EXHIBIT 99.1
Imagistics International Reports Record Fourth Quarter and Full Year
2004 Results Based on Strong Copier/MFP Growth
TRUMBULL, Conn.--(BUSINESS WIRE)--Feb. 10, 2005--Imagistics
International Inc. (NYSE:IGI)
-- EPS of $0.40, up 21% for Fourth Quarter
-- Copier/MFP Revenue up 5% in Fourth Quarter; Up 9% for Full
Year 2004
-- Copier/MFP Rental Revenue up 7% in Fourth Quarter; Up 9% for
Full Year 2004
-- Guidance for 2005 Raised to the $1.85 to $1.90 Range
Imagistics International Inc. (NYSE:IGI) today announced a 21
percent increase in diluted earnings per share to $0.40 for the fourth
quarter of 2004 compared with $0.33 for the fourth quarter of 2003.
Net income grew by 21 percent over the same period to $6.7 million
from $5.5 million last year. Total revenue for the fourth quarter
decreased 6 percent to $146.1 million. Revenue is generated from three
business lines: core copier/MFP (multifunctional products), facsimile
and sales to Pitney Bowes of Canada ("PB Canada") under a reseller
agreement. For the quarter, copier/MFP revenue increased 5 percent to
$104.3 million, facsimile revenue declined 19 percent to $39.7 million
and sales to PB Canada decreased 72 percent to $2.1 million compared
with the prior year's fourth quarter. Excluding sales to PB Canada,
total revenue for the fourth quarter was $144.0 million, down 3
percent compared to the previous year.
For the full year 2004, total revenue was $609.1 million, down 2
percent from 2003. Revenue excluding sales to PB Canada increased
slightly. For the full year 2004, diluted earnings per share grew 24
percent to $1.48, compared to $1.19 in 2003.
Marc C. Breslawsky, Imagistics Chairman and Chief Executive
Officer, said, "2004 was a strong year for Imagistics. For 2004, core
copier/MFP revenues grew a strong 9 percent and revenue excluding PB
Canada was up slightly, demonstrating our continuing success
transitioning from facsimile to copier/MFP. In fact, copier/MFP
revenue in the fourth quarter 2004 was 71 percent of total revenue, up
from 57 percent at the spinoff in December 2001. Although our sales to
PB Canada have declined significantly, those sales are at low margins
and the decline had no material impact on our profitability.
"For the fourth quarter 2004, we continued our track record of
delivering strong earnings every quarter since the spin off of
Imagistics over three years ago. Again, our management team executed
well and delivered on our commitments. Coming off a strong 2004, we
are establishing guidance for 2005, targeting earnings per share in
the $1.85 to $1.90 range. Our previous guidance for EPS growth was 20+
percent.
"As the market is transitioning to color in the workplace, we are
very excited about our new products. Just a few days ago we introduced
the cm3530 and cm4530 color-capable multifunctional devices. These
networked MFPs offer high quality 35 and 45 page-per-minute black and
white with 11 page-per-minute on-demand full color. With a full suite
of functions including printing, copying, scanning and faxing, these
products broaden our color-capable offerings and continue our strategy
of merging powerful scanning, email and file management capabilities
to provide seamless paths between hard copy and digital formats for
fast and easy document management and distribution. The launch of new
color products is an integral part of our strategy, as color MFPs
provide higher value recurring revenue and profit streams for pages
and aftermarket color supplies, compared to monochrome. Our plans
include refreshing the entire upper end of our product line in 2005,
more than doubling the pace of product introductions of last year."
Imagistics President and Chief Operating Officer, Joseph
Skrzypczak added, "Our strategic thrust is to continue the growth of
copier/MFP, focusing on rentals to increase our recurring revenue
stream, while maintaining gross margins and reducing operating
expenses. Sales, service and administrative expenses were running high
in 2004 due to the ERP implementation and we believe they peaked in
the third quarter 2004. On a year-over-year basis, fourth quarter 2004
SS&A expenses were essentially flat. The reduction of bonus and
certain benefit accruals in the fourth quarter 2004 were offset by
higher sales compensation, direct distribution, ERP related and bad
debt expenses. Compared with the third quarter 2004, we were pleased
that ERP-related salaries and consulting fees declined and we expect
that ongoing SS&A expenses will continue to decline in 2005, with
further reductions in ERP-related consulting and administrative
support expenses. We are in the final phase of the ERP implementation,
which we expect will be completed in 2005.
