EXHIBIT 99.1
Imagistics International Reports Record Third Quarter Earnings
TRUMBULL, Conn.--(BUSINESS WIRE)--Oct. 28, 2004--Imagistics
International Inc. (NYSE:IGI)
-- Record Earnings per Share of $0.38, up 27 Percent over Last
Year
-- Quarterly Copier/MFP Revenue up 9 Percent
-- Quarterly Free Cash Flow of $13.4 Million
Imagistics International Inc. (NYSE:IGI) today announced a 27
percent increase in diluted earnings per share to $0.38 for the third
quarter of 2004 compared with $0.30 for the third quarter of 2003. Net
income increased by 25 percent over the same period to $6.4 million
from $5.1 million last year. Total revenue for the third quarter
decreased 4 percent to $153.1 million. Revenue is generated from three
business lines: copier/MFP (multifunctional product), facsimile and
sales to Pitney Bowes of Canada ("PB Canada") under a reseller
agreement. Copier/MFP revenue increased 9 percent to $108.4 million,
facsimile revenue declined 17 percent to $43.0 million and sales to PB
Canada decreased 81 percent to $1.7 million compared with the prior
year's third quarter. Excluding sales to PB Canada, total revenue for
the third quarter was $151.4 million, essentially flat versus revenue
for the third quarter of the previous year.
Marc C. Breslawsky, Imagistics Chairman and Chief Executive
Officer, said, "We are very proud of the progress we have made in the
third quarter with record levels of net income and EPS. These results
reflect our ability to execute and achieve our operational and
strategic goals. We continue to successfully transition our business
to copier/MFP products from facsimile products. Copier/MFP revenue now
represents 72 percent of our total revenue versus 56 percent two years
ago, reflecting our strong growth in copier/MFP while facsimile
continues its expected decline. Copier/MFP is now clearly the dominant
part of our business and represents the largest portion of our
recurring revenue stream."
Mr. Breslawsky continued, "Again this quarter we continued our
unbroken string of quarterly year-over-year increases in copier/MFP
revenue since the spin-off, which now stands at eleven consecutive
quarters. We are particularly pleased by our 9 percent increase in
total copier/MFP revenue, led by a 13 percent increase in copier
rental revenue. We do expect the rate of growth in copier/MFP rental
revenue to moderate in the fourth quarter, as certain copier rental
contracts with the federal government are expiring and we do not
expect them to be renewed. In addition, we did see a higher rate of
decline in our facsimile rental business during the quarter due to
several large rental to sale conversions."
Mr. Breslawsky also commented, "This year J.D. Power and
Associates again honored us with their prestigious "#1
Copier/Multifunction Product in Overall Customer Satisfaction Among
Business Users"(1) award. We continue to be distinguished from our
peers by independent research organizations and believe that this is
not only a validation of our best of breed strategy, but also proof of
the success of our commitment to provide our customers world-class
products and unparalleled customer support."
Imagistics President and Chief Operating Officer, Joseph
Skrzypczak added, "In the third quarter, we continued to expand our
international presence through an acquisition in Ontario, Canada. This
acquisition will provide additional direct distribution and service
capabilities in the important Canadian market as well as enhance our
ability to support our broad portfolio of global and U.S.-based
national and major account customers. In addition to utilizing our
free cash flow for geographic expansion, we were also able to reduce
debt by $1.1 million and repurchase 255 thousand shares of our common
stock for a total cost of $8.2 million. This represents 2 percent of
the stock outstanding at June 30, 2004. Since the beginning of the
stock buyback program in 2002, we have repurchased 3.8 million shares
or 19 percent of the shares that were outstanding when Imagistics was
spun off in December 2001."
Third Quarter Results
Copier/MFP revenue rose 9 percent for the third quarter.
Copier/MFP sales increased 8 percent due to continued growth across
all digital multifunctional product segments. Rental revenue from the
copier/MFP product line increased 13 percent in the third quarter,
reflecting additional rental placements and an increase in page
volumes. Support services revenue increased 7 percent, in response to
copier/MFP equipment sales growth.
Facsimile revenue declined 17 percent in the third quarter.
Facsimile sales declined 10 percent, primarily due to lower supplies
sales from acceleration in the continuing industry-wide reduction in
facsimile usage somewhat offset by higher equipment sales recognized
in the quarter. Rental revenue from the facsimile product line
declined 22 percent in the third quarter, reflecting acceleration of
the decline in the rental installed base due in part to the impact of
rental to sale conversions and lower per unit pricing. Support
services revenue from facsimile declined 5 percent.
