Pitney Bowes Reports 4Q Results, $617 million in Free Cash Flow
Press release from the issuing company
STAMFORD, Conn., January 29, 2002 - Pitney Bowes Inc. (NYSE:PBI) today reported fourth quarter and full year 2001 performance in line with previous guidance. For the fourth quarter, revenue increased 11 percent to $1,091 million from $978 million in 2000. Excluding special items, income from continuing operations was $140.0 million and diluted earnings per share from continuing operations were 57 cents.
For the full year, revenue increased six percent to $4.1 billion from $3.9 billion in 2000. Excluding special items, income from continuing operations was $556.3 million and diluted earnings per share from continuing operations were $2.25.
As previously announced, special items in the fourth quarter of 2001 included: a non-cash pre-tax charge of $10 million associated with the company's plan to transition to the next generation of digital, networked mailing technology and a pre-tax charge of $28 million related to incremental restructuring plan initiatives to complete the company's restructuring program. There was also a pre-tax charge of approximately $24 million associated with the settlement of a lawsuit related to lease upgrade pricing in the early to mid-1990's. The settlement is subject to court approval. The $24 million charge relates to the following settlement costs: award certificates to be provided to members of the class for purchase of office products through the Pitney Bowes supply line and the cost of fees and expenses.
Excluding cash flows associated with special items, free cash flow from continuing operations for the year was approximately $617 million. Including cash flows associated with special items and discontinued operations, free cash flow for the year was approximately $780 million. During the quarter, the company repurchased approximately 2.2 million shares, bringing the total 2001 share repurchase to 7.8 million shares for approximately $300 million which completes the current board authorization for share repurchase.
Demonstrating its confidence in continued strong cash flow generation, the Board of Directors of the company has approved two actions to further enhance shareholder value:
* First, the dividend on common stock was increased to an annualized rate of $1.18 per share. The first quarter cash dividend at the new rate of 29.5 cents per share is payable on March 12, 2002.
* Second, the board authorized the repurchase of up to $300 million of the company's common stock. It is expected that these shares will be repurchased in the open market over the next 12 to 24 months.
Pitney Bowes Chairman and CEO Michael J. Critelli, commented, "During the fourth quarter, we successfully completed the spin-off of Imagistics International Inc. to shareholders and also completed the acquisition of Secap SA, a leading provider of digital mailing and paper handling systems in France. Both of these transactions enhance our strategy of delivering shareholder value by providing leading edge global, integrated mail and document management solutions to organizations of all sizes.
"The current global economic conditions provide us with both challenges and opportunities. During the quarter, we continued to experience the pressures of a slowing economy in the U.S. and around the world, as many of our customers delayed purchase or upgrade decisions. We have also seen some of our customers consolidate and downsize their operations, resulting in reduced demand for some of our higher value mailing products and outsourcing services.
"We are focused on working closely with our customers during these challenging times to provide them with the mail and document management solutions they need to succeed in this difficult environment. We will be launching additional digital networked mailing systems throughout 2002 which will enable companies to access new mailing services at a lower cost, which in turn will allow businesses to operate more efficiently."
The Global Mailing Segment includes worldwide revenues and related expenses from the sale, rental and financing of mail finishing, mail creation and shipping equipment, related supplies and services, postal payment solutions and software. In the fourth quarter, Global Mailing revenue increased five percent and operating profit increased six percent. Excluding revenues from the recent acquisitions of Bell & Howell's international operations and Secap SA, Global Mailing revenues were down slightly for the quarter.
In the mailing business in the U.S., customer orders and upgrades continued to be impacted by the slow economic environment, especially for shipping and systems related products.
Within the Global Mailing segment, international mailing's double-digit revenue growth was fueled by the recent acquisitions in Europe and Asia, including Secap SA and Bell & Howell's international operations, and solid demand for mailing products in much of Europe. However, revenue growth was moderated by weaker performance in the UK and Canada, as both countries were similarly affected by slowing economic activity and a lull in those countries' meter migration programs.
The Enterprise Solutions Segment includes Pitney Bowes Management Services and Document Messaging Technologies. Revenues from Pitney Bowes Management Services include facilities management contracts for advanced mailing, reprographic, document management and other added-value services to enterprises. Revenues from Document Messaging Technologies include sales, service and financing of high speed, software-enabled production mail systems, sorting equipment, incoming mail systems, electronic statement, billing and payment solutions, and mailing software. The Enterprise Solutions segment reported revenue growth of 35 percent and a decline in operating profit of 12 percent.