"We made progress reducing our accounts receivable balance at year
end 2004, which decreased sequentially by $5.4 million or 5 percent.
We expect further improvement in our accounts receivable balance in
2005 as we continue to resolve the backlog of outstanding issues."
Fourth Quarter Results
Revenues
Copier/MFP revenue of $104.3 million rose 5 percent for the fourth
quarter compared to the prior year. Copier/MFP sales increased 3
percent in the fourth quarter 2004 due to continued growth of our
product offerings in both the low and high end digital multifunctional
product segments and color. Rental revenue from the copier/MFP product
line grew 7 percent in the fourth quarter, as a result of additional
rental placements and growing page volumes. As expected, the growth in
copier/MFP rentals in fourth quarter 2004 was less than the 13 percent
experienced in the third quarter 2004. Certain contracts with the
Federal government expired and were not renewed, as our current
product offerings are manufactured in China and are not authorized
under applicable U.S. government purchasing regulations. Copier/MFP
rental revenue is expected to grow at a similar pace in first quarter
2005 as it did in the fourth quarter 2004. Copier/MFP support services
revenue grew 8 percent, due to increased page volumes and strong
growth of copier/MFP equipment throughout 2004, coupled with growth
from geographic expansion.
Facsimile revenue of $39.7 million was down 19 percent in the
fourth quarter. Facsimile sales declined 15 percent, reflecting lower
sales of supplies primarily due to the continuing industry-wide
reduction in facsimile usage. Rental revenue from the facsimile
product line declined 24 percent in the fourth quarter, reflecting 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 grew as a result of customers
purchasing service contracts on rental to sale conversions.
Sales to PB Canada declined 72 percent to $2.1 million in the
fourth quarter. Sales to PB Canada are at lower margins, so the
decline in revenue had little impact on profitability. Excluding sales
to PB Canada, consolidated revenues declined 3 percent.
Gross Margins
The sales gross margin was 46.9 percent, up 5.9 percentage points
compared with the fourth 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, which are at
substantially lower gross margins than direct sales. These factors
were partially offset by the continuing shift in product mix away from
the higher margin facsimile product line toward the lower margin
copier/MFP product line.
The rental gross margin was 72.2 percent, up 2.2 percentage points
compared with the fourth quarter last year. This improved rental gross
margin was primarily the result of lower product costs as well as the
impact of our more disciplined approach to contract terms and
conditions. 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.
Commenting on the improvement in gross margins, Mr. Skrzypczak
stated, "We continued to see year-over-year improvements in gross
margins in the fourth quarter 2004 but, as we have previously
indicated, we do anticipate that overall improvement in gross margins
will begin to level off."
Expenses
Selling, service and administrative ("SS&A") expenses of $80.8
million in the fourth quarter of 2004 were essentially flat compared
to $81.2 million in the fourth quarter of 2003, for the aforementioned
reasons. Interest expense of $1.0 million in the fourth quarter 2004
increased 8 percent compared to the prior year, due to higher levels
of debt partially offset by lower interest rates. The effective income
tax rate of 42.6 percent in the fourth quarter 2004 was essentially
the same as in the third quarter 2004, and was down from 45.6 percent
in the prior year, reflecting a change in the estimate of the
deductibility of certain expenses for tax purposes and a foreign
dividend net of foreign tax credits in 2003.
Timothy Coyne, Chief Financial Officer, stated, "We generated cash
from operations of $22.0 million in the fourth quarter of 2004. We
used our cash to finance $17.0 million in capital expenditures,
including $11.6 million to grow our rental asset base, thereby
continuing to build our profitable copier/MFP recurring revenue
stream. In the fourth quarter, we also invested $5.4 million in
property, plant and equipment, with $2.3 million of that for our ERP
system. Total ERP expenditures declined 34 percent in fourth quarter
2004 compared to third quarter 2004, with similar percentages
capitalized. In the fourth quarter 2004 we also reduced debt by $1.1
million and used $3.4 million to repurchase 97,700 shares. Since the
beginning of the stock buyback program in 2002, we have repurchased
approximately 3.9 million shares or 20 percent of the shares that were
outstanding when Imagistics was spun off in December 2001."