Sales to PB Canada declined 81 percent to $1.7 million in the
third quarter. Excluding sales to PB Canada, sales were essentially
flat.
The sales gross margin of 48.3 percent increased 10.4 percentage
points compared with the third quarter of 2003 due to capturing most
of the benefit of lower product costs, lower inventory obsolescence
charges and a lower proportion of sales to PB Canada at substantially
lower gross margins than direct sales. These factors were partially
offset by the continuing shift in product mix away from the facsimile
product line toward the copier/MFP product line, which commands lower
gross margins.
The rental gross margin of 72.3 percent improved 5.4 percentage
points compared with the third quarter last year. This improved rental
gross margin was primarily attributable to lower product costs as well
as the impact of rental contracts containing more favorable terms and
conditions than the contracts they are replacing. Similar to the sales
gross margin, rental gross margin improvements were partially offset
by the continuing shift in product revenue mix from facsimile to
copier/MFP.
Selling, service and administrative ("SS&A") expenses of $85.8
million in the third quarter of 2004 increased 13 percent from the
prior year level of $76.0 million. In the third quarter of 2004, the
increase in SS&A expenses was the result of higher compensation costs
related to the increase in copier/MFP revenue coupled with increased
sales headcount, higher ERP-related administrative costs, increased
bad debt expense, higher operating expenses associated with the
expansion of direct distribution capabilities and the absence of a
property damage insurance claim recovery we recorded in the third
quarter of 2003 related to the World Trade Center.
Interest expense declined 79 percent compared with the third
quarter of 2003 primarily as a result of the recognition in the third
quarter of 2003 of $2.8 million of interest expense associated with
the disposition of the Company's interest rate swap agreements.
Timothy Coyne, Chief Financial Officer, stated, "We generated
$31.8 million of cash from operations this quarter. As a result, we
were able to finance $13.5 million in capital expenditures to increase
our rental asset base, which reflects our strategic emphasis on
building the recurring revenue stream in our copier/MFP product line.
In the third quarter, we also invested $4.9 million in property, plant
and equipment, the majority of which was for our ERP system, as well
as $2.5 million for acquisitions to expand our distribution
capabilities."
First Nine Months Results
For the first nine months of 2004, total copier/MFP revenue grew
10 percent. Copier/MFP sales were up 12 percent, rentals increased 10
percent and support services were 7 percent higher than the prior
year. Over this period, facsimile revenue declined 15 percent from the
prior year. Facsimile sales were down 13 percent, rentals declined 16
percent and support services were 14 percent lower than the prior
year. For the nine months, sales to PB Canada declined 37 percent.
Total revenue for the first nine months was $462.9 million,
declining 1 percent from the first nine months of 2003. Revenue
excluding sales to PB Canada increased 1 percent.
Net income increased 22 percent to $18.3 million compared with
$14.9 million for the first nine months of 2003. Earnings per diluted
share increased 26 percent to $1.08 compared with $0.86 for the same
period last year. The increase in earnings was the result of improved
sales and rental gross margins and lower interest expense, which were
partially offset by higher SS&A expenses.
Summary and Outlook for 2004 and 2005
Mr. Breslawsky stated, "At this time, we are reiterating our
previous earnings guidance of $1.48 for the year. We believe that we
have reached the inflection point where growth in the copier/MFP
product line will more than compensate for the decline in facsimile
revenue. We continue to be confident that our unique business model
will provide copier/MFP growth in excess of the overall market and
will result in modest top-line growth beginning in 2005. We are
focused on completing our ERP implementation and reducing our
operating expenses to more normal levels. We maintain our expectation
that earnings per share growth will exceed 20 percent in 2005."
Conference Call
Imagistics International will be holding an earnings conference
call with Marc Breslawsky, Chairman and Chief Executive Officer,
Joseph Skrzypczak, President and Chief Operating Officer, and Timothy
Coyne, Chief Financial Officer, on Thursday, October 28, at 11:00 a.m.
(Eastern Time). The conference will be available by audio webcast at
our investor website, www.IGIinvestor.com, where it will also be
archived.
About Imagistics International Inc.
Imagistics International Inc. (NYSE:IGI) is a large direct sales,
service and marketing organization offering document imaging
solutions, including high performance, leading edge copier/MFPs and
facsimile machines to Fortune 1000 companies and other organizations.
