Pitney Bowes Inc. (NYSE:PBI) today reported financial results
for the first quarter 2014.
Highlights
- First quarter results from continuing
operations exclude $16 million in revenue and $0.01 in EPS for the
Canadian Document Imaging Solutions (DIS) business, which is
reflected as a discontinued operation
- Revenue of $937 million, growth of 3
percent over prior year
- Adjusted EPS of $0.42, growth of 15
percent over prior year, excludes debt extinguishment costs of
$0.19 per share and restructuring charges of $0.03 per share
- GAAP EPS from continuing operations of
$0.21; GAAP EPS of $0.22
- Free cash flow of $138 million; cash
from operations of $106 million
- Despite the sale of the DIS business,
the Company reaffirms its revenue growth rate, adjusted EPS and
free cash flow guidance for the year; updates GAAP EPS from
continuing operations guidance
- Issued $500 million of 10-year bonds
and retired $500 million of debt
“We delivered another solid quarter and our actions are
beginning to support our long-term economic model,” said Marc B.
Lautenbach, President and CEO, Pitney Bowes. “Our core mailing
businesses continued to improve and stabilize, and our Digital
Commerce business posted another excellent quarter of double-digit
revenue growth.
“We are off to a good start to the year,” Lautenbach continued.
“The decisions we made and the actions we have taken over the past
15 months are beginning to pay off. While we have more to do, we
are confident in our ability to continue to execute and deliver on
our long-term financial model. Our strategy is the right one and we
remain well-positioned to further capitalize on the changes in the
marketplace and the requirements of our clients.”
FIRST QUARTER 2013 RESULTS
Results for the quarter reflect the DIS business as a
discontinued operation. Revenue from continuing operations in the
first quarter totaled $937 million, growth of 3 percent on both a
reported and constant currency basis when compared to the prior
year. Revenue results in the first quarter reflect the ongoing
improvement in trends that the Company started to experience in
2013. Revenue for the quarter benefited from 23 percent growth in
the Digital Commerce Solutions segment and from 1 percent growth in
the Enterprise Business Solutions group. Revenue in the Small and
Medium Business (SMB) Solutions group declined just 1 percent,
which reflects the continued stabilization of revenue for this
business.
Adjusted earnings per diluted share from continuing operations
for the first quarter were $0.42.
First quarter earnings per diluted share from continuing
operations, on a Generally Accepted Accounting Principles (GAAP)
basis were $0.21. GAAP earnings per diluted share from continuing
operations include a charge of $0.19 per share related to debt
extinguishment costs associated with the debt tender in the
quarter. Results also include restructuring charges of $0.03 per
share associated with the previously announced cost reduction
plans.
GAAP earnings per diluted share of $0.22 include income from
discontinued operations of $0.01 per share.
Earnings Per
Share Reconciliation* Q1 2014
Q1 2013 Adjusted EPS from continuing
operations $0.42
$0.37 Extinguishment of debt ($0.19 )
($0.08 ) Restructuring charges ($0.03 )
-
GAAP EPS from continuing operations
$0.21 $0.29 Discontinued
operations – income (loss) $0.01
$0.04
GAAP EPS $0.22
$0.33
* 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 $138 million, while on a GAAP
basis, the Company generated $106 million in cash from operations.
In comparison to the prior year, free cash flow benefited from
higher adjusted net income and the timing of tax payments. During
the quarter, the Company used $38 million of cash for dividends and
$19 million for restructuring payments.
During the quarter, the Company issued $500 million of 10-year
bonds and used the proceeds to retire $500 million of debt.
BUSINESS SEGMENT REPORTING
The Company has reclassified current and prior period results,
associated with its shipping solutions, from the SMB Solutions
group to the Digital Commerce Solutions segment. The Company’s
business segment reporting reflects the clients served in each
market and the way it is now managing these segments for growth and
profitability. The reporting segment groups are: Small & Medium
Business (SMB) Solutions group; Enterprise Business Solutions
group; and the Digital Commerce Solutions segment.
The Small and Medium Business (SMB) Solutions group offers
mailing equipment, financing, services and supplies for small and
medium businesses to efficiently create mail and evidence postage.
This group includes the North America Mailing and International
Mailing segments. 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 provides mailing
equipment and services for large enterprise clients to process
mail, including sortation services to qualify large mail volumes
for postal worksharing discounts. This group includes the global
Production Mail and Presort Services segments.
