Pitney Bowes Announces Fourth Quarter and Annual Results for 2009
STAMFORD, Conn.--(BUSINESS WIRE)-- Pitney Bowes Inc. (NYSE:PBI) today reported 2009 fourth quarter and full year 2009 results.
Adjusted earnings per diluted share from continuing operations for the fourth quarter was $0.64 compared with $0.77 for the prior year. For the full year 2009, adjusted earnings per diluted share was $2.28 compared with $2.78 for the prior year.
On a Generally Accepted Accounting Principles (GAAP) basis, the company reported earnings per diluted share of $0.47 for the fourth quarter, compared with $0.36 per diluted share for the prior year and $2.04 for the full year compared with $2.00 for the prior year. GAAP earnings per diluted share for the quarter included an $0.11 charge for restructuring costs associated with the company's strategic transformation initiatives; a $0.01 benefit related to certain leveraged lease transactions in Canada and a $0.06 loss associated with discontinued operations. GAAP earnings per diluted share for the year included a $0.15 charge for restructuring costs associated with the company's strategic transformation initiatives; a non-cash net tax adjustment of $0.05, primarily associated with out-of-the money stock options that expired during the year and a $0.04 loss associated with discontinued operations.
Revenue for the quarter was $1.5 billion, a decline of 6 percent compared with the prior year, while on a constant currency basis revenue declined 9 percent. For the full year, revenue was $5.6 billion, a decline of 11 percent when compared with the prior year. Excluding the effect of currency during the year, revenue declined 9 percent.
Free cash flow was $223 million for the quarter and $889 million for the year. On a GAAP basis, the company generated $94 million in cash from operations for the quarter and $826 million for the year, which was partially used to reduce debt by $242 million during the year.
Free cash flow for the year benefited from lower levels of receivables and inventory as well as reduced capital expenditures. The company returned $74 million of dividends to common shareholders during the quarter and $298 million for the year.
The company's results for the quarter and the year are summarized in the table below:
Fourth Quarter* Full Year 2009
Adjusted EPS $0.64 $2.28
Restructuring ($0.11) ($0.15)
Tax Adjustments $0.01 ($0.05)
GAAP EPS from Continuing Operations $0.54 $2.08
Discontinued Operations ($0.06) ($0.04)
GAAP EPS $0.47 $2.04
*The sum of the earnings per share does not equal the totals above due to rounding.
Commenting on the quarter and the year, Chairman, President and CEO Murray D. Martin noted, "In 2009 we took definitive actions to position ourselves for long-term growth, while addressing the immediate challenges presented by an uncertain business environment.
"Throughout the year we enhanced productivity, reduced expenses, and increased the variability of our cost structure, all of which helped to offset the impact of revenue declines driven by macroeconomic conditions, and produced year-over-year EBIT margin improvements in our Software, Management Services, Mail Services, and Marketing Services business segments. In addition in the fourth quarter we saw improvement in both revenue and EBIT margins in the majority of our business segments when compared with the prior quarter.
"Our free cash flow remained strong and we continued to take actions to improve our capital position and increase our liquidity, as we reduced our debt by $242 million for the year.
"For the 28th consecutive year our Board of Directors approved an increase in the quarterly dividend. The dividend for the first quarter 2010 will be $.365 per common share.
"As we exited 2009, we began to see some early signs of improved economic activity including an increased backlog of orders in our Production Mail business; increased solution sales activity during December in our U.S. Mailing business; and, a moderating decline in total U.S. mail volumes, especially for standard mail. Additionally, in our Software business we had an 11% increase in the billings for large transactions, many of which will be recorded as recurring revenue. In 2010, we will continue to expand our recurring revenue stream as we move more towards a 'Software as a Service' (SaaS) model.
"We are streamlining our operations which will position us to invest in areas of growth with processes and systems that will allow us to gain better leverage across our businesses. Given the actions we have taken to date, our planned transformation initiatives going forward, and an expected gradual improvement in global business conditions in the latter half of the year, we are reaffirming our financial guidance for 2010."
Business Segment Results
Mailstream Solutions revenue declined 8 percent in the quarter to $1.0 billion with currency providing 3.6 percentage points of benefit to the change in revenue. Earnings before interest and taxes (EBIT) declined 15 percent to $268 million compared with the prior year.
Within Mailstream Solutions:
U.S. Mailing revenue declined 11 percent in the quarter to $499 million and EBIT declined 20 percent to $182 million when compared with the prior year.
