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Pitney Bowes Reports Record Fourth Quarter and Year-end Results
STAMFORD, Conn.--(BUSINESS WIRE)--Jan. 27, 2000--
Fourth Quarter 1999
-------------------
18% Growth in Diluted EPS from Continuing Operations to 66
cents
7% Revenue Growth to $1.19 Billion
14.9% Income from Continuing Operations Margin
Full-Year 1999
--------------
13% Growth in Diluted EPS from Net Income to $2.34
8% Revenue Growth to $4.43 Billion
Operating Profit Exceeds $1 Billion for the First Time on 15%
Growth
Nearly $1 Billion in Cash Generated from Operations
Pitney Bowes Inc. (NYSE: PBI) today announced record fourth-quarter performance featuring a seven-percent increase in revenue to $1.19 billion up from $1.11 billion in 1998 and an 18-percent increase in diluted earnings per share from continuing operations to 66 cents. Income from continuing operations rose 15 percent to $177.1 million. Net income grew nine percent to $178.1 million and diluted earnings per share grew 13 percent.
The Company additionally reported record 1999 performance, which included an eight-percent increase in full-year revenue to $4.43 billion and a 25 percent increase in diluted earnings per share from continuing operations to $2.42. Full-year income from continuing operations rose 22 percent from the prior year to $659.2 million. The full-year results include the one time, after-tax net settlement of $29.5 million received from the U.S. Postal Service in the third quarter of 1999. Diluted earnings per share from net income, increased 13 percent to $2.34 on income of $636.2 million, which is an increase of 10 percent above the prior year. Cash generated from operations was $981 million for the year, a 27 percent increase over 1998.
The Company also announced that it has received approximately $490 million from the sale of its mortgage servicing subsidiary, Atlantic Mortgage & Investment Corporation (AMIC) to ABN AMRO North America, which closed earlier this month. Financial results for 1999 and 1998 have been restated to exclude AMIC from continuing operations.
Pitney Bowes Chairman and CEO, Michael J. Critelli, commented, "I am pleased that our focus on customers' messaging needs yielded yet another year of strong revenue growth and the fifth consecutive year of double-digit diluted earnings per share growth from continuing operations. By extending our product offerings with value-added software and services and improving the customer experience by redesigning our business processes, we continue to enhance the return on the assets deployed in the business. The resulting cash from operations, when combined with the $490 million from the sale of AMIC, will provide us with additional flexibility as we invest for growth in 2000."
Turning to the quarter, Mr. Critelli noted, "Our success has not only been driven by having superior products and services that meet customers' messaging needs, but also by our investment in web-enabling systems and processes that help to improve customer acquisition, sales effectiveness and operating productivity. As a result of these and other initiatives, net margins improved when compared to the previous year, and we expect this trend to continue."
As previously announced, the Company is in the midst of an 11.6 million share repurchase program. During the fourth quarter, the Company repurchased approximately 1.5 million shares on the open market, bringing the total to approximately 7.4 million shares repurchased throughout 1999. Additionally, the Board of Directors implemented two actions to enhance total shareholder value:
- An 11.8 percent increase in the dividend on common stock to $1.14 per share, marking the eighteenth consecutive year of double-digit increases
- An additional authorization to repurchase four million shares of common stock for a total authorization of 8.2 million shares
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 service, and software. Mailing and Integrated Logistics revenue grew eight percent in the quarter with a 19 percent increase in operating profit.
Once again, the demand for software-enabled production mail systems, which process complex marketing, statement and billing applications, helped fuel the revenue growth for the sector. International results were also strong as the Company benefited from meter migration opportunities related to Euro conversion in Germany and technology transition opportunities in Canada and the United Kingdom. Customers continued to take advantage of the attractive financial alternatives offered them as part of a complete solution for their messaging needs. They can gain easy access to postage 24 hours a day, 7 days a week through Postage-by-Phone(TM) and pay for postage through credit products such as Purchase Power(SM), or advance deposit, interest-paying accounts via Postal Privilege(SM).
