Pitney Bowes Inc. (NYSE:PBI) today reported third quarter 2010
results.
Revenue for the quarter was $1.3 billion, which was flat to the
prior year excluding the impact of foreign currency and declined
one percent including the effects of currency. When compared to the
third quarter of 2009, revenue benefited from 10 percent increases
in both equipment sales and software revenue but was also affected
by lower financing, rental and supplies revenue due to lower
equipment sales in prior periods. Adjusted earnings per diluted
share from continuing operations for the third quarter was $0.55
compared with $0.55 for the prior year. Earnings per diluted share
for the quarter on a Generally Accepted Accounting Principles
(GAAP) basis was $0.43 compared with $0.50 per diluted share for
the prior year. GAAP earnings per diluted share for the quarter
included a $0.10 charge for restructuring costs associated with the
company’s strategic transformation initiatives and a $0.01 loss
associated with discontinued operations. Adjusted earnings per
diluted share for the quarter included a three cent per share
favorable adjustment related to a leveraged lease portfolio in
Canada. This benefit helped offset higher international shipping
costs in the mail services segment related to the company’s
expansion in the e-commerce parcel space.
Free cash flow for the quarter was $221 million, while on a GAAP
basis, the company generated $243 million in cash from operations.
Free cash flow benefited from $32 million of cash proceeds from the
monetization of an interest rate swap position during the quarter
and lower finance receivables. During the quarter, the company used
$77 million of cash for dividends and $100 million of cash to
buyback 4.7 million of its common shares. Year-to-date, the company
has generated $673 million in free cash flow and on a GAAP basis
$667 million in cash from operations, which was used primarily to
pay dividends, buyback shares, make restructuring payments, and
reduce debt.
The company’s results for the quarter are summarized in the
table below:
Third Quarter* Adjusted EPS $0.55
Restructuring and Asset Impairments ($0.10)
GAAP EPS from
Continuing Operations $0.44
Discontinued Operations
($0.01)
GAAP EPS $0.43
*The sum of the earnings per share does not equal the totals
above due to rounding.
Commenting on the quarter, Chairman, President and CEO Murray D.
Martin said, “We are encouraged by the improvement we saw in
equipment sales this quarter in our global Mailing and U.S.
Production Mail businesses and by the growth in software revenue.
Our new Connect+™ web-based mailing system is being very well
received by our customers and we expect it to be a key component in
driving future mailing equipment sales. Positive equipment sales
growth is an important early indicator of improvement in our
businesses which serve the SMB market.
“While the economic recovery remains uncertain for some of our
smaller customers, we are starting to see some signs of improved
business confidence and spending in our customer base, especially
among our larger enterprise customers in the U.S. This was
evidenced by increased mail volumes processed by our Mail Services
business and improved demand for our Software solutions and
Production Mail equipment.”
Business Segment Results
The company aggregates its business segments into two groups
based on the customers it primarily serves: Small and Medium
Business (SMB) Solutions and Enterprise Business Solutions. The SMB
Solutions group consists of the company’s global Mailing
operations. The Enterprise Business Solutions group includes the
company’s global Production Mail, Software, Management Services,
Mail Services and Marketing Services operations.
SMB Solutions
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $690 million (4%)
(3%)
EBIT $209 million 1%
Within the SMB Solutions Group:
U.S. Mailing
3Q 2010 Y-O-Y
Change Change ex Currency Revenue $462 million (6%) (6%) EBIT
$170 million (5%)
During the quarter, U.S. Mailing experienced improved sales
among its mid-and larger-sized customers, although small business
customers remained cautious about spending. Improving conditions
among mid and larger-sized customers, plus the availability of the
new Connect+ ™ mailing system, resulted in a 5 percent
year-over-year increase in equipment sales. This was the first
increase in mailing equipment sales in seven quarters. The
segment’s overall revenue was affected, as expected, by lower
rental and financing revenue as a result of lower sales in prior
periods. EBIT margin improved by 50 basis points versus the prior
year, benefiting from past and ongoing productivity improvements
related to the company’s strategic transformation program; lower
credit losses; and recent lease extensions. Lease extensions are
designed to enhance customer retention and result in improved
profitability.
International Mailing
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $228 million 1% 4% EBIT $ 39
million 33%
International Mailing revenue grew both on a reported basis and
excluding the impact of foreign currency when compared with the
prior year. The segment had double-digit growth for equipment sales
during the quarter, driven by the sale of postal rate updates for
scales in France. A similar postal rate update occurred in France
in the first quarter of 2009. Excluding the impact of the rate
change revenue, International Mailing still had high single-digit
growth in equipment sales versus the prior year. As in the U.S.,
financing and rental revenue declined as a result of lower
equipment sales in prior periods. EBIT improved versus the prior
year in part due to past and ongoing productivity initiatives, as
well as the favorable adjustment in a leveraged lease portfolio in
Canada. These factors were offset in part by the negative margin
impact from lower financing revenue.
