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Pitney Bowes Reports Second Quarter Earnings
STAMFORD, Conn.--(BUSINESS WIRE)--July 18, 2000--
Highlights:
-- 22nd Consecutive Quarter of Double-Digit Earnings Per Share Growth
-- Approximately $160 Million in Free Cash Flow
-- Repurchase of 5.4 Million Shares During the Quarter
Pitney Bowes Inc. (NYSE:PBI) today reported second quarter results that included diluted earnings per share from continuing operations of 64 cents, an 11% increase and the 22nd consecutive quarter of double-digit growth. Revenue in the quarter grew five percent to $1.2 billion and income from continuing operations rose five percent to $166.0 million.
Pitney Bowes Chairman and Chief Executive Officer Michael J. Critelli commented on the second quarter results: "We are pleased with what we've accomplished this quarter. Our Office Solutions segment reported its fourth consecutive quarter of higher year-over-year revenue growth. In particular, we experienced continued improvement in revenue growth in our copier and management services businesses. Our Mailing and Integrated Logistics (MAIL) segment reported six percent revenue growth despite unfavorable foreign currency impacts. We achieved these results against a difficult comparison to the second quarter 1999, which included the benefits of meter migration."
The Mailing and Integrated Logistics Segment includes the revenues and related expenses from the rental, sale and financing of mailing and shipping equipment, related supplies and services, and software. As noted above, the segment revenue grew six percent and its operating profit grew 15 percent, in line with our first quarter performance. Operating profit benefited from improving rental and financing margins in our core mail finishing business.
The higher growth components of the MAIL segment are producing strong results. In particular, our International Mailing operations continued to reap the benefits of the growth strategy: increasing market share; developing existing and new markets; increasing the value of business per customer and expanding the customer base. The success of these strategies, plus ongoing cost controls, resulted in another quarter of U.S. dollar-based double-digit revenue growth and even greater operating profit growth.
Worldwide production mail revenues also continued its double-digit growth trend, as large volume mailers turn to Pitney Bowes software-based solutions for enhanced functionality, speed and accuracy.
The Office Solutions Segment includes Pitney Bowes Office Systems and Pitney Bowes Management Services. Marking the fourth consecutive quarter of improved revenue growth and the highest growth since the first quarter of 1999, second quarter revenue grew five percent in the segment, while operating profit declined nine percent.
Office Systems' revenue grew six percent, while operating profit declined due to adverse currency impacts and ongoing strategic business initiatives. The relative value of the Yen and margin impacts associated with the ongoing transition to a rental revenue model for large national accounts in the copier business negatively impacted operating profit. Strong copier rental revenue growth demonstrates success of the company's strategy and its ability to place copier fleets in national accounts by leveraging its established relationships between corporations and its facsimile account teams.
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 to pursue disciplined, profitable growth once again produced substantially higher operating profit growth as year-over-year revenue growth increased by five percent. The unit's strategy has resulted in enhanced customer service and also led to a substantial improvement in net new written business versus the prior year.
Total Messaging Solutions, the combined results of the MAIL and Office Solutions segments, reported six percent growth in revenue and nine percent growth in operating profit.
The Capital Services Segment includes primarily asset- and fee-based income generated by large ticket non-core asset transactions. This quarter, consistent with the company's stated strategy to concentrate on fee-based income opportunities, the segment's revenue decreased eight percent and its operating profit decreased 13 percent.
Mr. Critelli continued, "Striking a strategic balance through carefully managing our substantial recurring revenue base, enhancing our growth-oriented businesses and making focused investments for the future, we were able to generate approximately $160 million in free cash flow during the quarter. We expect to generate similar levels of free cash flow in the future, which will be used for investments, dividends and share repurchases.
"We continued to enhance our future revenue growth opportunities during the quarter through additional investments of approximately $25 million in Internet and other new business initiatives. In fact, in addition to growing our investment, we were still able to reduce selling, service and administrative expenses as a percent of revenue by 20 basis points during the quarter."
"During the second quarter, we completed the repurchase of 3.6 million shares remaining under an authorization to repurchase 8.2 million shares of common shares outstanding. In addition, we repurchased 1.8 million shares during the quarter, under a subsequent authorization to buy up to $300 million worth of shares of common stock. This resulted in a total of 5.4 million shares being repurchased during the quarter and 10 million shares repurchased during the first half of 2000.
Mr. Critelli concluded, "Pitney Bowes has an extremely sound business foundation that allows us to invest for growth in the future and we continually improve that foundation. An example of this is the recent sale of our credit card portfolio. During the quarter, the company, through its subsidiary Pitney Bowes Credit Corporation, announced a strategic alliance under which U.S. Bancorp acquired and will service the PitneyWorks(SM) Business Rewards(SM) Visa(R) and Business Visa(R) card portfolios. This alliance expands Pitney Bowes' and U.S. Bank's capabilities to capture a greater share of the growing small business market. While the revenue and operating profit associated with this transaction were not material to second quarter 2000 results, the ongoing alliance with U.S. Bank will allow us to greatly expand the availability of these credit products while minimizing the amount of capital committed to this effort."
