United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8 - K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 26, 2004
PITNEY BOWES INC.
Commission File Number: 1-3579
State of Incorporation IRS Employer Identification No.
Delaware 06-0495050
World Headquarters
Stamford, Connecticut 06926-0700
Telephone Number: (203) 356-5000
Item 9 - Regulation FD Disclosure
The following information is furnished pursuant to Item 9, "Regulation FD
Disclosure" and Item 12, "Disclosure of Results of Operations and Financial
Condition."
On July 26, 2004, the registrant issued a press release setting forth its
financial results, including consolidated statements of income, selected segment
data, and a reconciliation of GAAP results to adjusted results for the three and
six months ended June 30, 2004 and 2003, and consolidated balance sheets at June
30, 2004, March 31, 2004 and June 30, 2003. A copy of its press release is
attached hereto as Exhibit 99.1 and hereby incorporated by reference.
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PITNEY BOWES INC.
July 26, 2004
/s/ B. P. Nolop
-------------------------------
B. P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ J. R. Catapano
-------------------------------
J. R. Catapano
Controller
(Principal Accounting Officer)
Index to Exhibit
Exhibit Description
------- ----------------------------------
99.1 Press release, dated July 26, 2004.
Exhibit 99.1
------------
PITNEY BOWES RESULTS ON TARGET FOR SECOND QUARTER 2004
------------------------------------------------------
o Revenue Growth of 6%
o GAAP Earnings per Share Growth of 14%
> Adjusted Earnings per Share Growth of 5%
o Cash from Operations of $239 Million
o Acquisition of Group 1 Completed in July
STAMFORD, Conn., July 26, 2004 - Pitney Bowes Inc. (NYSE: PBI) today announced
second quarter 2004 revenue and earnings performance in line with previous
guidance. Commenting on the quarter, Chairman and CEO Michael J. Critelli said,
"We are pleased that our financial performance was on target during the quarter.
The quarter's results included good market acceptance of new products by small
and mid-size, international, and document messaging technologies customers and
ongoing integration of acquisitions such as DDD Company and International Mail
Express. This is consistent with our plan to grow by enhancing the core
businesses and expanding our market presence through strategic acquisitions. The
acquisition of Group 1 Software, which was completed last week, is the latest
example of our strategy to grow our share of the $250 billion global mail and
document management markets. This acquisition will help us expand our global
reach; grow our mailstream participation; and lay the foundation for profitable
expansion into the customer communication market."
(1)
Revenue for the quarter grew six percent to $1.21 billion and net
income was $134.7 million or $.58 per diluted share, representing a 14 percent
increase compared to the previous year. Diluted earnings per share, excluding a
charge for the company's restructuring program, were $.62. During the quarter,
the company took several actions as part of its previously announced
restructuring program and recorded an after-tax charge of $10 million or $.04
per diluted share. Excluding this charge, net income was $145.1 million.
Consistent with the company's strategy to transition out of external financing
activity, non-core Capital Services contributed $.03 per diluted share this
quarter compared to $.04 per diluted share in the second quarter of 2003.
The company generated $239 million in cash from operations during the
quarter. Subtracting $72 million in capital expenditures and excluding $14
million in payments associated with restructuring initiatives, free cash flow
was $180 million. In addition, the company generated approximately $31 million
in cash from the sale of non-core Capital Services assets. During the quarter
the company repurchased approximately 892,000 of its shares for $39 million,
leaving $265 million of authorization for future share repurchases.
In the Global Mailstream Solutions Segment revenue increased five
percent and earnings before interest and taxes (EBIT) increased four percent
during the quarter. Revenue was characterized by continued strong growth in
small business solutions and double-digit growth in supplies and presort mail
services. The company has recently introduced a program to offer presort
services to a broader range of its customers. The quarter's revenue trends also
reflect the ongoing changing mix of the product line, where a greater percentage
of the revenue is coming from more fully featured smaller systems, supplies,
payment solutions, software and services and less from larger systems sales.
Non-U.S. operations again experienced good organic revenue growth and
also benefited from favorable foreign currency exchange rates, although to a
lesser extent than in the first quarter of the year. Overall, the introduction
of new digital mailing systems continues to be well received by customers
worldwide. All of the major markets in Asia and Europe had positive revenue
growth in the quarter, including Germany, which has experienced improving
business trends.
In the Global Enterprise Solutions Segment revenue grew seven percent
and EBIT increased 15 percent during the quarter.
(2)
Pitney Bowes Management Services (PBMS) reported revenue of $264
million, a five- percent increase compared to the prior year, with improved
margins on a sequential basis. PBMS continued its process of identifying and
delivering focused document management solutions to customers on a
cost-effective basis. There appeared to be improving demand during the quarter
for document management services in several key vertical markets, including the
government, legal and financial markets.
