Exhibit 99.1
Imagistics International Reports First Quarter 2005 Results
TRUMBULL, Conn.--(BUSINESS WIRE)--May 5, 2005--Imagistics International
Inc. (NYSE: IGI)
-- Copier/MFP revenue up 6%, copier/MFP rental revenue up 5%, facsimile
revenue down 28%
-- EPS of $0.13, after $0.14 of previously announced charges for
restructuring and severance, and expensing stock options
-- Continuing improvement in selling, service and administrative expenses
-- Affirming annual guidance
Imagistics International Inc. (NYSE: IGI) today announced diluted earnings
per share of $0.13 and net income of $2.1 million for the first quarter of 2005,
after previously announced charges of $1.8 million, or $0.06 per share, for
restructuring, and $1.8 million, or $0.06 per share for severance, as well as
$0.02 per share for the expensing of stock options. Of the $1.8 million of
restructuring charges, $1.1 million is classified as cost of sales and $0.7
million is classified as selling, service and administrative expenses. After
restating the first quarter of 2004 results for the retroactive adoption of
expensing stock options, diluted earnings per share were $0.30 and net income
was $5.2 million.
Total revenue for the first quarter of 2005 decreased 10 percent to $142.1
million. Revenue is generated from three business lines: copier/MFP
(multifunctional products), facsimile, and sales to PB Canada under a reseller
agreement. For the quarter, copier/MFP revenue increased 6 percent to $103.8
million, facsimile revenue declined 28 percent to $36.2 million, and sales to PB
Canada decreased 79 percent to $2.1 million compared with the prior year's first
quarter. The large decline in facsimile revenue this quarter was exacerbated by
a strong first quarter of 2004. As reported last year, a large sale of facsimile
equipment occurred in the first quarter of 2004, and as a result, that quarter
was the only one since the spin-off to show a sequential increase in facsimile
revenue. Additionally, continuing the trend experienced throughout 2004, revenue
from Pitney Bowes Canada ("PB Canada") was down sharply. Excluding sales to PB
Canada, total revenue for the first quarter was $140.0 million, down 6 percent
compared with the same period in the previous year.
Marc C. Breslawsky, Imagistics Chairman and Chief Executive Officer, said,
"Our focus continues to be on transforming Imagistics into a copier/MFP business
and creating a more customer focused, performance driven company. First quarter
2005 results were disappointing, as facsimile revenue declined faster than the
20 percent we originally expected. In the first quarter 2005 facsimile
represented only 26 percent of our revenue portfolio. Although our copier/MFP
revenue continued to grow in a market that has been generally soft, the revenue
and margin impact of this growth clearly did not offset the impact of the
decline we experienced in facsimile. Gross margins associated with facsimile are
greater than copier/MFP by approximately 14 percentage points. As the decline in
facsimile revenue continues and our product mix becomes more heavily skewed to
copier/MFPs, there is a resulting impact on the company's overall gross margin.
Gross margins for copier/MFP products and facsimile products are expected to
remain at their respective current levels.
"In the first quarter of 2005, the company took additional actions to
reduce selling, service and administrative expenses, and I am pleased to report
that those expenses were reduced by 6 percent in the first quarter of 2005
compared with the prior year, excluding the charges for restructuring and
severance. We are affirming our previous annual guidance of $1.61-$1.66 per
share for 2005."
Imagistics President and Chief Operating Officer, Joseph Skrzypczak added,
"As planned, this is the year that we expect to begin reducing selling, service
and administrative expenses and complete the implementation of the ERP system.
In addition to the 6 percent year-over-year decline in selling, service and
administrative expenses in the first quarter of 2005 after adjusting for the
restructuring and severance charges, we also reduced our accounts receivable
balance by 6 percent sequentially. Beyond the expected expense reduction from
completing the ERP implementation, we took the additional cost reduction actions
announced last month, including closing the National Remanufacturing Center and
reducing headcount by 100 employees across the organization. As previously
announced, we expect further expense reductions this year.
"We are on track with our new product introductions for 2005 and continue
to be excited about the potential of our color products. While our installed
base of color copier/MFPs is relatively small, in the first quarter of 2005
color enabled copier/MFP installs gained momentum, and were up over 200 percent
year-over-year and increased more than 50 percent sequentially. In our 31 to 69
page-per-minute copier/MFP product line, over 20 percent of our placements were
color units in the first quarter of 2005."