Pitney Bowes Management Services recorded a 52 percent increase in revenues, during the quarter compared to the prior year. Excluding the revenues from the recent acquisition of Danka Services International (DSI), Pitney Bowes Management Services revenues grew ten percent. While Pitney Bowes Management Services continues to record profitable growth, shrinking business operations of some of its customers and increasing medical costs for its employees had an adverse impact on operating profit during the quarter.
Document Messaging Technologies revenues declined one percent during the quarter while operating profit decreased significantly. Document Messaging Technologies performance continues to be impacted by a worldwide slow down in capital spending, which has caused many of its customers to delay purchases of higher-margin, customized inserting systems. Service revenues in the business continued to grow steadily, but are lower margin revenues than product sales. At the same time, the company is investing for the future growth of the business.
Total Messaging Solutions, the combined results of the Global Mailing and Enterprise Solutions segments, reported 12 percent revenue growth while operating profit increased four percent. Excluding the revenues from recent acquisitions (DSI, Secap SA and the European and Asian operations of Bell & Howell), Total Messaging Solutions revenues increased one percent.
The Capital Services Segment includes primarily asset- and fee-based income generated by financing or arranging transactions of critical large-ticket customer assets. Included in the segment this quarter are revenues and operating profit associated with the strategic financing of equipment for posts around the world. Previously, these revenues and operating profit were included in the Global Mailing segment. Revenues for the quarter declined seven percent and operating profit declined 12 percent, consistent with the company's ongoing objective to shift to fee-based transactions.
Given the assumption that difficult economic conditions will persist in 2002, the company expects revenue growth in the range of nine percent to 11 percent for the first quarter 2002 and seven percent to nine percent for the full year. After applying the new accounting standards for goodwill amortization, diluted earnings per share from continuing operations are expected to be in the range of 52 to 54 cents for the first quarter 2002 and $2.37 to $2.40 for the full year.
Commenting on the year, Mr. Critelli stated, "2001 was an exceptional and important year for Pitney Bowes. We have repositioned our business for greater growth; realigned our organizational structure to leverage strengths and address market opportunities; and completed the spin-off of Imagistics International Inc. and seven strategic transactions that will better position us for long-term growth and enhanced shareholder value. While 2002 may be a challenging year economically, we believe we are well positioned to profitably grow our business this year and into the future."
Fourth quarter 2001 consolidated revenue included $589.9 million from sales, up 22 percent from $483.2 million in the fourth quarter of 2000; $362.1 million from rentals and financing, down two percent from $371.0 million; and $138.8 million from support services, up 12 percent from $124.3 million. Income from continuing operations for the period was $100.4 million, or 41 cents per diluted share. Excluding special items in the fourth quarter 2001, income from continuing operations was $140.0 million, or 57 cents per diluted share compared to fourth quarter 2000 income from continuing operations of $137.7 million, or 55 cents per diluted share. Fourth quarter 2001 net income was $90.2 million, or 37 cents per diluted share compared to $148.3 million, or 59 cents per diluted share in 2000. Fourth quarter 2001 consolidated net income included a loss of $10.3 million from discontinued operations, or four cents per diluted share, while fourth quarter 2000 net income included $10.6 million of income from discontinued operations, or four cents per diluted share.
For the full year 2001, revenue was $4.12 billion, up six percent from $3.88 billion in 2000. Income from continuing operations, before special items in both periods, was $556.3 million, or $2.25 per diluted share in 2001, compared to $562.3 million, or $2.17 per diluted share in 2000. Special items for the full year 2001 included a non-cash pre-tax charge of $268 million associated with the company's plan to transition to the next generation of digital, networked mailing technology, and a pre-tax charge of $116 million related to restructuring plan initiatives. There was also a pre-tax charge of approximately $24 million associated with the settlement of a class action lawsuit related to lease upgrade pricing, and a $362 million net pre-tax gain as a result of settling a lawsuit with Hewlett-Packard Company. Special items in 2000 included: an after-tax charge of approximately $11 million related to the consolidation of information technology staff and infrastructure, as well as a $12 million tax benefit related to state tax law changes. Full year net income for 2001 included a $26.0 million loss from discontinued operations, or 10 cents per diluted share compared to $64.1 million of income, or 25 cents per diluted share in 2000. As a result, full year net income for 2001 was $488.3 million, or $ 1.97 per diluted share compared to $622.5 million, or $2.41 per diluted share in 2000.
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