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Pitney Bowes Reports First Quarter Earnings
Highlights:
- 21st Consecutive Quarter of Double-Digit Earnings Per Share Growth
- Improved Pretax Margin to 20.4 percent
- Company Invests Over $20 Million in Growth Initiatives During the Quarter
STAMFORD, Conn.--(BUSINESS WIRE)--April 18, 2000--Pitney Bowes Inc. (NYSE:PBI) today reported first quarter results that featured a 13 percent increase in diluted earnings per share from continuing operations to 57 cents, the 21st consecutive quarter of double-digit growth. Revenue in the quarter grew five percent to $1.1 billion and income from continuing operations grew nine percent to $151.6 million.
Pitney Bowes Chairman and Chief Executive Officer Michael J. Critelli discussed the first quarter results: "We were pleased with the good growth and margin expansion in strategic parts of our business, while we invested aggressively and structured our business to focus on Internet and other new business growth initiatives. However, revenues in the quarter did not reflect our underlying growth rate which we believe to be eight percent. We are experiencing a challenging revenue comparison for the first half of the year, due to the lack of meter migration and PROM revenues that were realized during the first half of 1999. Adjusting for these factors, our revenue growth this quarter would have been approximately eight percent."
"During the quarter, we delivered technologically-driven products and services for businesses of all sizes, including Internet-enabled applications. For example, we formed the docSense business to help large companies easily integrate web-based delivery of bills and statements with their existing hard copy systems. Our recently approved ClickStamp Online(TM) Internet postage application joins the PitneyWorks(SM) suite of mailing, shipping, marketing and financial solutions to help small businesses improve their operating efficiency. Over one million customers of all sizes use our Postage By Phone(R) system to manage more than $11 billion in postage transactions. Now they can visit www.postagebyphone.com and use the Internet 24/7 to download funds and monitor their postage usage. In addition to these and other Internet related products announced during the quarter, we announced a new incoming mail solution and a new digital metering system. We also completed a number of strategic alliances that broaden our solution set and customer base. Though it's too early in the process for these initiatives to have generated revenues, we expect strong contribution to revenue growth in the future.
"We continue to believe that our business models will produce higher revenue growth in the second half of the year. The core mail finishing business remains strong. We also have solid positions in high growth sectors of the market such as logistics, mail creation, production mail, and international mail as well as our new growth areas of Internet-based small business solutions, incoming messaging and desktop messaging solutions.
"This quarter alone we have invested approximately $20 million in Internet and other new business initiatives representing a 44 percent increase over the prior year because we believe these are key drivers of future growth in shareholder value. During the year our plan is to invest in excess of $100 million in Internet and other new business initiatives, which is almost twice the spend rate of 1999."
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. On a reported basis, the segment's revenue grew six percent and its operating profit grew a strong 14 percent led by improved sales margins. Revenue for the segment would have grown approximately 10 percent during the quarter excluding the impacts of meter migration and PROM sales associated with the U.S. postal rate increase in the first quarter 1999. Direct marketing and e-commerce activity stimulated strong demand for vendor-inclusive shipping and logistics systems, as well as the Company's unique mail creation products, such as the one-to-one marketing mail preparation system, Documatch(TM), and the address correction and postal formatting software, SmartMailer(TM). As a result, there was strong revenue growth in the software and services portion of the Mailing and Integrated Logistics segment, which includes the Company's mail creation and shipping businesses.
Worldwide production mail revenues continued to show strong growth as direct marketing and billing applications drove demand worldwide for high-speed, intelligent mail finishing. This included the first installations of the largest order the Company has ever received from the Peoples' Republic of China.
International Mailing results were also strong as the Company continues to benefit from meter migration mandates related to the Euro conversion in Germany and the transition to electronic and digital metering technology in the United Kingdom and Canada. During the quarter, the Company signed a working party agreement with Royal Mail to enable working together to develop products and services in the United Kingdom.
The Office Solutions Segment includes Pitney Bowes Office Systems and Pitney Bowes Management Services. First-quarter performance in this segment included three percent revenue growth with a nine percent decline in operating profit.
