Pitney Bowes Announces Third Quarter 2014 Results

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 its expected or potential future business and financial performance. For us forward-looking statements include, but are not limited to, statements about its 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; the implementation of a new enterprise resource planning system; changes in business portfolio; 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 its control as more fully outlined in the Company's 2013 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 and nine months ended September 30, 2014 and 2013, and consolidated balance sheets at September 30, 2014 and December 31, 2013 are attached.

       

Pitney Bowes Inc.

Consolidated Statements of Income

(Unaudited)

 

(Dollars in thousands, except per share data)

Three months ended September 30, Nine months ended September 30,
  2014     2013     2014     2013  

Revenue:

Equipment sales $ 177,458 $ 197,044 $ 558,032 $ 619,035
Supplies 72,548 68,692 228,349 213,185
Software 112,271 98,164 312,891 285,658
Rentals 119,047 125,918 365,069 384,436
Financing 107,835 111,032 325,529 337,739
Support services 154,321 159,508 470,763 482,400
Business services   198,164     160,131     576,958     458,061  
 
Total revenue   941,644     920,489     2,837,591     2,780,514  
 

Costs and expenses:

Cost of equipment sales 90,984 88,945 262,336 295,567
Cost of supplies 22,470 21,444 70,129 66,536
Cost of software 29,775 29,698 93,423 80,093
Cost of rentals 23,636 24,434 74,273 75,946
Financing interest expense 19,667 19,468 59,733 57,438
Cost of support services 92,500 98,425 288,203 300,291
Cost of business services 142,512 112,447 406,472 322,970
Selling, general and administrative 341,738 352,299 1,031,497 1,057,876
Research and development 26,060 24,769 80,901 81,351
Restructuring charges & asset impairments 4,526 34,909 22,666 53,940
Other interest expense 23,370 27,508 71,001 89,594
Interest income (1,212 ) (1,457 ) (3,297 ) (4,507 )
Other (income) expense, net   (15,919 )   -     45,738     25,121  
 
Total costs and expenses   800,107     832,889     2,503,075     2,502,216  
 

Income from continuing operations before income taxes

141,537 87,600 334,516 278,298
 

Provision for income taxes

  25,310     10,032     79,681     52,045  
 

Income from continuing operations

116,227 77,568 254,835 226,253
 

Income (loss) from discontinued operations, net of tax

  20,655     (78,501 )   30,173     (159,725 )
 

Net income (loss) before attribution of noncontrolling interests

136,882 (933 ) 285,008 66,528
 

Less: Preferred stock dividends of subsidiaries attributable

to noncontrolling interests

  4,593     4,594     13,781     13,782  
 

Net income (loss) - Pitney Bowes Inc.

$ 132,289   $ (5,527 ) $ 271,227   $ 52,746  
 
 

Amounts attributable to common stockholders:

Income from continuing operations $ 111,634 $ 72,974 $ 241,054 $ 212,471
Income (loss) from discontinued operations   20,655     (78,501 )   30,173     (159,725 )
 
Net income (loss) - Pitney Bowes Inc. $ 132,289   $ (5,527 ) $ 271,227   $ 52,746  
 

Basic earnings per share attributable to common stockholders (1) :

Continuing operations 0.55 0.36 1.19 1.05
Discontinued operations   0.10     (0.39 )   0.15     (0.79 )
 
Net income (loss) - Pitney Bowes Inc. $ 0.65   $ (0.03 ) $ 1.34   $ 0.26  
 

Diluted earnings per share attributable to common stockholders (1) :

Continuing operations 0.55 0.36 1.18 1.05
Discontinued operations   0.10     (0.39 )   0.15     (0.79 )
 
Net income (loss) - Pitney Bowes Inc. $ 0.65   $ (0.03 ) $ 1.33   $ 0.26  
 
(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)

   

Assets

September 30,
2014

December 31,
2013 (1)

Current assets:
Cash and cash equivalents $ 923,676 $ 907,806
Short-term investments 35,348 31,128
 
Accounts receivable, gross 412,702 482,949
Allowance for doubtful accounts receivable   (13,651 )   (13,149 )
Accounts receivable, net 399,051 469,800
 
Finance receivables 1,040,156 1,127,261
Allowance for credit losses   (21,914 )   (24,340 )
Finance receivables, net 1,018,242 1,102,921
 
Inventories 94,879 103,580
Current income taxes 29,815 28,934
Other current assets and prepayments 135,973 147,067
Assets held for sale   55,118     46,976  
 
Total current assets 2,692,102 2,838,212
 
Property, plant and equipment, net 266,520 245,171
Rental property and equipment, net 206,394 226,146
 
Finance receivables 839,912 974,972
Allowance for credit losses   (9,323 )   (12,609 )
Finance receivables, net 830,589 962,363
 
Investment in leveraged leases 32,465 34,410
Goodwill 1,694,987 1,734,871
Intangible assets, net 91,797 120,387
Non-current income taxes 65,092 73,751
Other assets   544,091     537,397  
 
Total assets $ 6,424,037   $ 6,772,708  
 

Liabilities, noncontrolling interests and stockholders' equity

Current liabilities:
Accounts payable and accrued liabilities $ 1,428,690 $ 1,644,582
Current income taxes 153,809 157,340
Notes payable and current portion of long-term obligations 274,879 -
Advance billings   399,016     425,833  
 
Total current liabilities 2,256,394 2,227,755
 
Deferred taxes on income 57,830 39,701
Tax uncertainties and other income tax liabilities 148,119 190,645
Long-term debt 2,962,997 3,346,295
Other non-current liabilities   423,981     466,766  
 