Second quarter 2000 revenue included $571.5 million from sales, up five percent from $546.4 million in the second quarter of 1999; $443.8 million from rentals and financing, up six percent from $418.8 million; and $145.7 million from support services, up four percent from $140.3 million.
Second quarter 2000 net income was $166.0 million, or 64 cents per diluted share, compared to $129.7 million, or 48 cents per diluted share, in 1999. Second quarter 1999 net income included a $27.7 million net after-tax charge, or 10 cents per diluted share related to discontinued operations.
For the six-month period ended June 30, 2000, revenue was $2.263 billion, up five percent from $2.155 billion in 1999; and net income in 2000 was $317.5 million, or $1.21 per diluted share, compared to $272.0 million, or 99 cents per diluted share in 1999. The year-to-date net income for 1999 included a $24.0 million net after-tax charge, or nine cents per diluted share, from discontinued operations.
Pitney Bowes is a global provider of total messaging solutions.
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 and six months ended June 30, 2000 and 1999 and consolidated balance sheets at June 30, 2000, March 31, 2000, and June 30, 1999 are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended June 30,
--------------------------------------
-------------------------------------- ---
2000 1999
--------------- ---------------
--------------- ---------------
Revenue from:
Sales $ 571,538 $ 546,370
Rentals and financing 443,801 418,773
Support services 145,695 140,289
--------------- ---------------
--------------- ---------------
Total revenue 1,161,034 1,105,432
--------------- ---------------
--------------- ---------------
Costs and expenses:
Cost of sales 321,814 306,351
Cost of rentals and financing 119,598 117,443
Selling, service
and administrative 389,763 373,132
Research and development 30,528 27,698
Interest, net 53,361 46,938
--------------- ---------------
--------------- ---------------
Total costs and expenses 915,064 871,562
--------------- ---------------
--------------- ---------------
Income from continuing operations
before income taxes 245,970 233,870
Provision for income taxes 80,013 76,462
--------------- ---------------
--------------- ---------------
Income from continuing operations 165,957 157,408
Loss from discontinued operations - (27,667)
--------------- ---------------
--------------- ---------------
Net income $ 165,957 $ 129,741
=============== ===============
=============== ===============
Basic earnings per share
Continuing operations $ 0.64 $ 0.58
Discontinued operations - (0.10)
--------------- ---------------
--------------- ---------------
Net income $ 0.64 $ 0.48
=============== ===============
=============== ===============
Diluted earnings per share
Continuing operations $ 0.64 $ 0.58
Discontinued operations - (0.10)
--------------- ---------------
--------------- ---------------
Net income $ 0.64 $ 0.48
=============== ===============
=============== ===============
Average common
and potential common
shares outstanding 259,702,184 273,016,885
=============== ===============
=============== ===============
Six Months Ended June 30,
------------------------------------
------------------------------------
2000 1999
---------------- ----------------
---------------- ----------------
Revenue from:
Sales $ 1,091,580 $ 1,056,752
Rentals and financing 879,967 824,498
Support services 291,454 273,506
---------------- ----------------
---------------- ----------------
Total revenue 2,263,001 2,154,756
---------------- ----------------
---------------- ----------------
Costs and expenses:
Cost of sales 622,647 603,070
Cost of rentals and financing 241,209 228,376
Selling, service
and administrative 768,076 734,160
Research and development 60,039 53,602
Interest, net 100,523 92,438
---------------- ----------------
---------------- ----------------
Total costs and expenses 1,792,494 1,711,646
---------------- ----------------
---------------- ----------------
Income from continuing operations
before income taxes 470,507 443,110
Provision for income taxes 152,997 147,131
---------------- ----------------
---------------- ----------------
Income from continuing operations 317,510 295,979
Loss from discontinued operations - (23,967)
---------------- ----------------
---------------- ----------------
Net income $ 317,510 $ 272,012
================ ================
================ ================
Basic earnings per share
Continuing operations $ 1.22 $ 1.10
Discontinued operations - (0.09)
---------------- ----------------
---------------- ----------------
Net income $ 1.22 $ 1.01
================ ================
================ ================
Diluted earnings per share
Continuing operations $ 1.21 $ 1.08
Discontinued operations - (0.09)
---------------- ----------------
---------------- ----------------
Net income $ 1.21 $ 0.99