Document Messaging Technologies (DMT) reported revenue growth of 15
percent to $70 million for the quarter, with improved margins over the prior
year. DMT benefited from the large backlog of orders generated in previous
quarters, in addition to the ongoing customer demand for the company's industry
leading inserting systems, such as APSTM and FlowmasterTM inserters. There was
also strong growth during the quarter in software solutions offerings.
In the Capital Services Segment, revenue increased 35 percent and EBIT
increased one percent. Revenue and EBIT for the quarter were favorably affected
by the sale of non-core assets. Excluding these asset sales, Capital Services
revenue would have declined six percent and EBIT would have declined eight
percent compared to prior year.
Including the recently completed acquisition of Group 1, the company
expects year-over-year revenue growth for the third quarter 2004 to be in the
range of seven to nine percent and for the full year 2004 to be in the range of
six to seven percent. As previously announced, over the remainder of this year
the company expects to incur additional restructuring charges. The company is
still finalizing plans related to future restructuring actions, a portion of
which will be recorded in the third and fourth quarters. Therefore, earnings
guidance is provided excluding the impact of these future charges, which have
not yet been determined. The company expects diluted earnings per share to be in
the range of $.62 to $.64 for the third quarter 2004 and reaffirms its full-year
diluted earnings per share range of $2.44 to $2.51.
In year-over-year comparisons, second quarter 2004 revenue included
$338.4 million from sales of equipment and supplies, up three percent versus the
prior year; $200.6 million from rentals, up four percent; $158.6 million from
core financing, up four percent; $40.7 million from non-core financing, up 48
percent; $307.6 million from business services, up ten percent; and $159.9
million from support services, up five percent.
(3)
For the six-month period ended June 30, 2004, revenue was $2.38
billion, up seven percent compared to 2003. Included in revenue was $669.8
million from sales of equipment and supplies, up eight percent; $402.1 million
from rentals, up three percent; $317.0 million from core financing, up four
percent; $60.2 million from non-core financing, up four percent; $608.3 million
from business services, up ten percent; and $320.4 million from support
services, up six percent. Net income for the period was $261.3 million or $1.11
per diluted share up 13 percent compared to 2003. Included in net income for the
period was $31.3 million in pre-tax restructuring charges. Excluding the after
tax impact of these charges, net income was $281.3 million and diluted earnings
per share were $1.20, an increase of six percent versus the prior year.
Management of Pitney Bowes will discuss the company's financial results
in a conference call today scheduled for 5:00 p.m. EDT. Instructions for
listening to the conference call over the WEB are available on the Investor
Relations page of the company's web site at www.pb.com/investorrelations.
----------------------------
Pitney Bowes engineers the flow of communication. The company is a $4.6
billion global leader of integrated mail and document management solutions
headquartered in Stamford, Connecticut. For more information about the company,
its products, services and solutions, visit www.pitneybowes.com.
-------------------
Pitney Bowes has presented in this earnings release net income and
diluted earnings per share on an adjusted basis. Also, management has included a
presentation of free cash flow on an adjusted basis.
Management believes this presentation provides a reasonable basis on
which to present the adjusted financial information, and is provided to assist
in investors' understanding of the Company's results of operations. In general,
results are adjusted to exclude the impact of special items such as
restructuring charges and write downs of assets, which materially impact the
comparability of the Company's results of operations. The adjusted financial
information is intended to be more indicative of the ongoing operations and
economic results of the Company.
This adjusted financial information should not be construed as an
alternative to our reported results determined in accordance with generally
accepted accounting principles (GAAP). Further, our definition of this adjusted
financial information may differ from similarly titled measures used by other
companies.
Pitney Bowes has provided in supplemental schedules attached for
reference adjusted financial information and a quantitative reconciliation of
the differences between the adjusted financial measures with the financial
measures calculated and presented in accordance with GAAP, except with respect
to our guidance because it would not be meaningful.
(4)
Additional reconciliation of adjusted financial measures to financial
measures calculated and presented in accordance with GAAP may be found at
the Company's web site in the Investor Relations section at
www.pb.com/investorrelations.
----------------------------
The statements contained in this news release that are not purely
historical are forward-looking statements with the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements may be identified by their use of forward-looking terminology
such as the words "expects," "anticipates," "intends" and other similar words.
Such forward-looking statements include, but are not limited to, statements
about possible restructuring charges and our future guidance, including our
expected revenue in the third quarter and full year 2004, and our expected
diluted earnings per share for the third quarter and for the full year 2004.
