Pitney Bowes Announces Second Quarter Results for 2012

[ Back ] [ More News ] [ Home ]

STAMFORD, Conn. — (BUSINESS WIRE) — August 2, 2012 — Pitney Bowes Inc. (NYSE: PBI) today reported second quarter 2012 results.

Revenue for the quarter was $1.2 billion, a decline of 5 percent when compared to the prior year. Excluding the impacts of currency, revenue declined 3 percent and benefited from growth in the International Mailing, Software and Mail Services segments. The Small and Medium Business Solutions (SMB) segment’s revenue streams continued to decline. Though the Production Mail and Management Services segments also experienced revenue declines, both saw improving revenue comparisons against the prior quarter on a constant currency basis.

Earnings per diluted share for the quarter, on a Generally Accepted Accounting Principles (GAAP) basis, were $0.50 versus $0.49 per diluted share for the prior year. Earnings per diluted share for the quarter includes a reduction of $0.03 per diluted share for costs associated with debt management, including the early redemption of $400 million of bonds originally scheduled to mature later this year.

Free cash flow for the quarter was $301 million, while on a GAAP basis, the company generated $274 million in cash from operations. In comparison to prior year, free cash flow was favorably impacted primarily by the timing of working capital payments. During the quarter the company used $84 million of cash for dividends and reduced debt by $578 million. The company did not repurchase any of its shares this quarter.

Commenting on the quarter, Chairman, President and CEO Murray D. Martin said, “During the quarter, excluding the impact of changes in currency, Software and Mail Services revenue grew. Additionally within our SMB business, International Mailing revenue grew year-over-year.

“There are drivers, particularly in the Enterprise group, that we anticipate will moderate year-over-year revenue declines in the second half of the year, as compared with the first half of the year. These drivers include expansion of ecommerce and direct mail opportunities in Mail Services, new print outsourcing services provided by Management Services and increased backlog of equipment orders for Production Mail. During the quarter, we signed a strategic partnership with ORION Holdings to provide print management services that create sustainable cost savings and increased value for the global network of Interpublic Group’s agencies and clients.

“We also continue to invest in our digital based communications services and we have now signed more than 50 large third-party mail service providers who will offer the Volly™ secure digital mail service to more than 6,000 companies and consumer brands.

“During the quarter we continued to enhance our operational efficiency and invest in growth opportunities. We also strengthened our balance sheet through the early redemption of $400 million of debt.”

Business Segment Results

The company reports its business segments in two groups based on the customers it primarily serves: Small and Medium Business (SMB) Solutions and Enterprise Business Solutions. The SMB Solutions group consists of the company’s global Mailing operations. The company aligns its SMB business segments into North America Mailing and International Mailing to reflect how the business is managed. North America Mailing includes the operations of U.S. and Canada Mailing. International Mailing includes all other SMB operations around the world. The Enterprise Business Solutions group includes the company’s global Production Mail, Software, Management Services, Mail Services and Marketing Services operations.

SMB Solutions
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$619 million	(8%)	(5%)
EBIT	$190 million	(6%)

Within the SMB Solutions Group:

North America Mailing
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$453 million	(8%)	(8%)
EBIT	$168 million	(5%)

During the quarter, the North America Mailing segment continued to increase placements of the Connect+™ mailing system, as well as improved retention rates among existing customers. Revenue was adversely impacted by lower rentals and financing revenue as a result of lower equipment sales in prior periods; however, rentals revenue declined at a slower rate than it did 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 improved by 140 basis points versus the prior year, which was the eighth consecutive quarter of year-over-year improvement due to ongoing productivity initiatives.

International Mailing
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$165 million	(6%)	1%
EBIT	$22 million	(19%)

International Mailing revenue increased one percent, which is its third consecutive quarter of constant currency growth. Revenue benefited from increased equipment sales and supplies revenue. The company began selling its innovative Connect+ product line in Germany during the quarter and Connect+ was approved for placement in France beginning in the third quarter. Meter populations in Europe were flat year-over-year and are growing in the emerging markets. EBIT margin declined year-over-year due to impacts of currency and the mix of business.

Enterprise Business Solutions
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$627 million	(3%)	(1%)
EBIT	$61 million	11%

Within the Enterprise Business Solutions Group:

Worldwide Production Mail
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$123 million	(8%)	(5%)
EBIT	$6 million	(39%)

Revenue during the quarter was adversely impacted by a low backlog heading into the quarter and some large enterprise customers continued to prolong their capital investment decisions. However, the business experienced an increase in the backlog of orders at the end of the quarter, which in part was a result of new products and the quadrennial Drupa industry trade show held in May. This is expected to improve performance in the second half of the year as compared to the first half of the year.

