Pitney Bowes Announces Third Quarter 2016 Financial Results

The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP); however, in our disclosures we use certain non-GAAP measures, such as adjusted earnings before interest and taxes, Adjusted EPS, revenue growth on a constant currency basis, revenue excluding the impact of currency and market exits, free cash flow and Segment EBIT.

The Company reports measures such as adjusted earnings before interest and taxes (EBIT) and Adjusted EPS and adjusted income from continuing operations to exclude the impact of special items like restructuring charges, tax adjustments, goodwill and asset write-downs, and costs related to recent dispositions and market exits. 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.

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. Constant currency is calculated by converting our current quarter reported results using the prior year’s exchange rate for the comparable quarter. In addition, this quarter the Company reported the comparison of “revenue excluding the impact of currency and market exits” to prior year, which excludes the impact of changes in foreign currency exchange rates since the prior period and also excludes the revenues associated with the recent market exits in several smaller markets. This comparison allows an investor insight into the underlying revenue performance of the business and true operational performance from a comparable basis to prior period. A reconciliation of reported revenue to constant currency revenue, as well as reported revenue to “revenue excluding the impact of currency and market exits” can be found in the Company’s attached financial schedules.

The Company reports free cash flow in order to provide investors insight into the amount of cash that management could have available for other discretionary uses. Free cash flow adjusts GAAP cash from operations for capital expenditures, restructuring payments, unusual tax settlements, contributions to the Company’s pension fund and cash used for other special items. A reconciliation of GAAP cash from operations to free cash flow can be found in the Company’s attached financial schedules.

In addition, Management uses segment EBIT to measure profitability and performance at the segment level. Segment 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. A reconciliation of Segment EBIT to the Company’s total Net Income can be found in the Company’s attached financial schedules.

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; the ability to protect the Company’s information technology systems against service interruptions, misappropriation of data, or breaches of security resulting from cyber-attacks or other events; management of outsourcing arrangements; the implementation of a new enterprise business platform; changes in business portfolio; the success of our investment in rebranding the Company; the risk of losing some of the Company’s larger clients in the Global Ecommerce segment; integrating newly acquired businesses, including operations and product and service offerings; foreign currency exchange rates; changes in our credit ratings; management of credit risk; changes in interest rates; the financial health of national posts; increased customs and regulatory risks associated with cross-border transactions; and other factors beyond its control as more fully outlined in the Company's 2015 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 and nine months ended September 30, 2016 and 2015, and consolidated balance sheets at September 30, 2016 and December 31, 2015 are attached.

 
Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited; in thousands, except share and per share amounts)
 
  Three months ended September 30,   Nine months ended September 30,
2016   2015 2016   2015
Revenue:
Equipment sales $ 173,143 $ 163,857 $ 485,145 $ 495,328
Supplies 61,306 71,174 198,631 215,178
Software 89,087 97,700 257,760 283,241
Rentals 102,747 108,420 309,706 333,729
Financing

87,883

99,925 276,915 306,992
Support services 123,954 136,820 383,632 415,615
Business services   200,911     191,645     607,717     591,030  
 
Total revenue   839,031     869,541     2,519,506     2,641,113  
 
Costs and expenses:
Cost of equipment sales 86,147 78,650 235,741 232,706
Cost of supplies 20,348 21,629 60,662 65,912
Cost of software 25,698 27,219 79,496 85,584
Cost of rentals 16,041 21,423 54,951 63,127
Financing interest expense 12,965 17,533 41,375 54,171
Cost of support services 74,799 79,747 224,790 244,853
Cost of business services 140,989 130,004 417,357 405,559
Selling, general and administrative 300,983 309,211 916,445 939,318
Research and development 28,680 29,153 89,761 83,693
Restructuring charges and asset impairments, net 16,494 36 49,503 14,305
Interest expense, net 22,294 20,165 62,394 65,200
Other (income) expense, net   -     (1,781 )   536     (94,916 )
 
Total costs and expenses   745,438     732,989     2,233,011     2,159,512  
 
Income from continuing operations before income taxes 93,593 136,552 286,495 481,601
Provision for income taxes   23,197     42,676     93,615     145,574  
 
Income from continuing operations 70,396 93,876 192,880 336,027
Loss from discontinued operations, net of tax   (291 )   -     (1,951 )   (582 )
 
Net income 70,105 93,876 190,929 335,445
Less: Preferred stock dividends attributable to noncontrolling interests   4,593     4,594     13,781     13,781  
 
Net income - Pitney Bowes Inc. $ 65,512   $ 89,282   $ 177,148   $ 321,664  
 
Amounts attributable to common stockholders:
Net income from continuing operations $ 65,803 $ 89,282 $ 179,099 $ 322,246
Loss from discontinued operations, net of tax   (291 )   -     (1,951 )   (582 )
 
Net income - Pitney Bowes Inc. $ 65,512   $ 89,282   $ 177,148   $ 321,664  
 

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

Continuing operations $ 0.35 $ 0.45 $ 0.95 $ 1.60
Discontinued operations   0.00     -     (0.01 )   -  
 
Net income - Pitney Bowes Inc. $ 0.35   $ 0.45   $ 0.94   $ 1.60  
 

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

Continuing operations $ 0.35 $ 0.44 $ 0.94 $ 1.60
Discontinued operations   0.00     -     (0.01 )   -  
 
Net income - Pitney Bowes Inc. $ 0.35   $ 0.44   $ 0.93   $ 1.59  
 
Weighted-average shares used in diluted earnings per share   186,682,575     201,016,809     189,592,489     201,884,967  
 
(1)   The sum of the earnings per share amounts may not equal the totals due to rounding.

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