Enterprise Business Solutions
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $656 million 2% 3%
EBIT $ 70 million 1%
Within the Enterprise Business Solutions
Group:
Worldwide Production Mail
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $135 million 7% 8% EBIT $15
million 33%
During the quarter, increased demand for the company’s
high-speed, high integrity inserting systems, especially in the
United States, helped drive revenue growth and a higher backlog of
customer orders when compared with the prior year. Revenue also
benefited from the installation of the first Intellijet™ color
production printing system from the company’s technology
distribution partnership with HP. EBIT margin improved by 220 basis
points propelled by current and ongoing productivity initiatives
that increased margin leverage from revenue growth.
Software
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $ 92 million 11% 12% EBIT
$ 8 million (3%)
During the quarter, the Software business experienced increased
demand for its software solutions, including data management,
analytics and CRM. As a result, revenue increased versus the prior
year as the company delivered more of these solutions to its
customers. The company continued its transition to annuity-based
pricing for selected software solutions and plans expansion of its
SaaS offerings and recurring revenue streams from term licenses.
The company also completed its planned acquisition of Portrait
Software plc during the quarter, which will further enhance the
company’s analytics and customer communications management
capabilities. Excluding related acquisition costs, Software EBIT
grew at a double-digit rate and the margin would have improved
versus the prior year.
Management Services
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $245 million (5%) (4%) EBIT
$ 24 million 20%
As expected, revenue for the quarter declined as a result of
account contractions and terminations in the U.S. over the last 12
months. The company has exited a number of postal facilities
management contracts in the U.S. as the postal service realigned
its delivery infrastructure. Outside the U.S., where the company
principally provides print and customer communication services to
enterprise accounts in Europe, revenue declined on lower volumes.
Despite lower revenue, EBIT margins continued to improve versus the
prior year, in both Europe and the U.S. The margin improvements
resulted from the company’s focus on more profitable contracts,
ongoing productivity initiatives, and a continued transition to a
more variable cost structure.
Mail Services
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $145 million 8% 8% EBIT $ 15
million (34%)
Mail Services continues to process increasing volumes of U.S.
domestic presort mail and diversify its mix of mail as it grows its
presence in Standard Class mail volumes. Overall volume of mail
processed increased from both new and existing customers and was
driven in part by the company’s unique nationwide capability to
help mailers benefit from the discounts available when properly
utilizing the Intelligent Mail Barcode. Presort-related revenue for
the quarter grew and the EBIT margin improved.
EBIT for the segment was impacted by increased costs associated
with the International Mail Services (IMS) portion of the business.
As the company ramps up its participation in the international
e-commerce parcel market, higher shipping rates by some of the
international carriers are affecting margins. The company is taking
action to mitigate these cost increases to improve the margins of
the business as volumes grow.
Marketing Services
3Q 2010
Y-O-Y Change
Change ex Currency Revenue $ 40 million 2% 2% EBIT $ 9
million 15%
Revenue improved versus the prior year primarily because of
increased vendor advertising for the Movers’ Source kits, despite a
decline in the number of household moves versus the prior year.
EBIT margin improved year-over-year due to ongoing productivity
initiatives.
2010 Guidance
This guidance discusses future results which are inherently
subject to unforeseen risks and developments. As such, discussions
about the business outlook should be read in the context of an
uncertain future, as well as the risk factors identified in the
safe harbor language at the end of this release.
The company is narrowing its earnings guidance range to reflect
the results for the first three quarters of the year and its
outlook for the remainder of the year. The global economy and
business environment appears to be stabilizing in some areas but
still remains uncertain in other areas, such as small business.
The company continues to expect revenue for the year, excluding
the impact of foreign currency, will be in the range of flat to a
three percent decline when compared with the prior year. The
company now expects adjusted EPS from continuing operations for the
year to be in the range of $2.15 to $2.22 and GAAP EPS in the range
of $1.54 to $1.69. GAAP EPS includes tax charges of $.13 per
diluted share related to out-of-the-money stock options; certain
capital lease transactions outside the U.S. and the impact of
health care legislation enacted in the beginning of the year. GAAP
EPS also includes expected restructuring and asset impairment
charges in the range of $.40 to $.48 related to the company’s
previously announced strategic transformation program.