================ ================
================ ================
Average common
and potential common
shares outstanding 262,624,456 274,073,691
================ ================
================ ================
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
Assets 6/30/00 3/31/00 6/30/99
------ ------- ------- -------
Current assets:
Cash and cash equivalents $ 296,695 $ 219,063 $ 132,693
Short-term investments,
at cost which
approximates market 2,811 19,126 949
Accounts receivable,
less allowances:
6/00 $25,767
3/00 $25,443
6/99 $24,983 435,749 423,192 416,302
Finance receivables,
less allowances:
6/00 $40,927
3/00 $43,034
6/99 $48,642 1,431,588 1,617,858 1,498,531
Inventories 260,668 262,595 259,858
Other current
assets and prepayments 173,013 152,870 83,173
Net assets of
discontinued operations - - 156,507
---------- ---------- ---------
Total current assets 2,600,524 2,694,704 2,548,013
---------- ---------- ---------
Property, plant
and equipment, net 486,140 484,812 467,013
Rental equipment
and related
inventories, net 789,369 797,301 842,176
Property leased
under capital
leases, net 2,640 2,800 3,269
Long-term
finance receivables,
less allowances:
6/00 $58,777
3/00 $59,089
6/99 $76,291 1,983,529 2,010,562 1,954,990
Investment in
leveraged leases 1,043,118 987,297 962,531
Goodwill,
net of amortization:
6/00 $58,426
3/00 $56,628
6/99 $51,425 229,039 229,180 227,874
Other assets 624,830 612,005 454,198
Net assets of
discontinued operations - - 313,063
---------- ---------- ---------
Total assets $7,759,189 $7,818,661 $7,773,127
=========== =========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and
accrued liabilities $ 825,341 $ 903,565 $ 776,665
Income taxes payable 217,665 265,275 186,279
Notes payable and
current portion of
long-term obligations 956,925 974,370 1,273,197
Advance billings 376,022 380,620 391,103
-------- -------- -------
Total current liabilities 2,375,953 2,523,830 2,627,244
---------- ---------- ---------
Deferred taxes on income 1,182,766 1,122,865 1,029,923
Long-term debt 2,201,591 2,037,860 1,898,942
Other noncurrent liabilities 326,588 331,985 352,911
-------- -------- -------
Total liabilities 6,086,898 6,016,540 5,909,020
---------- ---------- ---------
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 29
Cumulative preference stock,
no par value,
$2.12 convertible 1,796 1,809 1,945
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value 11,067 13,479 11,927
Retained earnings 3,606,430 3,513,693 3,208,052
Accumulated other
comprehensive income (114,798) (91,805) (85,851)
Treasury stock, at cost (2,465,571) (2,268,422) (1,905,333)
----------- ----------- -----------
Total stockholders' equity 1,362,291 1,492,121 1,554,107
---------- ---------- ---------
Total liabilities and
stockholders' equity $7,759,189 $7,818,661 $7,773,127
=========== =========== ==========
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 2000
(Unaudited)
(Dollars in thousands)
%
2000 1999 Change
------------ ----------- ----------
Second Quarter
Revenue
Mailing and Integrated
Logistics $ 789,218 $ 746,952 6%
Office Solutions 333,615 316,753 5%
------------ ----------- ----------
Total Messaging Solutions 1,122,833 1,063,705 6%
------------ ----------- ----------
Capital Services 38,201 41,727 (8%)
------------ ----------- ----------
Total Revenue $1,161,034 $1,105,432 5%
============ =========== ==========
Operating Profit (1)
Mailing and Integrated
Logistics $ 225,937 $ 197,294(2) 15%
Office Solutions 55,287 60,656 (9%)
------------ ----------- ----------
Total Messaging Solutions 281,224 257,950 9%
------------ ----------- ----------
Capital Services 11,131 12,784 (13%)
------------ ----------- ----------
Total Operating Profit $ 292,355 $ 270,734 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.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
June 30, 2000
(Unaudited)
(Dollars in thousands)
%
2000 1999 Change
------------ ---------- ---------
Year to Date
Revenue
Mailing and Integrated
Logistics $1,531,059 $1,445,581 6%
Office Solutions 657,604 631,333 4%
------------- ----------- ----------
Total Messaging Solutions 2,188,663 2,076,914 5%
------------- ----------- ----------
Capital Services 74,338 77,842 (5%)
------------ ------------ ----------
Total Revenue $2,263,001 $2,154,756 5%
============= =========== ==========
Operating Profit (1)
Mailing and Integrated
Logistics $ 422,041 $ 368,638 (2) 14%
Office Solutions 108,279 119,201 (9%)
------------- ----------- ----------
Total Messaging Solutions 530,320 487,839 9%
------------- ----------- ----------
Capital Services 19,692 20,966 (6%)
------------ ----------- ----------
Total Operating Profit $ 550,012 $ 508,805 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
Editorial - Sheryl Y. Battles
Exec. Director, External Affairs
203/351-6808
or
Financial - Charles F. McBride
Exec. Director, Investor Relations
203/351-6349
Website - www.pitneybowes.com