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Pitney Bowes Announces Record Quarterly Results Quarter's Solid Performance Led by MAIL Segment's Exceptionally Strong Growth
STAMFORD, Conn.--(BUSINESS WIRE)--Oct. 19, 1999--Pitney Bowes Inc. (NYSE: PBI) today announced another record quarter as third-quarter diluted earnings per share from continuing operations grew 44 percent to 69 cents. Excluding the impact of the previously announced one-time, after-tax net settlement of $29.5 million received from the U.S. Postal Service, diluted earnings per share from continuing operations rose 21 percent to 58 cents during the quarter. This marks the 19th consecutive quarter of double-digit, year-on-year diluted earnings per share growth from continuing operations. Consolidated revenue grew eight percent to $1.1 billion. Income from continuing operations grew 40 percent to $186.1 million, or 18 percent to $156.6 million, excluding the impact of the U.S. Postal Service settlement.
Pitney Bowes Chairman and Chief Executive Officer Michael J. Critelli commented on the company's quarterly performance: "Once again the exceptionally strong growth in our Mailing and Integrated Logistics (MAIL) segment led the quarter's solid financial performance. The market demand for the MAIL segment's comprehensive line of mailing, shipping and logistics software, systems and professional services demonstrates Pitney Bowes' unequaled ability to provide valuable end-to-end solutions for businesses of all sizes --from the desktop to the global enterprise. Additionally, our international operations enhanced the quarter's performance as we continued to increase revenues and expand market share in key overseas markets."
In segment performance for the quarter, Mailing and Integrated Logistics (MAIL) revenue grew 11 percent and operating profit rose 21 percent. The segment includes revenues and related expenses from the rental, sale and financing of mailing and shipping equipment, related supplies and services, and software. Growth contributors included:
-- Sophisticated, productivity-enhancing Automated Document Factory
Solutions, featuring customized, high-speed production mail
equipment, software and systems integration services
-- Multi-functional mail finishing systems such as the Paragon(R)
and the Galaxy(TM) digital system, with their range of mail
processing applications for all types of mail such as the
patented Weigh-on-the-Way(TM) (W-O-W)(TM) feature
-- Ongoing robustness in demand for advanced shipping and logistics
systems, as businesses of all types seek cost-efficient,
multi-carrier solutions for managing the fulfillment and
logistics of orders from the Internet and other channels
-- The continued need for mail creation hardware, software, and
hybrid solutions as businesses use mail for one-to-one marketing
to acquire and retain customers.
Pitney Bowes' international operations continued to excel, driven
by regulatory changes such as the required Euro conversion in some markets, meter migration and international Posts' need for operating improvements due to the elimination of postal subsidies.
During the quarter, the company also launched PitneyWorks(SM), its web-based business suite focused solely on meeting the needs of today's small business owners (www.pitneyworks.com). The portfolio of Internet-enabled solutions is designed to work the way small businesses work and meet a wide range of operational needs for running a small business such as: prospecting for customers (Target Prospects(TM) database), producing effective direct mail (DirectNET(TM) online mailing service), managing cash flow and financing critical needs (PitneyWorks(SM) Reserve Account, PitneyWorks(SM) Capital Line, PitneyWorks(SM) Purchase Power(SM), shipping orders (ValueShip(TM) online multi-carrier rating and routing software)...and putting a digital stamp on the envelope (ClickStamp(TM) Online and ClickStamp(TM) Plus currently in Beta testing with the U.S. Postal Service, and Personal Post(TM) digital postage meter with a built-in modem).
The Office Solutions Segment includes Pitney Bowes Office Systems and Pitney Bowes Management Services. Third-quarter performance in this segment featured two-percent revenue growth and a two-percent increase in operating profit. Excluding the impact of currency, operating profit growth would have been six percent. The segment's operating profit was impacted by the longer selling cycles of digital copier systems and the recent sharp and rapid rise in the value of the yen.
During the quarter, Management Services revenues were flat as new management continues to focus on programs to improve the profitability of customer contracts while increasing service levels.
Office Systems, featuring Copier and Facsimile, grew revenues three percent for the quarter. The copier business posted good sales growth even as the business continued the transition to digital, networked solutions and the focus on training to sell to national and major accounts. Ongoing price pressures in the market and lower supplies revenues impacted Facsimile revenues.
