Pitney Bowes Announces First Quarter 2013 Results

  Pitney Bowes Announces First Quarter 2013 Results

Business Wire

STAMFORD, Conn. -- April 30, 2013

Pitney Bowes Inc. (NYSE: PBI) today reported financial results for the first
quarter 2013.

Highlights

  *First quarter revenue of $1.2 billion

       *Year-over-year revenue growth in Production Mail and Mail Services
       *Continued moderation in decline of recurring revenue streams in the
         SMB group

  *Adjusted EPS from continuing operations of $0.42
  *GAAP EPS from continuing operations of $0.34, which includes costs of
    $0.08 associated with the recent debt tender
  *First quarter free cash flow of $107 million; GAAP cash from operations of
    $132 million
  *Issued $425 million of 30 year bonds and retired approximately $405
    million of debt originally scheduled to mature between 2014 and 2016.
  *Sale of the U.S. International Mail Services (IMS) business completed
  *On April 29, 2013, the Board of Directors approved a second quarter
    dividend of 18.75 cents per share for the Company’s common stock.

President and Chief Executive Officer, Marc Lautenbach, commented, “We are
taking a number of actions in support of the long-term health and growth of
our business. While the results for the quarter were mixed, we are seeing
progress in key elements of the business. We continued to experience a
moderation in the decline of recurring revenue streams in our SMB group, as
well as growth in both our Production Mail and Mail Services segments. Mail
Services revenue grew because of increased cross-border shipments, related to
the early stages of implementation of our partnership with ebay. We had weaker
revenue and EBIT results than expected in our Software segment due in part to
continued global economic uncertainty. We believe we have substantial
opportunities in these software markets and have taken actions to capture
these opportunities.

“Since joining the Company, I have actively sought input on strengths and
opportunities from our clients, our shareholders and our management team. As a
result, we have identified actions and developed plans focused on improving
revenues, managing costs, and improving working capital. We have taken some
very important first steps, including the announcement of a number of new
management appointments, actions to enhance our balance sheet and capital
allocation flexibility and exiting some non-strategic businesses.

“In connection with our ongoing management of the Company’s capital structure,
our Board of Directors approved a reduced second quarter dividend of 18.75
cents per share for the Company’s common stock. This action will provide us
the added financial flexibility to invest in the business and enhance our
capital structure, while continuing to provide a very competitive return to
shareholders.

“I am excited at our prospects and look forward to providing the details of
these plans and our path to enhance shareholder value at our Investor Update
meeting on May 3^rd.”

First Quarter 2013 Results

Revenue for the quarter was $1.2 billion, a decline of 4 percent when compared
to the prior year. Revenue for the quarter benefited from growth in the
Production Mail and Mail Services segments. International Mailing revenue was
flat with the prior year. Revenue was adversely impacted by lower recurring
revenue streams in the Small and Medium Business (SMB) group, lower licensing
revenue in the Software segment, and some pricing pressures in the Management
Services segment.

Earnings per diluted share for the quarter, on a Generally Accepted Accounting
Principles (GAAP) basis, were $0.33 compared to $0.79 per diluted share for
the prior year.

First quarter 2012 GAAP earnings per diluted share included a $0.11 per share
tax benefit in continuing operations, plus a $0.10 per share tax benefit in
discontinued operations, resulting from the resolution of additional tax
matters with the IRS. First quarter 2012 GAAP earnings per diluted share also
included a net $0.06 per share benefit from the sale of leveraged lease assets
in Canada.

First quarter 2013 GAAP earnings per diluted share were reduced by $0.08 due
to costs associated with the retirement of approximately $405 million of debt
originally scheduled to mature between 2014 and 2016.

Excluding the factors noted above, adjusted earnings per diluted share from
continuing operations for the first quarter 2013 were $0.42 compared to $0.52
in the prior year, as detailed in the table below:

                                                                 
Earnings Per Share Reconciliation*                        Q1 2013  Q1 2012
GAAP EPS                                                  $0.33    $0.79
Discontinued operations – (income) loss                   $0.01    ($0.09)
GAAP EPS from continuing operations                       $0.34    $0.70
Sale of Leveraged Lease Assets                            -        ($0.06)
Costs associated with retirement of debt                  $0.08    -
Adjusted EPS from continuing operations including net     $0.42    $0.64
tax benefit
Net tax benefit                                           -        ($0.11)
Adjusted EPS from continuing operations excluding net     $0.42    $0.52
tax benefit
                                                                  
* The sum of the earnings per share may not equal the totals above due to
rounding.


