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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
April 28, 2005
Date of Report (Date of earliest event reported)
Pitney Bowes Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-3579 06-0495050
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
World Headquarters
1 Elmcroft Road
Stamford, Connecticut 06926-0700
(Address of principal executive offices)
(203) 356-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following information is furnished pursuant to Item 2.02 Disclosure of
"Results of Operations and Financial Condition."
On April 28, 2005, the registrant issued a press release setting forth its
financial results, including consolidated statements of income, selected segment
data, and a reconciliation of reported results to adjusted results for the three
months ended March 31, 2005 and 2004, and consolidated balance sheets at March
31, 2005, December 31, 2004 and March 31, 2004. A copy of the press release is
attached hereto as Exhibit 99.1 and hereby incorporated by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release of Pitney Bowes Inc. dated April 28, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pitney Bowes Inc.
April 28, 2005
/s/ B.P. Nolop
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B.P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ S.J. Green
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S.J. Green
Vice President - Finance and
Chief Accounting Officer
(Principal Accounting Officer)
EXHIBIT 99.1
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PITNEY BOWES ANNOUNCES FIRST QUARTER RESULTS
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STAMFORD, Conn., April 28, 2005 - Pitney Bowes Inc. (NYSE:PBI) today reported
first quarter performance that exceeded previous revenue and earnings guidance.
Commenting on the company's financial performance during the quarter,
Chairman and CEO Michael J. Critelli noted, "We're off to a great start in 2005
as the momentum established by our strong fourth-quarter 2004 performance
continued this quarter. We are reaping the benefits of our previous actions to
strengthen organic growth, expand into new market spaces, and enhance our
operating efficiency."
For the first quarter 2005, revenue increased 12 percent to $1.32
billion, which was better than the company's previous revenue guidance of nine
to eleven percent. These results were driven by ongoing strong worldwide demand
for the company's mailing systems, mail services, small business solutions and
supplies for our broader base of digital products and acquisitions completed
within the prior year. Net income for the quarter was $149.6 million or $.64 per
diluted share versus $.54 per diluted share in the prior year.
During the quarter, the company recorded a net after-tax gain from
restructuring activity of $9 million. This gain is composed of an $18 million
after-tax gain from the previously announced sale of the company's 22-acre Main
Plant site and a $9 million after-tax charge for ongoing restructuring
initiatives to streamline business processes.
Separately, the company made a $10 million contribution, approximately
$6 million after-tax, to the Pitney Bowes Literacy and Education Fund and the
Pitney Bowes Employee Involvement Fund. According to Mr. Critelli, "We feel that
by investing in the community through these charitable foundations we are
investing in a better quality of life for us all and a better environment in
which to do business."
Excluding the impact of these items, the company's first quarter
adjusted diluted earnings per share was $.63 versus $.58 per diluted share for
the prior year.
The company has announced its plan to spin-off most of its Capital
Services business which contributed approximately $.03 per diluted share in the
first quarter 2005, about $.01 less than the prior year.
The company generated $192 million in cash from operations during the
quarter. Adjusted free cash flow was $144 million. Adjusted free cash flow
reflects cash from operations after subtracting capital expenditures and
excluding the impacts from the company's restructuring program and the
contributions to charitable foundations.
The company used $64 million to repurchase 1.4 million of its shares
during the quarter and has $136 million of remaining authorization for future
share repurchases.
Effective this quarter, the company has revised its segments to reflect
its product-based businesses separately from its service-based businesses. The
Global Mailstream Solutions Segment includes worldwide revenue and related
expenses from the sale, rental and financing of production mail and inserting
equipment for large enterprises, mail finishing, mail creation and shipping
equipment, related supplies and maintenance services, mailing and customer
communication software, postal payment solutions and small business solutions.
In the first quarter, Global Mailstream Solutions revenue increased 11 percent
and earnings before interest and taxes (EBIT) increased ten percent when
compared with the prior year.