The company maintained its focus on customer retention, as many customers continued to exercise their option to extend leases on existing equipment. The company experienced increased equipment sales activity in the month of December, particularly in its Solutions business. However, the lower levels of equipment sales in prior periods and the resulting lower level of finance receivables reduced revenue growth and profitability during the quarter and this trend is expected to continue into at least the first half of 2010.
International Mailing revenue declined 4 percent in the quarter to $241 million with currency providing about 10 percentage points of benefit to the change in revenue when compared with the prior year. EBIT declined 3 percent to $41 million.
While there appear to be some improving economic trends in Asia, Canada and parts of Europe, customers remained cautious and continue to take longer than usual to make purchase decisions and commitments. As in the U.S., the decline in high-margin finance and rental revenue streams, due to lower equipment sales in prior periods, reduced revenue and profitability during the quarter.
Worldwide Production Mail revenue declined 10 percent in the quarter to $160 million, with currency providing about 4 percentage points of benefit to the change in revenue, and EBIT declined 30 percent to $24 million compared with the prior year.
Production Mail has had three consecutive quarters of sequential EBIT margin improvement driven by ongoing productivity investments. During the quarter, Production Mail started to experience increased customer demand for its industry leading, high-speed inserting systems. As a result, Production Mail ended the quarter with an increased backlog of customer orders globally.
Software revenue increased one percent in the quarter to $105 million, with currency providing about 6 percentage points of benefit to the change in revenue, and EBIT increased 72 percent to $21 million compared with the prior year. EBIT margin reached 20 percent in the quarter, which was nearly double the prior year.
While Software typically has seasonally stronger fourth quarter sales, the company's actions to integrate its sales organization and focus its product offerings have resulted in a greatly improved EBIT margin. This is the third consecutive quarter of sequential EBIT margin improvement. The company continues to expand its SaaS offerings and recurring revenue streams from term licenses. The company experienced increased customer interest in its data integration, document composition and location intelligence software products which resulted in an increase in the billings for large transactions.
Mailstream Services revenue declined 2 percent in the quarter to $450 million with currency providing 1.6 percentage points of benefit to the change in revenue and EBIT increased 15 percent to $48 million compared with the prior year.
Within Mailstream Services:
Management Services revenue declined 3 percent in the quarter to $271 million, with currency providing about 2 percentage points of benefit to the change in revenue, and EBIT improved 33 percent to $23 million compared with the prior year.
In the U.S., EBIT margin remained above 10 percent, slightly improved from the first three quarters of the year. Outside of the U.S., the company has refocused the business to more profitable contracts and continued to transition to a more variable cost structure. As a result, the non-U.S. Pitney Bowes Management Services (PBMS) operations improved revenue during the quarter and greatly expanded EBIT margin. The company's strategy to move to a more variable cost infrastructure, that allows it to align costs with changing volumes, has resulted in three consecutive quarters of sequential EBIT margin improvement.
Mail Services revenue increased 2 percent in the quarter to $145 million and EBIT increased 2 percent to $19 million compared with the prior year.
Mail Services continues to process increasing volumes of presort mail from existing customers including a greater volume of Standard Class mail. An increase in outbound international package volume increased revenue for the International Mail Services portion of the business. While EBIT margin for the quarter was adversely affected by the timing of certain benefit costs, on an annual basis, the Mail Services EBIT margin for 2009 improved by 210 basis points when compared with the prior year due to ongoing automation and productivity initiatives.
Marketing Services revenue declined 3 percent in the quarter to $33 million and EBIT declined 2 percent to $6 million compared with the prior year.
On a year-over-year basis, revenue and EBIT were negatively affected by fewer household moves which resulted in a reduced need for change of address kits.
2010 Guidance
The company reaffirms its guidance for 2010. The company expects 2010 revenue to be in a range of flat to 3 percent growth, including an anticipated 2 percent benefit from currency. Adjusted earnings per diluted share is expected to be in the range of $2.30 to $2.50 for the year. Adjusted earnings per diluted share excludes the expected impact of $100 million to $150 million of pre-tax restructuring charges associated with the company's previously announced transformation initiatives. Adjusted earnings per diluted share also excludes an expected non-cash tax charge of approximately 7 cents per diluted share associated with out-of-the-money stock options that expire principally in the first quarter of 2010. On a Generally Accepted Accounting Principles (GAAP) basis, the company expects 2010 earnings per diluted share from continuing operations in the range of $1.75 to $2.11. The company expects that a greater percentage of its annual earnings will occur in the second half of the year as equipment sales start to improve and the impact of lower financing revenue moderates, and the company realizes increased benefits from its transformation initiatives.
