Pitney Bowes Announces Third Quarter Results for 2012 Business Wire STAMFORD, Conn. -- November 01, 2012 Pitney Bowes Inc. (NYSE: PBI) today reported financial results for the third quarter 2012. Recent Highlights *Revenues of $1.2 billion; Adjusted EPS of $0.47; GAAP EPS of $0.38 *Reaffirms full year 2012 guidance for the following: *Revenue in the range of flat to -4%, excluding the impact of currency; *Adjusted EPS guidance in the range of $1.95 to $2.15; *Free cash flow in the range of $750 - $850 million. *Updates GAAP EPS guidance to a range of $1.78 to $2.08, which includes new impairment and restructuring charges. *Significant progress on expanding our participation in higher growth cross-border ecommerce parcel opportunities, including, a broader strategic relationship with eBay to provide ecommerce shipping solutions beginning in the 4^th quarter. *Decision to exit the International Mail Services business focused on delivering mail and catalogues internationally, in line with the focus on higher growth cross-border ecommerce parcel opportunities. *Year-over-year growth in Production Mail revenue. *Continued growth in Presort revenue. Commenting on the quarter, Chairman, President and Chief Executive Officer Murray D. Martin said, “We continue to execute our strategy to be a leading provider of customer communications solutions; however, our earnings performance during the quarter did not meet our expectations. In the third quarter, our results continued to be affected by global economic weakness, especially in International Mailing and Software where public sector spending remains constrained. However, we were pleased to see gradually improving trends in North America Mailing, where equipment sales experienced a slower rate of decline and the best year-over-year comparisons in six quarters.” Mr. Martin added, “We continue to take actions to drive sustainable long-term growth for Pitney Bowes and our shareholders and are focused on positioning Pitney Bowes to succeed in the changing market landscape. We decided to exit the International Mail Services business related to the delivery of international mail and catalogs. As we focus on the higher growth opportunities, we are growing our participation in ecommerce opportunities related to cross border parcel shipping services. One example is our collaboration with eBay to facilitate cross border ecommerce by providing technology solutions and parcel shipping services. Additionally, to address our changing business mix and current economic pressures, we are initiating actions to further streamline the business through organizational and management consolidations to further reduce our cost structure. And, we will further realign future investments in the business as we focus on higher growth opportunities.” Third Quarter 2012 Results Revenue in the third quarter totaled $1.2 billion, a decline of 6 percent compared to the prior year period, and reflects global economic conditions with particular impact on the International Mailing, Software and Management Services business segments. On a constant currency basis, revenue declined 5 percent and benefited from equipment sales growth in Production Mail and 3 percent growth in presort revenue. Earnings per diluted share (EPS), as reported under Generally Accepted Accounting Principles basis (GAAP), for the quarter were $0.38, as compared with $0.85 per diluted share for the prior year. GAAP EPS for the quarter includes a charge of $0.09 per diluted share to reflect non-cash impairment charges for goodwill, intangible and long-lived assets related to the decision in October 2012 to exit the International Mail Services business. In comparison, the 2011 third quarter GAAP EPS included an $0.11 per share charge for restructuring costs and asset impairments; a $0.15 per share charge for goodwill; a $0.13 per share benefit from the sale of leveraged lease assets; and a $0.30 per share tax benefit from discontinued operations. Adjusted EPS were $0.47, as compared with adjusted EPS of $0.69 in the same period last year. Adjusted EPS for 2012 excludes the non-cash impairment charges for goodwill, intangible and long-lived assets related to the International Mail Services business. In comparison, the 2011 third quarter adjusted EPS included a $0.05 per share benefit related to insurance reimbursements and an $0.08 per share favorable tax settlement. Free cash flow during