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): April 17, 2003
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 5 - Other Events.
The registrant's press release dated April 17, 2003 regarding its financial
results for the period ended March 31, 2003, including consolidated statements
of income and selected segment data for the three months ended March 31, 2003
and 2002, reconciliation of reported consolidated results to adjusted results
for the three months ended March 31, 2003 and consolidated balance sheets at
March 31, 2003, December 31, 2002 and March 31, 2002, are attached.
Item 7 - Financial Statements and Exhibits.
c. Exhibits.
The following exhibits are furnished in accordance with the provisions of Item
601 of Regulation S-K:
Exhibit Description
- ------ -------------------------------------------------------------------
(1) Pitney Bowes Inc. press release dated April 17, 2003.
Item 9 - Regulation FD
The following information is furnished pursuant to Item 9, "Regulation FD
Disclosure" and Item 12, "Disclosure of Results of Operations and Financial
Condition."
On April 17, 2003, the registrant issued a press release setting forth its first
quarter 2003 earnings. A copy of its press release is attached hereto as Exhibit
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.
April 17, 2003
/s/ B.P. Nolop
------------------------------
B. P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ A.F. Henock
------------------------------
A. F. Henock
Vice President - Finance
(Principal Accounting Officer)
EXHIBIT 1
---------
PITNEY BOWES MEETS EARNINGS TARGET FOR FIRST QUARTER 2003
---------------------------------------------------------
o Revenue Growth of 4%
o Cash from Operations of $217 Million
o 1.6 Million Shares Repurchased
STAMFORD, Conn., April 17, 2003 - Pitney Bowes Inc. (NYSE: PBI) today
announced revenue and earnings for the first quarter 2003 that were in line
with previous guidance.
Commenting on the quarter, Chairman and CEO Michael J. Critelli stated,
"Once again the strength of our business model gives us the resilience to meet
expectations in a challenging economic environment. Even though the economy was
as difficult as we had feared it might be, we were able to grow both revenue and
operating profit in our core businesses and meet our revenue and earnings
targets."
Revenue for the quarter grew four percent to $1.09 billion and net
income was $113.9 million or $.48 per diluted share. In January this year the
company announced that it would take actions to execute long-term growth
strategies, and as a result, expected to record approximately $100 million of
after-tax charges over the next two years. During the quarter, the company took
several actions as part of this restructuring and recorded an after-tax charge
of $14 million or $.06 per diluted share. Diluted earnings per share excluding
this charge were $.54. First quarter 2003 earnings per share included $.04 per
diluted share from non-core Capital Services operations compared to $.06 per
diluted share in the first quarter of 2002.
1
The company also generated $217 million in cash from operations during
the quarter. Subtracting $68 million in capital expenditures and excluding $13
million in payments associated with restructuring initiatives, free cash flow
was $161 million. The company repurchased 1.6 million shares during the quarter
at an average price of $31.84, leaving $250 million of authorization for share
repurchases in 2003 and 2004.
In the first quarter, revenue increased five percent and operating
profit increased nine percent in the Global Mailing Segment. Global Mailing
continued to experience good customer demand for its revolutionary digital
mailing systems and related value added services. It benefited from strong
growth in its small business operations, although the economy caused some
delayed decision-making for upgrades and new equipment purchases at the high end
of the product line. Additionally, PSI Group, Inc. added operations and
customers during the quarter as the company's pre-sort or work sharing service
network continued to expand in terms of reach and revenue contribution.
Within the Global Mailing segment, non-U.S. revenue grew at a
double-digit rate as a result of favorable foreign currency exchange rates.
Canada and Australia had good revenue growth in local currency, helped by the
introduction of new digital mailing systems. France also experienced good
revenue growth on a local currency basis, helped by the success of the Secap
organization. In many other European countries revenue declined on a local
currency basis due to economic weakness and reduced demand after meter
migration. Economic conditions also caused a revenue decline in Japan during the
period.
The Enterprise Solutions Segment includes Pitney Bowes Management
Services (PBMS) and Document Messaging Technologies (DMT). The segment reported
four percent revenue growth and an operating profit decline of 35 percent for
the quarter.
PBMS reported revenue growth of four percent to $244 million when
compared to the prior year, while operating profit declined 37 percent. The
lingering economic malaise continues to contract the telecommunications,
financial services and transaction-based legal services industries, with a
resultant adverse impact on PBMS revenue growth and margins. PBMS continued to
add new customers and has retained all of its large customers. Yet margins were
adversely impacted by the initial lower margins, higher start-up costs and
delayed implementation associated with new accounts, and the loss of higher
margin business with long-term customers as they continued to downsize. PBMS
remains focused on diversifying its customer base and providing higher value
services to its existing customers, while enacting cost reduction and
containment measures to address these margin pressures.