EBIT margin this quarter declined year-over-year due to lower revenue and increased investment in Volly. The company expects continued investment in Volly in the second half of the year as this solution approaches market launch in both Australia and the U.S. Excluding the investment in Volly, EBIT margin would have been approximately 460 basis points higher this quarter.

Software
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$100 million	0%	3%
EBIT	$8 million	(11%)

During the quarter, the Software segment continued to experience good demand across its portfolio of software solutions, especially in the Americas. However, the company experienced lower sales in Europe, particularly in the public sector. Overall, the Software EBIT margin declined versus the prior year because of product mix and channel investments to expand its global solutions sales capability.

Management Services
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$228 million	(5%)	(3%)
EBIT	$13 million	(37%)

Management Services in North America experienced moderating revenue declines and had significant year-over-year improvement in net new written business for the second consecutive quarter. The improvement in net new written business and new strategic partnerships in print outsourcing are expected to drive revenue growth going forward. However, revenue for the quarter declined primarily due to account contractions and lower volumes in Europe as a result of the weak economic environment there. EBIT margin declined versus the prior year due to lower revenue and price compression.

Mail Services
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$141 million	5%	5%
EBIT	$27 million	176%

Mail Services revenue grew versus the prior year as a result of increased standard mail volumes and recovery from the impact that the fire at the Dallas presort facility had on 2011 results. Continued penetration in all of the workshare discount categories also helped drive revenue growth for presort operations. International Mail Services experienced lower revenue versus the prior year due to fewer catalogue shipments. EBIT margin benefited from ongoing productivity initiatives and streamlined operations in the International Mail Services portion of the business. EBIT margin also benefited from a final insurance reimbursement of $4 million that the company received related to the fire at its Dallas presort facility last year.

Marketing Services
	2Q 2012	Y-O-Y Change	Change ex Currency
Revenue	$36 million	(1%)	(1%)
EBIT	$8 million	10%

Marketing Services EBIT benefited from reduced print production costs and ongoing productivity initiatives.

2012 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.

The company is updating its 2012 annual guidance to reflect results year-to-date and weaker than originally anticipated business conditions in the second half of the year due, in part, to prolonged global economic uncertainty, especially in Europe. The company’s original earnings per share guidance also did not anticipate the significant changes in currencies that have occurred this year.

Year-to-date the company’s revenue, excluding currency, declined 4 percent and adjusted earnings per diluted share were $1.02, which excludes the $0.11 per share tax benefit in the first quarter. Based on results to date and expectations for the second half of the year, the company now anticipates 2012 revenue, excluding the impacts of currency, to be in a range of flat to a decline of 4 percent when compared to 2011. This guidance assumes moderating revenue declines for the second half of the year.

Additionally, the company expects adjusted earnings per diluted share from continuing operations for 2012 to be in the range of $1.95 to $2.15 and GAAP earnings per diluted share from continuing operations to be in the range of $2.12 to $2.32. The updated earnings per share guidance reflects an adverse impact of $0.04 to $0.06 per share based on current foreign exchange rates. GAAP earnings per diluted share include $0.11 per share of net tax benefits and $0.06 per share from the sale of leveraged lease assets in Canada, both of which occurred in the first quarter of the year.

Based on its strong cash flow performance year to date, the company is increasing its annual free cash flow range by $50 million and now expects it to be in the range of $750 million to $850 million.

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/investorrelations.

Pitney Bowes is a $5.3 billion global leader whose products, services and solutions deliver value within the mailstream and beyond. For more information visit www.pitneybowes.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 six months ended June 30, 2012 and 2011, and consolidated balance sheets at June 30, 2012 and March 31, 2012 are attached.


Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)

(Dollars in thousands, except per share data)
	Three months ended June 30,						Six months ended June 30,
	2012			2011⁽²⁾			2012			2011⁽²⁾
Revenue:
Equipment sales	$	224,235		$	242,921		$	444,414		$	484,552
Supplies		70,522			78,587			146,887			161,457
Software		104,551			105,516			208,901			205,081
Rentals		145,497			156,162			285,886			312,854
Financing		122,948			136,369			249,696			276,958
Support services		171,254			176,807			344,772			355,421
Business services		406,811			418,112			820,918			841,220