Full Year Results
Total revenue for the full year 2004 was $609.1 million, declining
2 percent from 2003. Revenue excluding sales to PB Canada increased
slightly.
For the full year 2004, total copier/MFP revenue gained 9 percent.
Copier/MFP sales increased 9 percent, rentals grew 9 percent and
support services were up 7 percent compared to the prior year. For the
full year 2004, facsimile revenue was down 16 percent compared to
2003. Facsimile sales declined 13 percent, rentals were down 18
percent and support services were 6 percent lower than the prior year.
For the full year 2004, sales to PB Canada declined 46 percent.
Net income for the full year was up 22 percent to $24.9 million
compared with $20.5 million for 2003. Earnings per diluted share grew
24 percent to $1.48 compared with $1.19 for 2003. 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.
Outlook for 2005
Mr. Breslawsky stated, "2005 is shaping up to be another exciting
year for Imagistics. We have plans to refresh much of our product
line, including the introduction of more affordable color MFPs. We
anticipate that productivity will improve across all business
functions. We believe that 2005 will show some top line growth, as we
are at the inflection point where increases in copier/MFP product line
revenue are expected to exceed the decline in facsimile revenue. Core
copier/MFP continues to grow at a healthy pace, while fax has become a
smaller part of our revenue portfolio. In fact, 2004 marked the first
year since we began reporting that copier/MFP revenue growth exceeded
the fax revenue decline. We are focused on completing our ERP
implementation and reducing our operating expenses to more normal
levels. We are coming off a strong 2004 and as a result, are targeting
EPS growth in the $1.85 to $1.90 range for 2005."
Conference Call
Imagistics International will hold a 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, February 10, 2005 at 11:00 a.m.
(Eastern Time) to discuss results. 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, and in 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 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.
Imagistics International Inc.
Consolidated Statements of Operations
Three months ended Year ended
December 31, December 31,
----------------------- -----------------------
(in millions, except
per share amounts) 2004 2003 B/(W) 2004 2003 B/(W)
- ----------------------------------------------------------------------
Revenue
Sales $ 73.2 $ 79.8 (8%) $ 310.6 $ 316.0 (2%)
Rentals 49.7 54.8 (9%) 209.5 222.2 (6%)
Support services 23.2 21.2 9% 89.0 84.0 6%
- ----------------------------------------------------------------------
Total revenue 146.1 155.8 (6%) 609.1 622.2 (2%)
Costs and expenses
Cost of sales 38.9 47.0 17% 171.4 192.8 11%
Cost of rentals 13.8 16.5 16% 59.1 72.3 18%
Selling, service and
administrative
expenses 80.8 81.2 - 331.5 312.7 (6%)
- ----------------------------------------------------------------------
Operating income 12.6 11.1 14% 47.1 44.4 6%
Interest expense, net 1.0 0.9 (8%) 3.7 8.4 56%
- ----------------------------------------------------------------------
Income before income
taxes 11.6 10.2 14% 43.4 36.0 21%
Provision for income
taxes 4.9 4.7 (7%) 18.5 15.5 (19%)
- ----------------------------------------------------------------------
Net income $ 6.7 $ 5.5 21% $ 24.9 $ 20.5 22%
======================================================================
Calculation of earnings per share
Income available to
common shareholders $ 6.7 $ 5.5 21% $ 24.9 $ 20.5 22%
Basic average shares
outstanding 15.959 16.232 2% 16.186 16.711 3%
Diluted average shares
outstanding 16.624 16.876 2% 16.868 17.230 2%
- ----------------------------------------------------------------------
Basic earnings per
share $ 0.42 $ 0.34 24% $ 1.54 $ 1.22 26%
Diluted earnings per
share $ 0.40 $ 0.33 21% $ 1.48 $ 1.19 24%
======================================================================
Imagistics International Inc.