The company expects to generate free cash flow for 2010 at or
above the high end of its stated range of $700 million to $800
million.
The company’s expected earnings results for 2010 are summarized
below.
Full Year
2010 Adjusted EPS $2.15 to $2.22
Restructuring and Asset Impairments ($0.40 to
$0.48)
Tax Charges ($0.13)
GAAP EPS from
Continuing Operations $1.54 to $1.69
Mr. Martin concluded, “We are focused on implementing the
actions that will help us navigate uncertain business and economic
conditions in the near-term, while positioning us for long-term
growth in the future. Our strategic transformation program is on
track and providing the expected financial benefits as we saw this
quarter when we had improving margins for four of our cost of
revenue lines on our income statement and improving EBIT margins at
five of our seven business segments. We remain focused on
streamlining our business operations and creating more flexibility
in our cost structure.
“Our investments for the future can be seen in actions during
the quarter such as the continued phased launch of our innovative
Connect+TM mailing system, and the completion of the acquisition of
Portrait plc. We are committed to driving innovation and
identifying more opportunities for growth in the future.”
Management of Pitney Bowes will discuss the company’s results in
a broadcast over the Internet today at 5:00 p.m. EST. 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 $5.6 billion global leader whose products,
services and solutions deliver value within the mailstream and
beyond. For more information visit www.pitneybowes.com.
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
transformation initiatives, restructuring charges, tax adjustments,
accounting adjustments and write downs of assets. 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 other
discretionary uses. 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. 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.
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 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.
Pitney Bowes has provided a quantitative reconciliation to GAAP
in supplemental schedules. This information may also be found at
the company's web site www.pb.com/investorrelations in the
Investor Relations section.
This document contains “forward-looking statements” about our
expected or potential future business and financial performance.
For us forward-looking statements include, but are not limited to,
statements about possible transformation initiatives; restructuring
charges; our future revenue and earnings guidance; and other
statements about future events or conditions. Forward-looking
statements are not guarantees of future performance and 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, fluctuations in customer demand; mail volumes; foreign
currency exchange rates; the outcome of litigations; and changes in
postal regulations, as more fully outlined in the company's 2009
Form 10-K Annual Report and other reports filed with the Securities
and Exchange Commission. Pitney Bowes assumes no obligation to
update any forward-looking statements contained in this document as
a result of new information, events or developments.
Note: Consolidated statements of income; revenue and EBIT by
business segment; and reconciliation of GAAP to non-GAAP measures
for the three and nine months ended September 30, 2010 and 2009,
and consolidated balance sheets at September 30, 2010 and June 30,
2010 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, 2010 2009 (2) 2010 2009 (2) Revenue: Equipment sales
$ 248,228 $ 225,759 $ 718,399 $ 714,780 Supplies 77,304 83,464
239,635 253,466 Software 95,850 87,295 265,130 254,401 Rentals
151,399 163,711 456,977 487,992 Financing 157,333 171,228 476,712
528,534 Support services 175,844 177,607 531,176 531,200 Business
services 439,784 447,756
1,303,183 1,344,493 Total revenue
1,345,742 1,356,820 3,991,212
4,114,866 Costs and expenses: Cost of
equipment sales 115,721 106,326 325,120 331,144 Cost of supplies
23,843 23,785 73,381 68,495 Cost of software 21,191 19,413 61,064
60,480 Cost of rentals 36,277 40,508 107,658 114,372 Financing
interest expense 22,189 23,975 65,948 73,865 Cost of support