The Capital Services Segment includes primarily asset- and fee-based income generated by large ticket external assets. During the quarter, the segment's revenue increased by one percent while its operating profit increased four percent. This performance is consistent with the company's previously announced strategy to shift to fee-based income by lowering the asset base and focusing on fee-based income opportunities.
As announced last quarter, 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.
Mr. Critelli concluded, "Our focus remains on maximizing long-term shareholder value, and our ongoing actions reflect our commitment to this strategy. We will continue to invest in developing breakthrough products and services, refining our operating efficiency and growing existing and emerging markets around the world."
As previously announced, the company is in the midst of an 11.6 million share repurchase program. During the third quarter the company repurchased approximately 1.7 million shares on the open market, bringing the total to 5.9 million shares repurchased during the first nine months of 1999.
Third quarter 1999 revenue included $529.6 million from sales, up eight percent from $488.6 million in the third quarter of 1998; $420.8 million from rentals and financing, up six percent from $396.3 million; and $139.4 million from support services, up nine percent from $128.3 million.
Third quarter 1999 income from continuing operations was $186.1 million, including the $29.5 million after-tax net settlement from the U.S. Postal Service, or 69 cents per diluted share, compared to $132.8 million, or 48 cents per diluted share from continuing operations, in 1998. There was no income from discontinued operations during the quarter compared to $8.8 million of income from discontinued operations, or three cents per diluted share in third quarter 1998.
For the nine-month period ended September 30, 1999, revenue was $3.245 billion, up nine percent from $2.982 billion in 1998; and net income in 1999 was $458.1 million, including the $29.5 million after-tax net settlement from the U.S. Postal Service, or $1.68 per diluted share, compared to $413.3 million, or $1.47 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 $25.4 million of income, or nine 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 nine months ended September 30, 1999 and 1998 and consolidated balance sheets at September 30, 1999, June 30, 1999, and September 30, 1998, are attached.
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Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
----------- ----------- ------
Year to Date
------------
Revenue
-------
Mailing and Integrated Logistics $ 2,182,526 $ 1,960,662 11%
Office Solutions 943,396 901,580 5%
Capital Services 118,659 119,308 (1%)
----------- ----------- ------
Total Revenue $ 3,244,581 $ 2,981,550 9%
=========== =========== ======
Operating Profit (1)
-------------------
Mailing and Integrated Logistics $ 573,252 $ 472,332 21%
Office Solutions 179,727 169,530 6%
Capital Services 32,874 32,029 3%
----------- ----------- -----
Total Operating Profit $ 785,853 $ 673,891 17%
=========== =========== ======
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
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,
-------------------- ------------------------
1999 1998 1999 1998
--------- ---------- ----------- -----------
Revenue from:
Sales $ 529,550 $ 488,575 $ 1,586,302 $ 1,431,310
Rentals and financing 420,836 396,329 1,245,334 1,170,525
Support services 139,439 128,271 412,945 379,715
--------- ---------- ----------- -----------
Total revenue 1,089,825 1,013,175 3,244,581 2,981,550
--------- ---------- ----------- -----------
Costs and expenses:
Cost of sales 300,490 282,503 903,560 847,486
Cost of rentals
and financing 118,049 102,767 346,425 309,743
Selling, service
and administrative 375,462 362,921 1,109,622 1,046,819
Research and
development 25,105 24,699 78,707 73,395
Other income (49,574) - (49,574) -
Interest, net 41,256 39,261 133,694 115,209
--------- ---------- ----------- -----------
Total costs and
expenses 810,788 812,151 2,522,434 2,392,652
--------- ---------- ----------- -----------
Income from continuing
operations before income
taxes 279,037 201,024 722,147 588,898
Provision for income
taxes 92,960 68,201 240,091 200,971
--------- ---------- ----------- -----------
Income from continuing
operations 186,077 132,823 482,056 387,927