The Digital Commerce Solutions segment leverages digital and
mobile channels that make the Company’s clients’ customer-facing
functions more effective. This segment includes software, marketing
services, a digital document exchange, shipping and ecommerce
solutions.
SMB Solutions Group
1Q 2014
Y-O-Y Change Change ex Currency
Revenue $534 million (1%) (1%)
EBIT
$185 million 12%
Within the SMB Solutions Group:
North America Mailing
1Q 2014 Y-O-Y Change
Change ex Currency Revenue $381 million (2%) (1%) EBIT
$160 million 8%
Within the North America Mailing results, equipment sales
revenue benefited from 2 percent growth in the U.S., which was more
than offset by lower equipment sales in Canada. This was the second
consecutive quarter of positive growth in U.S. equipment sales,
which benefited from the Company’s go-to-market strategy. Recurring
revenue streams declined at a lesser rate than prior year due to
growth in supplies revenue and a moderation in the decline in
financing and rentals revenue, continuing a trend of year-over-year
improvement. Overall, North America Mailing revenue declined at the
lowest rate in more than 5 years.
EBIT margin improved during the quarter due to the new
go-to-market strategy and additional cost reduction
initiatives.
International Mailing
1Q 2014 Y-O-Y Change
Change ex Currency Revenue $153 million 0% (1%) EBIT
$25 million 43%
International Mailing revenue benefited from growth in supplies,
offset by a decline in rentals revenue, largely in France, due
primarily to a migration from the rental of equipment to financing
of equipment. Financing revenue was slightly positive in the
quarter. EBIT margin improved versus the prior year due to the mix
of products and cost reduction initiatives.
Enterprise Business Solutions Group
1Q 2014
Y-O-Y Change Change ex Currency
Revenue $222 million 1% 1%
EBIT
$32 million 1%
Within the Enterprise Business Solutions Group:
Worldwide Production Mail
1Q 2014 Y-O-Y Change
Change ex Currency Revenue $105 million (4%) (4%) EBIT
$8 million (1%)
Production Mail revenue was impacted by fewer production print
installations during the quarter compared to the prior year.
However, revenue benefited from increased sales of inserting and
sortation equipment, as well as ongoing growth in supplies. EBIT
margin improved due to the greater mix of higher-margin inserting
systems sold in the quarter and cost reduction initiatives.
Presort Services
1Q 2014 Y-O-Y Change
Change ex Currency Revenue $116 million 5% 5% EBIT
$24 million 2%
Presort Services revenue benefited from an increase in First
Class mail volume processed as well as higher revenue related to
improved qualification of presorted mail for postal rate discounts.
EBIT increased on revenue growth but EBIT margin declined versus
the prior year in part due to costs associated with the
consolidation of two processing facilities in Pennsylvania, which
will result in improved future operating efficiencies.
Digital Commerce Solutions
1Q 2014
Y-O-Y Change Change ex Currency
Revenue $181 million 23% 23%
EBIT
$10 million N/M
Digital Commerce Solutions revenue benefited primarily from
continued strong growth in the Company’s ecommerce solutions for
cross-border package delivery. The Company also experienced growth
in its software license and marketing services revenues. EBIT
margin increased as a result of the operating leverage related to
the scaling of the ecommerce business, which was partially offset
by the continued investments in ecommerce technology and
infrastructure. EBIT margin was also impacted by the investment in
the software channel specialization.
2014 GUIDANCE
This guidance discusses future results which are inherently
subject to unforeseen risks and developments. As such, discussions
about the business outlook should be read in the context of an
uncertain future, as well as the risk factors identified in the
safe harbor language at the end of this release and as more fully
outlined in the Company's 2013 Form 10-K Annual Report and other
reports filed with the Securities and Exchange Commission.
Despite the sale of its DIS business, which contributed $0.01
per share to discontinued operations in the first quarter on a GAAP
basis, the Company is reaffirming its full year guidance for
revenue growth rate, adjusted earnings per share and free cash
flow.
The Company still expects:
- 2014 revenue growth rate, excluding the
impacts of currency, to be in a range of a one percent decline to
two percent growth when compared to 2013;
- Adjusted earnings per diluted share to
be in the range of $1.75 to $1.90;
- Free cash flow to be in the range of
$475 million to $575 million.
