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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Pitney Bowes Inc | NYSE:PBI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.095 | -1.74% | 5.365 | 5.45 | 5.3203 | 5.45 | 115,448 | 15:11:59 |
Pitney Bowes Inc. (NYSE:PBI), a global technology company that provides products and solutions that power commerce, today reported financial results for the first quarter 2015.
Quarterly Financial Results:
“2015 is an important year for Pitney Bowes as we continue to transform our company,” said Marc B. Lautenbach, President and CEO, Pitney Bowes. “Despite currency headwinds affecting our first quarter results, we continued to unlock value in our company. In the first quarter, we reduced costs across the company and grew operating income, even as we increased our investments in marketing, infrastructure and the growth areas of our business.
“Our Enterprise Business Solutions group delivered constant currency revenue and profit growth, and our performance in North America Mailing was consistent with the previous quarters. Software licensing revenue increased by high, single digits and despite the strengthening dollar, our ecommerce business continued to deliver solid results. Looking beyond our first quarter, I remain confident in our ability to continue to meet our strategic objectives and, as a result, we are reaffirming our 2015 guidance.”
FIRST QUARTER 2015 RESULTS
Revenue totaled $891 million, a decline of 1 percent on a constant currency basis and 5 percent on a reported basis versus the prior year. For comparative purposes, revenue would have been flat compared to the prior year when the current and prior periods are adjusted for the impacts of currency and the reduction in revenue resulting from the exit of direct operations in some European countries that we completed in the third quarter of 2014.
Digital Commerce Solutions revenue grew 9 percent on a constant currency basis and 6 percent on a reported basis. Revenue on a constant currency basis benefited from growth in ecommerce, marketing services and shipping solutions, while software solutions were flat.
Enterprise Business Solutions revenue grew 2 percent on a constant currency basis and was flat on a reported basis. Revenue on a constant currency basis benefited from continued growth in Presort Services, while revenue in Production Mail was flat. For comparative purposes, revenue would have grown 3 percent when adjusted for the impacts of currency and the divested revenues in Europe from the prior year.
Small and Medium Business (SMB) Solutions revenue declined 6 percent on a constant currency basis and 11 percent on a reported basis. For comparative purposes, revenue would have declined 5 percent when adjusted for the impacts of currency and the divested revenues in Europe from the prior year.
Adjusted earnings before interest and taxes (EBIT) was $178 million, which was an increase of $9 million, or 5%, versus the prior year. Adjusted EBIT margin expanded 190 basis points to 20.0%.
Generally Accepted Accounting Principles (GAAP) earnings per diluted share were $0.40, which includes the adverse impact from currency of $0.01 per share. Earnings per share during the quarter were also impacted by a higher tax rate in part due to higher than usual charges related to the expiration of certain stock options and a greater percentage of revenue from U.S. operations.
The Company’s earnings per share results for the quarter are summarized in the table below:
First Quarter2015
2014
Adjusted EPS from continuing operations$0.40
$0.42 Restructuring charges and asset impairments - ($0.03 ) Extinguishment of debt - ($0.19 ) GAAP EPS from continuing operations $0.40 $0.21 Discontinued operations - $0.01 GAAP EPS $0.40 $0.22
* The sum of the earnings per share may not equal the totals above due to rounding
FREE CASH FLOW RESULTS
Free cash flow during the quarter was $85 million and $104 million on a GAAP basis. In comparison to the prior year, first quarter free cash flow was lower primarily due to the timing of accounts payable and higher capital expenditures related to the Company’s ERP implementation.
During the quarter, the Company used cash to pay $38 million in dividends to its common shareholders. The Company also retired $275 million in debt through use of $175 million in cash on the balance sheet and the issuance of $100 million in commercial paper.
BUSINESS SEGMENT REPORTING
The Company’s business segment reporting reflects the clients served in each market and the way it manages these segments for growth and profitability. The reporting segment groups are the SMB Solutions group; the Enterprise Business Solutions group; and the Digital Commerce Solutions segment.
The SMB Solutions group offers mailing equipment, financing, services and supplies for small and medium businesses to efficiently create mail and evidence postage. This group includes the North America Mailing and International Mailing segments. North America Mailing includes the operations of U.S. and Canada Mailing. International Mailing includes all other SMB operations around the world.
The Enterprise Business Solutions group provides mailing and printing equipment and services for large enterprise clients to process mail, including sortation services to qualify large mail volumes for postal worksharing discounts. This group includes the global Production Mail and Presort Services segments.
The Digital Commerce Solutions segment leverages digital and mobile channels that make the Company’s clients’ customer-facing functions more effective. This segment includes software, ecommerce, shipping and marketing services.
