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Pitney Bowes Announces Revenue Gains in Q3

Tuesday, October 24, 2006

Press release from the issuing company

STAMFORD, Conn., Oct. 23 -- Pitney Bowes Inc. today reported third quarter 2006 financial results. For the third quarter 2006, revenue increased eight percent to $1.43 billion and income from continuing operations also rose eight percent to $144 million or $.64 per diluted share versus $.57 per diluted share for the prior year. This was a 12 percent increase in earnings per share over the prior year. During the quarter, the company recorded an after-tax charge of $4 million or $.02 per diluted share as part of its previously announced restructuring program. Excluding the impact of the restructuring charges in both periods, adjusted diluted earnings per share from continuing operations increased nine percent from $.61 in the prior year to $.66 this quarter. This was in line with the company's guidance of $.65 to $.67 per diluted share. The company's Chairman and CEO Michael J. Critelli, noted, "This quarter we continued to enhance the strength and resiliency of our business model as we invested in growth opportunities, while improving operating efficiency. Our confidence in the sustainability of our results was underscored during the quarter as our revenue and earnings per share were again both within our targeted growth ranges. We believe the company is uniquely positioned to take advantage of the many large and growing opportunities in the mailstream." Net cash used in operating activities was $68 million during the quarter. The net use of cash during the quarter includes the payment of approximately $238 million of taxes related to the sale of Capital Services and the settlement with the IRS as previously disclosed. Free cash flow was $133 million. Year-to-date the company has generated $390 million of free cash flow. The company used $19 million to repurchase 440 thousand of its shares during the quarter and has $229 million of remaining authorization for future share repurchases. Year-to-date the company has repurchased $312 million of its shares and plans to buy a total of $350 million to $400 million by year- end. Mailstream Solutions includes worldwide revenue and related expenses from the sale, rental, and financing of mail finishing, mail creation, shipping, and production mail equipment; supplies; support services; payment solutions; and mailing and customer communication software. In the third quarter, Mailstream Solutions revenue increased nine percent to $1.0 billion and earnings before interest and taxes (EBIT) increased four percent to $297 million, when compared with the prior year. Within Mailstream Solutions: U.S. Mailing operations had third quarter revenue growth of five percent to $587 million and EBIT growth of three percent to $232 million. Growth in the quarter was driven by supplies and payment solutions as the meter base continued to transition to new digital technology and customers took advantage of our broad range of financial offerings. There was also good growth in the company's shipping solutions that allow businesses to determine the best and most cost effective way to ship packages and documents. International Mailing revenue grew 17 percent to $253 million while EBIT increased by eight percent to $44 million. International Mailing revenue particularly benefited from growth in mailing systems equipment in the U K driven by the new requirement to pay postage based on the size and shape of the mail piece, as well as weight. Improved performance in Canada also contributed to revenue growth during the quarter. Transitional expenses related to the consolidation and outsourcing of administrative functions adversely affected the growth of International Mailing EBIT. We expect to start seeing the benefits of these initiatives in 2007. Worldwide revenue for Production Mail grew 15 percent to $146 million and EBIT increased 43 percent to $14 million. In the U.S. revenue growth was favorably affected by continued strong placements of inserting systems and the company's advanced, high-speed metering system. The strong U.S. results were partially offset by lower sales in Europe. Software revenue increased two percent to $50 million and EBIT declined 18 percent to $8 million. Revenue growth for the quarter was negatively affected by the comparison to the prior year, which included a large contract. EBIT was adversely impacted by investments in sales and marketing to position the business for longer-term growth. Mailstream Services includes worldwide revenue and related expenses from facilities management contracts, reprographics, document management, and other value-added services for targeted customer markets; mail services operations, which include presort mail services and international outbound mail services; and marketing services. For the quarter, Mailstream Services reported revenue growth of five percent to $397 million and EBIT growth of 32 percent to $35 million, versus the prior year. Within Mailstream Services: Management Services revenue increased one percent to $263 million for the quarter while EBIT increased 14 percent to $19 million, consistent with the company's strategy to focus on higher value service offerings and administrative cost reductions. The strong improvement in EBIT in the U.S. was partially offset by lower EBIT outside of the U.S. Mail Services revenue grew nine percent to $91 million and EBIT grew 81 percent to $9 million. Revenue reflects growth in presort and international mail services, while EBIT benefited from the ongoing successful integration of acquired sites and increased operating efficiencies. Marketing Services revenue increased 32 percent to $43 million and EBIT grew 42 percent to $6 million. Revenue growth benefited from the continued expansion of our marketing services programs. Outlook The company anticipates fourth quarter revenue growth in the range of seven to nine percent, which would result in full year revenue growth in the range of six to seven percent. The company expects adjusted earnings per share in fourth quarter 2006 in the range of $0.76 to $0.78 and $2.68 to $2.70 for the full year. Earnings per share on a Generally Accepted Accounting Principles (GAAP) basis is expected to be $0.71 to $0.75 for the fourth quarter and $2.49 to $2.53 for the full year. The earnings expectations for fourth quarter and the full year are further summarized as follows: During the fourth quarter, the company expects to record a restructuring charge in the range of $.03 to $0.05 per diluted share, which will complete the charges associated with the restructuring program. Mr. Critelli added, "The consistency of performance and enhanced visibility of our operating results after the sale of Capital Services allowed us to provide 2007 revenue and earnings guidance during our recent Investor Update meeting in September. This was the earliest we have ever provided guidance for an ensuing year." The company reconfirmed that in 2007 it expects revenue growth of five to eight percent with earnings per share in the range of $2.90 to $2.98.

 

 

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