the quarter was $40 million and $551 million year to date. On a GAAP basis the Company generated $69 million in cash from operations for the quarter and $440 million year to date. Comparisons of cash flow this quarter versus the prior year were impacted by a large tax refund and the timing of tax payments in the third quarter of last year. Comparisons to the second quarter of this year were also impacted by the timing of tax payments, as well as the timing of working capital requirements. Year-to-date, the Company has used its cash primarily to reduce debt, pay dividends, contribute to its pension plans and make restructuring payments. Business Segment Results SMB Solutions Group 3Q 2012 Y-O-Y Change Change ex Currency Revenue $602 million (8%) (6%) EBIT $180 million (11%) Within the SMB Solutions Group: North America Mailing 3Q 2012 Y-O-Y Change Change ex Currency Revenue $448 million (6%) (6%) EBIT $169 million (5%) During the quarter, the North America Mailing segment continued to benefit from increased placements of Connect+™ and pbWebConnect™ mailing systems and SendSuite Live™ shipping solutions. As a result, there was a decline of less than 4 percent in equipment sales revenue this quarter, representing the best year-over-year performance in 6 quarters. Revenue was impacted by lower recurring revenue, although at a slower rate than the previous year. Supplies revenue declined in part because of lower sales of third-party supplies for copiers and printers. EBIT margin for the segment again improved versus the prior year, even though there were fewer lease extensions on existing equipment. The higher proportion of equipment sales revenue will result in an improvement in customer retention and future recurring revenue streams; however, fewer lease extensions reduced EBIT margin in the quarter. International Mailing 3Q 2012 Y-O-Y Change Change ex Currency Revenue $154 million (13%) (7%) EBIT $ 11 million (55%) International Mailing revenue was negatively impacted by the uncertain economic environment in Europe, resulting in fewer upgrades and lower equipment sales, especially in the U.K. In addition, revenue comparisons were impacted by a postal rate change in France in the third quarter of last year, which generated $6 million of equipment sales related to postal rate updates (PROMs), which was not repeated this year. EBIT margin declined year-over-year due to lower revenue, lack of high-margin PROM sales contribution this quarter and the overall mix of business. Enterprise Business Solutions Group 3Q 2012 Y-O-Y Change Change ex Currency Revenue $614 million (5%) (4%) EBIT $ 41 million (46%) Within the Enterprise Business Solutions Group: Worldwide Production Mail 3Q 2012 Y-O-Y Change Change ex Currency Revenue $122 million 4% 7% EBIT $ 4 million 204% Production Mail revenue benefited from increased worldwide equipment sales following the Drupa trade show held during the second quarter. The company continues to make progress with its Volly™ service and has now signed 60 large third-party mail service providers who will offer the Volly secure digital mail service to 6,500 companies and consumer brands. As it continues to work with billers and develop its software, the company has decided to add to and enhance its technology to provide additional capabilities that will improve the onboarding process for billers. This will result in improving the scalability of the service and facilitating biller density. Therefore, the company has determined that Volly’s long-term value will be enhanced by deferring its availability to consumers until 2013. EBIT improved when compared to the prior year due to the growth of revenue and cost reduction initiatives in the U.S. and Europe, offset by continued investment in Volly. Excluding the investment in Volly, EBIT margin would have been approximately 540 basis points higher this quarter. Software 3Q 2012 Y-O-Y Change Change ex Currency Revenue $ 89 million (19%) (18%) EBIT $ 1 million (94%) Given the overall slowdown in the global market, Software has experienced a reduction in the number of large license deals compared with the prior year. Additionally, revenue was impacted by the continued austerity measures in the public sector globally. EBIT margin declined versus the prior year principally because of lower licensing revenue, as well as relatively higher R&D investment and marketing spend in the quarter. Management