Such forward-looking statements 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: severe adverse changes in the
economic environment, timely development and acceptance of new products or
gaining product approval; successful entry into new markets; changes in interest
rates; and changes in postal regulations, as more fully outlined in the
company's 2003 Form 10-K Annual Report filed with the Securities and Exchange
Commission. In addition, the forward-looking statements are subject to change
based on the timing and specific terms of any announced acquisitions. The
forward-looking statements contained in this news release are made as of the
date hereof and we do not assume any obligation to update the reasons why actual
results could differ materially from those projected in the forward-looking
statements.
================================================================================
Note: Consolidated statements of income for the three and six months ended June
30, 2004 and 2003, and consolidated balance sheets at June 30, 2004, March 31,
2004, and June 30, 2003, are attached.
(5)
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,
------------------------------ ---------------------------
2004 2003 (1) 2004 2003 (1)
--------------- ---------- ----------- ----------
Revenue from:
Sales $ 338,442 $ 327,804 $ 669,802 $ 618,654
Rentals 200,635 193,693 402,073 389,981
Business services 307,576 279,300 608,281 551,920
Support services 159,946 152,791 320,445 301,712
Core financing 158,627 152,888 317,016 304,557
Non-core financing 40,675 27,402 60,206 57,863
--------------- ----------- ----------- ----------
Total revenue 1,205,901 1,133,878 2,377,823 2,224,687
--------------- ----------- ----------- ----------
Costs and expenses:
Cost of sales 151,918 147,549 311,293 287,476
Cost of rentals 43,077 43,643 84,777 85,108
Cost of business services 252,690 229,529 498,582 452,322
Cost of support services 85,114 80,863 170,737 159,162
Cost of non-core financing 13,017 - 13,017 -
Selling, general and administrative 365,322 348,049 727,050 689,802
Research and development 38,930 39,008 74,934 74,759
Restructuring charge 16,229 32,091 31,272 53,356
Interest, net 41,656 40,178 82,192 83,459
--------------- ----------- ----------- ----------
Total costs and expenses 1,007,953 960,910 1,993,854 1,885,444
--------------- ----------- ----------- ----------
Income before income taxes 197,948 172,968 383,969 339,243
Provision for income taxes 63,230 54,072 122,657 106,444
--------------- ----------- ----------- ----------
Net income $ 134,718 $ 118,896 $ 261,312 $ 232,799
=============== =========== =========== ===========
Basic earnings per share $ 0.58 $ 0.51 $ 1.13 $ 0.99
=============== =========== =========== ===========
Diluted earnings per share $ 0.58 $ 0.50 $ 1.11 $ 0.98
=============== =========== =========== ===========
Average common and potential common
shares outstanding 234,122,702 236,136,087 234,521,468 236,421,147
=============== =========== =========== ===========
(1) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
-----------
(Dollars in thousands, except per share data)
Assets 6/30/04 3/31/04 6/30/03
------ ------------ ------------- -------------
Current assets:
Cash and cash equivalents $ 328,282 $ 298,711 $ 358,167
Short-term investments, at cost which
approximates market 1,951 2,180 7,464
Accounts receivable, less allowances:
6/04 $38,096 3/04 $41,165 6/03 $37,560 480,314 478,905 417,157
Finance receivables, less allowances:
6/04 $69,449 3/04 $69,160 6/03 $65,939 1,339,262 1,374,784 1,388,248
Inventories 207,950 215,036 231,425
Other current assets and prepayments 198,011 204,487 192,679
------------- ------------- -------------
Total current assets 2,555,770 2,574,103 2,595,140
------------- ------------- -------------
Property, plant and equipment, net 662,011 667,887 647,682
Rental equipment and related inventories, net 453,855 480,520 426,996
Property leased under capital leases, net 2,176 2,171 2,245
Long-term finance receivables, less allowances:
6/04 $111,111 3/04 $106,027 6/03 $77,131 1,799,073 1,819,967 1,637,674
Investment in leveraged leases 1,541,186 1,534,570 1,542,640
Goodwill 1,003,002 995,029 911,347
Intangible assets, net 208,611 206,145 192,119
Other assets 856,682 901,540 916,477
------------- ------------- -------------
Total assets $ 9,082,366 $ 9,181,932 $ 8,872,320
============= ============= =============
Liabilities and stockholders' equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,312,469 $ 1,350,379 $ 1,319,719
Income taxes payable 187,838 191,296 170,863
Notes payable and current portion of
long-term obligations 1,151,359 995,156 582,203
Advance billings 383,856 398,129 373,697
