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Pitney Bowes Announces Strong Revenue Growth in Q3
STAMFORD,
Conn., NOV 05– Pitney Bowes Inc. today reported third quarter
performance characterized by strong growth in revenue, earnings before
interest and taxes , and earnings per share. Revenue increased 11
percent to $1.36 billion. EBIT rose 12 percent to $272 million versus
the third quarter of 2004. Net income for the quarter increased six
percent to $144 million or $.62 per diluted share versus $.58 per
diluted share in the prior year. Excluding the impact of restructuring
charges, the company’s third quarter adjusted diluted earnings per
share was $.66 versus $.63 in the third quarter of 2004.
Commenting
on the company’s financial performance during the quarter, Chairman and
CEO Michael J. Critelli noted, “We are pleased with our broad- based
growth in equipment, software, supplies, financing, and services
revenue during the quarter. This reflects our success in executing our
strategies for expanded offerings throughout the mailstream.
“We are
also pleased that we were able to grow our earnings per share despite
an increase in interest expense, a higher tax rate, and a reduced
earnings contribution from Capital Services compared with the third
quarter of the prior year.”
During the quarter, the company took
several actions as part of its previously announced restructuring
program and recorded after-tax charges of $8 million or $.04 per
diluted share.
The company generated $218 million in cash from
operations during the quarter. Free cash flow was $165 million. Free
cash flow is equal to cash from operations less capital expenditures
and excludes the effects of the company’s restructuring program.
The
company purchased approximately one million of its common shares during
the quarter for $41 million. The Board of Directors approved an
additional $300 million authorization for the repurchase of shares over
the next twelve to twenty-four months. The company now has $310 million
of remaining authorization for future share repurchases.
Global
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; support services;
payment solutions; and mailing and customer communication software.
During
the quarter Global Mailstream Solutions revenue and EBIT increased nine
percent to $949 million and $286 million, respectively, when compared
with the third quarter in the prior year.
In the U.S., the quarter’s
revenue growth was favorably impacted by placements of networked
digital mailing systems (especially small and mid- sized systems), mail
creation equipment, and supplies. The quarter’s results also included
26 percent revenue growth from Document Messaging Technologies, driven
by growth from Group 1 software and placements of the industry-leading
Advanced Productivity Systems (APS) and Flexible Productivity Systems
(FPS).
Outside of the U.S., revenue grew 13 percent. These results
include increased placements of mailing equipment with small businesses
and increased sales of supplies in Europe. In addition, revenue growth
benefited from the fourth-quarter 2004 acquisition of Groupe Mag and
favorable foreign currency translation. Revenue growth for the quarter
was adversely impacted by the timing of production mail placements in
Europe.
Global Business Services 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, international outbound mail services, and direct mail
marketing services.
For the quarter, Global Business Services
reported revenue growth of 19 percent to $376 million and EBIT growth
of 66 percent to $26 million compared with the third quarter of the
prior year.
The company’s management services operation reported a
two percent decline in revenue and an EBIT margin improvement to seven
percent. This reflects the company’s focus on enhancing profitability
for this business.
Mail services revenue grew 129 percent versus the
third quarter last year as a result of the expansion of its network,
growth in customer base, and the acquisition of Imagitas during the
second quarter 2005. EBIT margins were seven percent, which was an
improvement versus last year’s third quarter even as the company
continued to invest in the growth of its presort and international mail
network and integrated recently acquired sites. Imagitas expanded its
marketing services for the motor vehicle registration process to a
fifth state and launched a catalog request form as an expanded offering
in its move update kit.
Capital Services revenue for the quarter
increased three percent to $31 million and EBIT declined 26 percent to
$16 million primarily as a result of the costs associated with the
planned spin-off of this business.
Earlier in the year, the company
announced that it had entered into a definitive agreement to effect a
sponsored spin-off of most of the Capital Services assets, which
contributed approximately $.03 per diluted share in the third quarter
2005, about one cent less than the contribution to earnings in the
third quarter of the prior year. 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. The preparation of the regulatory filings with respect to the
new company has taken longer than anticipated. Consequently, the
company now expects the spin-off to occur mid-year 2006.
The
anticipated net after-tax restructuring charges for the fourth quarter
are in the range of $5 million to $20 million, or $.02 to $.09 per
diluted share. The restructuring charges relate to the continued
realignment and streamlining of the company’s worldwide infrastructure
requirements.
The company anticipates fourth quarter revenue growth
in the range of five to seven percent and diluted earnings per share in
the range of $.64 to $.73. Excluding the impact of restructuring
charges, the company expects adjusted diluted earnings per share in the
range of $.73 to $.75.
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