Services 3Q 2012 Y-O-Y Change Change ex Currency Revenue $221 million (6%) (5%) EBIT $ 10 million (44%) Management Services revenue and EBIT margin continue to be impacted by ongoing pricing pressures, lower volumes and account contractions resulting from worldwide economic uncertainty and competitive conditions. However, there continues to be positive net new written business, which, coupled with new strategic partnerships in print outsourcing, are expected to drive revenue growth in the future. Mail Services 3Q 2012 Y-O-Y Change Change ex Currency Revenue $142 million (1%) (1%) EBIT $ 17 million (53%) Increased standard mail volumes and continued penetration in the workshare discount categories continue to drive revenue growth for the presort operations. Overall, Mail Services revenue declined slightly this quarter as a result of lower volumes in the International Mail Services business. The Company recently announced a partnership with eBay to provide ecommerce solutions for cross-border package delivery which is beginning roll out in the fourth quarter. EBIT margin comparisons versus the prior year were impacted by the $18 million insurance reimbursement received in the third quarter last year. Impacting EBIT margin this quarter was the Company’s continued investment in software applications and the distribution network to facilitate the expansion of its ecommerce solutions. Marketing Services 3Q 2012 Y-O-Y Change Change ex Currency Revenue $ 40 million (4%) (4%) EBIT $ 9 million 7% Marketing Services EBIT benefited from reduced print production costs and ongoing productivity initiatives. Executive Vice President and Chief Financial Officer, Michael Monahan, commented, “As the mix of business for the Company continues to shift to more enterprise-related revenues and we focus on incremental growth opportunities, we anticipate that these new revenue streams will have lower margins than our traditional Mailing business. Therefore, we intend to further streamline the business and reduce its cost structure to address margin mix, as the Company moves towards these initiatives. These actions, which are anticipated to result in annualized savings of $45 million to $55 million, combined with our ongoing efforts, will enhance shareholder value and improve the growth profile of the business.” 2012 Annual Guidance This guidance discusses future results which are inherently subject to unforeseen risks and developments. As such, discussions about the business outlook should be read in the context of an uncertain future, as well as the risk factors identified in the safe harbor language at the end of this release and as more fully outlined in the Company's 2011 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. The Company is reaffirming its 2012 revenue, adjusted EPS and cash flow guidance for the year, and is updating its GAAP EPS guidance. Based on results to date and expectations for the fourth quarter, the Company anticipates: *2012 revenue, excluding the impacts of currency, to remain in a range of flat to a decline of 4 percent when compared to 2011; *Adjusted earnings per diluted share from continuing operations to be in the range of $1.95 to $2.15; *GAAP earnings per diluted share from continuing operations to be in the range of $1.78 to $2.08; and *Free cash flow to be in the range of $750 million to $850 million. The Company’s efforts to further streamline the business and reduce its cost structure will result in a pre-tax restructuring charge in the fourth quarter that is expected to be in the range of $40 million to $60 million and is anticipated to generate annualized savings in the range of $45 million to $55 million. The updated GAAP earnings per share guidance reflects the goodwill and asset impairment charges of $0.09 per share related to the recent performance of the International Mail Services business that was recorded during the quarter, and the anticipated restructuring charge in the range of $0.15 to $0.25 per share that will be recorded in the fourth quarter. Conference Call and Webcast Management of Pitney Bowes will discuss the Company’s results in a broadcast over the Internet today at 5:00 p.m. EDT. 