The Company now expects GAAP earnings per diluted share from
continuing operations to be in the range of $1.53 to $1.68, which
reflects the following first quarter charges:
- Debt extinguishment costs of $0.19 per
share;
- Restructuring costs of $0.03 per
share.
This guidance excludes any further actions that are under
consideration by the Company to streamline its operations and
further reduce its cost structure.
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
Pitney Bowes provides technology solutions for small, mid-size
and large firms that help them connect with customers to build
loyalty and grow revenue. Many of the company’s solutions are
delivered on open platforms to best organize, analyze and apply
both public and proprietary data to two-way customer
communications. Pitney Bowes includes direct mail, transactional
mail and call center communications in its solution mix along with
digital channel messaging for the Web, email and mobile
applications.
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
goodwill and asset write-downs, because, while these are actual
Company expenses, they can mask underlying trends associated with
its 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 settlements or 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 and goodwill and asset impairments, 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 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 months ended March 31, 2014 and 2013, and
consolidated balance sheets at March 31, 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 March 31, 2014 2013 Revenue: Equipment sales $ 189,056 $
196,767 Supplies 79,517 73,218 Software 91,555 87,012 Rentals
123,579 129,114 Financing 110,050 113,887 Support services 158,252
162,589 Business services 185,488 146,776
Total revenue 937,497 909,363
Costs and expenses: Cost of equipment sales 82,534
94,543 Cost of supplies 24,154 22,846 Cost of software 30,164
24,791 Cost of rentals 25,444 26,398 Financing interest expense
19,653 19,019 Cost of support services 98,981 102,529 Cost of
business services 128,936 102,355 Selling, general and
administrative 351,375 351,654 Research and development 26,192
29,251 Restructuring charges 9,841 - Other interest expense 24,917
30,739 Interest income (853 ) (1,748 ) Other expense, net
61,657 25,121 Total costs and expenses
882,995 827,498 Income from
continuing operations before income taxes 54,502 81,865
Provision for income taxes 8,036 17,795
Income from continuing operations 46,466 64,070
Income from discontinued operations, net of tax 2,801
8,030 Net income before attribution of
noncontrolling interests 49,267 72,100 Less: Preferred stock
dividends of subsidiaries attributable to noncontrolling interests
4,594 4,594 Net income - Pitney
Bowes Inc. $ 44,673 $ 67,506 Amounts
attributable to common stockholders: Income from continuing
operations $ 41,872 $ 59,476 Income from discontinued operations
2,801 8,030 Net income - Pitney
Bowes Inc. $ 44,673 $ 67,506 Basic earnings
per share attributable to common stockholders (1): Continuing
operations 0.21 0.30 Discontinued operations 0.01
0.04 Net income - Pitney Bowes Inc. $ 0.22
$ 0.34 Diluted earnings per share attributable
to common stockholders (1): Continuing operations 0.21 0.29
Discontinued operations 0.01 0.04
Net income - Pitney Bowes Inc. $ 0.22 $ 0.33
(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
March 31,2014
December 31,2013
Current assets: Cash and cash equivalents $ 903,342 $ 907,806
Short-term investments 27,060 31,128 Accounts receivable,
gross 444,149 482,949 Allowance for doubtful accounts receivable
(13,900 ) (13,149 ) Accounts receivable, net 430,249
469,800 Finance receivables 1,095,183 1,127,261 Allowance
for credit losses (23,607 ) (24,340 ) Finance
receivables, net 1,071,576 1,102,921 Inventories 100,956
103,580 Current income taxes 30,006 28,934 Other current assets and
prepayments 125,065 147,067 Assets held for sale 127,038
46,976 Total current assets 2,815,292
2,838,212 Property, plant and equipment, net 237,901 245,171
Rental property and equipment, net 219,512 226,146 Finance
receivables 886,853 974,972 Allowance for credit losses
(12,014 ) (12,609 ) Finance receivables, net 874,839 962,363
Investment in leveraged leases 33,690 34,410 Goodwill