Discontinued operations - 8,763 (23,967) 25,363
--------- ---------- ----------- -----------
Net income $ 186,077 $ 141,586 $ 458,089 $ 413,290
========= ========== =========== ===========
Basic earnings per share
Continuing operations $ 0.70 $ 0.49 $ 1.80 $ 1.41
Discontinued operations - 0.03 (0.09) 0.09
--------- ---------- ----------- -----------
$ 0.70 $ 0.52 $ 1.71 $ 1.50
========= ========== =========== ===========
Diluted earnings per share
Continuing operations $ 0.69 $ 0.48 $ 1.77 $ 1.38
Discontinued operations - 0.03 (0.09) 0.09
--------- ---------- ----------- -----------
$ 0.69 $ 0.51 $ 1.68 $ 1.47
========= ========== =========== ===========
Average common and
potential common
shares outstanding 271,196,789 278,712,757 273,124,305 280,667,340
=========== =========== =========== ===========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
----------- ---------- ------
Third Quarter
-------------
Revenue
-------
Mailing and Integrated Logistics $ 736,945 $ 666,141 11%
Office Solutions 312,063 306,716 2%
Capital Services 40,817 40,318 1%
----------- ----------- ---
Total Revenue $ 1,089,825 $ 1,013,175 8%
=========== =========== ===
Operating Profit (1)
-------------------
Mailing and Integrated Logistics $ 198,213 $ 163,702 21%
Office Solutions 60,526 59,461 2%
Capital Services 11,908 11,482 4%
----------- ----------- ---
Total Operating Profit $ 270,647 $ 234,645 15%
=========== =========== ===
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
---------
(Dollars in thousands, except per share data)
(*)
Assets 9/30/99 6/30/99 9/30/98
------ --------- --------- ---------
Current assets:
Cash and cash equivalents $ 152,057 $ 132,693 $ 144,974
Short-term investments, at cost
which approximates market 873 949 1,930
Accounts receivable, less allowances:
9/99 $25,493
6/99 $24,983
9/98 $22,513 404,720 416,302 346,485
Finance receivables,
less allowances:
9/99 $43,147
6/99 $48,642
9/98 $61,274 1,560,641 1,498,531 1,687,540
Inventories 242,678 259,858 235,568
Other current assets and
prepayments 131,433 83,173 301,409
Net assets of discontinued
operations 137,869 156,507 -
--------- --------- ---------
Total current assets 2,630,271 2,548,013 2,717,906
--------- --------- ---------
Property, plant and equipment, net 473,558 467,013 486,842
Rental equipment and related
inventories, net 825,946 842,176 804,190
Property leased under capital
leases, net 3,097 3,269 3,909
Long-term finance receivables, less
allowances:
9/99 $57,197
6/99 $76,291
9/98 $73,840 1,925,891 1,954,990 2,397,466
Investment in leveraged leases 979,910 962,531 817,144
Goodwill, net of amortization:
9/99 $53,057
6/99 $51,425
9/98 $45,902 227,507 227,874 213,778
Other assets 495,998 454,198 813,110
Net assets of discontinued
operations 319,248 313,063 -
--------- --------- ---------
Total assets $7,881,426 $7,773,127 $8,254,345
========= ========= =========
Liabilities and stockholders' equity
------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities $ 825,622 $ 776,665 $ 864,511
Income taxes payable 230,347 186,279 165,414
Notes payable and current
portion of long-term
obligations 1,315,316 1,273,197 1,844,077
Advance billings 374,512 391,103 362,801
--------- --------- ---------
Total current
liabilities 2,745,797 2,627,244 3,236,803
--------- --------- ---------
Deferred taxes on income 1,061,686 1,029,923 929,199
Long-term debt 1,847,808 1,898,942 1,710,533
Other noncurrent liabilities 348,292 352,911 366,799
--------- --------- ---------
Total liabilities 6,003,583 5,909,020 6,243,334
--------- --------- ---------
Preferred stockholders' equity in
a subsidiary company 310,000 310,000 300,000
Stockholders' equity:
Cumulative preferred stock, $50
par value, 4% convertible 29 29 34
Cumulative preference stock, no
par value, $2.12 convertible 1,901 1,945 2,076
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 10,330 11,927 18,198
Retained earnings 3,326,639 3,208,052 2,971,883
Accumulated other comprehensive income
(93,456) (85,851) (90,548)
Treasury stock, at cost (2,000,938) (1,905,333) (1,513,970)
--------- --------- ---------
Total stockholders'
equity 1,567,843 1,554,107 1,711,011
--------- --------- ---------
Total liabilities and
stockholders' equity $ 7,881,426 $ 7,773,127 $ 8,254,345
========== ========== ==========
(*) Certain prior year amounts have been reclassified to conform
with the current year presentation.
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