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. About Pitney Bowes Delivering more than 90 years of innovation, Pitney Bowes provides business communications software, mailing systems and services that integrate physical and digital communications channels. Long known for making its customers more productive, Pitney Bowes is increasingly helping other companies grow their business through advanced customer communications management. Pitney Bowes is a $5.3 billion Company with 29,000 employees worldwide. Pitney Bowes: Every connection is a new opportunity™. www.pb.com The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP). The Company uses measures such as adjusted earnings per share, adjusted income from continuing operations and free cash flow to exclude the impact of special items like restructuring charges, tax adjustments, and asset write-downs, because, while these are actual Company expenses, they can mask underlying trends associated with our business. Such items are often inconsistent in amount and frequency and as such, the adjustments allow an investor greater insight into the current underlying operating trends of the business. The use of free cash flow provides investors insight into the amount of cash that management could have available for other discretionary uses. It adjusts GAAP cash from operations for capital expenditures, as well as special items like cash used for restructuring charges, unusual tax payments and contributions to its pension funds. Management uses segment EBIT to measure profitability and performance at the segment level. EBIT is determined by deducting the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges, asset impairments, and goodwill charges which are recognized on a consolidated basis. In addition, financial results are presented on a constant currency basis to exclude the impact of changes in foreign currency exchange rates since the prior period under comparison. Constant currency measures are intended to help investors better understand the underlying operational performance of the business excluding the impacts of shifts in currency exchange rates over the intervening period. Pitney Bowes has provided a quantitative reconciliation to GAAP in supplemental schedules. This information may also be found at the Company's web site www.pb.com/investorrelations. This document contains “forward-looking statements” about our expected or potential future business and financial performance. For us forward-looking statements include, but are not limited to, statements about our future revenue and earnings guidance and other statements about future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: mail volumes; the uncertain economic environment; timely development, market acceptance and regulatory approvals, if needed, of new products; fluctuations in customer demand; changes in postal regulations; interrupted use of key information systems; management of outsourcing arrangements; foreign currency exchange rates; changes in our credit ratings; management of credit risk; changes in interest rates; the financial health of national posts; and other factors beyond our control as more fully outlined in the Company's 2011 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments. Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three months and nine months ended September 30, 2012 and 2011, and consolidated balance sheets at September 30, 2012 and December 31, 2011 are attached. Pitney Bowes Inc. Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) Three months ended September Nine months ended September 30, 30, 2012 2011^(2) 2012 2011^(2) Revenue: Equipment $ 212,103 $ 221,475 $ 656,517 $ 706,027 sales Supplies 66,902 74,271 213,789 235,728 Software 93,476 113,224 302,377 318,305 Rentals 142,288 154,210 428,174 467,064 Financing 123,999 136,000 373,695 412,958 Support 171,652 175,286 516,424 530,707 services Business 405,257 425,258 1,226,175 1,266,478 services Total revenue 1,215,677 1,299,724 3,717,151 3,937,267 Costs and expenses: Cost of equipment 105,556 97,559 309,190 316,697 sales Cost of 20,694 22,611 65,428 74,365 supplies Cost of 22,784 23,431 68,281 73,541 software Cost of 25,182 35,819 87,257 107,834 rentals Financing interest 19,604 21,430 61,385 66,915 expense Cost of support 107,095 114,074 334,304 344,767 services Cost of business 315,830 326,415 948,359 985,232 services Selling, general and 400,862 427,412 1,203,653 1,286,739 administrative Research and 36,669 35,573 104,518 107,772 development Restructuring charges and 9,986 32,956 11,060 63,974 asset impairments Goodwill 18,315 45,650 18,315 45,650 impairment Other interest 