In the U.S., the quarter's performance included higher revenue from
Document Messaging Technologies driven by the contribution from the integration
of Group 1 Software, which was acquired in July 2004. Revenue growth was also
favorably impacted by continued demand for networked digital mailing systems,
especially from small and mid-sized customers, and from supplies for digital
products.
Outside of the U.S., revenue grew at a double-digit rate driven by
strong organic revenue growth, the fourth-quarter 2004 acquisition of Groupe
Mag, and favorable foreign currency translation. The results benefited from
strong demand for digital mailing systems, which are continuing to be introduced
outside of the U.S., good growth in mailing equipment placements with small
businesses, and increased supplies for digital products.
The Global Business Services Segment includes worldwide revenue and
related expenses from facilities management contracts, reprographics, document
management, and other value-added services to key vertical markets, and mail
services operations, which include presort mail services and international
outbound mail services. For the quarter, the Global Business Services segment
reported revenue and EBIT growth of 15 percent versus the prior year.
The company's management services operation reported flat revenue and
double-digit EBIT growth for the quarter consistent with the ongoing focus on
higher value service offerings and administrative cost reduction. The company
also advanced its vertical strategy during the quarter with the formation of
Pitney Bowes Legal Solutions and the addition of litigation support services
through the acquisition of Compulit at the end of the quarter.
Mail services revenue more than doubled versus the prior year as a
result of continued growth in its customer base and expansion of its services.
EBIT remained comparable with the prior year because of the company's
investments to expand its presort and international mail network and its
integration of recently acquired sites.
In the Capital Services Segment, revenue for the quarter increased 13
percent and EBIT declined 8 percent. The quarter's year-over-year revenue
increase was primarily due to the consolidation of PBG Capital Partners LLC that
was reported on an equity basis the year before. Earlier this month the company
announced that it had entered into a definitive agreement with Cerberus Capital
Management, L.P. for a sponsored spin-off of the Capital Services external
leasing business. Subject to customary regulatory approvals, the new entity will
be an independent, publicly traded company consisting of most of the assets in
the Capital Services segment, including assets related to Imagistics
International, Inc.
For the full year, the company expects to record net after-tax
restructuring charges in the range of $13 million to $26 million, or $.06 to
$.11 per diluted share, net of the after-tax gain on the sale of its Main Plant
site. The restructuring charges relate to the continued realignment and
streamlining of the company's worldwide infrastructure requirements.
The company is increasing its revenue and adjusted earnings guidance
for full year 2005. The company expects 2005 revenue growth in the range of
eight to ten percent and diluted earnings per share in the range of $2.51 to
$2.64. Excluding net restructuring charges and charitable contributions,
adjusted diluted earnings per share is expected to be in the range of $2.64 to
$2.72.
The company anticipates second quarter revenue growth in the range of
nine to eleven percent and adjusted diluted earnings per share in the range of
$.64 to $.66. The company is not able to give quarterly guidance inclusive of
restructuring charges at this time because the timing of some of the
restructuring activities is uncertain and not completely within our control.
In light of the Securities and Exchange Commission's recent decision to
delay the required implementation of Statement of Financial Accounting Standards
No. 123R for share-based payments, the company does not intend to implement this
accounting standard in 2005.
Management of Pitney Bowes will discuss the company's results in a
conference call today at 5:00 p.m. EDT. Instructions for listening to the
conference call over the WEB are available on the Investor Relations page of the
company's web site at http://www.pb.com/investorrelations.
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Pitney Bowes engineers the flow of communication. The company is a $5.1
billion global leader of integrated mail and document management solutions
headquartered in Stamford, Connecticut. For more information about the company,
its products, services and solutions, visit www.pitneybowes.com.