The company expects to generate free cash flow for 2010 in the range of $650 million to $750 million. During 2010 the company expects an increased investment in finance receivables through higher levels of equipment sales, requiring a higher use of cash versus the prior year.
The company's expected earnings results for 2010 are summarized below.
Full Year 2010
Adjusted EPS $2.30 to $2.50
Restructuring ($0.32 to $0.48)
Tax Adjustment ($0.07)
GAAP EPS from Continuing Operations $1.75 to $2.11
Mr. Martin concluded, "Given the actions we have taken to date and the plans we have in place for 2010, we believe the company is positioned to take advantage of an improving business environment and generate increased growth and profitability in 2010 and beyond."
Management of Pitney Bowes will discuss the company's results in a broadcast over the Internet today at 5:00 p.m. EST. 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 $5.6 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). However, earnings per share, income from continuing operations, and free cash flow results are adjusted to exclude the impact of special items such as transformation initiatives, restructuring charges, tax adjustments, accounting adjustments and write downs of assets. Although these charges represent actual expenses to the company, these charges might mask the periodic income and financial and operating trends associated with our business. The use of free cash flow has limitations. GAAP cash flow has the advantage of including all cash available to the company after actual expenditures for all purposes. Free cash flow permits a shareholder insight into the amount of cash that management could have available for other discretionary uses. It adjusts for long-term commitments such as capital expenditures, as well as special items like cash used for restructuring charges, unusual tax payments and contributions to its pension funds. These items use cash that is not otherwise available to the company and are important expenditures. Management compensates for these limitations by using a combination of GAAP cash flow and free cash flow in doing its planning.
EBIT excludes interest payments and taxes, both cash expenses to the company, and as a result, has the effect of showing a greater amount of earnings than net income. The company uses EBIT for purposes of measuring the performance of its management team. The interest rates and tax rates applicable to the company generally are outside the control of management, and it can be useful to judge performance independent of those variables. Financial results on a constant currency basis exclude the impact of changes in foreign currency exchange rates since the prior period under comparison and are calculated using the average of the rates in effect during that period. 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 in the Investor Relations section.
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 possible transformation initiatives; restructuring charges; 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: the uncertain economic environment, including adverse impacts on customer demand; changes in foreign currency exchange rates; the outcome of litigations; and changes in postal regulations, as more fully outlined in the company's 2008 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 or future 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 year ended December 31, 2009 and 2008, and consolidated balance sheets at December 31, 2009 and September 30, 2009 are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended December 31, Twelve Months Ended December 31,
2009 2008 (2) 2009 2008 (2)
Revenue:
Equipment $ 291,762 $ 341,175 $ 1,006,542 $ 1,252,058
sales
Supplies 82,773 86,664 336,239 392,414
Software 110,784 109,679 365,185 424,296
Rentals 159,440 174,502 647,432 728,160
Financing 165,910 180,877 694,444 772,711
Support 183,229 188,428 714,429 768,424
services
Business 460,407 471,264 1,804,900 1,924,242
services
Total revenue 1,454,305 1,552,589 5,569,171 6,262,305
Costs and
expenses:
Cost of
equipment 142,330 178,442 530,004 663,430
sales
Cost of 25,165 23,197 93,660 103,870
supplies
Cost of 21,761 21,250 82,241 101,357
software
Cost of 44,509 39,604 158,881 153,831
rentals
Financing
interest 23,721 24,507 97,586 110,136
expense
Cost of
support 93,161 104,238 393,251 447,745
services
Cost of
business 348,468 365,509 1,382,401 1,485,703
services
Selling,
general and 483,304 479,715 1,800,714 1,970,868
administrative
Research and 43,568 49,444 182,191 205,620
development
Restructuring
charges and 35,901 115,117 48,746 200,254
asset
impairments
Other interest 26,721 27,641 111,269 119,207
expense
Interest (1,796 ) (3,162 ) (4,949 ) (12,893 )
income
Total costs 1,286,813 1,425,502 4,875,995 5,549,128
and expenses
Income from
continuing
operations 167,492 127,087 693,176 713,177
before income
taxes
Provision for 47,779 29,540 240,154 244,929
income taxes
Income from
continuing 119,713 97,547 453,022 468,248
operations
Loss from
discontinued
operations, (13,405 ) (18,974 ) (8,109 ) (27,700 )
net of income
tax
Net income
before
attribution of 106,308 78,573 444,913 440,548
noncontrolling
interests
Less:
Preferred
stock
dividends of
subsidiaries 7,754 4,621 21,468 20,755
attributable
to
noncontrolling
interests
Pitney Bowes
Inc. net $ 98,554 $ 73,952 $ 423,445 $ 419,793
income
Amounts
attributable
to Pitney
Bowes Inc.
