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Pitney Bowes Announces Fourth Quarter And Annual Results For 2012

Conference Call and Webcast

Management of Pitney Bowes will discuss the Company’s results in a broadcast over the Internet today at 8:00 a.m. EST. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the Company’s web site at www.pb.com.

About Pitney Bowes

Delivering more than 90 years of innovation, Pitney Bowes provides business communications software, mailing systems and services that integrate physical and digital communications channels. Long known for making its customers more productive, Pitney Bowes is increasingly helping other companies grow their business through advanced customer communications management. Pitney Bowes is a $5 billion company with 29,000 employees worldwide. Pitney Bowes: Every connection is a new opportunity™. www.pb.com

The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP). The Company uses measures such as adjusted earnings per share, adjusted income from continuing operations and free cash flow to exclude the impact of special items like restructuring charges, tax adjustments, and asset write-downs, because, while these are actual Company expenses, they can mask underlying trends associated with our business. Such items are often inconsistent in amount and frequency and as such, the adjustments allow an investor greater insight into the current underlying operating trends of the business.

The use of free cash flow provides investors insight into the amount of cash that management could have available for other discretionary uses. It adjusts GAAP cash from operations for capital expenditures, as well as special items like cash used for restructuring charges, unusual tax payments and contributions to its pension funds. Management uses segment EBIT to measure profitability and performance at the segment level. EBIT is determined by deducting the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges, asset impairments, and goodwill charges which are recognized on a consolidated basis. In addition, financial results are presented on a constant currency basis to exclude the impact of changes in foreign currency exchange rates since the prior period under comparison. Constant currency measures are intended to help investors better understand the underlying operational performance of the business excluding the impacts of shifts in currency exchange rates over the intervening period.

Pitney Bowes has provided a quantitative reconciliation to GAAP in supplemental schedules. This information may also be found at the Company's web site www.pb.com/investorrelations .

This document contains “forward-looking statements” about our expected or potential future business and financial performance. For us forward-looking statements include, but are not limited to, statements about our future revenue and earnings guidance and other statements about future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: mail volumes; the uncertain economic environment; timely development, market acceptance and regulatory approvals, if needed, of new products; fluctuations in customer demand; changes in postal regulations; interrupted use of key information systems; management of outsourcing arrangements; foreign currency exchange rates; changes in our credit ratings; management of credit risk; changes in interest rates; the financial health of national posts; and other factors beyond our control as more fully outlined in the Company's 2011 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three months and twelve months ended December 31, 2012 and 2011, and consolidated balance sheets at December 31, 2012 and 2011 are attached.

       
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
 
(Dollars in thousands, except per share data)
Three months ended December 31, Twelve months ended December 31,
2012

2011 (2)

2012

2011 (2)

Revenue:
Equipment sales $ 281,772 $ 280,365 $ 938,289 $ 986,392
Supplies 69,815 72,246 283,604 307,974
Software 110,385 108,301 412,762 426,606
Rentals 141,445 151,926 569,619 618,990
Financing 121,435 134,311 495,130 547,269
Support services 173,243 175,798 689,667 706,505
Business services   389,212     382,208     1,514,944     1,528,860  
 
Total revenue   1,287,307     1,305,155     4,904,015     5,122,596  
 
Costs and expenses:
Cost of equipment sales 149,861 132,782 459,051 449,479
Cost of supplies 22,141 23,089 87,569 97,454
Cost of software 24,427 25,566 92,708 99,107
Cost of rentals 28,098 30,770 115,356 138,603
Financing interest expense 19,755 20,783 81,140 87,698
Cost of support services 105,750 107,815 440,055 452,582
Cost of business services 298,767 287,354 1,156,828 1,161,429
Selling, general and administrative 410,281 425,473 1,598,286 1,690,360
Research and development 32,390 40,873 136,908 148,645
Restructuring charges and asset impairments 22,291 84,087 23,117 136,548
Goodwill impairment - 84,500 - 84,500
Other interest expense 27,967 29,357 115,228 115,363
Interest income (2,189 ) (1,093 ) (7,982 ) (5,795 )
Other income, net   -     (9,200 )   1,138     (19,918 )
 