Total liabilities   5,849,321     6,271,162  
 
Noncontrolling interests (Preferred stockholders' equity in subsidiaries) 296,370 296,370
 
Stockholders' equity:
Cumulative preferred stock, $50 par value, 4% convertible 1 4
Cumulative preference stock, no par value, $2.12 convertible 559 591
Common stock, $1 par value 323,338 323,338
Additional paid-in-capital 174,783 196,977
Retained earnings 4,872,875 4,715,564
Accumulated other comprehensive loss (614,741 ) (574,556 )
Treasury stock, at cost   (4,478,469 )   (4,456,742 )
 
Total Pitney Bowes Inc. stockholders' equity   278,346     205,176  
 
Total liabilities, noncontrolling interests and stockholders' equity $ 6,424,037   $ 6,772,708  
(1)   Certain prior year amounts have been revised.
  Pitney Bowes Inc.
Revenue and EBIT
Business Segments
September 30, 2014

(Unaudited)

     

(Dollars in thousands)

Three Months Ended September 30,
%
  2014     2013   Change

Revenue

 
North America Mailing $ 363,285 $ 381,685 (5 %)
International Mailing   132,291     141,332   (6 %)
Small & Medium Business Solutions   495,576     523,017   (5 %)
 
Production Mail 113,497 116,477 (3 %)
Presort Services   111,434     105,093   6 %
Enterprise Business Solutions   224,931     221,570   2 %
 
Digital Commerce Solutions   221,137     175,902   26 %
 
Total revenue $ 941,644   $ 920,489   2 %
 

EBIT (1)

 
North America Mailing $ 159,638 $ 158,692 1 %
International Mailing   16,079     15,627   3 %
Small & Medium Business Solutions   175,717     174,319   1 %
 
Production Mail 9,570 10,620 (10 %)
Presort Services   21,927     20,398   7 %
Enterprise Business Solutions   31,497     31,018   2 %
 
Digital Commerce Solutions   24,534     12,885   90 %
 
Total EBIT $ 231,748 $ 218,222 6 %
 
Unallocated amounts:
Interest, net (2) (41,825 ) (45,519 )
Corporate and other expenses (59,779 ) (50,194 )
Restructuring charges & asset impairments (4,526 ) (34,909 )
Other income, net   15,919     -  
 
Income from continuing operations before income taxes $ 141,537   $ 87,600  
(1)   Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges & asset impairments.
(2) Interest, net includes financing interest expense, other interest expense and interest income.
 
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
September 30, 2014
(Unaudited)
     
(Dollars in thousands) Nine Months Ended September 30,
%
  2014     2013   Change

Revenue

 
North America Mailing $ 1,115,507 $ 1,162,718 (4 %)
International Mailing   438,819     444,665   (1 %)
Small & Medium Business Solutions   1,554,326     1,607,383   (3 %)
 
Production Mail 330,469 360,352 (8 %)
Presort Services   339,205     322,954   5 %
Enterprise Business Solutions   669,674     683,306   (2 %)
 
Digital Commerce Solutions   613,591     489,825   25 %
 
Total revenue $ 2,837,591   $ 2,780,514   2 %
 

EBIT (1)

 
North America Mailing $ 476,757 $ 464,668 3 %
International Mailing   67,347     53,092   27 %
Small & Medium Business Solutions   544,104     517,760   5 %
 
Production Mail 27,865 34,239 (19 %)
Presort Services   68,235     65,132   5 %
Enterprise Business Solutions   96,100     99,371   (3 %)
 
Digital Commerce Solutions   51,994     27,969   86 %
 
Total EBIT $ 692,198 $ 645,100 7 %
 
Unallocated amounts:
Interest, net (2) (127,437 ) (142,525 )
Corporate and other expenses (161,841 ) (145,216 )
Restructuring charges & asset impairments (22,666 ) (53,940 )
Other expense, net   (45,738 )   (25,121 )
 
Income from continuing operations before income taxes $ 334,516   $ 278,298  
 
(1)   Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges & asset impairments.
(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 September 30,

Nine Months Ended September 30,

  2014     2013     2014     2013  
 
GAAP income from continuing operations
after income taxes, as reported $ 111,634 $ 72,974 $ 241,054 $ 212,471
Restructuring charges & asset impairments 2,903 22,536 15,161 35,662
Extinguishment of debt - - 37,833 15,324
Investment divestiture (9,774 ) - (9,774 ) -
Income from continuing operations        
after income taxes, as adjusted $ 104,763   $ 95,510   $ 284,274   $ 263,457  
 
 
GAAP diluted earnings per share from
continuing operations, as reported $ 0.55 $ 0.36 $ 1.18 $ 1.05
Restructuring charges & asset impairments 0.01 0.11 0.07 0.18
Extinguishment of debt - - 0.19 0.08
Investment divestiture   (0.05 )   -     (0.05 )   -  
Diluted earnings per share from continuing
operations, as adjusted $ 0.51   $ 0.47   $ 1.39   $ 1.30  
 
 
GAAP net cash provided by operating activities,
as reported $ 116,985 $ 214,526 $ 397,432 $ 493,560
Capital expenditures (48,920 ) (29,951 ) (121,270 ) (103,392 )
Restructuring payments 8,621 14,098 42,151 41,353
Payments related to investment divestiture 53,738 - 53,738 -
Reserve account deposits (12,563 ) 9,227 (15,919 ) (16,962 )
Extinguishment of debt - - 61,657 25,121
       
Free cash flow, as adjusted $ 117,861   $ 207,900   $ 417,789   $ 439,680  
 

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