Pitney Bowes Results in Line with Guidance for Third Quarter 2004
Press release from the issuing company
STAMFORD, Conn., Oct. 25 -- Pitney Bowes Inc. today announced third quarter 2004 revenue and earnings performance in line with previous guidance.
Commenting on the company's performance, Chairman and CEO Michael J. Critelli said, "During the quarter we continued to leverage near-term opportunities, while executing our longer-term strategies for sustained growth. We also continued our evolution toward a one-company approach to our customers by appointing a president and chief operating officer. "We lead the industry in providing advanced technologies for mailers of all sizes, having rebuilt virtually all of our product lines in the last five years in mail finishing, mail creation, production mail, and distribution solutions. As our new products sustained positive market acceptance worldwide, we continued to see good results in mail services, small business solutions, supplies, payment solutions, software, and international operations. At the same time, we laid the foundation for future growth with the ongoing integration of Group1's customer communication and address management software suite with our existing software and service capabilities, and the continued expansion of our national presort network with the announced acquisition of Ancora. By enhancing our core businesses and adding strategic acquisitions, we are on track to deliver greater shareholder and customer value now and in the future."
Revenue for the quarter grew seven percent to $1.22 billion and net income was $136.5 million or $.58 per diluted share, representing a 16 percent increase compared to the previous year. During the quarter, the company recorded an after-tax charge of $10 million as part of its previously announced restructuring program. Excluding this restructuring charge, net income was $146.5 million and diluted earnings per share were $.63. Non-core Capital Services financing contributed $.02 per diluted share this quarter compared to $.04 per diluted share in the third quarter of 2003.
The company generated $214 million in cash from operations during the quarter. Subtracting $79 million in capital expenditures and excluding $15 million in payments associated with restructuring initiatives, free cash flow was $149 million. During the quarter the company repurchased approximately 936,000 of its shares for $40 million, leaving $225 million of authorization for future share repurchases.
In the Global Mailstream Solutions Segment revenue and earnings before interest and taxes (EBIT) increased five percent during the quarter. Similar to previous quarters, revenue trends also reflect the ongoing changing mix of the product line, where a greater percentage of the revenue is coming from more fully featured smaller systems, supplies, payment solutions, software and services and less from larger systems sales.
Non-U.S. revenue again grew at a double-digit rate as a result of both organic growth throughout most of Europe and favorable foreign currency exchange rates. In particular, revenue in the UK increased at a double-digit rate on a local currency basis because of the positive customer reception to new digital mailing systems and strong placements of the company's industry leading Advanced Productivity System(TM) (APS) production mail equipment.
In the Global Enterprise Solutions Segment revenue grew 16 percent and EBIT increased one percent.
Pitney Bowes Management Services (PBMS) reported revenue of $264 million for the quarter, an increase of six percent compared with the prior year. Organic revenue was flat compared with the prior year as we continued to position the business to provide higher value services. EBIT and operating margin were comparable with the prior quarter and last year.
Document Messaging Technologies (DMT) reported revenue growth of 54 percent to $96 million for the quarter and EBIT grew two percent. Excluding the impact of the recently acquired Group1 Software, DMT revenue increased 11 percent, driven by continued solid placements and orders for its inserting equipment. As expected, the integration costs of the Group1 acquisition had a negative impact on reported margins during the quarter. The integration of Group1 has gone exceptionally well and customers are very receptive to Group1's document composition and mail management software, which can help them to target, communicate with and respond to their customers on a more meaningful and cost effective basis.
In the Capital Services Segment, revenue declined 29 percent and EBIT declined 21 percent, consistent with our cessation of long-term lease origination in this business. During the quarter, we generated $16 million in asset sales, including the sale of two leased commercial aircraft for approximately $8 million. These sales had no material effect on the company's revenue or earnings during the quarter.
The company expects year-over-year revenue growth for the fourth quarter to be in the range of five to seven percent. The company is still finalizing future plans related to previously announced restructuring initiatives, a portion of which will be recorded in the fourth quarter of 2004. Therefore, earnings guidance is provided excluding the impact of these charges. Diluted earnings per share are expected to be in the range of $.66 to $.68 for the fourth quarter 2004.
In year-over-year comparisons, third quarter 2004 revenue included $346.4 million from sales of equipment and supplies, up eight percent from the prior year; $199.8 million from rentals, up two percent; $158.2 million from core financing, up four percent; $19.2 million from non-core financing down 39 percent; $316.5 million from business services, up 15 percent; and $177.5 million from support services, up 11 percent. Net income for the quarter was $136.5 million, or $0.58 per diluted share, up 16 percent compared to the third quarter of 2003. Included in net income for the period was a $16 million pre-tax restructuring charge. Excluding the after-tax impact of this charge, net income was $146.5 million and diluted earnings per share were $.63 in the third quarter of 2004, an increase of one percent compared to the prior year.
For the nine-month period ended September 30, 2004, total revenue was $3.60 billion, up seven percent compared to the same period in 2003. Included in total revenue was $1,016.2 million from sales of equipment and supplies, up eight percent; $601.8 million from rentals, up three percent; $475.2 million from core financing, up four percent; $79.4 million from non-core financing down 11 percent; $924.7 million from business services, up 12 percent; and $497.9 million from support services, up eight percent. Net income for the period was $397.8 million or $1.70 per diluted share up 14 percent compared to 2003. Included in net income for the period was $47 million in pre-tax restructuring charges. Excluding the after-tax impact of these charges, net income was $427.8 million and diluted earnings per share were $1.83, an increase of four percent versus the prior year.
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