Consolidated
($ millions) First QuarterY/Y Ex Currency
Y/Y
Y/Y
and Divested
2015
2014
Reported
Ex Currency
Revenues*
Revenue$
891
$
937
(5 %) (1 %) 0 % Adjusted EBIT $ 178 $ 170 5 %
SMB Solutions Group
($ millions) First QuarterY/Y Ex Currency
Y/Y
Y/Y
and Divested
Revenue2015
2014
Reported
Ex Currency
Revenues*
North America Mailing $ 362 $ 381 (5 %) (4 %) (4 %) International Mailing116
153
(24
%)
(12
%)
(7
%)
SMB Solutions Total $ 478 $ 534 (11 %) (6 %) (5 %) EBIT North America Mailing $ 164 $ 160 2 % International Mailing12
25
(53
%)
SMB Solutions Total $ 175 $ 185 (5 %)* Excluding the impacts of currency and the divested revenues in Europe related to the exit of a non-core product line in Norway and transition to a dealer sales network in six smaller European markets completed in the third quarter of 2014.
North America Mailing
Revenue for the quarter was consistent with the prior three quarters results. Recurring revenue stream trends were in-line with prior quarters driven primarily by financing revenue, which declined less than one percent, and the continued stabilization of rentals revenue. Equipment sales declined at a mid-single digit rate in the U.S. compared to a relatively strong first quarter in 2014. The Company continues to focus on driving productivity improvements in the segment’s sales channels. EBIT margin improved versus the prior year due to continued benefits from the go-to-market implementation and on-going cost reduction initiatives.
International Mailing
During the quarter, revenue declined 24 percent on a reported basis. Currency adversely affected the decline in revenue by 12 percentage points. For comparative purposes, revenue would have declined 7 percent when adjusted for the impacts of currency and the reduction in revenue resulting from the exit of direct operations in some European countries completed in the third quarter of 2014.
The Company continued to implement its go-to-market strategy throughout Europe during the quarter. This transition was first completed in the UK in January, which had positive revenue growth in the quarter, and is now complete in Germany. However in France, the Company’s second largest market in Europe, the Company is still in the consultation stages of the proposed transition, which impacted sales productivity during the quarter. EBIT margin declined versus the prior year primarily due to lower revenue and the impact of currency on some supply chain costs.
Enterprise Business Solutions Group
($ millions) First QuarterY/Y Ex Currency
Y/Y
Y/Y
and Divested
Revenue2015
2014
Reported
Ex Currency
Revenues*
Production Mail $100
$
105
(5 %) 0 % 1 % Presort Services
122
116
4
%
4
%
4
%
Enterprise Business Total $ 221 $ 222 0 % 2 % 3 % EBIT Production Mail $ 9 $ 8 17 % Presort Services27
24
15
%
Enterprise Business Total $ 37 $ 32 16 %* Excluding the impacts of currency and the divested revenues in Europe related to the exit of a non-core product line in Norway and transition to a dealer sales network in six smaller European markets completed in the third quarter of 2014.
Production Mail
Equipment sales grew as a result of a larger number of inserting equipment installations during the quarter. Supplies revenue continued to benefit from the growth in production print installations in 2014. Support services revenue declined as a result of some in-house mailers shifting their mail processing to third party outsourcers who provide some self-service on equipment. For comparative purposes, revenue would have grown 1 percent when adjusted for the impacts of currency and the divested revenues in Europe from the prior year related to this segment. EBIT margin improved versus the prior year due to a favorable mix of higher margin equipment sales and on-going cost reduction initiatives.
Presort Services
Revenue benefited from the addition of new customers and an increase in the volume of mail processed. EBIT margin improved versus the prior year due to the revenue growth and on-going operational productivity.
Digital Commerce Solutions
($ millions) First QuarterY/Y
Y/Y
2015
2014
Reported
Ex Currency
Revenue$
192
$
181
6 % 9 % EBIT $ 16 $ 10 67 %
On a constant currency basis, the segment continued to deliver revenue growth in ecommerce, marketing services and shipping solutions. Software revenue was flat on a constant currency basis.
Ecommerce’s revenue growth was driven in part by a continued increase in the number of packages shipped but did reflect the unfavorable impacts of a stronger U.S. dollar on the number of purchases outbound from the U.S. Ecommerce also achieved continued expansion in its UK outbound cross-border services.
Marketing services and shipping solutions revenue continued to grow as a result of new client additions for their respective product offerings.
Software license revenue increased at a high single-digit rate on a constant currency basis, but was offset by lower professional services and maintenance revenue when compared to prior year.
EBIT margin improved even as the Company continued to invest in development activities and infrastructure in ecommerce and software solutions.
2015 GUIDANCE
This guidance discusses future results, which are inherently subject to unforeseen risks and developments. As such, discussions about the business outlook should be read in the context of an uncertain future, as well as the risk factors identified in the safe harbor language at the end of this release and as more fully outlined in the Company's 2014 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission.