First Quarter 2005 Results
Revenues
Copier/MFP revenue of $103.8 million rose 6 percent for the first quarter
2005, compared with the prior year. Copier/MFP sales increased 8 percent in the
first quarter 2005 due to continued growth of our product offerings, including
strong demand for color copier/MFP products. Rental revenue from the copier/MFP
product line grew 5 percent in the first quarter, as a result of additional
rental placements and growing page volumes. The growth in copier/MFP rentals in
first quarter 2005 continued to be impacted by the expiration of certain
contracts with the Federal government that 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 support services
revenue grew 2 percent.
Facsimile revenue of $36.2 million was down 28 percent in the first quarter
of 2005. Facsimile sales declined 29 percent, reflecting lower equipment and
supply sales primarily due to the continuing industry-wide reduction in
facsimile usage, and a large sale of facsimile equipment in the first quarter of
2004. Rental revenue from the facsimile product line declined 29 percent in the
first quarter of 2005, 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 declined 6 percent in the first quarter
of 2005.
Sales to PB Canada declined 79 percent to $2.1 million in the first
quarter. Sales to PB Canada are at low margins, so the decline in revenue had
little impact on profitability. Excluding sales to PB Canada, consolidated
revenues declined 6 percent.
Gross Margins
The sales gross margin was 41.9 percent, up 1.2 percentage points compared
with the first quarter of 2004. Excluding $1.1 million of inventory obsolescence
that is part of the restructuring charge, the sales gross margin was 43.5
percent, up 2.8 percentage points compared with the first quarter of 2004, due
to a lower proportion of sales to PB Canada, which are at substantially lower
gross margins than direct sales, lower inventory obsolescence charges, and
capturing most of the benefit of lower product costs. 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 70.1 percent, down 0.9 percentage points
compared with the first quarter last year. This slightly lower rental gross
margin was primarily the result of the continuing shift in product revenue mix
from facsimile to copier/MFP.
Expenses
Selling, service and administrative ("SS&A") expenses in the first quarter
of 2005 were $80.8 million, down 3.3 percent compared with the first quarter of
2004. Excluding the $2.5 million of previously announced charges, consisting of
restructuring charges of $0.7 million and severance charges of $1.8 million,SS&A
expenses were down $5.3 million or 6 percent compared to the first quarter of
2004. Interest expense increased by $0.2 million in the first quarter 2005
compared to the prior year, due to a higher level of debt and higher interest
rates.
As the company previously announced, it expects to take an additional
severance charge of approximately $0.6 million in the second quarter of 2005.
Timothy Coyne, Chief Financial Officer, stated, "In the first quarter of
2005, we generated cash from operations of $6.0 million, compared to a use of
cash of $4.4 million in the same period last year, as restated. Traditionally,
cash from operations is low in the first quarter as cash is used to pay
incentives and other items accrued in the previous year. In the first quarter
2005 we repurchased 143,364 shares, which represents an increase of 47 percent
compared with the number of shares repurchased in the fourth quarter of 2004.
While debt increased by $8.8 million in the first quarter of 2005, we still
maintained debt as a percentage of total capital at a conservative 22 percent.
"ERP-related costs are winding down. In the first quarter of 2005, total
direct ERP-related expenditures were $2.2 million, and declined 52 percent
compared with the first quarter last year and were down 38 percent
sequentially."
Expensing Stock Options
The company adopted SFAS 123R early and began expensing employee stock
options effective January 1, 2005. The expensing of stock options reduced
diluted earnings per share by approximately $0.02 in the first quarter 2005,
compared with approximately $0.04 in the first quarter of 2004. For the full
year 2005, the expensing of stock options is expected to reduce diluted earnings
per share by $0.08- $0.10. For the full year 2004, the expensing of stock
options reduces diluted earnings per share to $1.35, down $0.13, from the
previously reported $1.48 per share. Prior periods have been restated to include
the effect of expensing stock options. Historical quarterly restated financial
statements are posted on our investor website, www.IGIinvestor.com.
Outlook
The company affirms its 2005 guidance of $1.61-$1.66 per share, which
represents an increase of 19-23 percent over the restated $1.35 per share earned
in 2004. That guidance, as recently announced, is after expensing stock options
and charges for restructuring and severance. Earnings are expected to be
weighted to the latter part of 2005, reflecting the timing of the impact of cost
reduction actions offsetting the greater than anticipated decline in facsimile
revenue.
The company expects the copier/MFP revenue growth rate for the balance of
2005 to remain in the mid single digit percent range, similar to that
experienced in the first quarter of 2005. Facsimile revenue is estimated to
decline at an annual rate in the mid-to-high twenty percent range for the
remainder of 2005. SS&A expenses, exclusive of acquisitions, are estimated to
further decline, reflecting cost reduction actions already implemented and
identified.