Its direct sales and service network is located throughout the United
States, Canada and the United Kingdom. Imagistics International is a
member of the S&P SmallCap 600 Index and the Russell 2000 Index(R) and
is headquartered in Trumbull, Connecticut. For additional information
about Imagistics International, please visit www.imagistics.com and
www.IGIinvestor.com.
The statements contained in this news release that are not purely
historical are forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, that are based on
management's beliefs, certain assumptions and current expectations.
These statements may be identified by their use of forward-looking
terminology such as the words "expects," "projects," "anticipates,"
"intends" and other similar words. 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, general economic, business and market
conditions, competitive pricing pressures, timely development and
acceptance of new products, our reliance on third party suppliers,
potential disruptions in implementing information technology systems,
including the recent ERP implementation, potential disruptions
affecting the international shipment of goods, our ability to create
brand recognition under our new name and currency and interest rate
fluctuations. For a more complete discussion of certain of the risks
and uncertainties that could cause actual results to differ from those
contained in the forward-looking statements, see "Risk Factors" in the
Imagistics 2003 Form 10-K and other SEC filings. The forward-looking
statements contained in this news release are made as of the date
hereof, and we do not undertake any obligation to update any
forward-looking statements, whether as a result of future events, new
information or otherwise.
(1) J.D. Power and Associates 2003-2004 Copier Customer
Satisfaction StudiesSM. 2004 Study based on responses from 2,986 IT
and business decision makers at small, medium and large companies in
the first 18 months of copier ownership.
Imagistics International Inc.
Consolidated Statements of Operations
(Unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------------------ ---------------------
(in millions, except per B / B /
share amounts) 2004 2003 (W) 2004 2003 (W)
- ----------------------------------------------------------------------
Revenue
Sales $79.6 $84.3 (6%) $237.3 $236.2 -
Rentals 51.2 54.2 (6%) 159.8 167.4 (5%)
Support services 22.3 21.0 6% 65.8 62.8 5%
- ----------------------------------------------------------------------
Total revenue 153.1 159.5 (4%) 462.9 466.4 (1%)
Costs and expenses
Cost of sales 41.1 52.3 21% 132.5 145.8 9%
Cost of rentals 14.2 18.0 21% 45.3 55.8 19%
Selling, service
and administrative
expenses 85.8 76.0 (13%) 250.6 231.5 (8%)
- ----------------------------------------------------------------------
Operating income 12.0 13.2 (9%) 34.5 33.3 4%
Interest expense,
net 0.9 4.3 79% 2.7 7.5 64%
- ----------------------------------------------------------------------
Income before income
taxes 11.1 8.9 24% 31.8 25.8 23%
Provision for
income taxes 4.7 3.8 (23%) 13.5 10.9 (25%)
- ----------------------------------------------------------------------
Net income $6.4 $5.1 25% $18.3 $14.9 22%
======================================================================
Calculation of earnings
per share
Income available to
common shareholders $6.4 $5.1 25% $18.3 $14.9 22%
Basic average shares
outstanding 16.145 16.472 2% 16.255 16.855 4%
Diluted average shares
outstanding 16.797 17.067 2% 16.956 17.330 2%
- ----------------------------------------------------------------------
Basic earnings per share $0.40 $0.31 29% $1.12 $0.89 26%
Diluted earnings per
share $0.38 $0.30 27% $1.08 $0.86 26%
======================================================================
Imagistics International Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (Unaudited) (Unaudited)
September June March December
30, 30, 31, 31,
(in millions) 2004 2004 2004 2003
- ----------------------------------------------------------------------
Cash $12.3 $10.7 $12.5 $22.9
Accounts receivable, net 111.1 119.8 119.8 107.7
Accrued billings 27.8 24.7 22.2 20.9
Inventories 91.2 81.5 83.6 86.1
Other current assets 33.0 32.0 32.5 29.0
- ----------------------------------------------------------------------
Total current assets 275.4 268.7 270.6 266.6
Property, plant and
equipment, net 57.8 55.2 53.5 53.2
Rental assets, net 63.6 62.8 63.2 67.2
Other assets 70.9 68.0 63.2 59.7
- ----------------------------------------------------------------------
Total assets $467.7 $454.7 $450.5 $446.7
======================================================================
Current portion of long-
term debt $0.5 $0.5 $0.5 $0.5
Accounts payable and
accrued liabilities 87.7 74.5 67.1 79.3
Advance billings 15.3 14.6 15.2 16.3
- ----------------------------------------------------------------------
Total current liabilities 103.5 89.6 82.8 96.1
Long-term debt 71.5 72.6 77.8 62.9
Other liabilities 23.3 22.4 21.2 20.3
