Pitney Bowes Reports First Quarter Earnings - Company Financial Information

Edge: Work-Group Computing Report, April 24, 2000

Pitney Bowes Inc. (NYSE:PBI) Tuesday reported first quarter results that featured a 13 percent increase in diluted earnings per share from continuing operations to 57 cents, the 21st consecutive quarter of double-digit growth. Revenue in the quarter grew five percent to $1.1 billion and income from continuing operations grew nine percent to $151.6 million.

Pitney Bowes Chairman and Chief Executive Officer Michael J. Critelli discussed the first quarter results: "We were pleased with the good growth and margin expansion in strategic parts of our business, while we invested aggressively and structured our business to focus on Internet and other new business growth initiatives. However, revenues in the quarter did not reflect our underlying growth rate which we believe to be eight percent. We are experiencing a challenging revenue comparison for the first half of the year, due to the lack of meter migration and PROM revenues that were realized during the first half of 1999. Adjusting for these factors, our revenue growth this quarter would have been approximately eight percent."

"During the quarter, we delivered technologically-driven products and services for businesses of all sizes, including Internet-enabled applications. For example, we formed the docSense business to help large companies easily integrate web-based delivery of bills and statements with their existing hard copy systems. Our recently approved ClickStamp Online Internet postage application joins the PitneyWorks suite of mailing, shipping, marketing and financial solutions to help small businesses improve their operating efficiency. Over one million customers of all sizes use our Postage By Phone system to manage more than $11 billion in postage transactions. Now they can visit www.postagebyphone.com and use the Internet 24/7 to download funds and monitor their postage usage. In addition to these and other Internet related products announced during the quarter, we announced a new incoming mail solution and a new digital metering system. We also completed a number of strategic alliances that broaden our solution set and customer base. Though it's too early in the process for these initiatives to have generated revenues, we expect strong contribution to revenue growth in the future.

"We continue to believe that our business models will produce higher revenue growth in the second half of the year. The core mail finishing business remains strong. We also have solid positions in high growth sectors of the market such as logistics, mail creation, production mail, and international mail as well as our new growth areas of Internet-based small business solutions, incoming messaging and desktop messaging solutions.

"This quarter alone we have invested approximately $20 million in Internet and other new business initiatives representing a 44 percent increase over the prior year because we believe these are key drivers of future growth in shareholder value. During the year our plan is to invest in excess of $100 million in Internet and other new business initiatives, which is almost twice the spend rate of 1999."

The Mailing and Integrated Logistics Segment includes revenues and related expenses from the rental, sale and financing of mailing and shipping equipment, related supplies and services, and software. On a reported basis, the segment's revenue grew six percent and its operating profit grew a strong 14 percent led by improved sales margins. Revenue for the segment would have grown approximately 10 percent during the quarter excluding the impacts of meter migration and PROM sales associated with the U.S. postal rate increase in the first quarter 1999. Direct marketing and e-commerce activity stimulated strong demand for vendor-inclusive shipping and logistics systems, as well as the Company's unique mail creation products, such as the one-to-one marketing mail preparation system, Documatch, and the address correction and postal formatting software, SmartMailer. As a result, there was strong revenue growth in the software and services portion of the Mailing and Integrated Logistics segment, which includes the Company's mail creation and shipping businesses.

Worldwide production mail revenues continued to show strong growth as direct marketing and billing applications drove demand worldwide for high-speed, intelligent mail finishing. This included the first installations of the largest order the Company has ever received from the Peoples' Republic of China.

International Mailing results were also strong as the Company continues to benefit from meter migration mandates related to the Euro conversion in Germany and the transition to electronic and digital metering technology in the United Kingdom and Canada. During the quarter, the Company signed a working party agreement with Royal Mail to enable working together to develop products and services in the United Kingdom.

The Office Solutions Segment includes Pitney Bowes Office Systems and Pitney Bowes Management Services. First-quarter performance in this segment included three percent revenue growth with a nine percent decline in operating profit.