The Company is reaffirming its annual revenue growth, earnings per share and free cash flow guidance. The Company’s guidance is based on an assumption that the global economy and foreign exchange markets in 2015 will not change significantly. This guidance excludes any unusual items that may occur or additional portfolio or restructuring actions, not specifically identified, as the Company implements plans to further streamline its operations and reduce costs.
Based on the above, the Company still expects in 2015:
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. ET. 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
Pitney Bowes (NYSE: PBI) is a global technology company offering innovative products and solutions that enable commerce in the areas of customer information management, location intelligence, customer engagement, shipping and mailing, and global ecommerce. More than 1.5 million clients in approximately 100 countries around the world rely on products, solutions and services from Pitney Bowes. For additional information, visit Pitney Bowes at www.pitneybowes.com.
The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP). The Company uses measures such as adjusted earnings before interest and taxes (EBIT), 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 goodwill and asset write-downs, because, while these are actual Company expenses, they can mask underlying trends associated with its 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 settlements or 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 from revenue 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 and goodwill and asset impairments, which are recognized on a consolidated basis. In addition, revenue growth is 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 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 the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not limited to, statements about its 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; the implementation of a new enterprise resource planning system; changes in business portfolio; the success of our investment in rebranding the Company; the risk of customer concentration in our Digital Commerce Solutions segment; 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 its control as more fully outlined in the Company's 2014 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 ended March 31, 2015 and 2014, and consolidated balance sheets at March 31, 2015 and December 31, 2014 are attached.
Pitney Bowes Inc. Consolidated Statements of Income(Unaudited)
(Dollars in thousands, except share and per share data) Three months ended March 31, 2015 2014 Revenue: Equipment sales $ 165,964 $189,056
Supplies 73,368 79,517 Software 86,357 91,555 Rentals 113,997 123,579 Financing 105,630 110,050 Support services 139,558 158,252 Business services 205,807 185,488 Total revenue 890,681 937,497 Costs and expenses: Cost of equipment sales 75,013 82,534 Cost of supplies 22,659 24,154 Cost of software 29,864 30,164 Cost of rentals 20,701 25,444 Financing interest expense 18,770 19,653 Cost of support services 83,599 98,981 Cost of business services 139,919 128,936 Selling, general and administrative 314,529 351,375 Research and development 26,048 26,192 Restructuring charges, net (81 ) 9,841 Interest expense, net 24,064 24,064 Other expense - 61,657 Total costs and expenses 755,085 882,995 Income from continuing operations before income taxes 135,596 54,502 Provision for income taxes 50,547 8,036 Income from continuing operations 85,049 46,466 Income from discontinued operations, net of tax 157 2,801 Net income before attribution of noncontrolling interests 85,206 49,267
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests
4,594 4,594 Net income - Pitney Bowes Inc. $ 80,612 $ 44,673 Amounts attributable to common stockholders: Income from continuing operations $ 80,455 $ 41,872 Income from discontinued operations 157 2,801 Net income - Pitney Bowes Inc. $ 80,612 $ 44,673 Basic earnings per share attributable to common stockholders (1): Continuing operations 0.40 0.21 Discontinued operations - 0.01 Net income - Pitney Bowes Inc. $ 0.40 $ 0.22 Diluted earnings per share attributable to common stockholders (1): Continuing operations 0.40 0.21 Discontinued operations - 0.01 Net income - Pitney Bowes Inc. $ 0.40 $ 0.22 Weighted-average shares used in diluted EPS 202,679,433 203,885,840(1) The sum of the earnings per share amounts may not equal the totals above due to rounding.
