STAMFORD, Conn., Feb. 2 -- Pitney Bowes Inc. today reported fourth quarter and full year 2003 performance in line with previous revenue and earnings guidance.
In summarizing the company's financial performance during the year, Chairman and CEO Michael J. Critelli noted, "I am very pleased that in 2003 we were able to continue our transformation for long-term growth and still meet revenue and earnings growth guidance. We were able to produce these results by staying focused on our three strategic priorities: enhancing core businesses, streamlining infrastructure and executing our growth strategies. For example, during the year we continued to reduce our exposure to non-core financing, and are transitioning from direct manufacturing to assembly for most of our equipment. We accelerated our infrastructure improvement programs to position the company for growth and an improving economy. We acquired the DDD Company, which expanded our presence in the important government sector. We also significantly expanded our presort network from 12 sites when we acquired it to 23 sites throughout the U.S. currently. And finally, in December we announced the realignment of our organizational structure to enhance customer and shareholder value."
For the fourth quarter 2003, revenue increased four percent to $1.22 billion and net income from continuing operations was $143.6 million or $.61 per diluted share. In January of 2003, the company announced a two-year restructuring program to implement its growth plan. There were $13 million in after-tax charges during the quarter related to this program, bringing the total for the year to approximately $75 million after-tax for 2003. Excluding the quarter's after-tax restructuring charge of $.05 per diluted share, fourth quarter adjusted diluted earnings per share from continuing operations were $.66, which is in line with previous guidance.
Consistent with its previously announced strategy to reduce its exposure to non-core financing, the company's fourth quarter 2003 diluted earnings per share included $.04 per share from non-core Capital Services compared to $.05 in the fourth quarter 2002. For the full year 2003, diluted earnings per share included $.16 per share from non-core Capital Services compared to $.24 per share for the year 2002.
Other income in the fourth quarter included $6.4 million of after-tax income related to the expiration of award certificates provided in connection with the settlement of a class action lawsuit. Other income also included an after-tax charge of $6.3 million for contributions to establish two charitable foundations.
In addition, there was $3.3 million of income from discontinued operations in the quarter, or $.01 per diluted share, from the favorable resolution of certain contingent liabilities associated with the previous sales of Colonial Pacific Leasing Company in 1998 and Atlantic Mortgage & Investment Corporation in 2000.
The company also generated $175 million in cash from operations during the quarter, bringing the total to $851 million for the full year 2003. Subtracting $72 million in capital expenditures and excluding $50 million in contributions to the pension plan, $10 million in contributions to the charitable foundations, and $21 million in payments associated with the restructuring program, free cash flow was $185 million during the quarter. The company repurchased 1.5 million of its shares during the quarter for $60 million, leaving $100 million of authorization.
The board of directors of the company authorized an increase in the dividend on common stock to an annualized rate of $1.22 per share. This is the twenty-second consecutive year that the company has increased its dividend on common stock.
In the Global Mailstream Solutions Segment, revenue increased four percent and operating profit increased five percent when compared with the prior year. In the U.S. strong growth in small business mailing products and presort operations was offset by lower financing revenue from slower equipment sales in previous quarters. Customer acceptance of new digital mailing systems continued on track as placements are driven by the multiple cost saving opportunities and the remote access to value-added services such as delivery and signature confirmation provided by the networked systems. More than two- thirds of the meter base is now composed of digital equipment.
Outside of the U.S. revenue grew at a double-digit pace due primarily to favorable foreign exchange rates. On a local currency basis, revenue grew two percent as a result of improved performance in the UK, Germany, and the Nordic countries despite continuing weak economic conditions in Europe. Japan had excellent revenue growth during the quarter due to the recent introduction of the company's new digital mailing systems. Canada's revenue was down slightly on a local currency basis, due to a tough comparison with the prior year, which benefited from sales associated with a postal rate change and meter migration activity.
The Global Enterprise Solutions Segment includes Pitney Bowes Management Services (PBMS) and U.S. Document Messaging Technologies (DMT). The segment reported 10 percent revenue growth and a 15 percent increase in operating profit versus the prior year. PBMS reported revenue growth of four percent to $261.4 million when compared with the prior year while operating profit declined nine percent. However, PBMS continued to improve its operating profit margin sequentially through ongoing administrative cost reduction measures. The successful integration of DDD Company enhances the company's capabilities to expand its presence in the important state and federal government market segment. The diversification of its customer base will help offset the weakness that still exists in many other customer segments.
DMT reported revenue of $87.0 million for the quarter, an increase of 31 percent from the prior year while operating profit increased 73 percent. Companies appear to have gradually increased their capital spending to prepare for an improving economy. As a result, enterprises are investing in DMT's leading edge, information based inserting and sortation equipment that will help large enterprises market to and support their customers more effectively.
Total Messaging Solutions, the combined results of the Global Mailstream Solutions and Global Enterprise Solutions segments, reported a six percent increase in revenue and operating profit.
In the Capital Services Segment revenue for the quarter decreased 32 percent and there was a one percent decline in operating profit as the company continued to reduce its exposure to non-core, long-term financing. The segment continues to benefit from lower interest rates and the sale of selected non-core Capital Services assets. Excluding the positive impact of lower interest expense, the earnings before interest and taxes (EBIT) for the segment declined 23 percent compared to the prior year. During the quarter, the company liquidated approximately $18 million in assets held for sale, and continued to pursue the sale of other non-core lease assets on an economically advantageous basis, which resulted in the sale of an additional $13 million of assets from the portfolio during the quarter.
Revenue growth is expected to be in the range of three to five percent for the first quarter and for the full year 2004. During the year, the company expects to continue its restructuring initiatives related to realigned infrastructure requirements and reduced manufacturing needs for digital equipment, similar to 2003. However, the company is still finalizing its plans for the first quarter and for the remainder of the year and therefore earnings guidance is provided excluding the impact of these charges and the impact of any new accounting standards. Adjusted diluted earnings per share are expected to be in the range of $.55 to $.57 for the first quarter and in the range of $2.44 to $2.51 for the full year 2004.
As noted above, the board of directors declared a quarterly cash dividend of the company's common stock of 30.5 cents per share, payable March 12, 2004, to stockholders of record on February 20, 2004. 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, 2004, to stockholders of record on March 15, 2004, and a quarterly cash dividend of 50 cents per share on the company's 4% convertible cumulative preferred stock, payable May 1, 2004 to stockholders of record on April 15, 2004.
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