During the quarter, Office Systems' revenue grew three percent while operating profit declined. Operating profit was negatively impacted by an increase in the value of the Yen, the higher costs of digital equipment, and margin impacts associated with the transition to a rental revenue model for large national accounts in the copier business. Strong copier rental revenue growth demonstrates the Company's ongoing success in leveraging its extensive corporate facsimile relationships to place copier fleets in national accounts.
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 of pursuing disciplined, profitable growth continues to be demonstrated in several ways. This quarter the business once again produced substantially higher operating profit growth than the three percent revenue growth. This strategy, which includes enhanced customer service, also resulted in net new written business in the first quarter of 2000 nearly equal to that of full-year 1999. We believe that this positions us well for revenue growth improvement during 2000.
The Capital Services Segment includes primarily asset- and fee-based income generated by large ticket external assets. During the quarter, the segment's revenue was flat while operating profit increased by five percent. We expect the revenue base of Capital Services to be flat or decline as the Company continues its strategic shift to fee-based income resulting in a lower revenue generating asset base.
Mr. Critelli concluded, "We are confident that the actions we are taking in our core business as well as the significant investments we are making in new growth initiatives, will drive higher revenue growth in the second half of the year."
As previously announced, the Company has authorization to repurchase 8.2 million of its common shares outstanding. During the first quarter 2000, the Company repurchased approximately 4.6 million shares under this program.
First quarter 2000 revenue included $520.0 million from sales, up two percent from $510.4 million in the first quarter of 1999 (exclusive of PROM revenues associated with the U.S. Postal Service rate increase, sales would have grown four percent); $436.2 million from rentals and financing, up eight percent from $405.7 million; and $145.8 million from support services, up nine percent from $133.2 million. Net income for the period was $151.6 million, or 57 cents per diluted share, compared to first-quarter 1999 net income of $142.3 million, or 52 cents per diluted share. First quarter 1999 net income included $3.7 million of income from discontinued operations, or 1 cent per diluted share in 1999.
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 1999 Form 10-K Annual Report filed with the Securities and Exchange Commission.
Note: Consolidated statements of income for the three months ended March 31, 2000 and 1999, and consolidated balance sheets at March 31, 2000, December 31, 1999, and March 31, 1999, are attached. -0-
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended March 31,
--------------------------------------------------
2000 1999
------------------ -------------------
Revenue from:
Sales $ 520,042 $ 510,382
Rentals and financing 436,166 405,725
Support services 145,759 133,217
------------------ -------------------
Total revenue 1,101,967 1,049,324
------------------ -------------------
Costs and expenses:
Cost of sales 300,833 296,719
Cost of rentals and
financing 121,611 110,933
Selling, service and
administrative 378,313 361,028
Research and development 29,511 25,904
Interest, net 47,162 45,500
------------------ -------------------
Total costs and
expenses 877,430 840,084
------------------ -------------------
Income from continuing
operations before
income taxes 224,537 209,240
Provision for income taxes 72,984 70,669
------------------ -------------------
Income from continuing
operations 151,553 138,571
Income from discontinued
operations - 3,700
------------------ -------------------
Net income $ 151,553 $ 142,271
================== ===================
Basic earnings per share
Continuing operations $ 0.58 $ 0.52
Discontinued operations - 0.01
------------------ -------------------
Net income $ 0.58 $ 0.53
================== ===================