- ----------------------------------------------------------------------
Total liabilities 198.3 184.6 181.8 179.3
Stockholders' equity 269.4 270.1 268.7 267.4
- ----------------------------------------------------------------------
Total liabilities and
stockholders' equity $467.7 $454.7 $450.5 $446.7
======================================================================
Shares outstanding (in
thousands) 16,365 16,608 16,694 16,774
=========== =========== =========== ========
Memo: Total debt $72.0 $73.1 $78.3 $63.4
=========== =========== =========== ========
Imagistics International Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
(in millions) 2004 2003 2004 2003
- ----------------------------------------------------------------------
Cash flows from operating activities:
Net income $6.4 $5.1 $18.3 $14.9
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 16.1 18.5 49.8 56.5
Provision for bad debt 4.0 1.2 10.4 5.7
Reserve for inventory obsolescence 0.2 1.4 2.7 5.1
Deferred taxes on income 0.4 2.2 (2.2) 4.2
Change in assets and liabilities,
net of acquisitions:
Accounts receivable 5.2 (5.2) (12.1) 7.0
Accrued billings (3.1) - (6.9) (1.4)
Inventories (9.2) 4.6 (5.7) 3.7
Other currents assets and
prepayments 0.3 0.5 0.2 2.1
Accounts payable and accrued
liabilities 11.4 (1.9) 5.0 (14.7)
Advance billings 0.7 0.4 (1.5) (1.3)
Other, net (0.6) 1.2 (0.5) 2.6
- ----------------------------------------------------------------------
Net cash provided by operating activities 31.8 28.0 57.5 84.4
- ----------------------------------------------------------------------
Cash flows from investing activities:
Expenditures for rental equipment
assets (13.5) (10.7) (34.8) (28.0)
Expenditures for property, plant and
equipment (4.9) (4.6) (11.6) (13.7)
Acquisitions, net of cash acquired (2.5) (4.1) (12.2) (4.1)
- ----------------------------------------------------------------------
Net cash used in investing activities (20.9) (19.4) (58.6) (45.8)
- ----------------------------------------------------------------------
Cash flows from financing activities:
Purchases of treasury stock (8.2) (5.6) (20.5) (26.2)
Net (repayments) borrowings under
Term Loan
and Revolving Credit Facility (1.1) (20.2) 8.6 (20.6)
Exercises of stock options,
including purchases
under employee stock purchase
plan - 0.1 2.4 2.0
- ----------------------------------------------------------------------
Net cash used in financing activities (9.3) (25.7) (9.5) (44.8)
- ----------------------------------------------------------------------
Increase (decrease) in cash 1.6 (17.1) (10.6) (6.2)
Cash at beginning of period 10.7 42.2 22.9 31.3
- ----------------------------------------------------------------------
Cash at end of period $12.3 $25.1 $12.3 $25.1
======================================================================
Imagistics International Inc.
Supplemental Data Schedules
Revenue
(Unaudited)
Three months ended
September 30,
-------------------------------------
(in millions) 2004 2003
- --------------------------------------------------------------------
Growth Growth
Revenue Rate Revenue Rate
-------------------------------------
Sales
Copier/MFP products $59.1 8% $54.6 12%
Facsimile products 18.8 (10%) 21.0 (11%)
Pitney Bowes of Canada 1.7 (81%) 8.7 84%
- --------------------------------------------------------------------
Total sales 79.6 (6%) 84.3 9%
Rentals
Copier/MFP products 28.8 13% 25.4 6%
Facsimile products 22.4 (22%) 28.8 (15%)
- --------------------------------------------------------------------
Total rentals 51.2 (6%) 54.2 (7%)
Support services
Copier/MFP products 20.5 7% 19.2 3%
Facsimile products 1.8 (5%) 1.8 (20%)
- --------------------------------------------------------------------
Total support services 22.3 6% 21.0 1%
- --------------------------------------------------------------------
Total revenue $153.1 (4%) $159.5 2%
====================================================================
Revenue
Copier/MFP products $108.4 9% $99.2 8%
Facsimile products 43.0 (17%) 51.6 (14%)
- --------------------------------------------------------------------
Revenue excluding
Pitney Bowes of Canada 151.4 - 150.8 -
Pitney Bowes of Canada 1.7 (81%) 8.7 84%
- --------------------------------------------------------------------
Total revenue $153.1 (4%) $159.5 2%
====================================================================
Although revenue, excluding sales to Pitney Bowes of Canada,
represents a non-GAAP financial measure, management considers this to
be meaningful to investors as sales to Pitney Bowes of Canada under a
reseller agreement are at margins significantly below the margins on
sales to our direct customers. We expect to maintain a reseller
agreement with Pitney Bowes of Canada; however, we are unable to
predict the future level of sales to Pitney Bowes of Canada. We also
believe it is useful to analyze revenue excluding sales to Pitney
Bowes of Canada in order to better evaluate the effectiveness of our
direct sales and marketing initiatives and our pricing policies.