Total costs and expenses   1,139,539     1,282,156     4,299,402     4,636,055  
 
Income from continuing operations before income taxes 147,768 22,999 604,613 486,541
 
Provision for income taxes   44,224     (32,170 )   150,305     67,610  
 
Income from continuing operations 103,544 55,169 454,308 418,931
 
Income from discontinued operations, net of income tax   11,387     206,899     9,231     216,924  
 
Net income before attribution of noncontrolling interests 114,931 262,068 463,539 635,855
 
Less: Preferred stock dividends of subsidiaries attributable
to noncontrolling interests   4,594     4,594     18,376     18,375  
 
Net income - Pitney Bowes Inc. $ 110,337   $ 257,474   $ 445,163   $ 617,480  
 
 
Amounts attributable to common stockholders:
Income from continuing operations $ 98,950 $ 50,575 $ 435,932 $ 400,556
Income from discontinued operations   11,387     206,899     9,231     216,924  
 
Net income - Pitney Bowes Inc. $ 110,337   $ 257,474   $ 445,163   $ 617,480  
 

Basic earnings per share attributable to common stockholders (1):

Continuing operations 0.49 0.25 2.18 1.98
Discontinued operations   0.06     1.04     0.05     1.07  
 
Net income - Pitney Bowes Inc. $ 0.55   $ 1.29   $ 2.22   $ 3.06  
 
Diluted earnings per share attributable to common stockholders (1):
Continuing operations 0.49 0.25 2.16 1.98
Discontinued operations   0.06     1.03     0.05     1.07  
 
Net income - Pitney Bowes Inc. $ 0.55   $ 1.28   $ 2.21   $ 3.05  
 
(1)   The sum of the earnings per share amounts may not equal the totals above due to rounding.
 
(2) Certain prior year amounts have been reclassified to conform to the current year presentation.
 

   
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited in thousands, except per share data)
 
Assets 12/31/12 12/31/11
Current assets:
Cash and cash equivalents $ 913,276 $ 856,238
Short-term investments 36,611 12,971
 
Accounts receivable, gross 755,218 755,485
Allowance for doubtful accounts receivable   (26,968 )   (31,855 )
Accounts receivable, net 728,250 723,630
 
Finance receivables 1,213,776 1,296,673
Allowance for credit losses   (25,484 )   (45,583 )
Finance receivables, net 1,188,292 1,251,090
 
Inventories 179,678 178,599
Current income taxes 51,836 102,556
Other current assets and prepayments   114,184     134,774  
 
Total current assets 3,212,127 3,259,858
 
Property, plant and equipment, net 385,377 404,146
Rental property and equipment, net 241,192 258,711
 
Finance receivables 1,041,099 1,123,638
Allowance for credit losses   (14,610 )   (17,847 )
Finance receivables, net 1,026,489 1,105,791
 
Investment in leveraged leases 34,546 138,271
Goodwill 2,136,138 2,147,088
Intangible assets, net 166,214 212,603
Non-current income taxes 94,434 89,992
Other assets   563,374     530,644  
 
Total assets $ 7,859,891   $ 8,147,104  
 
Liabilities, noncontrolling interests and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 1,809,226 $ 1,840,465
Current income taxes 240,681 242,972
Notes payable and current portion of long-term obligations 375,000 550,000
Advance billings   452,130     458,425  
 
Total current liabilities 2,877,037 3,091,862
 
Deferred taxes on income 69,222 175,944
Tax uncertainties and other income tax liabilities 145,881 194,840
Long-term debt 3,642,375 3,683,909
Other non-current liabilities   718,375     743,165  
 
Total liabilities   7,452,890     7,889,720  
 
Noncontrolling interests (Preferred stockholders' equity in subsidiaries) 296,370 296,370
 