services 111,521 119,034 337,822 356,620 Cost of business services
335,588 335,406 1,003,712 1,033,933 Selling, general and
administrative 435,292 435,931 1,304,941 1,317,410 Research and
development 38,454 45,052 117,487 138,623 Restructuring charges and
asset impairments 33,805 12,845 103,039 12,845 Other interest
expense 29,310 27,244 86,172 84,548 Interest income (393 )
(668 ) (1,851 ) (3,153 ) Total costs
and expenses 1,202,798 1,188,851
3,584,493 3,589,182 Income from
continuing operations before income taxes 142,944 167,969 406,719
525,684 Provision for income taxes 46,880
57,691 155,302 192,375
Income from continuing operations 96,064 110,278 251,417
333,309 (Loss)/gain from discontinued operations, net of
income tax (2,536 ) (2,429 ) (8,332 )
5,296 Net income before attribution of noncontrolling
interests 93,528 107,849 243,085 338,605 Less: Preferred
stock dividends of subsidiaries attributable to noncontrolling
interests 4,593 4,622 13,730
13,714 Pitney Bowes Inc. net income $
88,935 $ 103,227 $ 229,355 $ 324,891
Amounts attributable to Pitney Bowes Inc.:
Income from continuing operations $ 91,471 $ 105,656 $ 237,687 $
319,595 (Loss)/gain from discontinued operations (2,536 )
(2,429 ) (8,332 ) 5,296 Pitney
Bowes Inc. net income $ 88,935 $ 103,227 $ 229,355
$ 324,891 Basic earnings per share of common
stock attributable to Pitney Bowes Inc. common stockholders (1):
Continuing operations $ 0.44 $ 0.51 $ 1.15 $ 1.55 Discontinued
operations (0.01 ) (0.01 ) (0.04 ) 0.03
Net income $ 0.43 $ 0.50 $ 1.11
$ 1.57 Diluted earnings per share of common stock
attributable to Pitney Bowes Inc. common stockholders (1):
Continuing operations $ 0.44 $ 0.51 $ 1.15 $ 1.54 Discontinued
operations (0.01 ) (0.01 ) (0.04 ) 0.03
Net income $ 0.43 $ 0.50 $ 1.11
$ 1.57 Average common and potential common shares
outstanding 206,282,026 207,643,504
207,291,482 207,198,120
(1) The sum of the earnings per share amounts may not equal the
totals above due to rounding. (2) Certain prior year amounts
have been reclassified to conform to the current year presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except
per share data)
Assets
09/30/10 06/30/10 Current assets: Cash and cash equivalents $
386,046 $ 459,451 Short-term investments 21,351 21,839 Accounts
receivable, less allowances:
09/10 $34,865 06/10 $34,565
725,667 710,019 Finance receivables, less allowances:
09/10 $48,366 06/10 $46,195
1,308,821 1,329,000 Inventories 187,875 182,974 Current income
taxes 112,719 146,859 Other current assets and prepayments
102,838 99,856 Total current assets
2,845,317 2,949,998 Property, plant and equipment, net
458,766 463,993 Rental property and equipment, net 315,489 322,110
Long-term finance receivables, less allowances:
09/10 $20,511 06/10 $22,921
1,245,798 1,226,406 Investment in leveraged leases 241,125 232,820
Goodwill 2,312,304 2,211,544 Intangible assets, net 304,186 280,829
Non-current income taxes 108,546 107,963 Other assets
484,376 481,404 Total assets $
8,315,907 $ 8,277,067
Liabilities,
noncontrolling interests and stockholders' deficit
Current liabilities: Accounts payable and accrued liabilities $
1,694,745 $ 1,661,401 Current income taxes 130,114 139,593 Notes
payable and current portion of long-term obligations 135,674
149,082 Advance billings 461,573 465,972
Total current liabilities 2,422,106 2,416,048
Deferred taxes on income 304,765 320,100 Tax uncertainties and
other income tax liabilities 546,314 541,332 Long-term debt
4,242,845 4,233,469 Other non-current liabilities 573,447
590,429 Total liabilities
8,089,477 8,101,378 Noncontrolling
interests (Preferred stockholders' equity in subsidiaries) 296,370
296,370 Stockholders' deficit: Cumulative preferred stock,
$50 par value, 4% convertible 4 4 Cumulative preference stock, no
par value, $2.12 convertible 804 824 Common stock, $1 par value
323,338 323,338 Additional paid-in capital 247,800 244,662 Retained
earnings 4,293,549 4,280,409 Accumulated other comprehensive loss
(451,880 ) (583,181 ) Treasury stock, at cost (4,483,555 )
(4,386,737 ) Total Pitney Bowes Inc. stockholders'
deficit (69,940 ) (120,681 ) Total
liabilities, noncontrolling interests and stockholders' deficit $
8,315,907 $ 8,277,067
Pitney Bowes Inc.