The Office Solutions Segment includes Pitney Bowes Office Systems and Pitney Bowes Management Services. Fourth quarter performance in this segment included three-percent revenue growth and a six-percent decline in operating profit. Excluding the impact of currency, operating profit would have grown two percent. The segment's operating profit was impacted by the recent sharp and rapid rise in the value of the yen, the longer selling cycles of national accounts, and the costs associated with transitioning to renting copiers, consistent with our strategy of acquiring Fortune 1000 customers. In fact, the Company recently added copier as a preferred supplier to three Fortune 1000 companies.
During the quarter, Pitney Bowes Management Services (PBMS) revenues were flat while operating profits increased at a double-digit percentage rate, driven by programs designed to improve the profitability of customer contracts while increasing service levels. In the fourth quarter, PBMS booked its highest net new business since the third quarter of 1998.
Office Systems, featuring the copier and facsimile product lines, grew revenues four percent for the quarter. The copier business posted excellent rental revenue growth as the business continued the transition to digital, networked solutions and a focus on selling 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 16 percent while its operating profit decreased by six percent. The Company continued its strategic shift to fee-based income by lowering the asset base. Excluding the Capital Services Segment, the Company's revenue also grew seven percent for the quarter.
Commenting on the year, Mr. Critelli stated, "1999 was an excellent year of profitability and growth where Pitney Bowes benefited from strong demand for a wide variety of products and services that help businesses of all sizes meet their mail and messaging needs. The Paragon(TM) and Galaxy(TM) multifunctional mail finishing systems were in high demand by mid- to high-volume mailers looking for enhanced operational efficiency. The customer acquisition and retention needs of businesses of all kinds, including e-businesses, stimulated the demand for targeted direct marketing mail. Mailers at the high-end of the market turned to the customized software, equipment and systems integration services provided by our Production Mail and Document Factory Solutions business. We provide that same ability to produce professional, tailored one-to-one marketing documents for the mid-volume user through our unique Mail Creation solutions such as the DocuMatch(TM), a networked, integrated mail preparation system.
"Additionally, our shipping and logistics business has experienced superior growth in revenue and operating profit because of the growing needs of all businesses, including e-tailers, to select and manage the most efficient and cost-effective way to fulfill customer orders.
"Our international operations enjoyed excellent growth in revenue and profitability during the year led by focused sales management and cost controls, plus meter migration mandates in several countries.
"As a result, during the past year Pitney Bowes was able to grow its revenue by eight percent, its operating profit by 15 percent and deliver 19 percent growth in diluted earnings per share from continuing operations, even when the $29.5 million net after-tax settlement with the U.S. Postal Service is excluded."
Mr. Critelli concluded, "Looking toward 2000, we will benefit not only from the drivers of growth in 1999, but from the explosive growth of the 'new economy.' E-commerce and the Internet are expanding customers' options for business transactions, adding e-tail to traditional retail transactions. The opportunity is to participate in both a greater volume of transactions and a greater part of the transaction cycle, from customer acquisition/retention, order fulfillment and product delivery, to bill presentment and payment.
"Our e-business initiatives will leverage the explosive growth of the Internet by creating new revenue opportunities in both the business-to-business and business-to-consumer market places, as well as creating efficient e-business models which leverage our cost structure. Central to defining our total e-business strategy is our extensive expertise in understanding the value proposition for customers in the business messaging and logistics marketplace. PBI is positioned to be a significant participant in the commercially-viable segments of these emerging markets by employing the following guiding principles:
- PBI will web-enable all of our two million plus customers
- PBI will achieve seamless interaction with our customers through multiple distribution channels and touch points
- PBI will approach developing segments utilizing a scalable investment strategy
- PBI will leverage the four critical components that spell
competitive success on the Internet
- Brand Recognition
- Intellectual Property
- Investment Capital
"New and developing e-commerce companies must use significant investment capital to grow customer base, build brand recognition and develop technology. Pitney Bowes will exploit its already substantial advantage in these areas to compete and win in targeted market segments.
"In summary, the transaction cycle is changing the new e-commerce world, but properly positioned companies like Pitney Bowes can use these opportunities to enrich product and services offerings."
Fourth quarter 1999 revenue included $594.0 million from sales, up six percent from $562.2 million in the fourth quarter of 1998; $451.6 million from rentals and financing, up 10 percent from $411.3 million; and $142.5 million from support services, up five percent from $135.8 million.