27,541 28,932 87,261 86,006 expense Interest (2,057 ) (1,265 ) (5,793 ) (4,702 ) income Other income, - (10,718 ) 1,138 (10,718 ) net Total costs 1,108,061 1,199,879 3,294,356 3,544,072 and expenses Income from continuing operations 107,616 99,845 422,795 393,195 before income taxes Provision for 26,489 (17,087 ) 93,519 77,319 income taxes Income from continuing 81,127 116,932 329,276 315,876 operations Income from discontinued operations, - 60,428 19,332 57,911 net of income tax Net income before attribution of 81,127 177,360 348,608 373,787 noncontrolling interests Less: Preferred stock dividends of subsidiaries attributable to noncontrolling 4,594 4,593 13,782 13,781 interests Net income - Pitney Bowes $ 76,533 $ 172,767 $ 334,826 $ 360,006 Inc. Amounts attributable to common stockholders: Income from continuing $ 76,533 $ 112,339 $ 315,494 $ 302,095 operations Income from discontinued - 60,428 19,332 57,911 operations Net income - Pitney Bowes $ 76,533 $ 172,767 $ 334,826 $ 360,006 Inc. Basic earnings per share attributable to common stockholders ^(1): Continuing 0.38 0.56 1.58 1.49 operations Discontinued 0.00 0.30 0.10 0.29 operations Net income - Pitney Bowes $ 0.38 $ 0.86 $ 1.67 $ 1.78 Inc. Diluted earnings per share attributable to common stockholders ^(1): Continuing 0.38 0.56 1.57 1.48 operations Discontinued 0.00 0.30 0.10 0.28 operations Net income - Pitney Bowes $ 0.38 $ 0.85 $ 1.66 $ 1.77 Inc. ^(1) The sum of the earnings per share amounts may not equal the totals above due to rounding. ^(2) Certain prior year amounts have been reclassified to conform to the current year presentation. Pitney Bowes Inc. Consolidated Balance Sheets (Unaudited in thousands, except per share data) Assets 09/30/12 12/31/11 Current assets: Cash and cash equivalents $ 424,789 $ 856,238 Short-term investments 36,238 12,971 Accounts receivable, gross 695,575 755,485 Allowance for doubtful accounts (28,355 ) (31,855 ) receivable Accounts receivable, net 667,220 723,630 Finance receivables 1,218,080 1,296,673 Allowance for credit losses (26,368 ) (45,583 ) Finance receivables, net 1,191,712 1,251,090 Inventories 187,082 178,599 Current income taxes 22,044 102,556 Other current assets and prepayments 144,987 134,774 Total current assets 2,674,072 3,259,858 Property, plant and equipment, net 382,850 404,146 Rental property and equipment, net 249,310 258,711 Finance receivables 1,047,411 1,123,638 Allowance for credit losses (18,235 ) (17,847 ) Finance receivables, net 1,029,176 1,105,791 Investment in leveraged leases 34,373 138,271 Goodwill 2,127,114 2,147,088 Intangible assets, net 175,995 212,603 Non-current income taxes 45,615 89,992 Other assets 555,661 530,644 Total assets $ 7,274,166 $ 8,147,104 Liabilities, noncontrolling interests and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 1,643,395 $ 1,840,465 Current income taxes 220,236 242,972 Notes payable and current portion of 375,000 550,000 long-term obligations Advance billings 449,051 458,425 Total current liabilities 2,687,682 3,091,862 Deferred taxes on income 25,017 175,944 Tax uncertainties and other income tax 193,867 194,840 liabilities Long-term debt 3,305,504 3,683,909 Other non-current liabilities 641,093 743,165 Total liabilities 6,853,163 7,889,720 Noncontrolling interests (Preferred 296,370 296,370 stockholders' equity in subsidiaries) Stockholders' equity: Cumulative preferred stock, $50 par 4 4 value, 4% convertible Cumulative preference stock, no par 653 659 value, $2.12 convertible Common stock, $1 par value 323,338 323,338 Additional paid-in-capital 222,620 240,584 Retained Earnings 4,709,761 4,600,217 Accumulated other comprehensive loss (625,868 ) (661,645 ) Treasury Stock, at cost (4,505,875 ) (4,542,143 ) Total Pitney Bowes Inc. stockholders' 124,633 (38,986 ) equity Total liabilities, noncontrolling $ 7,274,166 $ 8,147,104 interests and stockholders' equity Pitney Bowes Inc. Revenue and EBIT Business Segments September 30, 2012 (Unaudited) (Dollars in thousands) Three Months Ended September 30, % 2012 2011 Change Revenue North America Mailing $ 447,920 475,663 (6 %) International Mailing 154,171 177,797 (13 %) Small & Medium Business Solutions 602,091 653,460 (8 %) Production Mail 122,251 117,220 4 % Software 88,629 109,153 (19 %) Management Services 220,887 235,428 (6 %) Mail Services 142,182 143,055 (1 %) Marketing Services 39,637 41,408 (4 %) Enterprise Business Solutions 613,586 