Pitney Bowes Inc. Consolidated Balance Sheets
(Unaudited in thousands, except per share data)
March 31,
December 31,
Assets
2015
2014
Current assets: Cash and cash equivalents $ 871,687 $ 1,079,145 Short-term investments 41,741 32,121 Accounts receivable, gross 389,744 424,479 Allowance for doubtful accounts receivable (10,166 ) (10,742 ) Accounts receivable, net 379,578 413,737 Short-term finance receivables 979,495 1,019,412 Allowance for credit losses (17,422 ) (19,108 ) Short-term finance receivables, net 962,073 1,000,304 Inventories 95,029 84,827 Current income taxes 36,743 40,542 Other current assets and prepayments 67,881 57,173 Assets held for sale 43,750 52,271 Total current assets 2,498,482 2,760,120 Property, plant and equipment, net 288,680 285,091 Rental property and equipment, net 193,369 200,380 Long-term finance receivables 782,702 828,723 Allowance for credit losses (7,479 ) (9,002 ) Long-term finance receivables, net 775,223 819,721 Goodwill 1,635,171 1,672,721 Intangible assets, net 72,172 82,173 Non-current income taxes 85,259 96,377 Other assets 561,087 569,110 Total assets $ 6,109,443 $ 6,485,693Liabilities, noncontrolling interests and stockholders' equity
Current liabilities: Accounts payable and accrued liabilities $ 1,354,876 $ 1,558,731 Current income taxes 102,347 90,167 Current portion of long-term obligations 520,914 324,879 Advance billings 409,381 386,846 Total current liabilities 2,387,518 2,360,623 Deferred taxes on income 66,775 64,839 Tax uncertainties and other income tax liabilities 88,381 86,127 Long-term debt 2,554,317 2,927,127 Other non-current liabilities 661,147 673,348 Total liabilities 5,758,138 6,112,064 Noncontrolling interests (Preferred stockholders' equity in subsidiaries) 296,370 296,370 Stockholders' equity: Cumulative preferred stock, $50 par value, 4% convertible 1 1 Cumulative preference stock, no par value, $2.12 convertible 543 548 Common stock, $1 par value 323,338 323,338 Additional paid-in-capital 152,869 178,852 Retained earnings 4,940,505 4,897,708 Accumulated other comprehensive loss (908,647 ) (846,156 ) Treasury stock, at cost (4,453,674 ) (4,477,032 ) Total Pitney Bowes Inc. stockholders' equity 54,935 77,259 Total liabilities, noncontrolling interests and stockholders' equity $ 6,109,443 $ 6,485,693Pitney Bowes Inc. Revenue and EBIT Business Segments March 31, 2015
(Unaudited)
(Dollars in thousands) Three Months Ended March 31, % 2015 2014 ChangeRevenue
North America Mailing $ 361,874 $ 381,027 (5 %) International Mailing 116,173 153,268 (24 %) Small & Medium Business Solutions 478,047 534,295 (11 %) Production Mail 99,503 105,216 (5 %) Presort Services 121,531 116,491 4 % Enterprise Business Solutions 221,034 221,707 - Digital Commerce Solutions 191,600 181,495 6 % Total revenue $ 890,681 $ 937,497 (5 %)EBIT (1)
North America Mailing $ 163,665 $ 160,338 2 % International Mailing 11,724 24,819 (53 %) Small & Medium Business Solutions 175,389 185,157 (5 %) Production Mail 9,032 7,737 17 % Presort Services 27,494 23,896 15 % Enterprise Business Solutions 36,526 31,633 15 % Digital Commerce Solutions 15,895 9,531 67 % Total EBIT $ 227,810 $ 226,321 1 % Unallocated amounts: Interest, net (2) (42,834 ) (43,717 ) Corporate and other expenses (49,461 ) (56,604 ) Restructuring charges, net 81 (9,841 ) Other expense, net - (61,657 ) Income from continuing operations before income taxes $ 135,596 $ 54,502(1) Earnings before interest and taxes (EBIT) excludes general corporate expenses and restructuring charges, net.
(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 March 31, 2015 2014
GAAP income from continuing operations after income taxes, as reported
$ 80,455 $ 41,872 Restructuring charges, net (53 ) 6,681 Extinguishment of debt - 37,833Income from continuing operations after income taxes, as adjusted
$ 80,402 $ 86,386GAAP diluted earnings per share from continuing operations, as reported
$ 0.40 $ 0.21 Restructuring charges, net - 0.03 Extinguishment of debt - 0.19Diluted earnings per share from continuing operations, as adjusted
$ 0.40 $ 0.42GAAP net cash provided by operating activities, as reported
$ 103,887 $ 105,616 Capital expenditures (43,908 ) (30,143 ) Restructuring payments 21,874 18,937 Payments related to investment divestiture 23,160 - Reserve account deposits (20,077 ) (15,159 ) Extinguishment of debt - 58,357 Free cash flow, as adjusted $ 84,936 $ 137,608 Note: The sum of the earnings per share amounts may not equal the totals above due to rounding. Pitney Bowes Inc. Reconciliation of Reported Consolidated Results to Adjusted Results (Unaudited) (Dollars in thousands, except per share data) Three Months Ended March 31, 2015 2014GAAP income from continuing operations after income taxes, as reported
$ 80,455$
41,872
Restructuring charges, net (53 ) 6,681 Extinguishment of debt - 37,833
Income from continuing operations after income taxes, as adjusted
80,402 86,386 Provision for income taxes, as adjusted 50,519 35,020Preferred stock dividends of subsidiaries attributable to noncontrolling interests
4,594 4,594Income from continuing operations before income taxes, as adjusted
135,515 126,000 Interest, net 42,834 43,717 Adjusted EBIT 178,349 169,717 Depreciation and amortization 42,496 43,741 Adjusted EBITDA $ 220,845 $ 213,458
Pitney Bowes Inc.EditorialBill Hughes, 203-351-6785Chief Communications OfficerorFinancialCharles F. McBride, 203-351-6349VP, Investor Relations
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