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Pitney Bowes has presented in this earnings release diluted earnings
per share on an adjusted basis. Also, management has included a presentation of
free cash flow on an adjusted basis and earnings before interest and taxes
(EBIT). Management believes this presentation provides a reasonable basis on
which to present the adjusted financial information, and is provided to assist
in investors' understanding of the Company's results of operations. The
Company's financial results are reported in accordance with generally accepted
accounting principles (GAAP). However, the earnings per share and free cash flow
results are adjusted to exclude the impact of special items such as
restructuring charges and write downs of assets, which materially impact the
comparability of the Company's results of operations. 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 discretionary uses if it made different decisions about
employing its cash. It adds back long-term commitments such as capital
expenditures, as well as special items like cash used for restructuring charges.
Of course, each of these items uses 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.
The adjusted financial information and certain financial measures such
as EBIT are intended to be more indicative of the ongoing operations and
economic results of the Company. EBIT excludes interest payments and taxes, both
cash items, and as a result, has the effect of showing a greater amount of
earnings than net income. The company believes that interest payments and taxes,
though important, do not reflect the management effectiveness as these items are
largely outside of their control. In assessing performance, the company uses
both EBIT and net income.
This adjusted financial information should not be construed as an
alternative to our reported results determined in accordance with GAAP. Further,
our definition of this adjusted financial information may differ from similarly
titled measures used by other companies.
Pitney Bowes has provided in supplemental schedules attached for
reference adjusted financial information and a quantitative reconciliation of
the differences between the adjusted financial measures with the financial
measures calculated and presented in accordance with GAAP, except with respect
to our guidance because it would not be meaningful. Additional reconciliation of
adjusted financial measures to financial measures calculated and presented in
accordance with GAAP may be found at the Company's web site
http://www.pb.com/investorrelations in the Investor Relations section.
- -----------------------------------
The statements contained in this news release that are not purely
historical are forward-looking statements with the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements may be identified by their use of forward-looking terminology
such as the words "expects," "anticipates," "intends" and other similar words.
Such forward-looking statements include, but are not limited to, statements
about possible restructuring charges and our future guidance, including our
expected revenue in the second quarter and full year 2005, and our expected
diluted earnings per share for the second quarter and for the full year 2005.
Such forward-looking statements 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: severe adverse changes in the
economic environment, timely development and acceptance of new products or
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 2004 Form 10-K Annual Report filed with the Securities and Exchange
Commission. In addition, the forward-looking statements are subject to change
based on the timing and specific terms of any announced acquisitions or business
spin-offs. The forward-looking statements contained in this news release are
made as of the date hereof and we do not assume any obligation to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.
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Note: Consolidated statements of income for the three months ended March 31,
2005 and 2004, and consolidated balance sheets at March 31, 2005, December 31,
2004, and March 31, 2004, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended March 31,
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2005 2004(1)
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Revenue from:
Sales $381,427 $331,360
Rentals 201,641 201,438
Financing 157,275 148,229
Support services 194,934 158,413
Business services 349,103 302,791
Capital Services 33,408 29,691
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Total revenue 1,317,788 1,171,922
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Costs and expenses:
Cost of sales 167,777 159,375
Cost of rentals 42,317 41,700
Cost of support services 100,174 85,623
Cost of business services 288,842 245,892
Selling, general and administrative 408,384 360,819
Research and development 41,549 36,004
Restructuring (15,840) 15,043
Charitable contribution 10,000 -
Interest, net 46,816 41,445
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Total costs and expenses 1,090,019 985,901
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Income before income taxes 227,769 186,021
Provision for income taxes 78,165 59,427
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Net income $149,604 $126,594
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Basic earnings per share $0.65 $0.55