------------- ------------- -------------
Total current liabilities 3,035,522 2,934,960 2,446,482
------------- ------------- -------------
Deferred taxes on income 1,715,412 1,686,223 1,556,269
Long-term debt 2,463,928 2,691,094 3,240,110
Other noncurrent liabilities 421,769 415,301 349,487
------------- ------------- -------------
Total liabilities 7,636,631 7,727,578 7,592,348
------------- ------------- -------------
Preferred stockholders' equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par value,
4% convertible 19 19 19
Cumulative preference stock, no par value,
$2.12 convertible 1,268 1,292 1,368
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value - - -
Retained earnings 4,161,616 4,103,860 3,930,970
Accumulated other comprehensive income 38,588 94,732 (40,474)
Treasury stock, at cost (3,389,094) (3,378,887) (3,245,249)
------------- ------------- -------------
Total stockholders' equity 1,135,735 1,144,354 969,972
------------- ------------- -------------
Total liabilities and stockholders' equity $ 9,082,366 $ 9,181,932 $ 8,872,320
============= ============= =============
Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
June 30, 2004
(Unaudited)
-----------
(Dollars in thousands)
%
2004 2003 (2) Change
------------ ---------- -------
Second Quarter
--------------
Revenue
-------
Global Mailstream Solutions $ 820,409 $ 782,748 5%
Global Enterprise Solutions 334,183 313,025 7%
Capital Services 51,309 38,105 35%
------------ ----------- --------
Total Revenue $ 1,205,901 $ 1,133,878 6%
============ =========== ========
EBIT (1)
----
Global Mailstream Solutions $ 256,358 $ 246,316 4%
Global Enterprise Solutions 21,262 18,556 15%
Capital Services 25,232 25,011 1%
------------ ----------- --------
Total EBIT 302,852 289,883 4%
Unallocated amounts:
Interest, net (41,656) (40,178)
Corporate expense (47,019) (44,646)
Restructuring charge (16,229) (32,091)
------------ -----------
Income before income taxes $ 197,948 $ 172,968
============ ===========
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses.
(2) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Revenue and EBIT
By Business Segment
June 30, 2004
(Unaudited)
-----------
(Dollars in thousands)
%
2004 2003 (2) Change
------------- ------------ ------
Year to Date
------------
Revenue
-------
Global Mailstream Solutions $ 1,634,022 $ 1,527,543 7%
Global Enterprise Solutions 662,801 618,675 7%
Capital Services 81,000 78,469 3%
------------- ------------ -------
Total Revenue $ 2,377,823 $ 2,224,687 7%
============= ============ =======
EBIT (1)
----
Global Mailstream Solutions $ 506,235 $ 479,653 6%
Global Enterprise Solutions 36,222 33,229 9%
Capital Services 44,442 50,407 (12%)
------------- ------------ -------
Total EBIT 586,899 563,289 4%
Unallocated amounts:
Interest, net (82,192) (83,459)
Corporate expense (89,466) (87,231)
Restructuring charge (31,272) (53,356)
------------- ------------
Income before income taxes $ 383,969 $ 339,243
============= ============
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses.
(2) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
-----------
(Dollars in thousands, except per share amounts)
Three months ended June 30, Six months ended June 30,
------------------------------- -----------------------------
2004 2003 2004 2003
-------------- ------------ ------------ ------------
GAAP income before income taxes, as reported $ 197,948 $ 172,968 $ 383,969 $ 339,243
Restructuring charge 16,229 32,091 31,272 53,356
-------------- ------------ ------------ ------------
Income before income taxes, as adjusted 214,177 205,059 415,241 392,599
Provision for income taxes, as adjusted 69,072 65,625 133,914 125,652
-------------- ------------ ------------ ------------
Income, as adjusted $ 145,105 $ 139,434 $ 281,327 $ 266,947
============== ============ ============ ============
GAAP diluted earnings per share, as reported $ 0.58 $ 0.50 $ 1.11 $ 0.98
Restructuring charge 0.04 0.09 0.09 0.14
-------------- ------------ ------------ ------------
Diluted earnings per share, as adjusted $ 0.62 $ 0.59 $ 1.20 $ 1.13
============== ============ ============ ============
GAAP net cash provided by operating activities,
as reported $ 238,984 $ 208,988 $ 513,962 $ 425,836
Capital expenditures (72,378) (70,013) (146,847) (138,355)
-------------- ------------ ------------ ------------
Free cash flow 166,606 138,975 367,115 287,481
Payments related to restructuring charge 13,612 10,887 30,164 23,722
-------------- ------------ ------------ ------------
Free cash flow, as adjusted $ 180,218 $ 149,862 $ 397,279 $ 311,203
============== ============ ============ ============
Note: The sum of the earnings per share amounts may not equal the totals above
due to rounding.