Free Cash Flow Results

Free cash flow for the quarter was $107 million, while on a GAAP basis, the
Company generated $132 million in cash from operations. In comparison, prior
year free cash flow benefited from tax refunds associated with resolution of
tax matters with the IRS. During the quarter, the Company used $75 million of
cash for dividends and $16 million for restructuring payments.

During the quarter, the Company also issued $425 million of 30 year bonds that
are callable at par after five years. The Company used the proceeds of the
bond issuance to retire approximately $405 million of debt originally
scheduled to mature between 2014 and 2016.

Business Segment Results

SMB Solutions Group

                                     
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $598 million     (5%)             (5%)
EBIT      $172 million   (13%)          
                                              

Within the SMB Solutions Group:

North America Mailing
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $430 million     (7%)             (7%)
EBIT      $155 million   (13%)          
                                              

During the quarter, North America Mailing was adversely impacted by lower
recurring revenue streams. However, the trend of recurring revenues has
continued to moderate versus the prior year. The Company expects this trend to
continue. Revenue during the quarter was also adversely impacted by lower
equipment sales.

EBIT for the segment declined versus the prior year as a result of a higher
proportion of new equipment placements in lieu of lease extensions and the
decline in higher-margin recurring revenue streams. In addition, EBIT
comparisons were adversely impacted by a favorable credit loss adjustment in
the prior year.

International Mailing
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $167 million     0%               0%
EBIT      $18 million    (11%)          
                                              

International Mailing revenue benefited from increased sales from the second
half 2012 launch of Connect+™ mailing systems in France and Germany and postal
rate change related revenue in France. This was offset by lower equipment
sales in the UK due to the weak economic environment, as well as lower sales
in the Nordics. EBIT was adversely impacted by higher product costs associated
with foreign currency movements and costs related to facilities consolidation.

Enterprise Business Solutions Group

                                     
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $569 million     (4%)             (3%)
EBIT      $42 million    (36%)          
                                              

Within the Enterprise Business Solutions Group:

Worldwide Production Mail
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $119 million     3%               4%
EBIT      $3 million     10%            
                                              

Production Mail revenue benefited from the installation of some large
production print orders and there continues to be a higher quarter-end backlog
than in the prior year. The Company also recognized its initial license
revenue associated with the delivery of Volly™ software to Australia Post.
EBIT benefited from the growth in revenue, offset by the higher mix of
production printers that have lower margins than inserter products. The
continued investment in Volly also impacted EBIT margin. Excluding the net
investments associated with Volly, the EBIT margin would have been
approximately 400 basis points higher.

Software
          1Q 2013       Y-O-Y Change   Change ex Currency
Revenue     $81 million     (20%)            (19%)
EBIT      $5 million    (54%)          
                                             

Software revenue and EBIT declined compared to the prior year due primarily to
fewer large dollar licensing deals and the delay in some deal signings,
particularly in the Americas. Prior year results benefitted from a large
multi-year licensing agreement with Facebook for global location intelligence
applications. During the quarter, weakness continued in the European and Asian
operations due to on-going austerity measures in the public sector. EBIT was
unfavorably impacted by the decline in licensing revenue. Despite the revenue
decline, the Company continued to invest in product development to drive
future growth.

Management Services
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $225 million     (2%)             (2%)
EBIT      $13 million    (6%)           
                                              

Management Services revenue was adversely impacted by pricing pressures on
contract renewals. EBIT margin was nearly flat year-over-year as productivity
improvements substantially offset the revenue impacts. The Company recently
signed large, multi-year contracts for document processing services with two
state agencies. These contracts should enhance revenue growth as they are
implemented in coming quarters.