Fourth quarter 1999 net income was $178.1 million, or 66 cents per diluted share, compared to $163.1 million, or 59 cents per diluted share, in 1998. There was no income from AMIC in the fourth quarter 1999 compared to $8.5 million in net income, or three cents per diluted share, in 1998.
For the full year, revenue was $4.43 billion, up eight percent from $4.09 billion in 1998; and net income in 1999 was $636.2 million, or $2.34 per diluted share, compared to $576.4 million, or $2.06 per diluted share in 1998. The full year net income included $22.9 million in net losses from discontinued operations, or eight cents per diluted share, compared to $33.9 million in net income or twelve cents per diluted share, in 1998.
Pitney Bowes is a global provider of informed mail and messaging management. For more information about the Company visit www.pitneybowes.com.
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 and subsequent Form 8-K current report filed with the Securities and Exchange Commission.
Note: Consolidated statements of income for the three and twelve months ended December 31, 1999 and 1998, and consolidated balance sheets at December 31, 1999, September 30, 1999 and December 31, 1998 are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
---------------------------------
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
1999 1998 1999 1998
------ ------ ----- ----
Revenue from:
Sales $ 593,953 $ 562,236 $ 2,180,255 $ 1,993,546
Rentals
and financing 451,618 411,341 1,696,952 1,581,866
Support services 142,456 135,788 555,401 515,503
--------- -------- ---------- ---------
Total revenue 1,188,027 1,109,365 4,432,608 4,090,915
--------- --------- ---------- ---------
Costs and expenses:
Cost of sales 316,564 298,918 1,220,124 1,146,404
Cost of rentals
and financing 123,487 109,380 469,912 419,123
Selling, service
and admini-
strative 409,727 396,261 1,519,349 1,443,080
Research and
development 30,193 27,411 108,900 100,806
Other income -- -- (49,574) --
Interest, net 45,631 41,689 179,325 156,898
-------- ------- --------- -------
Total costs and
expenses 925,602 873,659 3,448,036 3,266,311
------- ------- --------- ---------
Income from continuing
operations before
income taxes 262,425 235,706 984,572 824,604
Provision for
income taxes 85,322 81,121 325,413 282,092
------- ------ ------- -------
Income from
continuing
operations 177,103 154,585 659,159 542,512
Discontinued
operations 1,020 8,519 (22,947) 33,882
------- ----- -------- ------
Net income $ 178,123 $ 163,104 $ 636,212 $ 576,394
========== =========== ========== ==========
Basic earnings
per share
Continuing
operations $ 0.67 $ 0.57 $ 2.47 $ 1.98
Discontinued
operations -- 0.03 (0.09) 0.12
------------- ------------- ------------- --------------
Net income $ 0.67 $ 0.60 $ 2.38 $ 2.10
============= ============= ============== =============
Diluted earnings
per share
Continuing
operations $ 0.66 $ 0.56 $ 2.42 $ 1.94
Discontinued
operations -- 0.03 (0.08) 0.12
------------- ------------- -------------- ------------
Net income $ 0.66 $ 0.59 $ 2.34 $ 2.06
============= ============= ============== ============
Average common
and potential
common shares
outstanding 268,775,741 276,722,479 272,006,143 279,656,603
============= =========== ============ ===========
Pitney Bowes Inc.