common
stockholders:
Income from
continuing $ 111,959 $ 92,926 $ 431,554 $ 447,493
operations
Loss from
discontinued (13,405 ) (18,974 ) (8,109 ) (27,700 )
operations
Pitney Bowes
Inc. net $ 98,554 $ 73,952 $ 423,445 $ 419,793
income
Basic earnings
per share of
common stock
attributable
to Pitney
Bowes Inc.
common
stockholders
(1):
Continuing $ 0.54 $ 0.45 $ 2.09 $ 2.15
operations
Discontinued (0.06 ) (0.09 ) (0.04 ) (0.13 )
operations
Net income $ 0.48 $ 0.36 $ 2.05 $ 2.01
Diluted
earnings per
share of
common stock
attributable
to Pitney
Bowes Inc.
common
stockholders
(1):
Continuing $ 0.54 $ 0.45 $ 2.08 $ 2.13
operations
Discontinued (0.06 ) (0.09 ) (0.04 ) (0.13 )
operations
Net income $ 0.47 $ 0.36 $ 2.04 $ 2.00
Average common
and potential 207,733,717 206,933,281 207,322,440 209,699,471
common shares
outstanding
(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) (Dollars in thousands, except per share data) Assets 12/31/09 09/30/09 Current assets: Cash and cash equivalents $ 412,737 $ 441,128 Short-term investments 14,682 17,660 Accounts receivable, less allowances: 12/09 $42,781 09/09 $46,312 816,852 772,077 Finance receivables, less allowances: 12/09 $46,790 09/09 $43,333 1,370,918 1,365,631 Inventories 156,502 176,626 Current income taxes 103,832 100,904 Other current assets and prepayments 98,297 98,736 Total current assets 2,973,820 2,972,762 Property, plant and equipment, net 514,904 529,079 Rental property and equipment, net 360,207 374,021 Long-term finance receivables, less allowances: 12/09 $25,368 09/09 $25,547 1,355,442 1,370,460 Investment in leveraged leases 233,359 231,088 Goodwill 2,286,904 2,294,594 Intangible assets, net 316,417 319,040 Non-current income taxes 122,428 118,976 Other assets 387,182 414,215 Total assets $ 8,550,663 $ 8,624,235 Liabilities, noncontrolling interests and stockholders' equity/(deficit) Current liabilities: Accounts payable and accrued liabilities $ 1,748,254 $ 1,693,697 Current income taxes 38,919 37,822 Notes payable and current portion of long-term 226,022 170,783 obligations Advance billings 447,786 452,380 Total current liabilities 2,460,981 2,354,682 Deferred taxes on income 414,275 402,593 Tax uncertainties and other income tax 526,655 511,804 liabilities Long-term debt 4,213,640 4,218,646 Other non-current liabilities 625,079 783,750 Total liabilities 8,240,630 8,271,475 Noncontrolling interests (Preferred 296,370 374,165 stockholders' equity in subsidiaries) Stockholders' equity/(deficit): Cumulative preferred stock, $50 par value, 4% 4 4 convertible Cumulative preference stock, no par value, 868 876 $2.12 convertible Common stock, $1 par value 323,338 323,338 Additional paid-in capital 256,133 251,273 Retained earnings 4,305,794 4,281,613 Accumulated other comprehensive loss (457,378 ) (461,550 ) Treasury stock, at cost (4,415,096 ) (4,416,959 ) Total Pitney Bowes Inc. stockholders' equity/ 13,663 (21,405 ) (deficit) Total liabilities, noncontrolling interests and $ 8,550,663 $ 8,624,235 stockholders' equity/(deficit)
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
December 31, 2009
(Unaudited)
(Dollars in thousands)
Three Months Ended December 31,
%
2009 2008 (2) Change
Revenue
U.S. Mailing $ 498,882 $ 563,170 (11 %)
International Mailing 240,505 251,507 (4 %)
Production Mail 159,745 176,897 (10 %)
Software 105,180 103,680 1 %
Mailstream Solutions 1,004,312 1,095,254 (8 %)
Management Services 271,272 281,092 (3 %)
Mail Services 145,309 141,901 2 %
Marketing Services 33,412 34,342 (3 %)
Mailstream Services 449,993 457,335 (2 %)
Total revenue $ 1,454,305 $ 1,552,589 (6 %)
EBIT (1)
U.S. Mailing $ 181,876 $ 226,887 (20 %)
International Mailing 40,883 42,147 (3 %)
Production Mail 24,063 34,398 (30 %)
Software 21,271 12,373 72 %
Mailstream Solutions 268,093 315,805 (15 %)
Management Services 23,013 17,242 33 %
Mail Services 19,401 18,964 2 %
Marketing Services 5,615 5,733 (2 %)
Mailstream Services 48,029 41,939 15 %
Total EBIT $ 316,122 $ 357,744 (12 %)
Unallocated amounts:
Interest, net (48,646 ) (48,986 )
Corporate expense (59,633 ) (60,842 )
Restructuring charges and asset (35,901 ) (115,117 )
impairments
Other items (4,450 ) (5,712 )
Income from continuing operations $ 167,492 $ 127,087
before income taxes
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses and restructuring charges and asset impairments.