1,726,596 1,734,871 Intangible assets, net 110,878 120,387
Non-current income taxes 69,008 73,751 Other assets 543,620
537,397 Total assets $ 6,631,336
$ 6,772,708
Liabilities,
noncontrolling interests and stockholders' equity
Current liabilities: Accounts payable and accrued liabilities $
1,484,250 $ 1,644,582 Current income taxes 163,080 157,340 Notes
payable and current portion of long-term obligations 274,879 -
Advance billings 466,410 425,833 Liabilities related to assets held
for sale 1,116 - Total current
liabilities 2,389,735 2,227,755 Deferred taxes on income
58,975 60,667 Tax uncertainties and other income tax liabilities
187,423 186,452 Long-term debt 3,066,690 3,346,295 Other
non-current liabilities 442,365 466,766
Total liabilities 6,145,188 6,287,935
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 563
591 Common stock, $1 par value 323,338 323,338 Additional
paid-in-capital 170,038 196,977 Retained Earnings 4,705,475
4,698,791 Accumulated other comprehensive loss (573,333 ) (574,556
) Treasury Stock, at cost (4,436,304 ) (4,456,742 )
Total Pitney Bowes Inc. stockholders' equity 189,778
188,403 Total liabilities,
noncontrolling interests and stockholders' equity $ 6,631,336
$ 6,772,708
Pitney Bowes Inc. Revenue and EBIT
Business Segments March 31, 2014
(Unaudited)
(Dollars in thousands)
Three Months Ended March 31,
%
2014
2013
Change
Revenue
North America Mailing $ 381,027 388,836 -2 % International
Mailing 153,268 152,976 0 % Small &
Medium Business Solutions 534,295 541,812
-1 % Production Mail 105,216 109,453 -4 % Presort
Services 116,491 110,900 5 % Enterprise
Business Solutions 221,707 220,353 1 %
Digital Commerce Solutions 181,495
147,198 23 %
Total revenue $
937,497 $ 909,363 3
%
EBIT
(1)
North America Mailing $ 160,338 $ 148,458 8 % International
Mailing 24,819 17,390 43 % Small &
Medium Business Solutions 185,157 165,848
12 % Production Mail 7,737 7,832 -1 % Presort
Services 23,896 23,488 2 % Enterprise
Business Solutions 31,633 31,320 1 %
Digital Commerce Solutions 9,531 (279 )
N/M
Total EBIT $ 226,321
$ 196,889 15 % Unallocated
amounts: Interest, net (2) (43,717 ) (48,010 ) Corporate and other
expenses (56,604 ) (41,893 ) Restructuring charges (9,841 ) - Other
expense, net (61,657 ) (25,121 )
Income
from continuing operations before income taxes $
54,502 $ 81,865 (1)
Earnings before interest and taxes (EBIT) excludes general
corporate expenses and restructuring charges. (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, 2014 2013 GAAP income from continuing operations after
income taxes, as reported $ 41,872 $ 59,476 Restructuring charges
6,681 - Extinguishment of debt 37,833 15,325
Income from continuing operations after income taxes, as
adjusted $ 86,386 $ 74,801 GAAP diluted
earnings per share from continuing operations, as reported $ 0.21 $
0.29 Restructuring charges 0.03 - Extinguishment of debt
0.19 0.08 Diluted earnings per share from
continuing operations, as adjusted $ 0.42 $ 0.37
GAAP net cash provided by operating activities, as
reported $ 105,616 $ 132,160 Capital expenditures (30,143 ) (38,839
) Restructuring payments 18,937 16,275 Reserve account deposits
(15,159 ) (27,327 ) Extinguishment of debt 58,357 25,121
Free cash flow, as adjusted $ 137,608 $ 107,390
Note: The sum of the earnings per share amounts may not equal
the totals above due to rounding.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted
Results (Unaudited) (Dollars in thousands, except per
share data) Three Months Ended March 31, 2014 2013
GAAP income from continuing operations after income taxes, as
reported $ 41,872 $ 59,476 Restructuring charges 6,681 -
Extinguishment of debt 37,833
15,325 Income from continuing operations after income taxes, as
adjusted 86,386 74,801 Provision for income taxes, as adjusted
35,020 27,592 Preferred stock dividends of subsidiaries
attributable to noncontrolling interests
4,594 4,594 Income from continuing operations before
income taxes, as adjusted 126,000 106,987 Interest, net
43,717 48,010
Adjusted EBIT
169,717 154,997 Depreciation and amortization
43,741 50,532
Adjusted EBITDA
$ 213,458 $
205,529
Pitney Bowes Inc.EditorialBill Hughes, 203-351-6785Chief
Communications OfficerorFinancialCharles F. McBride,
203-351-6349VP, Investor Relationswww.pitneybowes.com
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