Diluted earnings per share
Continuing operations $ 0.57 $ 0.51
Discontinued operations - 0.01
------------------ -------------------
Net income $ 0.57 $ 0.52
================== ===================
Average common and
potential common
shares outstanding 266,033,984 274,962,244
================== ===================
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited) (Unaudited)
Assets 3/31/00 12/31/99 3/31/99
------ ------- -------- -------
Current assets:
Cash and cash
equivalents $ 219,063 $ 254,270 $ 129,687
Short-term investments,
at cost which
approximates market 19,126 2,414 1,654
Accounts receivable,
less allowances:
3/00 $25,443
12/99 $28,716
3/99 $25,667 423,192 432,224 419,002
Finance receivables,
less allowances:
3/00 $43,034
12/99 $48,056
3/99 $51,114 1,617,858 1,779,696 1,543,328
Inventories 262,595 257,452 260,727
Other current assets
and prepayments 152,870 128,662 350,659
Net assets of discontinued
operations - 487,856 -
--------- --------- ---------
Total current assets 2,694,704 3,342,574 2,705,057
--------- --------- ---------
Property, plant and
equipment, net 484,812 484,181 474,985
Rental equipment and
related inventories, net 797,301 810,788 829,470
Property leased under
capital leases, net 2,800 11,140 3,418
Long-term finance receivables,
less allowances:
3/00 $59,089
12/99 $56,665
3/99 $78,816 2,010,562 1,907,431 1,941,355
Investment in leveraged
leases 987,297 969,589 841,780
Goodwill, net of
amortization:
3/00 $56,628
12/99 $54,848
3/99 $49,588 229,180 226,764 223,213
Other assets 612,005 470,205 823,025
--------- --------- ---------
Total assets $7,818,661 $8,222,672 $7,842,303
========== ========== ==========
Liabilities and
stockholders' equity
----------------------
Current liabilities:
Accounts payable and
accrued liabilities $ 903,565 $ 915,826 $ 830,084
Income taxes payable 265,275 255,201 224,865
Notes payable and current
portion of long-term
obligations 974,370 1,320,332 1,483,599
Advance billings 380,620 381,405 393,829
--------- --------- ---------
Total current
liabilities 2,523,830 2,872,764 2,932,377
--------- --------- ---------
Deferred taxes on income 1,122,865 1,082,019 949,322
Long-term debt 2,037,860 1,997,856 1,710,427
Other noncurrent
liabilities 331,985 334,423 354,801
--------- --------- ---------
Total liabilities 6,016,540 6,287,062 5,946,927
--------- --------- ---------
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 34
Cumulative preference
stock, no par value,
$2.12 convertible 1,809 1,841 1,976
Common stock, $1
par value 323,338 323,338 323,338
Capital in excess of
par value 13,479 17,382 13,807
Retained earnings 3,513,693 3,437,185 3,146,946
Accumulated other
comprehensive income (91,805) (93,015) (88,665)
Treasury stock, at cost (2,268,422) (2,061,150) (1,812,060)
---------- ---------- ----------
Total stockholders'
equity 1,492,121 1,625,610 1,585,376
---------- ---------- ----------
Total liabilities and
stockholders' equity $7,818,661 $8,222,672 $7,842,303
========== ========== ==========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
March 31, 2000
(Unaudited)
(Dollars in thousands)
%
2000 1999 Change
---------- --------- ------------
First Quarter
-------------
Revenue
-------
Mailing and Integrated
Logistics $ 741,841 $ 698,629 6%
Office Solutions 323,989 314,580 3%
--------- --------- ------------
MAIL and Office
Solutions 1,065,830 1,013,209 5%
--------- --------- ------------
Capital Services 36,137 36,115 -
--------- --------- ------------
Total Revenue $1,101,967 $ 1,049,324 5%
========== =========== ============
Operating Profit (1)
--------------------
Mailing and Integrated
Logistics $ 196,104 $ 171,343 (2) 14%
Office Solutions 52,992 58,545 (9%)
--------- --------- ------------
MAIL and Office
Solutions 249,096 229,888 8%
--------- --------- ------------
Capital Services 8,561 8,182 5%
--------- --------- ------------
Total Operating Profit $ 257,657 $ 238,070 8%
========= ========= ============
(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.
CONTACT:
Pitney Bowes Inc., Stamford
Editorial - Sheryl Y. Battles
Exec. Director, External Affairs
203/351-6808
or
Financial - Charles F. McBride
Exec. Director, Investor Relations
203/351-6349
or
Website - www.pitneybowes.com