United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8 - K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 17, 2002
PITNEY BOWES INC.
Commission File Number: 1-3579
State of Incorporation IRS Employer Identification No.
Delaware 06-0495050
World Headquarters
Stamford, Connecticut 06926-0700
Telephone Number: (203) 356-5000
Item 5 - Other Events.
The registrant's press release dated October 17, 2002 regarding its financial
results for the period ended September 30, 2002, including consolidated
statements of income and selected segment data for the three and nine months
ended September 30, 2002 and 2001, and consolidated balance sheets at September
30, 2002, June 30, 2002 and September 30, 2001, are attached.
The registrant is also providing additional information regarding the
composition of its Capital Services lease related assets included in its
Consolidated Balance Sheet:
(Dollars in millions) September 30, 2002
---------------------------
Leveraged leases $ 1,438
Finance receivables 1,053
Other assets 162
Rental equipment 21
---------------------------
Total $ 2,674
===========================
Capital Services finance receivables are composed of the following:
Assets held for sale $ 420
Single investor leases:
Large ticket single investor leases 405
Imagistics lease portfolio 228
---------------------------
Total $ 1,053
===========================
Other assets represent the registrant's 50% equity interest in PBG Capital
Partners LLC as discussed in the registrant's 2001 Annual Report on Form 10-K.
Item 7 - Financial Statements and Exhibits.
c. Exhibits.
The following exhibits are furnished in accordance with the provisions of Item
601 of Regulation S-K:
Exhibit Description
------- -------------------------------------------------------------------
(1) Pitney Bowes Inc. press release dated October 17, 2002.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PITNEY BOWES INC.
October 21, 2002
/s/ B.P. Nolop
----------------------------------------------
B. P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ A.F. Henock
----------------------------------------------
A. F. Henock
Vice President - Finance
(Principal Accounting Officer)
EXHIBIT 1
---------
PITNEY BOWES THIRD QUARTER 2002 EARNINGS IN LINE WITH GUIDANCE
--------------------------------------------------------------
o Diluted Earnings Per Share of 61 Cents
o 2.5 Million Shares Repurchased During The Quarter
o Free Cash Flow of $127 Million
STAMFORD, Conn., October 17, 2002 - Pitney Bowes Inc. (NYSE: PBI) today
announced third quarter results that include an eight percent increase in
diluted earnings per share from continuing operations to 61 cents, which
compares with 57 cents from continuing operations for the third quarter of 2001,
excluding special items.
Revenue grew seven percent to $1.11 billion and income from continuing
operations was $146.9 million, which compares with income from continuing
operations of $140.2 million in last year's third quarter excluding special
items, and $122.1 million including special items.
Commenting on the quarter, Pitney Bowes Chairman and CEO Michael J.
Critelli said, "We are pleased with our improved performance this quarter.
We achieved positive organic revenue growth in all major business lines:
Global Mailing, Management Services and Document Messaging Technologies.
In addition, we completed our acquisition of PSI, which will enable us to better
serve our customers by helping to reduce cost and speed the delivery of mail.
This transaction is an important component of our expansion into the mail
stream, and underscores the value of Pitney Bowes products, software and
integrated business solutions in helping companies reduce the cost and enhance
the efficiency of their communications flow.
(2)
"The success of our new product launches is a testament to the strength
of the Pitney Bowes brand. Our revolutionary DM series of digital mailing
systems featuring Intellilink technology has experienced customer satisfaction
unparalleled in our history of new product launches. We will continue to
leverage our brand strength to help engineer the flow of communications between
posts and carriers and our mutual customers, and the flow of high value
communications between large enterprises and their customers," Mr.Critelli
continued.
The Global Mailing Segment includes worldwide revenue and related
expenses from the sale, rental and financing of mail finishing, mail creation
and shipping equipment, related supplies and services, presort mail services,
postal payment solutions, small business solutions and software. With the launch
of DeliverAbility(TM), the company is adding mail and package tracking and
tracing capability at the desktop. In the third quarter, Global Mailing revenue
and operating profit both increased ten percent when compared with the prior
year. Excluding the revenue from the acquisitions of Secap SA and PSI Group Inc.
and the impact of favorable foreign currency, Global Mailing revenue increased
four percent. Global Mailing in the U.S. benefited from the placement of new
digital mailing systems and improved demand for its mail creation and
distribution solutions products.