Condensed Consolidated Balance Sheets
(Unaudited)(Unaudited)(Unaudited)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
(in millions) 2004 2004 2004 2004 2003
- ----------------------------------------------------------------------
Cash $ 12.8 $ 12.3 $ 10.7 $ 12.5 $ 22.9
Accounts receivable,
net 105.7 111.1 119.8 119.8 107.7
Accrued billings 29.0 27.8 24.7 22.2 20.9
Inventories 94.7 91.2 81.5 83.6 86.1
Other current assets 31.4 33.0 32.0 32.5 29.0
- ----------------------------------------------------------------------
Total current assets 273.6 275.4 268.7 270.6 266.6
Property, plant and
equipment, net 60.3 57.8 55.2 53.5 53.2
Rental assets, net 62.8 63.6 62.8 63.2 67.2
Other assets 70.8 70.9 68.0 63.2 59.7
- ----------------------------------------------------------------------
Total assets $ 467.5 $ 467.7 $ 454.7 $ 450.5 $ 446.7
======================================================================
Current portion of
long-term debt $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5
Accounts payable and
accrued liabilities 80.3 87.7 74.5 67.1 79.3
Advance billings 14.8 15.3 14.6 15.2 16.3
- ----------------------------------------------------------------------
Total current
liabilities 95.6 103.5 89.6 82.8 96.1
Long-term debt 70.4 71.5 72.6 77.8 62.9
Other liabilities 24.5 23.3 22.4 21.2 20.3
- ----------------------------------------------------------------------
Total liabilities 190.5 198.3 184.6 181.8 179.3
Stockholders' equity 277.0 269.4 270.1 268.7 267.4
- ---------------------------------------------------------------------
Total liabilities
and stockholders'
equity $ 467.5 $ 467.7 $ 454.7 $ 450.5 $ 446.7
======================================================================
Shares outstanding
(in thousands) 16,305 16,365 16,608 16,694 16,774
==================================================
Memo: Total debt $ 70.9 $ 72.0 $ 73.1 $ 78.3 $ 63.4
==================================================
Imagistics International Inc.
Condensed Consolidated Statements of Cash Flows
Three months ended Year ended
December 31, December 31,
--------------------- ---------------------
(in millions) 2004 2003 2004 2003
- ----------------------------------------------------------------------
Cash flows from operating
activities:
Net income $ 6.7 $ 5.5 $ 24.9 $ 20.5
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 16.0 18.0 65.8 74.5
Provision for bad debt 2.0 1.0 12.4 6.7
Reserve for inventory
obsolescence (0.4) 2.3 2.4 7.5
Deferred taxes on income 5.1 (5.1) 2.9 (0.9)
Change in assets and
liabilities, net of
acquisitions:
Accounts receivable 3.4 (36.5) (8.7) (29.5)
Accrued billings (1.3) 3.0 (8.2) 1.6
Inventories (3.1) 8.8 (8.8) 12.5
Other currents assets
and prepayments (1.9) (1.7) (1.7) 0.3
Accounts payable and
accrued liabilities (4.8) 11.3 0.2 (3.5)
Advance billings (0.5) (9.8) (2.0) (11.1)
Other, net 0.8 1.9 0.2 4.5
- ----------------------------------------------------------------------
Net cash provided by (used
in) operating activities 22.0 (1.3) 79.4 83.1
- ----------------------------------------------------------------------
Cash flows from investing
activities:
Expenditures for rental
equipment assets (11.6) (6.9) (46.4) (34.9)
Expenditures for
property, plant and
equipment (5.4) (2.4) (17.0) (16.1)
Acquisitions, net of cash
acquired (0.8) - (12.9) (4.1)
- ----------------------------------------------------------------------
Net cash used in investing
activities (17.8) (9.3) (76.3) (55.1)
- ----------------------------------------------------------------------
Cash flows from financing
activities:
Purchases of treasury
stock (3.4) (2.2) (23.9) (28.4)
Net (repayments)
borrowings under Term
Loan and Revolving
Credit Facility (1.1) 9.9 7.5 (10.7)
Exercises of stock
options, including
purchases under employee
stock purchase plan 0.8 0.7 3.2 2.7
- ----------------------------------------------------------------------
Net cash (used in)
provided by financing
activities (3.7) 8.4 (13.2) (36.4)
- ----------------------------------------------------------------------
Increase (decrease) in
cash 0.5 (2.2) (10.1) (8.4)
Cash at beginning of
period 12.3 25.1 22.9 31.3
- ----------------------------------------------------------------------
Cash at end of period $ 12.8 $ 22.9 $ 12.8 $ 22.9
======================================================================
Imagistics International Inc.