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Diluted earnings per share $0.64 $0.54
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Average common and potential common
shares outstanding 233,476,134 234,746,785
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(1) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited) (Unaudited)
Assets 3/31/05 12/31/04 3/31/04
- ------ ----------- ----------- -----------
Current assets:
Cash and cash equivalents $ 322,544 $ 316,217 $ 298,711
Short-term investments, at cost which
approximates market 13,706 3,933 2,180
Accounts receivable, less allowances:
3/05, $49,353; 12/04, $50,254; 3/04, $41,165 596,435 567,772 478,905
Finance receivables, less allowances:
3/05, $69,260; 12/04, $71,001; 3/04, $69,160 1,357,906 1,400,593 1,374,784
Inventories 224,095 206,697 215,036
Other current assets and prepayments 201,748 197,874 204,487
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Total current assets 2,716,434 2,693,086 2,574,103
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Property, plant and equipment, net 638,811 644,495 667,887
Rental equipment and related inventories, net 487,703 475,905 480,520
Property leased under capital leases, net 2,897 3,081 2,171
Long-term finance receivables, less allowances:
3/05, $93,240; 12/04, $102,074; 3/04, $106,027 1,795,644 1,820,733 1,819,967
Investment in leveraged leases 1,551,035 1,585,030 1,534,570
Goodwill 1,437,679 1,411,381 995,029
Intangible assets, net 315,593 323,737 206,145
Other assets 872,924 863,132 901,540
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Total assets $ 9,818,720 $ 9,820,580 $ 9,181,932
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Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,419,783 $ 1,475,107 $ 1,350,379
Income taxes payable 259,897 218,605 191,296
Notes payable and current portion of
long-term obligations 747,268 1,178,946 995,156
Advance billings 466,329 421,819 398,129
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Total current liabilities 2,893,277 3,294,477 2,934,960
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Deferred taxes on income 1,756,189 1,771,825 1,686,223
Long-term debt 3,176,025 2,798,894 2,691,094
Other noncurrent liabilities 360,657 355,303 415,301
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Total liabilities 8,186,148 8,220,499 7,727,578
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Preferred stockholders' equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par value,
4% convertible 17 19 19
Cumulative preference stock, no par value,
$2.12 convertible 1,235 1,252 1,292
Common stock, $1 par value 323,338 323,338 323,338
Retained earnings 4,316,613 4,243,404 4,103,860
Accumulated other comprehensive income 121,540 135,526 94,732
Treasury stock, at cost (3,440,171) (3,413,458) (3,378,887)
----------- ----------- -----------
Total stockholders' equity 1,322,572 1,290,081 1,144,354
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Total liabilities and stockholders' equity $ 9,818,720 $ 9,820,580 $ 9,181,932
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Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
March 31, 2005
(Unaudited)
(Dollars in thousands)
%
2005 2004(2) Change
---------- ---------- ----------
First Quarter
- -------------
Revenue
- -------
Global Mailstream Solutions $ 935,277 $ 839,440 11%
Global Business Services 349,103 302,791 15%
Capital Services 33,408 29,691 13%
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Total Revenue $1,317,788 $1,171,922 12%
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EBIT (1)
- ----
Global Mailstream Solutions $ 273,682 $ 248,075 10%
Global Business Services 18,228 15,827 15%
Capital Services 19,504 21,182 (8%)
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Total EBIT 311,414 285,084 9%
Unallocated amounts:
Interest, net (46,816) (41,445)
Corporate expense (42,669) (42,575)
Charitable contribution (10,000) -
Restructuring 15,840 (15,043)
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Income before income taxes $ 227,769 $ 186,021
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(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses.
(2) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months ended March 31,
-----------------------------
2005 2004
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GAAP income before income taxes, as reported $ 227,769 $ 186,021
Restructuring (15,840) 15,043
Charitable contribution 10,000 -
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Income before income taxes, as adjusted 221,929 201,064
Provision for income taxes, as adjusted 75,456 64,842
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Income, as adjusted $ 146,473 $ 136,222
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GAAP diluted earnings per share, as reported $ 0.64 $ 0.54
Restructuring (0.04) 0.04
Charitable contribution 0.03 -
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Diluted earnings per share, as adjusted $ 0.63 $ 0.58
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GAAP net cash provided by operating activities,
as reported $ 192,359 $ 274,978
Capital expenditures (79,539) (74,469)
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Free cash flow 112,820 200,509
Restructuring payments 21,292 16,552
Charitable contribution 10,000 -
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Free cash flow, as adjusted $ 144,112 $ 217,061
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