Mail Services
          1Q 2013        Y-O-Y Change   Change ex Currency
Revenue     $119 million     4%               4%
EBIT      $19 million    (43%)          
                                              

Mail Services revenue benefited from volumes associated with the early-stage
roll out of the Company’s ecommerce solutions for cross-border package
delivery. EBIT margin was affected this quarter by investments and costs for
the start-up phase of the Company’s new ecommerce offering. Prior year EBIT
included a $7 million insurance reimbursement related to the fire at its
Dallas presort facility that adversely impacted year-over-year comparisons.

Marketing Services
          1Q 2013       Y-O-Y Change   Change ex Currency
Revenue     $25 million     (16%)            (16%)
EBIT      $2 million    (59%)          
                                             

Marketing Services revenue and EBIT declined due to lower marketing fees
related to certain marketing category contract renewals and fewer household
moves when compared to the prior year.

2013 Guidance Update

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 2012 Form 10-K Annual Report and
other reports filed with the Securities and Exchange Commission.

The Company still expects 2013 revenue, excluding the impacts of currency, to
be in the range of flat to 3 percent growth when compared to 2012, and
continues to expect adjusted earnings per diluted share to be in the range of
$1.85 to $2.00. The Company also continues to expect free cash flow to be in
the range of $600 million to $700 million.

The Company is updating its 2013 annual guidance for GAAP earnings per diluted
share from continuing operations to reflect the first quarter charge of $0.08
per diluted share related to costs associated with the recent debt tender. The
Company now expects GAAP earnings per diluted share from continuing operations
to be in the range of $1.77 to $1.92. This guidance excludes any further
actions that are planned or under consideration by the Company to streamline
its operations and further reduce its cost structure.

The Company expects that it will make continued investments in its growth
initiatives that will result in higher expenses in the first half of the year,
but are anticipated to lead to greater revenue and margin contribution
beginning in the second half of the year. Additionally, it is expected that
the decline in recurring revenue streams will continue to moderate and will
have less of an impact on revenue and earnings in the second half of the year.
The Company expects interest expense to increase approximately $10 million, or
$0.03 per diluted share, related to the interest rate differential between the
Company’s recent $425 million debt issuance and the debt tendered.

The Company will provide more information regarding its plans and the expected
financial impacts at their May 3^rd Investor update meeting.

Conference Call and Webcast

Management of Pitney Bowes will discuss the Company’s results in a broadcast
over the Internet today at 8:00 a.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 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 2012 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 ended
March 31, 2013 and 2012, and consolidated balance sheets at March 31, 2013 and
December 31, 2012 are attached.


Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
                                                               
(Dollars in thousands, except per share data)
                                                 Three months ended March 31,
                                                 2013            2012
Revenue:
Equipment sales                                  $ 214,999       $ 220,179
Supplies                                           74,287          76,365
Software                                           87,012          104,350
Rentals                                            136,379         140,389
Financing                                          116,762         126,748
Support services                                   165,486         173,518
Business services                                 372,031       378,587   
                                                                 
Total revenue                                     1,166,956     1,220,136 
                                                                 
Costs and expenses:
Cost of equipment sales                            109,337         96,916
Cost of supplies                                   23,262          23,871
Cost of software                                   20,706          21,093
Cost of rentals                                    27,755          30,225
Financing interest expense                         19,875          21,139
Cost of support services                           108,009         115,087
Cost of business services                          291,648         286,817
Selling, general and administrative                377,206         405,486
Research and development                           33,335          34,073
Other interest expense                             30,739          29,367
Interest income                                    (1,748    )     (1,733    )
Other expense (income), net                       25,121        (3,234    )
                                                                 
Total costs and expenses                          1,065,245     1,059,107 
                                                                 
Income from continuing operations before income    101,711         161,029
taxes
                                                                 
Provision for income taxes                        27,549        15,493    
                                                                 
Income from continuing operations                  74,162          145,536
                                                                 
(Loss) income from discontinued operations, net   (2,062    )    17,728    
of tax
                                                                 
Net income before attribution of noncontrolling    72,100          163,264
interests
                                                                 
Less: Preferred stock dividends of subsidiaries
attributable                                      4,594         4,594     
to noncontrolling interests
                                                                 