Total revenue		1,245,818			1,314,474			2,501,474			2,637,543

Costs and expenses:
Cost of equipment sales		106,718			104,385			203,634			219,138
Cost of supplies		20,863			25,562			44,734			51,754
Cost of software		24,404			24,898			45,497			50,110
Cost of rentals		31,850			36,109			62,075			72,016
Financing interest expense		20,642			22,192			41,781			45,485
Cost of support services		112,122			115,417			227,209			230,693
Cost of business services		313,553			325,250			632,529			658,817
Selling, general and administrative		391,606			432,715			802,791			859,326
Research and development		33,776			37,441			67,849			72,199
Restructuring charges and asset impairments		1,074			4,994			1,074			31,018
Other interest expense		30,353			28,550			59,720			57,074
Interest income		(2,003	)		(2,215	)		(3,736	)		(3,437	)
Other income, net		4,372			-			1,138			-

Total costs and expenses		1,089,330			1,155,298			2,186,295			2,344,193

Income from continuing operations before income taxes		156,488			159,176			315,179			293,350

Provision for income taxes		52,271			53,012			67,030			94,406

Income from continuing operations		104,217			106,164			248,149			198,944

(Loss) income from discontinued operations, net of income tax		-			(635	)		19,332			(2,517	)

Net income before attribution of noncontrolling interests		104,217			105,529			267,481			196,427

Less: Preferred stock dividends of subsidiaries attributable
to noncontrolling interests		4,594			4,594			9,188			9,188

Net income - Pitney Bowes Inc.	$	99,623		$	100,935		$	258,293		$	187,239


Amounts attributable to common stockholders:
Income from continuing operations	$	99,623		$	101,570		$	238,961		$	189,756
Loss (income) from discontinued operations		-			(635	)		19,332			(2,517	)

Net income - Pitney Bowes Inc.	$	99,623		$	100,935		$	258,293		$	187,239

Basic earnings per share attributable to common stockholders ⁽¹⁾:
Continuing operations		0.50			0.50			1.19			0.93
Discontinued operations		-			(0.00	)		0.10			(0.01	)

Net income - Pitney Bowes Inc.	$	0.50		$	0.50		$	1.29		$	0.92

Diluted earnings per share attributable to common stockholders ⁽¹⁾:
Continuing operations		0.50			0.50			1.19			0.93
Discontinued operations		-			(0.00	)		0.10			(0.01	)

Net income - Pitney Bowes Inc.	$	0.50		$	0.49		$	1.29		$	0.92

⁽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	06/30/12			3/31/12
Current assets:
Cash and cash equivalents	$	499,772		$	915,553
Short-term investments		38,549			35,863

Accounts receivable, gross		691,332			725,446
Allowance for doubtful accounts receivable		(30,233	)		(31,117	)
Accounts receivable, net		661,099			694,329

Finance receivables		1,221,086			1,263,826
Allowance for credit losses		(31,781	)		(39,124	)
Finance receivables, net		1,189,305			1,224,702

Inventories		187,562			179,321
Current income taxes		20,107			116,247
Other current assets and prepayments		124,922			128,244
Total current assets		2,721,316			3,294,259

Property, plant and equipment, net		391,651			403,657
Rental property and equipment, net		251,495			261,388

Finance receivables		1,072,641			1,097,093
Allowance for credit losses		(19,960	)		(15,278	)
Finance receivables, net		1,052,681			1,081,815

Investment in leveraged leases		32,725			32,977
Goodwill		2,133,559			2,162,689
Intangible assets, net		188,657			201,891
Non-current income taxes		44,299			85,410
Other assets		528,614			538,172
Total assets	$	7,344,997		$	8,062,258

Liabilities, noncontrolling interests and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities	$	1,701,135		$	1,675,152
Current income taxes		230,242			295,283
Notes payable and current portion of long-term obligations		375,000			577,830
Advance billings		466,926			494,068
Total current liabilities		2,773,303			3,042,333

Deferred taxes on income		30,472			107,175
Tax uncertainties and other income tax liabilities		223,603			198,853
Long-term debt		3,306,473			3,682,798
Other non-current liabilities		633,510			643,686
Total liabilities		6,967,361			7,674,845

Noncontrolling interests (Preferred stockholders' equity in subsidiaries)		296,370			296,370

Stockholders' equity:
Cumulative preferred stock, $50 par value, 4% convertible		4			4
Cumulative preference stock, no par value, $2.12 convertible		653			653
Common stock, $1 par value		323,338			323,338
Additional paid-in-capital		227,136			225,869
Retained Earnings		4,708,485			4,683,949
Accumulated other comprehensive loss		(657,658	)		(617,106	)
Treasury Stock, at cost		(4,520,692	)		(4,525,664	)
Total Pitney Bowes Inc. stockholders' equity		81,266			91,043
Total liabilities, noncontrolling interests and stockholders' equity	$	7,344,997		$	8,062,258