Consolidated Balance Sheets
----------------------------
(Dollars in thousands, except per share data)
(Unaudited)
Assets 12/31/99 9/30/99 12/31/98
------ -------- -------- --------
Current assets:
Cash and cash equivalents $ 254,270 $ 152,057 $ 125,684
Short-term investments,
at cost which approximates
market 2,414 873 3,302
Accounts receivable, less
allowances:
12/99 $28,716
9/99 $25,493
12/98 $24,665 432,224 404,720 382,406
Finance receivables,
less allowances:
12/99 $48,056
9/99 $43,147
12/98 $51,232 1,779,696 1,560,641 1,400,786
Inventories 257,452 242,678 266,734
Other current assets and
prepayments 128,662 131,433 330,051
Net assets of discontinued
operations 487,856 137,869 --
-------- -------- --------
Total current assets 3,342,574 2,630,271 2,508,963
--------- --------- ---------
Property, plant and equipment,
net 484,181 473,558 477,476
Rental equipment and related
inventories, net 810,788 825,946 806,585
Property leased under capital
leases, net 11,140 3,097 3,743
Long-term finance receivables,
less allowances:
12/99 $56,665
9/99 $57,197
12/98 $79,543 1,907,431 1,925,891 1,999,339
Investment in leveraged leases 969,589 979,910 827,579
Goodwill, net of
amortization:
12/99 $54,848
9/99 $53,057
12/98 $47,514 226,764 227,507 222,980
Other assets 470,205 495,998 814,374
Net assets of
discontinued
operations -- 319,248 --
------- --------- -------
Total assets $ 8,222,672 $ 7,881,426 $ 7,661,039
=========== =========== ===========
Liabilities and stockholders'
equity
----------------------------
Current liabilities:
Accounts payable
and accrued liabilities $ 915,826 $ 825,622 $ 898,548
Income taxes payable 255,201 230,347 194,443
Notes payable and current
portion of long-term
obligations 1,320,332 1,315,316 1,259,193
Advance billings 381,405 374,512 369,628
--------- --------- ---------
Total current liabilities 2,872,764 2,745,797 2,721,812
--------- --------- ---------
Deferred taxes on income 1,082,019 1,061,686 920,521
Long-term debt 1,997,856 1,847,808 1,712,937
Other noncurrent
liabilities 334,423 348,292 347,670
--------- --------- ---------
Total liabilities 6,287,062 6,003,583 5,702,940
--------- --------- ---------
Preferred stockholders'
equity in a subsidiary
company 310,000 310,000 310,097
Stockholders' equity:
Cumulative preferred stock,
$50 par value,
4% convertible 29 29 34
Cumulative preference stock,
no par value,
$2.12 convertible 1,841 1,901 2,031
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par
value 17,382 10,330 16,173
Retained earnings 3,437,185 3,326,639 3,073,839
Accumulated other comprehensive
income (93,015) (93,456) (88,217)
Treasury stock, at cost (2,061,150) (2,000,938) (1,679,196)
---------- ----------- ----------
Total stockholders' equity 1,625,610 1,567,843 1,648,002
---------- ----------- ----------
Total liabilities and
stockholders' equity $ 8,222,672 $ 7,881,426 $ 7,661,039
========== ========== ===========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
----- ----- -------
Fourth Quarter
--------------
Revenue
-------
Mailing and Integrated
Logistics $ 808,923 $ 746,382 8%
Office Solutions 322,615 314,427 3%
Capital Services 56,489 48,556 16%
--------- -------- -------
Total Revenue $1,188,027 $ 1,109,365 7%
========== ========== =======
Operating Profit(1)
------------------
Mailing and Integrated
Logistics $ 225,125 $ 188,408 19%
Office Solutions 61,710 65,626 (6%)
Capital Services 18,253 19,402 (6%)
---------- --------- -------
Total Operating Profit $ 305,088 $ 273,436 12%
========== ========== =======
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 1999
(Unaudited)
(Dollars in thousands)
%
1999 1998 Change
----- ----- ------
Year Ended December 31
----------------------
Revenue
-------
Mailing and Integrated
Logistics $2,991,449 $2,707,044 11%
Office Solutions 1,266,011 1,216,007 4%
Capital Services 175,148 167,864 4%
--------- ---------- ------
Total Revenue $4,432,608 $4,090,915 8%
========= ========= ======
Operating Profit(1)
------------------
Mailing and Integrated
Logistics $ 798,377 $ 660,740 21%
Office Solutions 241,437 235,156 3%
Capital Services 51,127 51,431 (1%)
--------- ---------- --------
Total Operating
Profit $1,090,941 $ 947,327 15%
========== ========== ========
(1) Operating profit excludes general corporate expenses, income
taxes and net interest other than that related to finance
operations.
CONTACT:
Editorial - Sheryl Y. Battles
Exec. Director, External Affairs
(203) 351-6808
Financial - Charles F. McBride
Exec. Director, Investor Relations
(203) 351-6349
Website - www.pitneybowes.com