2
DMT reported revenue of $59 million for the quarter, an increase of
three percent versus the prior year. Operating profit also rose three percent
during the quarter. DMT continued to be adversely impacted by reduced capital
spending by businesses.
Total Messaging Solutions, the combined results of the Global Mailing
and Enterprise Solutions segments, showed a five percent increase in revenue and
a six percent increase in operating profit.
Revenue for the quarter declined 14 percent and operating profit
decreased 13 percent in the Capital Services Segment which is consistent with
the company's previously announced decision to cease originating large-ticket,
structured, third party financing of non-core assets. During the quarter, the
company liquidated approximately $80 million of non-core assets, including $29
million of its assets held for sale, and continued to pursue the sale of other
non-core lease assets on an economically advantageous basis.
The company anticipates that, in aggregate, the global economy will
remain weak for at least the near term. Given this assumption, the company
expects year-over-year revenue growth for the second quarter and the full year
2003 to be in the range of two to four percent. As previously announced, over
the course of the next two years the company expects to incur $100 million of
after-tax restructuring charges, inclusive of the $14 million in restructuring
charges recorded during this quarter. The company is still finalizing plans
related to future restructuring actions, a portion of which will be recorded in
the second quarter of 2003. Therefore, earnings guidance is provided excluding
the impact of these future charges. Diluted earnings per share are expected to
be in the range of $.58 to $.60 for the second quarter 2003 and the company is
reaffirming previous full year guidance of $2.38 to $2.45 exclusive of
restructuring charges.
In year-over-year comparisons, first quarter 2003 revenue included
$290.9 million from sales of equipment and supplies, down five percent; $214.3
million from rentals, up five percent; $134.4 million from core financing, up
three percent; $29.8 million from non-core financing down 17 percent; $272.6
million from business services, up 16 percent; and $148.9 million from support
services, up eight percent. Net income for the period was $113.9 million, or
$.48 per diluted share, down 12 percent compared to the first quarter of 2002.
Excluding the after tax impact of the $21 million restructuring charge, net
income was $127.5 million or $.54 per diluted share in the first quarter of
2003.
3
Management of Pitney Bowes will discuss the company's financial results
in a conference call today scheduled for 11 a.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.investorrelations.pitneybowes.com.
-------------------------------------
Pitney Bowes engineers the flow of communication. The company is a $4.4
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 of a non-recurring
nature, 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. 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 www.pitneybowes.com
-------------------
in the Investor Relations section.
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 second quarter and full year 2003, and our expected
diluted earnings per share for the second quarter and for the full year 2003.
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 2002 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 months ended March 31,
2003 and 2002, and consolidated balance sheets at March 31, 2003, December 31,
2002, and March 31, 2002, are attached.
4
Pitney Bowes Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
-------------------------------------
2003 2002
-------------- --------------
Revenue from:
Sales $ 290,850 $ 306,802
Rentals 214,301 203,783
Core financing 134,361 130,701
Non-core financing 29,756 35,668
Business services 272,620 234,397
Support services 148,921 138,157
-------------- --------------
Total revenue 1,090,809 1,049,508
-------------- --------------
Costs and expenses:
Cost of sales 139,927 146,419
Cost of rentals 41,608 43,105
Cost of core financing 35,193 36,486
Cost of non-core financing 11,267 11,076
Cost of business services 222,793 187,851
Cost of support services 78,299 71,603
Selling, general and administrative 295,150 285,065
Research and development 35,751 34,069
Restructuring charge 21,265 -
Interest, net 43,281 45,298
-------------- --------------
Total costs and expenses 924,534 860,972
-------------- --------------
Income before income taxes 166,275 188,536
Provision for income taxes 52,372 59,019
-------------- --------------
Net income $ 113,903 $ 129,517
============== ==============
Basic earnings per share
Net income $ 0.48 $ 0.54
Restructuring charge 0.06 -
-------------- --------------
Net income excluding restructuring charge $ 0.54 $ 0.54
============== ==============
Diluted earnings per share
Net income $ 0.48 $ 0.53
Restructuring charge 0.06 -
-------------- --------------
Net income excluding restructuring charge $ 0.54 $ 0.53
============== ==============
Average common and potential common