Revenue and EBIT Business Segments September 30,
2010
(Unaudited)
(Dollars in thousands)
Three Months Ended
September 30, % 2010 2009 Change
Revenue
U.S. Mailing
$ 461,787 $ 491,036 (6%) International Mailing 227,844
224,681 1% Small & Medium Business Solutions
689,631 715,717 (4%) Production Mail 134,943 126,434
7% Software 91,544 82,361 11% Management Services 245,113 259,370
(5%) Mail Services 144,988 134,042 8% Marketing Services
39,523 38,896 2% Enterprise Business Solutions
656,111 641,103 2%
Total revenue $
1,345,742 $ 1,356,820 (1%)
EBIT
(1)
U.S. Mailing
$ 169,871 $ 178,066 (5%) International Mailing 38,931
29,193 33% Small & Medium Business Solutions 208,802
207,259 1% Production Mail 15,243 11,494 33% Software
7,996 8,241 (3%) Management Services 23,508 19,517 20% Mail
Services 15,139 23,024 (34%) Marketing Services 8,571
7,448 15% Enterprise Business Solutions 70,457 69,724
1%
Total EBIT $ 279,259 $
276,983 1% Unallocated amounts: Interest, net
(2) (51,106) (50,551) Corporate expense (51,404) (45,618)
Restructuring charges and asset impairments (33,805)
(12,845)
Income from continuing operations before income
taxes $ 142,944 $ 167,969
(1) Earnings before interest and taxes (EBIT) excludes
general corporate expenses and restructuring charges and asset
impairments. (2) Interest, net includes financing interest expense,
other interest expense and interest income.
Pitney Bowes
Inc. Revenue and EBIT Business Segments
September 30, 2010
(Unaudited)
(Dollars in thousands)
Nine Months Ended September
30, % 2010 2009 Change
Revenue
U.S. Mailing
$ 1,406,464 $ 1,517,377 (7%) International Mailing 678,961
679,893 (0%) Small & Medium Business Solutions
2,085,425 2,197,270 (5%) Production Mail 380,114
366,000 4% Software 251,877 240,559 5% Management Services 748,538
789,635 (5%) Mail Services (3) 416,245 413,891 1% Marketing
Services 109,013 107,511 1% Enterprise Business
Solutions 1,905,787 1,917,596 (1%)
Total
revenue $ 3,991,212 $ 4,114,866
(3%)
EBIT
(1)
U.S. Mailing
$ 507,921 $ 561,232 (9%) International Mailing 105,469
87,201 21% Small & Medium Business Solutions
613,390 648,433 (5%) Production Mail 35,111 26,974
30% Software 18,136 16,064 13% Management Services 65,781 49,294
33% Mail Services (3) 44,813 63,322 (29%) Marketing Services
20,430 17,323 18% Enterprise Business Solutions
184,271 172,977 7%
Total EBIT $
797,661 $ 821,410 (3%) Unallocated
amounts: Interest, net (2) (150,269) (155,260) Corporate expense
(137,634) (127,621) Restructuring charges and asset impairments
(103,039) (12,845)
Income from continuing
operations before income taxes $ 406,719 $
525,684
(1)
Earnings before interest and taxes (EBIT)
excludes general corporate expenses and restructuring charges and
asset impairments.
(2)
Interest, net includes financing interest
expense, other interest expense and interest income.
(3)
The Mail Services segment for the nine
month period ended September 30, 2010 includes a one-time out of
period adjustmentprimarily to correct rates used to estimate earned
but unbilled revenue for the periods 2007 through first quarter
2010.The adjustment reduced 2010 year-to-date revenue and EBIT by
$21 million and $16 million, respectively. The impact of
thisadjustment was not material on any individual quarter or year
during these periods and is not material to anticipated
2010results.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted
Results (Unaudited) (Dollars in thousands,
except per share data) Three Months Ended September 30,
Nine Months Ended September 30, 2010 2009 2010 2009
GAAP income from continuing operations after income taxes, as
reported $ 91,471 $ 105,656 $ 237,687 $ 319,595 Restructuring
charges and asset impairments 21,630 8,300 67,027 8,300 Tax
adjustments 568 216 22,058
12,204 Income from continuing operations after
income taxes, as adjusted $ 113,669 $ 114,172 $
326,772 $ 340,099 GAAP diluted earnings
per share from continuing operations, as reported $ 0.44 $ 0.51 $
1.15 $ 1.54 Restructuring charges and asset impairments 0.10 0.04
0.32 0.04 Tax adjustments 0.00 0.00
0.11 0.06 Diluted earnings per share
from continuing operations, as adjusted $ 0.55 $ 0.55
$ 1.58 $ 1.64 GAAP net cash provided by
operating activities, as reported $ 243,085 $ 249,038 $ 666,887 $
732,424 Capital expenditures (31,538 ) (36,319 ) (90,177 ) (126,509
) Restructuring payments and discontinued operations 23,958 17,647
90,713 66,757 Reserve account deposits (14,062 )
(7,768 ) 5,405 (6,236 ) Free cash flow,
as adjusted $ 221,443 $ 222,598 $ 672,828 $
666,436 Note: The sum of the earnings
per share amounts may not equal the totals above due to rounding.
Pitney Bowes (NYSE:PBI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Pitney Bowes (NYSE:PBI)
Historical Stock Chart
From Jul 2023 to Jul 2024