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

(Dollars in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011

GAAP income from continuing operations
after income taxes, as reported	$	99,623		$	101,570		$	238,961		$	189,756
Restructuring charges and asset impairments		462			3,563			462			20,869
Sale of leveraged lease assets		-			-			(12,886	)		-
Tax adjustments		-			334			-			2,513
Income from continuing operations
after income taxes, as adjusted	$	100,085		$	105,467		$	226,537		$	213,138


GAAP diluted earnings per share from
continuing operations, as reported	$	0.50		$	0.50		$	1.19		$	0.93
Restructuring charges and asset impairments		0.00			0.02			0.00			0.10
Sale of leveraged lease		-			-			(0.06	)		-
Tax adjustments		-			0.00			-			0.01
Diluted earnings per share from continuing
operations, as adjusted	$	0.50		$	0.52		$	1.13		$	1.04


GAAP net cash provided by operating activities,
as reported	$	274,172		$	152,640		$	370,167		$	449,401
Capital expenditures		(38,722	)		(53,341	)		(88,751	)		(88,017	)
Restructuring payments		21,630			22,223			47,875			51,968
Pension contribution		-			123,000			95,000			123,000
Tax payments on sale of leveraged lease assets		15,671			-			84,904			-
Reserve account deposits		28,008			24,083			2,334			18,088

Free cash flow, as adjusted	$	300,759		$	268,605		$	511,529		$	554,440

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


Pitney Bowes Inc.
Revenue and EBIT
Business Segments
June 30, 2012
(Unaudited)

(Dollars in thousands)	Three Months Ended June 30,
							%
	2012			2011			Change
Revenue

North America Mailing	$	453,484			493,653		(8	%)
International Mailing		165,480			176,158		(6	%)
Small & Medium Business Solutions		618,964			669,811		(8	%)

Production Mail		123,067			133,769		(8	%)
Software		99,874			99,783		0	%
Management Services		227,561			240,461		(5	%)
Mail Services		140,507			134,273		5	%
Marketing Services		35,845			36,377		(1	%)
Enterprise Business Solutions		626,854			644,663		(3	%)

Total revenue	$	1,245,818			1,314,474		(5	%)

EBIT (1)

North America Mailing	$	167,870		$	175,786		(5	%)
International Mailing		21,758			26,735		(19	%)
Small & Medium Business Solutions		189,628			202,521		(6	%)

Production Mail		5,594			9,223		(39	%)
Software		8,487			9,542		(11	%)
Management Services		12,606			19,979		(37	%)
Mail Services		27,085			9,819		176	%
Marketing Services		7,503			6,792		10	%
Enterprise Business Solutions		61,275			55,355		11	%

Total EBIT	$	250,903		$	257,876		(3	%)

Unallocated amounts:
Interest, net (2)		(48,992	)		(48,527	)
Corporate and other expenses		(44,349	)		(45,179	)
Restructuring and asset impairments		(1,074	)		(4,994	)

Income from continuing operations before income taxes	$	156,488		$	159,176

⁽¹⁾	Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges and asset impairments.
⁽²⁾	Interest, net includes financing interest expense, other interest expense and interest income.


Pitney Bowes Inc.
Revenue and EBIT
Business Segments
June 30, 2012
(Unaudited)

(Dollars in thousands)	Six Months Ended June 30,
							%
	2012			2011			Change
Revenue

North America Mailing	$	914,789			1,002,692		(9	%)
International Mailing		333,494			346,691		(4	%)
Small & Medium Business Solutions		1,248,283			1,349,383		(7	%)

Production Mail		238,083			265,375		(10	%)
Software		200,201			195,768		2	%
Management Services		458,191			482,085		(5	%)
Mail Services		290,663			278,556		4	%
Marketing Services		66,053			66,376		(0	%)
Enterprise Business Solutions		1,253,191			1,288,160		(3	%)

Total Revenue	$	2,501,474			2,637,543		(5	%)

EBIT (1)

North America Mailing	$	346,041		$	355,447		(3	%)
International Mailing		41,755			49,928		(16	%)
Small & Medium Business Solutions		387,796			405,375		(4	%)

Production Mail		8,373			16,397		(49	%)
Software		19,179			15,054		27	%
Management Services		25,921			41,008		(37	%)
Mail Services		58,990			20,084		194	%
Marketing Services		12,320			10,952		12	%
Enterprise Business Solutions		124,783			103,495		21	%

Total EBIT	$	512,579		$	508,870		(1	%)

Unallocated amounts:
Interest, net		(97,765	)		(99,122	)
Corporate and other expenses		(98,561	)		(85,380	)
Restructuring and asset impairments		(1,074	)		(31,018	)

Income from continuing operations before income taxes	$	315,179		$	293,350

⁽¹⁾	Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges and asset impairments.
⁽²⁾	Interest, net includes financing interest expense, other interest expense and interest income.

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