(2) Certain prior year amounts have been reclassified to conform to the
current year presentation.
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
December 31, 2009
(Unaudited)
(Dollars in thousands) Twelve Months Ended December 31,
%
2009 2008 (2) Change
Revenue
U.S. Mailing $ 2,016,259 $ 2,250,399 (10 %)
International Mailing 920,398 1,133,652 (19 %)
Production Mail 525,745 616,255 (15 %)
Software 345,739 399,814 (14 %)
Mailstream Solutions 3,808,141 4,400,120 (13 %)
Management Services 1,060,907 1,172,170 (9 %)
Mail Services 559,200 541,776 3 %
Marketing Services 140,923 148,239 (5 %)
Mailstream Services 1,761,030 1,862,185 (5 %)
Total revenue $ 5,569,171 $ 6,262,305 (11 %)
EBIT (1)
U.S. Mailing $ 743,108 $ 890,356 (17 %)
International Mailing 128,084 184,667 (31 %)
Production Mail 51,037 81,514 (37 %)
Software 37,335 28,335 32 %
Mailstream Solutions 959,564 1,184,872 (19 %)
Management Services 72,307 70,173 3 %
Mail Services 82,723 68,800 20 %
Marketing Services 22,938 21,291 8 %
Mailstream Services 177,968 160,264 11 %
Total EBIT $ 1,137,532 $ 1,345,136 (15 %)
Unallocated amounts:
Interest, net (203,906 ) (216,450 )
Corporate expense (187,254 ) (209,543 )
Restructuring charges and asset (48,746 ) (200,254 )
impairments
Other items (4,450 ) (5,712 )
Income from continuing operations $ 693,176 $ 713,177
before income taxes
(1) Earnings before interest and taxes (EBIT) excludes general corporate
expenses and restructuring charges and asset impairments.
(2) Certain prior year amounts have been reclassified to conform to the
current year presentation.
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended December 31, Twelve Months Ended December 31,
2009 2008 2009 2008
GAAP income
from
continuing
operations $ 111,959 $ 92,926 $ 431,554 $ 447,493
after income
taxes, as
reported
Restructuring
charges and 23,482 82,347 31,782 144,210
asset
impairments
Tax (2,141 ) (15,272 ) 10,063 (8,792 )
adjustments
MapInfo
purchase - - - 322
accounting
Income from
continuing
operations $ 133,300 $ 160,001 $ 473,399 $ 583,233
after income
taxes, as
adjusted
GAAP diluted
earnings per
share from $ 0.54 $ 0.45 $ 2.08 $ 2.13
continuing
operations,
as reported
Restructuring
charges and 0.11 0.40 0.15 0.69
asset
impairments
Tax (0.01 ) (0.07 ) 0.05 (0.04 )
adjustments
MapInfo
purchase - - - 0.00
accounting
Diluted
earnings per
share from $ 0.64 $ 0.77 $ 2.28 $ 2.78
continuing
operations,
as adjusted
GAAP net cash
provided by
operating $ 93,627 $ 253,356 $ 826,051 $ 1,009,415
activities,
as reported
Capital (40,219 ) (67,330 ) (166,728 ) (237,308 )
expenditures
Restructuring
payments and 36,755 36,822 103,512 103,273
discontinued
operations
Pension 125,000 - 125,000 -
contribution
Reserve
account 7,900 16,742 1,664 33,359
deposits
Free cash
flow, as $ 223,063 $ 239,590 $ 889,499 $ 908,739
adjusted
Note: The sum of the earnings per share amounts may not equal the totals above
due to rounding.
Source: Pitney Bowes Inc.
Released February 4, 2010