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, May
5, 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 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 the United Kingdom, and in parts of
Canada. 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 2004 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 Income
(Unaudited)
Three months ended
March 31,
-------------------------
(in millions, except per share amounts) 2005 2004 B/(W)
- ----------------------------------------------------------------------
Revenue
Sales $ 72.9 $ 82.5 (12%)
Rentals 47.6 54.4 (13%)
Support services 21.6 21.4 2%
- ----------------------------------------------------------------------
Total revenue 142.1 158.3 (10%)
Costs and expenses
Cost of sales 42.3 48.9 14%
Cost of rentals 14.2 15.8 10%
Selling, service and administrative expenses 80.8 83.6 3%
- ----------------------------------------------------------------------
Operating income 4.8 10.0 (52%)
Interest expense, net 1.1 0.9 (21%)
- ----------------------------------------------------------------------
Income before income taxes 3.7 9.1 (60%)
Provision for income taxes 1.6 3.9 61%
- ----------------------------------------------------------------------
Net income $ 2.1 $ 5.2 (59%)
======================================================================
Calculation of earnings per share
Income available to common shareholders $ 2.1 $ 5.2 (59%)
Basic average shares outstanding 16.134 16.386 2%
Diluted average shares outstanding 16.547 17.112 3%
- ----------------------------------------------------------------------
Basic earnings per share $ 0.13 $ 0.31 (58%)
Diluted earnings per share $ 0.13 $ 0.30 (57%)
======================================================================
The Company adopted SFAS No. 123R, "Share-Based Payment," as of
January 1, 2005. Accordingly, certain previously reported amounts have
been restated to conform to the current year presentation.
Imagistics International Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, December 31, March 31,
(in millions) 2005 2004 2004
- ----------------------------------------------------------------------
Cash $ 13.4 $ 12.8 $ 12.5
Accounts receivable, net 99.7 105.7 119.8
Accrued billings 30.8 29.0 22.2
Inventories 89.0 94.7 83.6
Other current assets 28.9 31.4 32.5
- ----------------------------------------------------------------------
Total current assets 261.8 273.6 270.6
Property, plant and equipment,
net 59.5 60.3 53.5
Rental assets, net 60.1 62.8 63.2
Other assets 70.3 70.8 63.2
- ----------------------------------------------------------------------
Total assets $ 451.7 $ 467.5 $ 450.5
======================================================================
Current portion of long-term
debt $ 0.5 $ 0.5 $ 0.5
Accounts payable and accrued
liabilities 57.3 80.3 67.1
Advance billings 14.3 14.8 15.2
- ----------------------------------------------------------------------
Total current liabilities 72.1 95.6 82.8
Long-term debt 79.2 70.4 77.8
Other liabilities 17.6 18.2 15.4
- ----------------------------------------------------------------------
Total liabilities 168.9 184.2 176.0
Stockholders' equity 282.8 283.3 274.5
- ----------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 451.7 $ 467.5 $ 450.5
======================================================================
Shares outstanding (in
thousands) 16,316 16,305 16,694
============ ============ ============
Memo: Total debt $ 79.7 $ 70.9 $ 78.3
============ ============ ============
The Company adopted SFAS No. 123R, "Share-Based Payment," as of
January 1, 2005. Accordingly, certain previously reported amounts have
been restated to conform to the current year presentation.