Stockholders' equity:
Cumulative preferred stock, $50 par value, 4% convertible 4 4
Cumulative preference stock, no par value, $2.12 convertible 648 659
Common stock, $1 par value 323,338 323,338
Additional paid-in-capital 223,847 240,584
Retained Earnings 4,744,802 4,600,217
Accumulated other comprehensive loss (681,213 ) (661,645 )
Treasury Stock, at cost   (4,500,795 )   (4,542,143 )
 
Total Pitney Bowes Inc. stockholders' equity (deficit)   110,631     (38,986 )
 
Total liabilities, noncontrolling interests and stockholders' equity (deficit) $ 7,859,891   $ 8,147,104  
 

 
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
December 31, 2012

(Unaudited)

     
(Dollars in thousands) Three Months Ended December 31,
%
2012 2011 Change

Revenue

 
North America Mailing $ 456,243 $ 482,843 (6 %)
International Mailing   187,973     182,928   3 %
Small & Medium Business Solutions   644,216     665,771   (3 %)
 
Production Mail 151,775 161,888 (6 %)
Software 104,550 102,481 2 %
Management Services 241,880 231,378 5 %
Mail Services 112,690 109,849 3 %
Marketing Services   32,196     33,788   (5 %)
Enterprise Business Solutions   643,091     639,384   1 %
 
Total revenue $ 1,287,307   $ 1,305,155   (1 %)
 

EBIT (1)

 
North America Mailing $ 173,690 $ 195,272 (11 %)
International Mailing   25,939     23,568   10 %
Small & Medium Business Solutions   199,629     218,840   (9 %)
 
Production Mail 13,716 19,591 (30 %)
Software 17,823 6,564 172 %
Management Services 19,012 17,065 11 %
Mail Services 19,841 34,651 (43 %)
Marketing Services   6,444     6,516   (1 %)
Enterprise Business Solutions   76,836     84,387   (9 %)
 
Total EBIT $ 276,465 $ 303,227 (9 %)
 
Unallocated amounts:
Interest, net (2) (45,533 ) (49,047 )
Corporate and other expenses (60,873 ) (62,594 )
Restructuring and asset impairments (22,291 ) (84,087 )
Goodwill impairment   -     (84,500 )
 
Income from continuing operations before income taxes $ 147,768   $ 22,999  
 
(1)   Earnings before interest and taxes (EBIT) excludes general corporate expenses, restructuring charges and asset impairments and goodwill impairment.
(2) Interest, net includes financing interest expense, other interest expense and interest income.
 

 
Pitney Bowes Inc.
Revenue and EBIT
Business Segments
December 31, 2012

(Unaudited)

     
(Dollars in thousands) Twelve Months Ended December 31,
%
2012 2011 Change

Revenue

 
North America Mailing $ 1,818,952 $ 1,961,198 (7 %)
International Mailing   675,637     707,416   (4 %)
Small & Medium Business Solutions   2,494,589     2,668,614   (7 %)
 
Production Mail 512,109 544,483 (6 %)
Software 393,380 407,402 (3 %)
Management Services 920,959 948,891 (3 %)
Mail Services 445,092 411,634 8 %
Marketing Services   137,886     141,572   (3 %)
Enterprise Business Solutions   2,409,426     2,453,982   (2 %)
 
Total Revenue $ 4,904,015   $ 5,122,596   (4 %)
 

EBIT (1)

 
North America Mailing $ 688,665 $ 727,999 (5 %)
International Mailing   78,979     98,601   (20 %)
Small & Medium Business Solutions   767,644     826,600   (7 %)
 
Production Mail 25,644 32,562 (21 %)
Software 37,958 38,182 (1 %)
Management Services 55,198 76,321 (28 %)
Mail Services 101,005 103,026 (2 %)
Marketing Services   28,061     26,184   7 %
Enterprise Business Solutions   247,866     276,275   (10 %)
 
