213,281,780 � � (1) The sum of
the earnings per share amounts may not equal the totals above due
to rounding. � �
Pitney Bowes Inc. Consolidated Balance
Sheets
(Unaudited)
� (Dollars in thousands, except per share data) �
Assets
� 03/31/09 � 12/31/08 Current assets: Cash and cash equivalents $
423,217 $ 376,671 Short-term investments 19,717 21,551 Accounts
receivable, less allowances:
03/09 $42,336����12/08 $45,264
795,272 879,622 Finance receivables, less allowances:
03/09 $43,592����12/08 $45,932
1,384,657 1,455,746 Inventories 170,228 161,321 Current income
taxes 53,018 59,594 Other current assets and prepayments � 79,458 �
� 78,108 � � Total current assets 2,925,567 3,032,613 � Property,
plant and equipment, net 555,963 574,260 Rental property and
equipment, net 385,680 397,949 Long-term finance receivables, less
allowances:
03/09 $24,877����12/08 $25,858
1,371,318 1,419,964 Investment in leveraged leases 195,340 201,921
Goodwill 2,209,599 2,251,830 Intangible assets, net 353,603 375,822
Non-current income taxes 62,283 64,387 Other assets � 425,769 � �
417,685 � � Total assets $ 8,485,122 � $ 8,736,431 � �
Liabilities and stockholders'
deficit
Current liabilities: Accounts payable and accrued liabilities $
1,684,080 $ 1,922,399 Current income taxes 138,895 108,662 Notes
payable and current portion of long-term obligations 384,382
770,501 Advance billings � 482,215 � � 441,556 � � Total current
liabilities 2,689,572 3,243,118 � Deferred taxes on income 270,630
254,353 FIN 48 uncertainties and other income tax liabilities
305,077 294,487 Long-term debt 4,227,697 3,934,865 Other
non-current liabilities � 820,310 � � 823,322 � � Total liabilities
� 8,313,286 � � 8,550,145 � � Noncontrolling interests (Preferred
stockholders' equity in subsidiaries) 374,165 374,165 �
Stockholders' deficit: Cumulative preferred stock, $50 par value,
4% convertible 7 7 Cumulative preference stock, no par value, $2.12
convertible 972 976 Common stock, $1 par value 323,338 323,338
Additional paid-in capital 255,535 259,306 Retained earnings
4,308,909 4,278,804 Accumulated other comprehensive loss (644,905 )
(596,341 ) Treasury stock, at cost � (4,446,185 ) � (4,453,969 ) �
Total Pitney Bowes Inc. stockholders' deficit � (202,329 ) �
(187,879 ) � Total liabilities and stockholders' deficit $
8,485,122 � $ 8,736,431 � � �
Pitney Bowes Inc. Revenue
and EBIT Business Segments March 31, 2009
(Unaudited)
� (Dollars in thousands) �
Three Months Ended March 31,
2009 �
2008 �
%
Change
Revenue
� U.S. Mailing $ 508,523 $ 552,585 (8 %) International Mailing
237,312 308,333 (23 %) Production Mail 109,429 135,404 (19 %)
Software � 75,375 � � 99,663 � (24 %) Mailstream Solutions �
930,639 � � 1,095,985 � (15 %) � Management Services 266,502
302,635 (12 %) Mail Services 141,251 125,422 13 % Marketing
Services � 41,192 � � 49,915 � (17 %) Mailstream Services � 448,945
� � 477,972 � (6 %) �
Total revenue $
1,379,584 �
$ 1,573,957 �
(12 %)
�
EBIT (1)
� U.S. Mailing $ 192,834 $ 223,955 (14 %) International Mailing
30,939 49,935 (38 %) Production Mail 5,067 8,583 (41 %) Software �
2,604 � � 6,478 � (60 %) Mailstream Solutions � 231,444 � � 288,951
� (20 %) � Management Services 13,637 18,637 (27 %) Mail Services
18,575 18,389 1 % Marketing Services � 2,016 � � 1,752 � 15 %
Mailstream Services � 34,228 � � 38,778 � (12 %) �
Total
EBIT $ 265,672 $ 327,729 (19
%) � Unallocated amounts: Interest, net (50,651 ) (58,777 )
Corporate expense (36,572 ) (48,579 ) Restructuring charges and
asset impairments � - � � (17,093 ) �
Income from continuing
operations before income taxes $ 178,449 �
$ 203,280 � � (1) � Earnings before interest and
taxes (EBIT) excludes general corporate expenses and restructuring
charges and asset impairments. � �
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted
Results (Unaudited) � (Dollars in thousands, except per share
data) � � Three months ended March 31, 2009 2008 �
GAAP income from continuing
operations after income taxes, as reported
$ 101,779 $ 122,935 Restructuring charges and asset impairments -
10,352 Tax adjustment 11,119 6,480 MapInfo purchase accounting � -
� � 322 �
Income from continuing operations
after income taxes, as adjusted
$ 112,898 � $ 140,089 � � �
GAAP diluted earnings per share
from continuing operations, as reported
$ 0.49 $ 0.58 Restructuring charges and asset impairments - 0.05
Tax adjustment 0.05 0.03 MapInfo purchase accounting � - � � 0.00 �
Diluted earnings per share from
continuing operations, as adjusted
$ 0.55 � $ 0.66 � � �
GAAP net cash provided by
operating activities, as reported
$ 276,471 $ 253,135 Capital expenditures (47,776 ) (56,933 )
Restructuring payments and discontinued operations 32,701 12,693
Reserve account deposits � (21,675 ) � (7,233 ) � Free cash flow,
as adjusted $ 239,721 � $ 201,662 � �
Note: The sum of the earnings per
share amounts may not equal the totals above due to rounding.
�
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