STAMFORD, Conn. May 06, 2008 -- Pitney Bowes Inc. today reported first quarter 2008 financial results.
Revenue increased 11 percent to $1.6 billion and adjusted income from continuing operations was $140 million. Adjusted income for the quarter excludes charges related to restructuring initiatives that the company announced on November 15, 2007 to reduce costs, accelerate operational improvements and transition its product line; and a tax adjustment in the UK. On a Generally Accepted Accounting Principles (GAAP) basis, the company reported net income from continuing operations of $123 million.
Adjusted earnings per diluted share for the first quarter was $0.66, which compares with $0.66 for the prior year. On a GAAP basis, the company reported earnings per diluted share from continuing operations of $0.58 for the quarter, compared with $0.66 per diluted share for the prior year. Diluted earnings per share for the quarter was $0.56 including discontinued operations, compared with $0.65 the prior year.
Free cash flow for the quarter was $197 million, while cash from operations was $248 million for the first quarter.
During the quarter, the company used $74 million of cash for dividends and $180 million to buy back 5 million of its shares. The remaining authorization for future share repurchases was $227 million at the end of the first quarter.
Commenting on the quarter, President and CEO Murray D. Martin noted, “We are encouraged by our ability to achieve a solid performance despite the difficult economic environment. Today more than ever, businesses of all sizes are looking for ways to connect information, offerings, and goods with their existing and potential customers in a cost efficient manner. Our diverse portfolio of mail and document management solutions assists businesses in generating revenue, reducing costs, and enhancing the impact of their customer communications through targeting and customization.”
Business Segment Results
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, customer communication, and location intelligence software.
In the first quarter, Mailstream Solutions revenue increased 9 percent to $1.1 billion while earnings before interest and taxes (EBIT) declined 4 percent to $289 million, when compared with the prior year.
Within Mailstream Solutions:
As anticipated, U.S. Mailing’s revenue and EBIT for the quarter were adversely affected by lower equipment sales due to the postal rate case in the first half of last year, the wind-down of meter migration, and current weak economic conditions. As a result, the segment’s revenue declined 5 percent to $553 million and EBIT declined 8 percent to $224 million. The EBIT margin was hurt by lower revenue growth and the mix of business when compared with 2007, which included the sale of higher margin mailing equipment upgrade kits that enabled mailers to comply with the change in postage rates.
International Mailing’s revenue grew 20 percent to $308 million and EBIT increased 8 percent to $50 million. The segment’s revenue grew 6 percent when compared with the prior year, excluding the effects of currency and acquisitions. Revenue benefited by about 13 percent from favorable currency translation and by about 1 percent from acquisitions. EBIT margin comparisons with the prior year were adversely affected by the mix of business. However, the EBIT margin improved by 120 basis points when compared with the fourth quarter 2007 due to improved margin in France resulting from a postal rate change.
Worldwide revenue for Production Mail grew 5 percent to $135 million and EBIT increased 25 percent to $9 million. Favorable currency translation contributed about 5 percent to revenue growth. Revenue benefited from higher equipment placements in the U.K., Asia, and Canada; however, there were lower equipment sales in the U.S. and parts of Europe. The EBIT margin improved due to a higher gross margin and lower administrative costs.
Software revenue increased 159 percent to $100 million and EBIT increased 114 percent to $7 million. Results for the quarter were driven by broad-based demand for location intelligence and customer communication software solutions both within and outside of the U.S. Revenue grew 46 percent when compared with the prior year, excluding currency and acquisitions. Acquisitions, including MapInfo, contributed 105 percent to revenue growth and favorable currency translation contributed about 8 percent. The 1 percent decline in EBIT margin was due primarily to acquisition costs associated with MapInfo.
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 cross-border mail services; and marketing services.
For the quarter, Mailstream Services reported revenue growth of 17 percent to $478 million, and EBIT increased 17 percent to $39 million versus the prior year.
Within Mailstream Services:
Management Services’ revenue increased 11 percent to $303 million for the quarter while EBIT decreased 10 percent to $19 million. The segment’s revenue growth for the quarter benefited from last year’s acquisition of a French-based business services company, which added about 9 percent to growth, and favorable currency translation, which added about 3 percent to growth. The segment’s revenue and EBIT were adversely affected by continued weakness in U.S. legal solutions and slower business in government solutions. Acquisition costs also negatively impacted EBIT.
The company is nearing conclusion of its evaluation of the strategic options for its U.S. Management Services operations and expects to make a statement by the end of the second quarter.
Mail Services revenue grew 25 percent to $125 million and EBIT grew 56 percent to $18 million. Revenue growth was driven by both presort and cross-border mail services, while EBIT benefited from operating leverage from the increase in mail volume processed and increased operating efficiencies. Acquisitions added about 3 percent to revenue growth.
Marketing Services revenue increased 42 percent to $50 million as the segment’s results benefited from the continued expansion of marketing services programs and acquisitions during the year, which added about 11 percent to revenue growth. EBIT margin more than doubled to 4 percent of revenue versus the prior year.
Based upon first quarter results, the company increased full-year free cash flow guidance to a range of $625 to $700 million and reaffirmed 2008 expected revenue growth of 6 to 9 percent, and adjusted earnings per diluted share from continuing operations of $2.80 to $2.90.
Adjusted earnings per diluted share excludes charges related to the initiatives that the company announced on November 15, 2007 to reduce costs, accelerate improvements in operational efficiency, and transition its product line. Adjusted earnings per diluted share also excludes a tax adjustment associated with a UK leasing program that ended in 2002. The company anticipates that the restructuring and asset impairment charges in 2008 in connection with the transition initiatives will be in the range of $40 million to $100 million ($0.12 to $0.30 per diluted share).
On a GAAP basis, earnings per diluted share from continuing operations is expected to be in the range of $2.47 to $2.75.
Management of Pitney Bowes will discuss the company’s results in a broadcast over the Internet today at 5:00 p.m. EST. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the company’s web site at www.pb.com/investorrelations.
Pitney Bowes engineers the flow of communication. The company is a $6.3 billion global leader of mailstream solutions headquartered in Stamford, Connecticut. For more information about the company, its products, services and solutions, visit www.pitneybowes.com.
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