Imagistics International Inc.
Supplemental Data Schedules
Revenue
(Unaudited)
Nine months ended
September 30,
-------------------------------------
(in millions) 2004 2003
- ------------------------------------------------------------------
Growth Growth
Revenue Rate Revenue Rate
-------------------------------------
Sales
Copier/MFP products $167.5 12% $150.0 6%
Facsimile products 56.4 (13%) 64.8 (10%)
Pitney Bowes of Canada 13.4 (37%) 21.4 18%
- ------------------------------------------------------------------
Total sales 237.3 - 236.2 2%
Rentals
Copier/MFP products 82.3 10% 75.1 7%
Facsimile products 77.5 (16%) 92.3 (12%)
- ------------------------------------------------------------------
Total rentals 159.8 (5%) 167.4 (5%)
Support services
Copier/MFP products 60.4 7% 56.5 2%
Facsimile products 5.4 (14%) 6.3 (15%)
- ------------------------------------------------------------------
Total support services 65.8 5% 62.8 -
- ------------------------------------------------------------------
Total revenue $462.9 (1%) $466.4 (1%)
==================================================================
Revenue
Copier/MFP products $310.2 10% $281.6 6%
Facsimile products 139.3 (15%) 163.4 (12%)
- ------------------------------------------------------------------
Revenue excluding
Pitney Bowes of Canada 449.5 1% 445.0 (1%)
Pitney Bowes of Canada 13.4 (37%) 21.4 18%
- ------------------------------------------------------------------
Total revenue $462.9 (1%) $466.4 (1%)
==================================================================
Although revenue, excluding sales to Pitney Bowes of Canada,
represents a non-GAAP financial measure, management considers this to
be meaningful to investors as sales to Pitney Bowes of Canada under a
reseller agreement are at margins significantly below the margins on
sales to our direct customers. We expect to maintain a reseller
agreement with Pitney Bowes of Canada; however, we are unable to
predict the future level of sales to Pitney Bowes of Canada. We also
believe it is useful to analyze revenue excluding sales to Pitney
Bowes of Canada in order to better evaluate the effectiveness of our
direct sales and marketing initiatives and our pricing policies.
Imagistics International Inc.
Supplemental Data Schedules
EBITDA
(Unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------------- -------------------
(in millions) B / B /
2004 2003 (W) 2004 2003 (W)
- ----------------------------------------------------------------------
EBITDA
Net income $6.4 $5.1 25% $18.3 $14.9 22%
Interest expense, net 0.9 4.3 79% 2.7 7.5 64%
Provision for income
taxes 4.7 3.8 (23%) 13.5 10.9 (25%)
- ----------------------------------------------------------------------
EBIT 12.0 13.2 (9%) 34.5 33.3 4%
Depreciation and
amortization 16.1 18.5 13% 49.8 56.5 12%
- ----------------------------------------------------------------------
EBITDA $28.1 $31.7 (12%) $84.3 $89.8 (6%)
======================================================================
Free Cash Flow
(Unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------------- -------------------
(in millions) B / B /
2004 2003 (W) 2004 2003 (W)
- ----------------------------------------------------------------------
Free cash flow
Net cash provided by
operating activities $31.8 $28.0 13% $57.5 $84.4 (32%)
Expenditures for rental
equipment assets 13.5 10.7 (26%) 34.8 28.0 (24%)
Expenditures for
property, plant and
equipment 4.9 4.6 (6%) 11.6 13.7 15%
- ----------------------------------------------------------------------
Free cash flow $13.4 $12.7 5% $11.1 $42.7 (74%)
======================================================================
Although EBITDA and free cash flow represent non-GAAP financial
measures, management believes these measures are meaningful to
investors in evaluating our ability to meet our future debt
requirements and to fund capital expenditures and working capital
requirements.
CONTACT: Imagistics International Inc.
Timothy E. Coyne, 203-365-2364
tim.coyne@imagistics.com