Supplemental Data Schedules
Revenue
Three months ended Year ended
December 31, December 31,
----------------------------- -----------------------------
(in millions) 2004 2003 2004 2003
- ----------------------------------------------------------------------
Growth Growth Growth Growth
Revenue Rate Revenue Rate Revenue Rate Revenue Rate
----------------------------- -----------------------------
Sales
Copier/MFP
products $ 55.2 3% $ 53.5 8% $222.7 9% $203.5 7%
Facsimile
products 15.9 (15%) 18.8 (24%) 72.4 (13%) 83.6 (14%)
Pitney
Bowes of
Canada 2.1 (72%) 7.5 (22%) 15.5 (46%) 28.9 4%
- ----------------------------------------------------------------------
Total
sales 73.2 (8%) 79.8 (5%) 310.6 (2%) 316.0 -
Rentals
Copier/MFP
products 28.0 7% 26.1 8% 110.3 9% 101.2 7%
Facsimile
products 21.7 (24%) 28.7 (12%) 99.2 (18%) 121.0 (12%)
- ----------------------------------------------------------------------
Total
rentals 49.7 (9%) 54.8 (3%) 209.5 (6%) 222.2 (4%)
Support
services
Copier/MFP
products 21.1 8% 19.6 9% 81.6 7% 76.1 4%
Facsimile
products 2.1 22% 1.6 (18%) 7.4 (6%) 7.9 (16%)
- ----------------------------------------------------------------------
Total
support
services 23.2 9% 21.2 6% 89.0 6% 84.0 1%
- ----------------------------------------------------------------------
Total
revenue $146.1 (6%) $155.8 (3%) $609.1 (2%) $622.2 (1%)
======================================================================
Revenue
Copier/MFP
products $104.3 5% $ 99.2 8% $414.6 9% $380.8 6%
Facsimile
products 39.7 (19%) 49.1 (17%) 179.0 (16%) 212.5 (13%)
- ----------------------------------------------------------------------
Revenue
excluding
Pitney
Bowes of
Canada 144.0 (3%) 148.3 (2%) 593.6 - 593.3 (1%)
Pitney
Bowes of
Canada 2.1 (72%) 7.5 (22%) 15.5 (46%) 28.9 4%
- ----------------------------------------------------------------------
Total
revenue $146.1 (6%) $155.8 (3%) $609.1 (2%) $622.2 (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
direct sales to our 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
Three months ended Year ended
December 31, December 31,
---------------------- ----------------------
(in millions) 2004 2003 B/(W) 2004 2003 B/(W)
- ----------------------------------------------------------------------
EBITDA
Net income $ 6.7 $ 5.5 21% $ 24.9 $ 20.5 22%
Interest expense, net 1.0 0.9 (8%) 3.7 8.4 56%
Provision for income
taxes 4.9 4.7 (7%) 18.5 15.5 (19%)
- ----------------------------------------------------------------------
EBIT 12.6 11.1 14% 47.1 44.4 6%
Depreciation and
amortization 16.0 18.0 11% 65.8 74.5 12%
- ----------------------------------------------------------------------
EBITDA $ 28.6 $ 29.1 (1%) $112.9 $118.9 (5%)
======================================================================
Free Cash Flow
Three months ended Year ended
December 31, December 31,
---------------------- ----------------------
(in millions) 2004 2003 B/(W) 2004 2003 B/(W)
- ----------------------------------------------------------------------
Free cash flow
Net cash provided by
(used in) operating
activities $ 22.0 $ (1.3) * $ 79.4 $ 83.1 (4%)
Expenditures for rental
equipment assets 11.6 6.9 (69%) 46.4 34.9 (33%)
Expenditures for
property, plant and
equipment 5.4 2.4 (123%) 17.0 16.1 (6%)
- ----------------------------------------------------------------------
Free cash flow $ 5.0 $(10.6) 147% $ 16.0 $ 32.1 (50%)
======================================================================
* Not meaningful
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.
Vice President, Corporate Communications
and Investor Relations
Jim Magrone, 203-365- 2361
jmagrone@imagistics.com