646,264 (5 %) Total revenue $ 1,215,677 1,299,724 (6 %) EBIT (1) North America Mailing $ 168,934 $ 177,280 (5 %) International Mailing 11,286 25,105 (55 %) Small & Medium Business Solutions 180,220 202,385 (11 %) Production Mail 3,555 (3,426 ) 204 % Software 956 16,564 (94 %) Management Services 10,266 18,248 (44 %) Mail Services 16,671 35,107 (53 %) Marketing Services 9,297 8,716 7 % Enterprise Business Solutions 40,745 75,209 (46 %) Total EBIT $ 220,965 $ 277,594 (20 %) Unallocated amounts: Interest, net (2) (45,088 ) (49,097 ) Corporate and other expenses (39,960 ) (50,046 ) Restructuring and asset (9,986 ) (32,956 ) impairments Goodwill impairment (18,315 ) (45,650 ) Income from continuing operations $ 107,616 $ 99,845 before income taxes Earnings before interest and taxes (EBIT) excludes general corporate (1) expenses, restructuring charges and asset impairments and goodwill impairment. (2) Interest, net includes financing interest expense, other interest expense and interest income. Pitney Bowes Inc. Revenue and EBIT Business Segments September 30, 2012 (Unaudited) (Dollars in thousands) Nine Months Ended September 30, % 2012 2011 Change Revenue North America Mailing $ 1,362,709 1,478,355 (8%) International Mailing 487,665 524,488 (7%) Small & Medium Business Solutions 1,850,374 2,002,843 (8%) Production Mail 360,334 382,595 (6%) Software 288,830 304,921 (5%) Management Services 679,078 717,513 (5%) Mail Services 432,845 421,611 3% Marketing Services 105,690 107,784 (2%) Enterprise Business Solutions 1,866,777 1,934,424 (3%) Total Revenue $ 3,717,151 3,937,267 (6%) EBIT (1) North America Mailing $ 514,975 $ 532,727 (3%) International Mailing 53,041 75,033 (29%) Small & Medium Business Solutions 568,016 607,760 (7%) Production Mail 11,928 12,971 (8%) Software 20,135 31,618 (36%) Management Services 36,187 59,256 (39%) Mail Services 75,661 55,191 37% Marketing Services 21,617 19,668 10% Enterprise Business Solutions 165,528 178,704 (7%) Total EBIT $ 733,544 $ 786,464 (7%) Unallocated amounts: Interest, net (142,853 ) (148,219 ) Corporate and other expenses (138,521 ) (135,426 ) Restructuring and asset (11,060 ) (63,974 ) impairments Goodwill impairment (18,315 ) (45,650 ) Income from continuing operations $ 422,795 $ 393,195 before income taxes Earnings before interest and taxes (EBIT) excludes general corporate (1) expenses, restructuring charges and asset impairments and goodwill impairment. (2) Interest, net includes financing interest expense, other interest expense and interest income. Pitney Bowes Inc. Reconciliation of Reported Consolidated Results to Adjusted Results (Unaudited) (Dollars in thousands, except per share data) Three Months Ended Nine Months Ended September September 30, 30, 2012 2011 2012 2011 GAAP income from continuing operations after income taxes, as $ 76,533 $ 112,339 $ 315,494 $ 302,095 reported Restructuring charges and 6,430 22,169 6,892 43,038 asset impairments Goodwill 11,172 31,334 11,172 31,334 impairment Sale of leveraged - (26,689 ) (12,886 ) (26,689 ) lease assets Tax - 447 - 2,960 adjustments Income from continuing operations after income taxes, as $ 94,135 $ 139,600 $ 320,672 $ 352,738 adjusted GAAP diluted earnings per share from continuing operations, as $ 0.38 $ 0.56 $ 1.57 $ 1.48 reported Restructuring charges and 0.03 0.11 0.03 0.21 asset impairments Goodwill 0.06 0.15 0.06 0.15 impairment Sale of leveraged - (0.13 ) (0.06 ) (0.13 ) lease Tax - 0.00 - 0.01 adjustments Diluted earnings per share from continuing operations, as $ 0.47 $ 0.69 $ 1.59 $ 1.73 adjusted GAAP net cash provided by operating activities, as reported $ 69,466 $ 301,055 $ 439,633 $ 750,456 Capital (39,065 ) (35,012 ) (127,816 ) (123,029 ) expenditures Restructuring 12,871 26,411 60,746 78,379 payments Pension - - 95,000 123,000 contribution Tax payments on sale of 14,345 - 99,249 - leveraged lease assets Reserve account (17,707 ) (32,616 ) (15,373 ) (14,528 ) deposits Free cash flow, as $ 39,910 $ 259,838 $ 551,439 $ 814,278 adjusted Note: The sum of the earnings per share amounts may not equal the totals above due to rounding. Contact: Editorial Pitney Bowes Inc. Sheryl Y. Battles, 203-351-6808 VP, Corp. Communications or Financial Pitney Bowes Inc. Charles F. McBride, 203-351-6349 VP, Investor Relations Website - www.pitneybowes.com
Pitney Bowes Announces Third Quarter Results for 2012
Press spacebar to pause and continue. Press esc to stop.