Net income - Pitney Bowes Inc.                   $ 67,506       $ 158,670   
                                                                 
                                                                 
Amounts attributable to common stockholders:
Net income from continuing operations            $ 69,568        $ 140,942
(Loss) income from discontinued operations, net   (2,062    )    17,728    
of tax
                                                                 
Net income - Pitney Bowes Inc.                   $ 67,506       $ 158,670   
                                                                 
Basic earnings per share attributable to common
stockholders ^(1):
Continuing operations                              0.35            0.70
Discontinued operations                           (0.01     )    0.09      
                                                                 
Net income - Pitney Bowes Inc.                   $ 0.34         $ 0.79      
                                                                 
Diluted earnings per share attributable to
common stockholders ^(1):
Continuing operations                              0.34            0.70
Discontinued operations                           (0.01     )    0.09      
                                                                 
Net income - Pitney Bowes Inc.                   $ 0.33         $ 0.79      


^(1)  The sum of the earnings per share amounts may not equal the totals
       above due to rounding.
       


Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited in thousands, except per share data)
                                                             
                                               March 31,        December 31,
Assets
                                               2013             2012
Current assets:
Cash and cash equivalents                      $ 909,664        $ 913,276
Short-term investments                           37,712           36,611
                                                                
Accounts receivable, gross                       663,357          748,469
Allowance for doubtful accounts receivable      (15,739    )    (20,219    )
Accounts receivable, net                         647,618          728,250
                                                                
Finance receivables                              1,160,865        1,213,776
Allowance for credit losses                     (23,774    )    (25,484    )
Finance receivables, net                         1,137,091        1,188,292
                                                                
Inventories                                      167,469          179,678
Current income taxes                             49,082           51,836
Other current assets and prepayments            113,142        114,184    
                                                                
Total current assets                             3,061,778        3,212,127
                                                                
Property, plant and equipment, net               377,246          385,377
Rental property and equipment, net               236,026          241,192
                                                                
Finance receivables                              993,242          1,041,099
Allowance for credit losses                     (13,206    )    (14,610    )
Finance receivables, net                         980,036          1,026,489
                                                                
Investment in leveraged leases                   34,236           34,546
Goodwill                                         2,115,450        2,136,138
Intangible assets, net                           153,440          166,214
Non-current income taxes                         93,391           94,434
Other assets                                    564,503        563,374    
                                                                
Total assets                                   $ 7,616,106     $ 7,859,891  
                                                                
Liabilities, noncontrolling interests and
stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities       $ 1,586,957      $ 1,809,226
Current income taxes                             207,081          240,681
Notes payable and current portion of long-term   375,000          375,000
obligations
Advance billings                                466,677        452,130    
                                                                
Total current liabilities                        2,635,715        2,877,037
                                                                
Deferred taxes on income                         94,883           69,222
Tax uncertainties and other income tax           144,739          145,881
liabilities
Long-term debt                                   3,657,634        3,642,375
Other non-current liabilities                   713,578        718,375    
                                                                
Total liabilities                               7,246,549      7,452,890  
                                                                
Noncontrolling interests (Preferred              296,370          296,370
stockholders' equity in subsidiaries)
                                                                
Stockholders' equity:
Cumulative preferred stock, $50 par value, 4%    4                4
convertible
Cumulative preference stock, no par value,       648              648
$2.12 convertible
Common stock, $1 par value                       323,338          323,338
Additional paid-in-capital                       203,454          223,847
Retained Earnings                                4,736,961        4,744,802
Accumulated other comprehensive loss             (711,974   )     (681,213   )
Treasury Stock, at cost                         (4,479,244 )    (4,500,795 )
                                                                
Total Pitney Bowes Inc. stockholders' equity    73,187         110,631    
                                                                
Total liabilities, noncontrolling interests    $ 7,616,106     $ 7,859,891  
and stockholders' equity

 
    Pitney Bowes Inc.
    Revenue and EBIT
    Business Segments
    March 31, 2013

    (Unaudited)
    
(Dollars in thousands)                Three Months Ended March 31,
                                        2013           2012           %
                                                                        Change
    Revenue
                                                                        