Total EBIT $ 1,015,510 $ 1,102,875 (8 %)
 
Unallocated amounts:
Interest, net (188,386 ) (197,266 )
Corporate and other expenses (199,394 ) (198,020 )
Restructuring and asset impairments (23,117 ) (136,548 )
Goodwill impairment   -     (84,500 )
 
Income from continuing operations before income taxes $

604,613

  $ 486,541  
 
(1)   Earnings before interest and taxes (EBIT) excludes general corporate expenses, restructuring charges and asset impairments and goodwill impairment.
(2) Interest, net includes financing interest expense, other interest expense and interest income.
 

 
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
 
(Dollars in thousands, except per share data)    
 
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
 
GAAP income from continuing operations
after income taxes, as reported $ 98,950 $ 50,575 $ 435,932 $ 400,556
Restructuring charges and asset impairments 15,096 62,571 15,407 97,660
Goodwill impairment - 82,890 - 82,890
Sale of leveraged lease assets - - (12,886 ) (26,689 )
Tax adjustments   -     579     -     3,539  
Income from continuing operations
after income taxes, as adjusted $ 114,046   $ 196,615   $ 438,453   $ 557,956  
 
 
GAAP diluted earnings per share from
continuing operations, as reported $ 0.49 $ 0.25 $ 2.16 $ 1.98
Restructuring charges and asset impairments 0.07 0.31 0.08 0.48
Goodwill impairment - 0.41 - 0.41
Sale of leveraged lease - - (0.06 ) (0.13 )
Tax adjustments   -     0.00     -     0.02  
Diluted earnings per share from continuing
operations, as adjusted $ 0.56   $ 0.98   $ 2.18   $ 2.75  
 
 
GAAP net cash provided by operating activities,
as reported $ 255,560 $ 198,531 $ 660,188 $ 948,987
Capital expenditures (48,770 ) (32,951 ) (176,586 ) (155,980 )
Restructuring payments 13,972 28,623 74,718 107,002
Pension contribution - - 95,000 123,000
Tax payments on sale of leveraged lease assets 14,879 - 114,128 -
Reserve account deposits   17,009     49,882     1,636     35,354  
 
Free cash flow, as adjusted $ 252,650   $ 244,085   $ 769,084   $ 1,058,363  
 
NOTE:
 
The sum of the earnings per share amounts may not equal the totals above due to rounding.
 
The above table includes an adjustment to GAAP net cash provided by operating activities due to a reclassification between net cash provided by operating activities and net cash used in investing activities. As a result, GAAP net cash provided by operating activities increased by $28.8 million for the year ended December 31, 2011, and decreased by $35.0 million for the nine months ended September 30, 2012.
 

 
Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited)
 
(Dollars in thousands, except per share data)      
 
Three Months Ended December 31, Twelve Months Ended December 31,
2012 2011 2012 2011
 
GAAP income from continuing operations
after income taxes, as reported $ 98,950 $ 50,575 $ 435,932 $ 400,556
Restructuring charges and asset impairments 15,096 62,571 15,407 97,660
Goodwill impairment - 82,890 - 82,890
Sale of leveraged lease assets - - (12,886 ) (26,689 )
Tax adjustments   -   579     -     3,539  
Income from continuing operations
after income taxes, as adjusted 114,046 196,615 438,453 557,956
Provision for income taxes, as adjusted 51,418 (9,623 ) 174,718 138,539
Preferred stock dividends of subsidiaries

attributable to noncontrolling interests

  4,594   4,594     18,376     18,375  
Income from continuing operations, as adjusted 170,058 191,586 631,547 714,870
Interest expense, net   45,533   49,047     188,386     197,266  
Adjusted EBIT 215,591 240,633 819,933 912,136
Depreciation and amortization   64,049   67,141     255,556     272,142  
Adjusted EBITDA $ 279,640 $ 307,774   $ 1,075,489   $ 1,184,278  




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