Imagistics International Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
-----------------
(in millions) 2005 2004
- ----------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 2.1 $ 5.2
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 15.3 17.1
Provision for bad debt 2.0 2.4
Reserve for inventory obsolescence 1.4 1.4
Stock-based compensation expense 0.5 1.0
Excess tax benefits from stock-based compensation (0.5) (0.5)
Deferred taxes on income 3.0 (3.0)
Non-cash restructuring impairment charges 0.5 -
Change in assets and liabilities, net of
acquisitions:
Accounts receivable 4.0 (13.7)
Accrued billings (1.8) (1.3)
Inventories 5.6 1.5
Other currents assets and prepayments 0.6 (1.0)
Accounts payable and accrued liabilities (23.8) (13.1)
Advance billings (0.6) (1.3)
Other, net (2.3) 0.9
- ----------------------------------------------------------------------
Net cash provided by (used in) operating activities 6.0 (4.4)
- ----------------------------------------------------------------------
Cash flows from investing activities:
Expenditures for rental equipment assets (9.4) (9.8)
Expenditures for property, plant and equipment (2.1) (2.8)
Acquisitions, net of cash acquired - (3.8)
- ----------------------------------------------------------------------
Net cash used in investing activities (11.5) (16.4)
- ----------------------------------------------------------------------
Cash flows from financing activities:
Purchases of treasury stock (4.7) (6.3)
Net (repayments) borrowings under Term Loan
and Revolving Credit Facility 8.9 14.9
Exercises of stock options, including purchases
under employee stock purchase plan 1.6 1.1
Excess tax benefits from stock-based compensation 0.5 0.5
- ----------------------------------------------------------------------
Net cash provided by financing activities 6.3 10.2
- ----------------------------------------------------------------------
Effect of exchange rates on cash (0.2) 0.2
Increase (decrease) in cash 0.6 (10.4)
Cash at beginning of period 12.8 22.9
- ----------------------------------------------------------------------
Cash at end of period $ 13.4 $ 12.5
======================================================================
The Company adopted SFAS No. 123R, "Share-Based Payment," as of
January 1, 2005. Accordingly, certain previously reported amounts have
been restated to conform to the current year presentation and certain
previously reported amounts have been reclassified to conform to the
current year presentation.
Imagistics International Inc.
Supplemental Data Schedules
Revenue
(Unaudited)
Three months ended
March 31,
-----------------------------------
(in millions) 2005 2004
- ----------------------------------------------------------------------
Growth Growth
Revenue Rate Revenue Rate
-----------------------------------
Sales
Copier/MFP products $ 56.3 8% $ 52.1 16%
Facsimile products 14.5 (29%) 20.3 (6%)
Pitney Bowes of Canada 2.1 (79%) 10.1 59%
- ----------------------------------------------------------------------
Total sales 72.9 (12%) 82.5 13%
Rentals
Copier/MFP products 27.6 5% 26.1 6%
Facsimile products 20.0 (29%) 28.3 (13%)
- ----------------------------------------------------------------------
Total rentals 47.6 (13%) 54.4 (5%)
Support services
Copier/MFP products 19.9 2% 19.6 6%
Facsimile products 1.7 (6%) 1.8 (22%)
- ----------------------------------------------------------------------
Total support services 21.6 2% 21.4 3%
- ----------------------------------------------------------------------
Total revenue $ 142.1 (10%) $ 158.3 5%
======================================================================
Revenue
Copier/MFP products $ 103.8 6% $ 97.8 11%
Facsimile products 36.2 (28%) 50.4 (11%)
- ----------------------------------------------------------------------
Revenue excluding
Pitney Bowes of Canada 140.0 (6%) 148.2 3%
Pitney Bowes of Canada 2.1 (79%) 10.1 59%
- ----------------------------------------------------------------------
Total revenue $ 142.1 (10%) $ 158.3 5%
======================================================================
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 ended
March 31,
-----------------------
(in millions) 2005 2004 B/(W)
- ----------------------------------------------------------------------
EBITDA
Net income $ 2.1 $ 5.2 (59%)
Interest expense, net 1.1 0.9 (21%)
Provision for income taxes 1.6 3.9 61%
- ----------------------------------------------------------------------
EBIT 4.8 10.0 (52%)
Depreciation and amortization 15.3 17.1 11%
- ----------------------------------------------------------------------
EBITDA $ 20.1 $ 27.1 (26%)
======================================================================
The Company adopted SFAS No. 123R, "Share-Based Payment," as of
January 1, 2005. Accordingly, certain previously reported amounts have
been restated to conform to the current year presentation.
Free Cash Flow
(Unaudited)
Three months ended
March 31,
-----------------------
(in millions) 2005 2004 B/(W)
- ----------------------------------------------------------------------
Free cash flow
Net cash provided by (used in) operating
activities $ 6.0 $ (4.4) *
Expenditures for rental equipment assets 9.4 9.8 4%
Expenditures for property, plant and equipment 2.1 2.8 25%
Effect of exchange rates on cash (0.2) 0.2 *
- ----------------------------------------------------------------------
Free cash flow $ (5.7) $(16.8) (66%)
======================================================================
*Not meaningful
The Company adopted SFAS No. 123R, "Share-Based Payment," as of
January 1, 2005. Accordingly, certain previously reported amounts have
been restated to conform to the current year presentation. Certain
previously reported amounts have been reclassified to conform to the
current year presentation.
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.
Jim Magrone, 203-365-2361
jmagrone@imagistics.com