Outside of the U.S., Global Mailing experienced double-digit revenue
growth, supported by improved business trends in the UK and Canada, and revenue
from the acquisition of Secap SA. Excluding the revenue from Secap SA and the
favorable impact of foreign currency, Global Mailing's international revenue
grew about two percent. This revenue growth was achieved despite lower revenue
in Germany, where demand for mailing equipment has slowed in a post meter
migration environment.
The Enterprise Solutions Segment includes Pitney Bowes Management
Services (PBMS) and Document Messaging Technologies (DMT). Revenue from PBMS
includes facilities management contracts for advanced mailing, reprographic,
document management and other value-added services to large enterprises. Revenue
from DMT includes sales, service and financing of high speed, software-enabled
production mail systems, sorting equipment, incoming mail systems, electronic
statement, billing and payment solutions, and mailing software. The Enterprise
Solutions segment reported revenue growth of five percent and operating profit
growth of three percent when compared with the prior year.
(3)
PBMS reported revenue growth of six percent to $247.4 million when
compared with the prior year while operating profit declined 20 percent. PBMS
continues to generate strong growth in new written business, but this growth is
being partially offset by the continued contraction of large enterprise
accounts, especially in the financial services and legal sectors. Operating
profit was adversely impacted by the costs associated with acquiring new
accounts that have not yet generated a full quarter of revenue as well as
investments in product technology and infrastructure, especially in Europe.
DMT reported revenue of $62.4 million for the quarter, an increase of
three percent from the prior year, with a greater improvement in operating
profit. Worldwide demand for high-speed, software-enabled production mail
equipment and mail processing software has remained slow, but appears to be
stabilizing. Cost reduction programs initiated earlier in the year resulted in
an increase in operating profit over the prior year.
Total Messaging Solutions, the combined results of the Global Mailing
and Enterprise Solutions segments, reported an eight percent increase in revenue
and a nine percent increase in operating profit.
The Capital Services Segment includes primarily asset- and fee-based
income generated by financing or arranging transactions of critical large-ticket
customer assets. Revenue for the quarter decreased 24 percent and operating
profit decreased 17 percent when compared with the third quarter 2001, which
included incremental revenue from asset sales and related fee income. Its
operating margins improved due to the decline in interest rate levels.
During the quarter, the company repurchased 2.5 million of its shares
outstanding, at a net cost of $89 million. Free cash flow, excluding payments
related to special items, was $127 million for the third quarter of 2002.
Including payments for special items, free cash flow was $117 million.
The company expects revenue growth for the full year 2002 to be in the
range of six to seven percent. Diluted earnings per share from continuing
operations are expected to be in the range of 64 to 65 cents for the fourth
quarter 2002, and in the range of $2.37 to $2.38 for the full year 2002. The
company is continuing its discussions with U.S. Air and has recently begun
discussions with United Airlines concerning its leased planes and believes its
range of potential exposure for both U.S. Air and United Airlines is still
consistent with that disclosed in its last Form 10-Q filing.
(4)
Mr. Critelli noted, "As we look to solidify our outlook for 2003, we
are evaluating the potential impact of a number of factors. First, we are
finalizing plans associated with our growth strategy, which will be presented to
our Board of Directors in November. Second, we are reviewing possible actions to
reduce our overall exposure in Capital Services to focus exclusively on
transactions related to our postal and document-related financing business.
Third, we have preliminarily estimated that incremental pension and retiree
medical costs for 2003 will be about 12 cents per share. Fourth, we are still
evaluating other incremental cost factors such as infrastructure investments,
and are continuing to review infrastructure needs. And finally, like most other
companies, we are factoring in the risks and opportunities associated with an
uncertain economy. We anticipate providing earnings guidance for 2003 as part of
our fourth quarter earnings announcement."
