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Pitney Bowes Exceeds Revenue Guidance in Q4

Press release from the issuing company

STAMFORD, Conn., Feb. 2 -- Pitney Bowes Inc. today reported fourth quarter and full year 2004 performance that exceeded previous revenue and earnings guidance. In summarizing the company's financial performance during the quarter, Chairman and CEO Michael J. Critelli noted, "We had an exceptionally strong finish to the year. We enjoyed good demand worldwide for our mailing products and services and our strategy of focusing on targeted services in key vertical markets is proving successful in our management services business. We are pleased that our customers recognize the benefits of our integrated mail and document management products and services as they position themselves for growth." For the fourth quarter 2004, revenue increased 12 percent to $1.36 billion, substantially above the company's previous revenue guidance of five to seven percent. The results were driven by stronger than expected worldwide demand for the company's mailing systems and services, improving trends in the management services business, and continued weakening of the U.S. dollar. Net income for the quarter was $82.7 million or $.35 per diluted share versus $.61 per diluted share in the prior year. During the quarter, as previously announced, the company recorded a $13 million after-tax charge resulting from a nationwide settlement of the remaining lawsuits related to an equipment replacement program offered by its leasing subsidiary. In addition, the company recorded an after-tax restructuring charge of $71 million. The charge included a $30 million non-cash, after-tax charge for the write-off of pre-implementation costs related to the company's decision not to proceed with certain systems development. This decision comes as a result of the company's changing business profile and organizational realignment. Also included were an $18 million after-tax charge for the anticipated closure of a manufacturing facility in Germany and a $23 million after-tax charge for other restructuring initiatives. During 2005, the company expects to record an after-tax gain of approximately $18 million in connection with the sale of its 22-acre Main Plant site. Excluding the impact of the charges noted above, the company's fourth quarter adjusted diluted earnings per share was $.71 versus $.66 per diluted share for the prior year on a comparable basis. For the full year 2004, diluted earnings per share from continuing operations was $2.05 versus $2.10 in 2003. Excluding the impact of restructuring charges in both periods and the company's legal settlement in the fourth quarter 2004, adjusted diluted earnings per share from continuing operations was $2.54 in 2004 versus $2.41 in 2003. Non-core Capital Services financing contributed $.02 per diluted share in the fourth quarter 2004 versus $.04 per diluted share in the fourth quarter 2003. For the full year 2004, diluted earnings per share included $.09 per diluted share from non-core Capital Services compared with $.16 per diluted share for the full-year 2003. The company generated $217 million in cash from operations during the quarter, bringing the total to $945 million for the full year 2004. Subtracting $317 million in capital expenditures and excluding $66 million in payments associated with the restructuring program, adjusted free cash flow for the full-year 2004 was $694 million. The company used $25 million to repurchase 556 thousand of its shares during the quarter, bringing the totals for the year to $200 million and 4.7 million shares, for an average price of $42.60 per share. The company has $200 million of remaining authorization for future share repurchases. The board of directors of the company authorized an increased dividend on its common stock to an annualized rate of $1.24 per share. This is the twenty- third consecutive year that the company has increased the dividend on its common stock. In the Global Mailstream Solutions Segment, revenue increased 12 percent and earnings before interest and taxes (EBIT) increased eight percent when compared with the prior year. In the U.S., there continued to be strong revenue growth from small business mailing products, supplies, payment solutions and mail services. Mail services operations experienced very strong revenue growth from both existing and acquired sites. Also, the company enjoyed greater than expected demand for its networked digital mailing systems by medium-sized customers. Outside of the U.S., revenue grew organically at a double-digit pace due primarily to strong growth in Europe, led by excellent results in the UK. This strong performance reflected an increase in production mail equipment placements with large customers and an increase in meter and mailing equipment placements with small businesses. Revenue growth also benefited from favorable foreign currency exchange rates. In the Global Enterprise Solutions Segment, revenue increased 15 percent and EBIT increased 36 percent versus the prior year. Pitney Bowes Management Services (PBMS) reported revenue of $273 million for the quarter, an increase of four percent and a significantly greater percentage increase in EBIT when compared with the prior year. Its EBIT margin improved versus the prior quarter and the prior year, helped by a focus on higher margin service offerings and ongoing administrative cost reduction initiatives. During the quarter PBMS experienced strong new business and a continued improvement in transactional reprographic volumes. Also, the consolidation and reduction of business with existing accounts continues to subside. Document Messaging Technologies (DMT) reported revenue growth of 46 percent to $131 million for the quarter and EBIT grew at a similar rate. These results reflect the continued successful integration of Group 1 Software and ongoing demand for DMT's leading edge, information-based inserting and sortation equipment. Group 1 Software, which provides industry leading document composition and mail hygiene software, experienced strong demand for its software products and services during the quarter. In the Capital Services Segment, revenue for the quarter declined eight percent and EBIT declined 29 percent due to a smaller asset base. During the quarter, the company announced that it intends to pursue a sponsored spin-off of its external financing business. The new entity would be an independent, publicly traded company consisting of most of the assets in the Capital Services segment, including assets related to Imagistics International, Inc. In 2005, the company expects revenue growth in the range of nine to eleven percent for the first quarter and seven to nine percent for the full year. During the year, the company expects to record additional after-tax restructuring charges in the range of $13 million to $26 million, or $.06 to $.11 per diluted share, net of the anticipated gain on the sale of its Main Plant site. These charges relate to the continued realignment and streamlining of the company's worldwide infrastructure requirements. Including these net restructuring charges, the company expects diluted earnings per share to be in the range of $2.51 to $2.64 for the full year 2005. Excluding these charges, adjusted diluted earnings per share is expected to be in the range of $2.62 to $2.70 for the full year 2005 and in the range of $.60 to $.62 for the first quarter of the year. 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 July of 2005, the company expects to adopt Statement of Financial Accounting Standards No. 123 for share-based payments. The annual impact on diluted earnings per share of this new accounting pronouncement, which is not included in the estimates noted above, is expected to be in the range of $.07 to $.09, which is comparable with 2004. As noted above, the board of directors declared a quarterly cash dividend of the company's common stock of 31 cents per share, payable March 12, 2005, to stockholders of record on February 18, 2005. The board also declared a quarterly cash dividend of 53 cents per share on the company's $2.12 convertible preference stock, payable April 1, 2005, to stockholders of record on March 15, 2005, and a quarterly cash dividend of 50 cents per share on the company's 4% convertible cumulative preferred stock, payable May 1, 2005 to stockholders of record on April 15, 2005.