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Pitney Bowes Profit Nearly Doubles in Q4

Tuesday, February 06, 2007

Press release from the issuing company

STAMFORD, Conn.-- Pitney Bowes Inc. today reported fourth quarter and full year 2006 financial results. The company's Chairman and CEO Michael J. Critelli noted, "2006 was a year of significant accomplishment for Pitney Bowes, capped off by the passage of historic postal reform legislation. There are four things of particular note for our customers and shareholders. First, we had good financial performance during the quarter and throughout the year, meeting our revenue and earnings targets. Second, we completed our restructuring program which continues to make us more efficient and competitive. Third, the sale of Capital Services and our tax settlement agreement with the Internal Revenue Service earlier in the year provides greater stability, transparency and visibility into our business. Fourth, our strategies to expand into higher growth segments throughout the mailstream have solidly positioned us to take advantage of the stability, flexibility, technology and partnerships that postal reform will bring. We are focused on the many growth opportunities available to us and committed to providing end-to-end, integrated mailstream solutions for our customers." FOURTH QUARTER 2006 RESULTS For the fourth quarter 2006, revenue increased eight percent to $1.55 billion. Income from continuing operations increased from $84 million in the fourth quarter 2005 to $163 million in the fourth quarter 2006, which was an increase of 95 percent. Earnings per diluted share from continuing operations increased 101 percent from $.36 in the fourth quarter 2005 to $.73 this quarter. The company completed its previously announced restructuring program and recorded an after-tax restructuring charge of $12 million or $.05 per diluted share during the quarter. The company also recorded an after-tax gain of $2 million in other income or $0.01 per diluted share, primarily due to a revised liability estimate associated with a previous legal settlement. Excluding the impact of the restructuring charge and gain resulting from a revised liability estimate with respect to a legal settlement, adjusted diluted earnings per share from continuing operations increased eleven percent from $.69 in the prior year to $.77 this quarter. This was in line with the company's guidance of $.76 to $.78 per diluted share. For the full year 2006, the adjusted diluted earnings per share from continuing operations was $2.69 versus $2.46 in 2005, which was a nine percent increase. The following table presents a reconciliation of earnings per share from continuing operations both on a Generally Accepted Accounting Principles (GAAP) basis and on an adjusted basis. The company also had a $0.02 per share loss in discontinued operations resulting from interest costs associated with the tax payments made to the IRS related to Capital Services. This compares with $0.02 per share of income from discontinued operations in the prior year. For the full-year 2006, the company had a $2.04 per share loss in discontinued operations versus income of $0.15 per share in the prior year. As previously discussed, the company adopted the new accounting rule for pension and other retiree benefits (FAS 158). The company recorded a $297 million reduction to equity, which was less than it had originally anticipated due to a higher discount rate and the strong performance of pension plan investments in 2006. In the U.S. the company's qualified pension plans are fully funded on both an accumulated benefit obligation and projected benefit obligation basis. Net cash used in operating activities was $622 million during the quarter. The net use of cash during the quarter includes the payment of $802 million of taxes related to the sale of Capital Services and the settlement with the IRS as previously disclosed. This payment was funded by cash received from the sale of Capital Services, which had been placed in short-term investments. Excluding the tax payment, net cash from operating activities was $180 million for the quarter. Free cash flow was $126 million for the quarter and $523 million for the full-year. Free cash flow included $81 million for the quarter and $208 million for the full-year of investments in finance receivables, net of reserve account deposits. The company's Board of Directors authorized a one-cent increase of its quarterly common stock dividend to $.33 per share. The increased dividend will be paid in the first quarter, marking the 25th consecutive year that the company has increased the dividend on its common stock. The company used $88 million to repurchase 1.9 million of its shares during the quarter and still has authorization to repurchase $141 million of its common shares. During the year, the company repurchased 9.2 million shares for $400 million. 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; mailing and multi-vendor support services; payment solutions; and mailing and customer communication software. In the fourth quarter, Mailstream Solutions revenue increased nine percent to $1.1 billion and earnings before interest and taxes (EBIT) increased six percent to $343 million, when compared with the prior year. Within Mailstream Solutions: U.S. Mailing operations had fourth quarter revenue growth of five percent to $620 million and EBIT growth of four percent to $246 million. Growth in the quarter was driven by placements of the company's networked digital mailing systems and strong growth of supplies and payment solutions as customers took advantage of our broad range of offerings. There also continued to be 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 13 percent to $272 million while EBIT was flat at $48 million. International Mailing revenue benefited from a recent postal rate change in France, double-digit growth in supplies, and ongoing strong placements of mailing equipment with small businesses. Incremental investments to expand our marketing channels in Europe and transitional expenses related to the consolidation and outsourcing of administrative functions in Europe continued to adversely affect International Mailing EBIT margins. The company expects to start seeing the benefits of these initiatives in 2007. Worldwide revenue for Production Mail grew 10 percent to $179 million and EBIT increased 15 percent to $33 million. Revenue growth was favorably affected by continued strong placements of equipment and the company's high-speed metering system in the U.S. Software revenue increased 24 percent to $63 million and EBIT increased 45 percent to $16 million. Revenue growth for the quarter benefited from strong sales of document composition software that enables companies to customize and personalize their mailstream communications. The software business had double-digit revenue growth in all major markets and EBIT was favorably impacted by positive operating leverage. 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 seven percent to $412 million and EBIT growth of 38 percent to $43 million, versus the prior year. Within Mailstream Services: Management Services revenue increased three percent to $276 million for the quarter while EBIT increased seven percent to $22 million, consistent with the company's strategy to focus on higher value service offerings while reducing administrative costs. Mail Services revenue grew eight percent to $94 million and EBIT grew 79 percent to $13 million. Revenue growth was driven by both presort and international mail services, while EBIT benefited from the ongoing successful integration of acquired sites and increased operating efficiencies. Marketing Services revenue increased 41 percent to $43 million and EBIT grew 127 percent to $8 million driven by continued expansion of our marketing services programs. Outlook The company anticipates revenue growth in the range of six to nine percent for the first quarter and full year.

 

 

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