Mr. Critelli concluded, "By balancing our short-term and long-term
plans, we believe that a combination of on-going cost containment initiatives
and continued investment in industry-leading products and services will help us
deliver consistently greater shareholder value."
Third quarter 2002 revenue included $592.5 million from sales, up
nine percent from $541.9 million in the third quarter of 2001; $374.4 million
from rentals and financing, up two percent from $365.7 million; and $147.2
million from support services, up eight percent from $136.8 million. Net income
for the period was $146.9 million, or 61 cents per diluted share. Income from
continuing operations for the third quarter 2001 was $122.1 million or 49 cents
per diluted share which included the following special items: a $10 million
pre-tax charge associated with the company's transition to the next generation
of networked technology; and an $18 million pre-tax charge related to
initiatives associated with a restructuring plan. Excluding these special
charges, third quarter 2001 income from continuing operations was $140.2
million, or 57 cents per diluted share and net income was $135.3 million, or 55
cents per diluted share. Third quarter 2001 net income includes a loss of $4.9
million from discontinued operations or two cents per diluted share.
(5)
For the nine-month period ended September 30, 2002, revenue was $3.245
billion, up seven percent from $3.032 billion in 2001. Net income for
year-to-date 2002 was $419.5 million or $1.73 per diluted share compared to
income from continuing operations for the same period of 2001 which, excluding
special items, was $416.3 million, or $1.68 per diluted share. Year-to date
pre-tax restructuring charges for 2001 totaled approximately $122 million of
which $89 million was related to continuing operations. Year-to-date net income
for 2001, which also included a net pre-tax gain of $362 million from settling a
lawsuit with Hewlett-Packard and a pre-tax charge of $258 million associated
with the company's transition to the next generation of networked technology,
was $398.2 million or $1.60 per diluted share. The year-to-date net income for
2001 included a loss of $15.7 million from discontinued operations, or
approximately six cents per diluted share.
Pitney Bowes senior management will discuss the company's financial
results in a conference call today, scheduled for 5 p.m. EDT. Instructions
for listening to the conference call over the WEB are available on the
Investor Relations page of the company's web site at www.pitneybowes.com
-------------------
Pitney Bowes is a $4 billion global provider of integrated mail and
document management solutions headquartered in Stamford, Connecticut. The
company serves over 2 million businesses of all sizes through direct and dealer
operations in more than 130 countries. For additional information on the
company, its products and solutions visit www.pitneybowes.com.
-------------------
The statements contained in this news release that are not purely historical are
forward-looking statements with the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements
may be identified by their use of forward-looking terminology such as the words
"expects," "projects," "estimates," "anticipates," "intends" and other similar
words. Such forward-looking statements include, but are not limited to,
statements about business reach and customer demand, pending and possible
acquisitions, restructuring charges, preliminary estimated 2003 pension and
medical costs and our preliminary future outlook, including our expected revenue
for the fourth quarter and full year 2002, and our expected diluted earnings per
share for the fourth quarter and for the full year 2002 and preliminary outlook
of factors for 2003. 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: severe
adverse changes in the economic environment, changes in international or
national political or economic conditions, including terrorist attacks, timely
development and acceptance of new products or gaining product approval;
successful entry into new markets; changes in interest rates; and changes in
postal regulations, as more fully outlined in the company's 2001 Form 10-K
Annual Report filed with the Securities and Exchange Commission. In addition,
the forward-looking statements are subject to change based on the timing and
specific terms of any announced acquisitions or possible restructuring or other
one-time or special items. The forward-looking statements contained in this news
release are made as of the date hereof and we do not assume any obligation to
update the reasons why actual results could differ materially from those
projected in the forward-looking statements.
===============================================================================
Note: Consolidated statements of income for the three and nine months ended
September 30, 2002 and 2001, and consolidated balance sheets at September 30,
2002, June 30, 2002, and September 30, 2001, are attached.
