STAMFORD, Conn., April 28 -- Pitney Bowes Inc. today reported first quarter performance that exceeded previous revenue and earnings guidance.
Commenting on the company's financial performance during the quarter, Chairman and CEO Michael J. Critelli noted, "We're off to a great start in 2005 as the momentum established by our strong fourth-quarter 2004 performance continued this quarter. We are reaping the benefits of our previous actions to strengthen organic growth, expand into new market spaces, and enhance our operating efficiency."
For the first quarter 2005, revenue increased 12 percent to $1.32 billion, which was better than the company's previous revenue guidance of nine to eleven percent. These results were driven by ongoing strong worldwide demand for the company's mailing systems, mail services, small business solutions and supplies for our broader base of digital products and acquisitions completed within the prior year. Net income for the quarter was $149.6 million or $.64 per diluted share versus $.54 per diluted share in the prior year.
During the quarter, the company recorded a net after-tax gain from restructuring activity of $9 million. This gain is composed of an $18 million after-tax gain from the previously announced sale of the company's 22-acre Main Plant site and a $9 million after-tax charge for ongoing restructuring initiatives to streamline business processes.
Separately, the company made a $10 million contribution, approximately $6 million after-tax, to the Pitney Bowes Literacy and Education Fund and the Pitney Bowes Employee Involvement Fund. According to Mr. Critelli, "We feel that by investing in the community through these charitable foundations we are investing in a better quality of life for us all and a better environment in which to do business."
Excluding the impact of these items, the company's first quarter adjusted diluted earnings per share was $.63 versus $.58 per diluted share for the prior year.
The company has announced its plan to spin-off most of its Capital Services business which contributed approximately $.03 per diluted share in the first quarter 2005, about $.01 less than the prior year.
The company generated $192 million in cash from operations during the quarter. Adjusted free cash flow was $144 million. Adjusted free cash flow reflects cash from operations after subtracting capital expenditures and excluding the impacts from the company's restructuring program and the contributions to charitable foundations.
The company used $64 million to repurchase 1.4 million of its shares during the quarter and has $136 million of remaining authorization for future share repurchases.
Effective this quarter, the company has revised its segments to reflect its product-based businesses separately from its service-based businesses. The Global Mailstream Solutions Segment includes worldwide revenue and related expenses from the sale, rental and financing of production mail and inserting equipment for large enterprises, mail finishing, mail creation and shipping equipment, related supplies and maintenance services, mailing and customer communication software, postal payment solutions and small business solutions. In the first quarter, Global Mailstream Solutions revenue increased 11 percent and earnings before interest and taxes (EBIT) increased ten percent when compared with the prior year.
In the U.S., the quarter's performance included higher revenue from Document Messaging Technologies driven by the contribution from the integration of Group 1 Software, which was acquired in July 2004. Revenue growth was also favorably impacted by continued demand for networked digital mailing systems, especially from small and mid-sized customers, and from supplies for digital products.
Outside of the U.S., revenue grew at a double-digit rate driven by strong organic revenue growth, the fourth-quarter 2004 acquisition of Groupe Mag, and favorable foreign currency translation. The results benefited from strong demand for digital mailing systems, which are continuing to be introduced outside of the U.S., good growth in mailing equipment placements with small businesses, and increased supplies for digital products.
The Global Business Services Segment includes worldwide revenue and related expenses from facilities management contracts, reprographics, document management, and other value-added services to key vertical markets, and mail services operations, which include presort mail services and international outbound mail services. For the quarter, the Global Business Services segment reported revenue and EBIT growth of 15 percent versus the prior year.
The company's management services operation reported flat revenue and double-digit EBIT growth for the quarter consistent with the ongoing focus on higher value service offerings and administrative cost reduction. The company also advanced its vertical strategy during the quarter with the formation of Pitney Bowes Legal Solutions and the addition of litigation support services through the acquisition of Compulit at the end of the quarter.
Mail services revenue more than doubled versus the prior year as a result of continued growth in its customer base and expansion of its services. EBIT remained comparable with the prior year because of the company's investments to expand its presort and international mail network and its integration of recently acquired sites.
In the Capital Services Segment, revenue for the quarter increased 13 percent and EBIT declined 8 percent. The quarter's year-over-year revenue increase was primarily due to the consolidation of PBG Capital Partners LLC that was reported on an equity basis the year before. Earlier this month the company announced that it had entered into a definitive agreement with Cerberus Capital Management, L.P. for a sponsored spin-off of the Capital Services external leasing business. Subject to customary regulatory approvals, the new entity will be an independent, publicly traded company consisting of most of the assets in the Capital Services segment, including assets related to Imagistics International, Inc.
For the full year, the company expects to record net after-tax restructuring charges in the range of $13 million to $26 million, or $.06 to $.11 per diluted share, net of the after-tax gain on the sale of its Main Plant site. The restructuring charges relate to the continued realignment and streamlining of the company's worldwide infrastructure requirements.
The company is increasing its revenue and adjusted earnings guidance for full year 2005. The company expects 2005 revenue growth in the range of eight to ten percent and diluted earnings per share in the range of $2.51 to $2.64. Excluding net restructuring charges and charitable contributions, adjusted diluted earnings per share is expected to be in the range of $2.64 to $2.72.
The company anticipates second quarter revenue growth in the range of nine to eleven percent and adjusted diluted earnings per share in the range of $.64 to $.66. 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 light of the Securities and Exchange Commission's recent decision to delay the required implementation of Statement of Financial Accounting Standards No. 123R for share-based payments, the company does not intend to implement this accounting standard in 2005.
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