shares outstanding 236,522,184 244,288,147
============== ==============
Pitney Bowes Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited) (Unaudited)
Assets 3/31/03 12/31/02 3/31/02
- ------ ------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 375,653 $ 315,156 $ 264,323
Short-term investments, at cost which
approximates market 8,411 3,491 10,545
Accounts receivable, less allowances:
3/03 $37,191 12/02 $35,139 3/02 $32,199 428,340 404,366 394,692
Finance receivables, less allowances:
3/03 $70,538 12/02 $71,373 3/02 $64,427 1,433,848 1,446,460 1,598,463
Inventories 230,009 210,888 172,804
Other current assets and prepayments 179,347 172,264 148,063
------------- ------------ ------------
Total current assets 2,655,608 2,552,625 2,588,890
------------- ------------ ------------
Property, plant and equipment, net 638,152 622,244 537,850
Rental equipment and related inventories, net 421,841 422,717 450,582
Property leased under capital leases, net 2,057 1,974 1,193
Long-term finance receivables, less allowances:
3/03 $80,839 12/02 $82,635 3/02 $66,913 1,651,509 1,686,168 1,816,210
Investment in leveraged leases 1,530,720 1,559,915 1,368,729
Goodwill 892,096 827,241 668,908
Other assets 1,056,956 1,059,430 818,002
------------- ------------ ------------
Total assets $ 8,848,939 $ 8,732,314 $ 8,250,364
============= ============ ============
Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,280,359 $ 1,248,337 $ 1,367,091
Income taxes payable 155,301 98,897 290,024
Notes payable and current portion of
long-term obligations 1,533,078 1,647,338 1,234,773
Advance billings 375,799 355,737 321,264
------------- ------------ ------------
Total current liabilities 3,344,537 3,350,309 3,213,152
------------- ------------ ------------
Deferred taxes on income 1,522,996 1,535,618 1,260,820
Long-term debt 2,422,424 2,316,844 2,233,844
Other noncurrent liabilities 353,373 366,216 347,136
------------- ------------ ------------
Total liabilities 7,643,330 7,568,987 7,054,952
------------- ------------ ------------
Preferred stockholders' equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par value,
4% convertible 24 24 24
Cumulative preference stock, no par value,
$2.12 convertible 1,417 1,432 1,552
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value - - 2,013
Retained earnings 3,889,447 3,848,562 3,716,613
Accumulated other comprehensive income (81,736) (121,615) (154,304)
Treasury stock, at cost (3,236,881) (3,198,414) (3,003,824)
------------- ------------ ------------
Total stockholders' equity 895,609 853,327 885,412
------------- ------------ ------------
Total liabilities and stockholders' equity $ 8,848,939 $ 8,732,314 $ 8,250,364
============= ============ ============
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
March 31, 2003
(Unaudited)
(Dollars in thousands)
%
2003 2002 Change
-------------- ------------- --------
First Quarter
- ------------
Revenue
-------
Global Mailing $ 747,941 $ 712,091 5%
Enterprise Solutions 303,209 291,390 4%
-------------- ------------- --------
Total Messaging Solutions 1,051,150 1,003,481 5%
-------------- ------------- --------
Non-core 29,756 35,668 (17%)
Core 9,903 10,359 (4%)
-------------- ------------- --------
Capital Services 39,659 46,027 (14%)
-------------- ------------- --------
Total Revenue $ 1,090,809 $ 1,049,508 4%
============== ============= ========
Operating Profit (1)
-------------------
Global Mailing $ 220,577 $ 201,581 9%
Enterprise Solutions 11,364 17,581 (35%)
-------------- ------------- --------
Total Messaging Solutions 231,941 219,162 6%
-------------- ------------- --------
Non-core 12,025 15,380 (22%)
Core 5,071 4,327 17%
-------------- ------------- --------
Capital Services 17,096 19,707 (13%)
-------------- ------------- --------
Total Operating Profit 249,037 238,869 4%
Unallocated amounts:
Net interest (corporate interest expense,
net of intercompany transactions) (26,193) (20,245)
Corporate expense (35,304) (30,088)
Restructuring charge (21,265) -
-------------- -------------
Income before income taxes $ 166,275 $ 188,536
============== =============
<FN>
(1) Operating profit excludes general corporate expenses, income taxes and net
interest other than that related to finance operations.
</FN>
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
(Dollars in thousands, except per share amounts)
Three months ended
March 31, 2003
------------------
GAAP income before income taxes, as reported $ 166,275
Restructuring charge 21,265
-----------------
Income before income taxes, as adjusted 187,540
Provision for income taxes, as adjusted 60,027
-----------------
Net income, as adjusted $ 127,513
=================
GAAP diluted earnings per share, as reported $ 0.48
Restructuring charge 0.06
-----------------
Diluted earnings per share, as adjusted $ 0.54
=================
GAAP net cash provided by operating activities,
as reported $ 216,848
Net investment in fixed assets (68,342)
-----------------
Free cash flow 148,506
Payments related to restructuring charge 12,835
-----------------
Free cash flow excluding restructuring payments $ 161,341
=================