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited)
----------
(Dollars in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
--------------------------------- --------------------------------
2002 2001 2002 2001
------------ -------------- ------------- ------------
Revenue from:
Sales and management services $ 592,481 $ 541,947 $ 1,702,368 $ 1,535,853
Rentals and financing 374,383 365,684 1,114,001 1,098,774
Support services 147,207 136,849 428,535 397,040
------------ -------------- ----------- ------------
Total revenue 1,114,071 1,044,480 3,244,904 3,031,667
------------ -------------- ----------- ------------
Costs and expenses:
Cost of sales and management services 356,753 332,909 1,030,677 915,220
Cost of rentals and financing 91,082 85,169 271,754 266,229
Cost of meter transition (*) - 10,300 - 258,000
Selling, service and administrative 377,336 344,850 1,095,934 1,003,890
Research and development 33,925 31,554 104,089 98,021
Other income (*) - - - (362,172)
Interest, net 41,190 45,315 131,815 140,201
Restructuring charges (*) - 17,879 - 88,639
------------ -------------- ----------- ------------
Total costs and expenses 900,286 867,976 2,634,269 2,408,028
------------ -------------- ----------- ------------
Income from continuing operations
before income taxes 213,785 176,504 610,635 623,639
Provision for income taxes 66,899 54,406 191,129 209,748
------------ -------------- ----------- ------------
Income from continuing operations 146,886 122,098 419,506 413,891
Discontinued operations - (4,884) - (15,711)
------------ -------------- ----------- ------------
Net income $ 146,886 $ 117,214 $ 419,506 $ 398,180
============ ============== =========== ============
Basic earnings per share
Continuing operations $ 0.62 $ 0.50 $ 1.75 $ 1.68
Discontinued operations - (0.02) - (0.06)
------------ -------------- ----------- ------------
Net income 0.62 0.48 1.75 1.61
Special items after-tax (*) - 0.07 - 0.01
Discontinued operations - 0.02 - 0.06
------------ -------------- ----------- ------------
Income from continuing operations
excluding special items $ 0.62 $ 0.57 $ 1.75 $ 1.69
============ ============== =========== ============
Diluted earnings per share
Continuing operations $ 0.61 $ 0.49 $ 1.73 $ 1.67
Discontinued operations - (0.02) - (0.06)
------------ -------------- ----------- ------------
Net income 0.61 0.47 1.73 1.60
Special items after-tax (*) - 0.07 - 0.01
Discontinued operations - 0.02 - 0.06
------------ -------------- ----------- ------------
Income from continuing operations
excluding special items $ 0.61 $ 0.57 $ 1.73 $ 1.68
============ ============== =========== ============
Average common and potential common
shares outstanding 240,323,222 247,279,863 242,545,228 248,527,220
============ ============== =========== ============
Note: Special items are indicated by the asterisks above or are otherwise
explained in the press release. Special items for the three and nine
months ended September 30, 2001 resulted in a net after-tax charge
of $18,110 and $2,421, respectively.
The sum of the earnings per share amounts may not equal the totals above
due to rounding.
Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited)
-----------
(Dollars in thousands, except per share data)
Assets 9/30/02 6/30/02 9/30/01
------ ----------- ------------- -------------
Current assets:
Cash and cash equivalents $ 268,487 $ 240,643 $ 292,312
Short-term investments, at cost which
approximates market 12,631 11,946 8,107
Accounts receivable, less allowances:
9/02 $34,064 6/02 $33,392 9/01 $30,349 423,160 414,322 386,885
Finance receivables, less allowances:
9/02 $68,228 6/02 $66,991 9/01 $57,825 1,675,731 1,622,835 1,486,910
Inventories 206,498 193,533 164,630
Other current assets and prepayments 172,568 161,117 151,398
Net assets of discontinued operations - - 230,789
----------- ------------- -------------
Total current assets 2,759,075 2,644,396 2,721,031
----------- ------------- -------------
Property, plant and equipment, net 595,875 554,489 509,850
Rental equipment and related inventories, net 428,934 450,508 469,387
Property leased under capital leases, net 1,719 1,006 1,691
Long-term finance receivables, less allowances:
9/02 $66,395 6/02 $66,143 9/01 $67,879 1,799,052 1,780,539 1,790,647
Investment in leveraged leases 1,438,484 1,388,732 1,260,955
Goodwill 809,690 668,552 566,075
Other assets 923,622 818,336 691,149
Net assets of discontinued operations - - 219,121
----------- ------------- -------------
Total assets $ 8,756,451 $ 8,306,558 $ 8,229,906
=========== ============= =============
Liabilities and stockholders' equity
------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,313,603 $ 1,280,707 $ 1,191,435
Income taxes payable 231,115 237,225 378,926
Notes payable and current portion of
long-term obligations 1,568,571 1,459,165 756,579
Advance billings 336,598 339,587 333,532
----------- ------------- -------------
Total current liabilities 3,449,887 3,316,684 2,660,472
----------- ------------- -------------
Deferred taxes on income 1,340,809 1,284,301 1,218,881
Long-term debt 2,379,565 2,129,027 2,436,358
Other noncurrent liabilities 358,340 353,638 338,076
----------- ------------- -------------
Total liabilities 7,528,601 7,083,650 6,653,787
----------- ------------- -------------
Preferred stockholders' equity in a
subsidiary company 310,000 310,000 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par value,
4% convertible 24 24 24
Cumulative preference stock, no par value,
$2.12 convertible 1,475 1,539 1,609
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value - 960 3,471
Retained earnings 3,864,245 3,788,916 3,950,435
Accumulated other comprehensive income (119,403) (132,796) (148,132)
Treasury stock, at cost (3,151,829) (3,069,073) (2,864,626)
----------- ------------- -------------
Total stockholders' equity 917,850 912,908 1,266,119
----------- ------------- -------------
Total liabilities and stockholders' equity $ 8,756,451 $ 8,306,558 $ 8,229,906
=========== ============= =============
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2002
(Unaudited)
(Dollars in thousands)
%
2002 2001 (2) Change
---------- ----------- -------
Third Quarter
-------------
Revenue
-------
Global Mailing $ 762,630 $ 694,805 10%
Enterprise Solutions 309,797 294,881 5%
---------- ----------- -------
Total Messaging Solutions 1,072,427 989,686 8%
---------- ----------- -------
Capital Services 41,644 54,794 (24%)
---------- ----------- -------
Total Revenue $1,114,071 $ 1,044,480 7%
========== =========== =======
Operating Profit (1)
--------------------
Global Mailing $ 226,121 $ 206,403 10%
Enterprise Solutions 18,914 18,332 3%
---------- ----------- -------
Total Messaging Solutions 245,035 224,735 9%
---------- ----------- -------
Capital Services 18,229 22,045 (17%)
---------- ----------- -------
Total Operating Profit $ 263,264 $ 246,780 7%
========== =========== =======
(1) Operating profit excludes general corporate expenses, income taxes and net
interest other than that related to finance operations.
(2) Prior year amounts have been reclassified to conform with the current year
presentation.
Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
September 30, 2002
(Unaudited)
(Dollars in thousands)
%
2002 2001 (2) Change
---------- ----------- -------
Year to Date
------------
Revenue
-------
Global Mailing $2,211,924 $ 2,110,294 5%
Enterprise Solutions 900,318 772,353 17%
---------- ----------- -------
Total Messaging Solutions 3,112,242 2,882,647 8%
---------- ----------- -------
Capital Services 132,662 149,020 (11%)
---------- ----------- -------
Total Revenue $3,244,904 $ 3,031,667 7%
========== =========== =======
Operating Profit (1)
--------------------
Global Mailing $ 652,789 $ 637,939 2%
Enterprise Solutions 58,849 56,556 4%
---------- ----------- -------
Total Messaging Solutions 711,638 694,495 2%
---------- ----------- -------
Capital Services 57,795 57,249 1%
---------- ----------- -------
Total Operating Profit $ 769,433 $ 751,744 2%
========== =========== =======
(1) Operating profit excludes general corporate expenses, income taxes and net
interest other than that related to finance operations.
(2) Prior year amounts have been reclassified to conform with the current year
presentation.