    North America Mailing               $ 430,375       $ 461,305       (7  %)
    International Mailing                167,455       168,014      (0  %)
    Small & Medium Business              597,830       629,319      (5  %)
    Solutions
                                                                        
    Production Mail                       118,802         115,016       3   %
    Software                              80,721          100,327       (20 %)
    Management Services                   225,256         230,630       (2  %)
    Mail Services                         118,855         114,636       4   %
    Marketing Services                   25,492        30,208       (16 %)
    Enterprise Business Solutions        569,126       590,817      (4  %)
                                                                        
    Total Revenue                       $ 1,166,956    $ 1,220,136    (4  %)
                                                                        
    EBIT (1)
                                                                        
    North America Mailing               $ 154,505       $ 178,171       (13 %)
    International Mailing                17,749        19,997       (11 %)
    Small & Medium Business              172,254       198,168      (13 %)
    Solutions
                                                                        
    Production Mail                       3,055           2,779         10  %
    Software                              4,890           10,692        (54 %)
    Management Services                   12,545          13,315        (6  %)
    Mail Services                         19,349          34,245        (43 %)
    Marketing Services                   1,986         4,817        (59 %)
    Enterprise Business Solutions        41,825        65,848       (36 %)
                                                                        
    Total EBIT                          $ 214,079       $ 264,016       (19 %)
                                                                        
    Unallocated amounts:
    Interest, net                         (48,866   )     (48,773   )
    Corporate and other expenses         (63,502   )    (54,214   )
                                                                        
    Income from continuing              $ 101,711      $ 161,029   
    operations before income taxes
                                                                        

(1)  Earnings before interest and taxes (EBIT) excludes general corporate
      expenses.
(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 March 31,
                                                2013            2012
                                                                 
GAAP income from continuing operations          $  69,568        $ 140,942
after income taxes, as reported
Extinguishment of debt                             15,325          -
Sale of leveraged lease assets                    -             (12,886 )
Income from continuing operations               $  84,893       $ 128,056 
after income taxes, as adjusted
                                                                 
                                                                 
GAAP diluted earnings per share from            $  0.34          $ 0.70
continuing operations, as reported
Extinguishment of debt                             0.08            -
Sale of leveraged lease                           -             (0.06   )
Diluted earnings per share from continuing      $  0.42         $ 0.64    
operations, as adjusted
                                                                 
                                                                 
GAAP net cash provided by operating activities, $  132,160       $ 71,380
as reported
Capital expenditures                               (38,839  )      (50,029 )
Restructuring payments                             16,275          26,245
Extinguishment of debt                             25,121          -
Pension contribution                               -               95,000
Tax payments on sale of leveraged lease assets     -               69,233
Reserve account deposits                          (27,327  )     (25,674 )
                                                                 
Free cash flow, as adjusted                     $  107,390      $ 186,155 
                                                                           

NOTE:

The sum of the earnings per share amounts may not equal the totals above due
to rounding.

The above table includes an adjustment to GAAP net cash provided by operating
activities due to a

reclassification between net cash provided by operating activities and net
cash used in investing activities.

As a result, GAAP net cash provided by operating activities decreased by $24.6
million for the three months

ended March 31, 2012.



Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)

(Dollars in thousands, except per share data)

                                               Three Months Ended March 31,
                                               2013          2012

GAAP income from continuing operations         $  69,568      $  140,942
after income taxes, as reported
Extinguishment of debt                            15,325         -
Sale of leveraged lease assets                   -             (12,886  )
Income from continuing operations                 84,893         128,056
after income taxes, as adjusted
Provision for income taxes, as adjusted           37,345         32,194
Preferred stock dividends of subsidiaries        4,594         4,594    
attributable to noncontrolling interests
Income from continuing operations, as adjusted    126,832        164,844
Interest expense, net                            48,866        48,773   
Adjusted EBIT                                     175,698        213,617
Depreciation and amortization                    57,227        64,370   
Adjusted EBITDA                                $  232,925     $  277,987  

Contact:

Pitney Bowes Inc.
Editorial
Sheryl Y. Battles, 203-351-6808
VP, Corp. Communications
or
Financial
Charles F. McBride, 203-351-6349
VP, Investor Relations
Website – www.pitneybowes.com
 
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