Transcript
January 2003 PBI internal use only1
Join us at the Sheraton Hotelonly 1 mile from Grand Central Station!
VALUED INVESTORc/o SHERATON HOTEL811 7TH AVENUENEW YORK, NY 10019-6002
Top Investor QuestionsInvestor Update – September 10, 2008
Top Investor Questions
Why did the company decide to retain PBMS and what are the drivers of growth and profitability?
Retain Pitney Bowes Management Services
•• In best interest of shareholdersIn best interest of shareholders
•• Grow the business and improve profitabilityGrow the business and improve profitability
•• Mine core opportunities such as offMine core opportunities such as off--site services and virtual site services and virtual mail management mail management
•• Drive growth in newer services such as Critical Drive growth in newer services such as Critical Communication Solutions and Records ManagementCommunication Solutions and Records Management
•• Enhance underperforming areasEnhance underperforming areas
•• Continue to improve labor productivity and streamline processesContinue to improve labor productivity and streamline processes
•• Target 10% EBIT marginTarget 10% EBIT margin
What is the status of the company’s restructuring initiatives? Is the company on target to get $150 million in savings?
Transition Initiatives on target
•• Programs in place to achieve at least $150 million in savingsPrograms in place to achieve at least $150 million in savings
•• Plan to invest about half of the anticipated savings in the Plan to invest about half of the anticipated savings in the businessbusiness
•• Identified approximately 1,700 positions to be eliminated Identified approximately 1,700 positions to be eliminated
What is the company’s capital allocation policy with regard to dividends, share repurchase and acquisitions?
Improving levels of free cash flow
$0
$200
$400
$600
$800
$1,000
2003 2004 2005 2006 2007 2008
Average Per Year = $617 million
$540 $555 $543 $523
$924*
* Includes facility sales, tax refunds and other unusual sources* Includes facility sales, tax refunds and other unusual sources of cashof cash
$675 to $750
Forecast
Consistently increased the dividend for 26 years
$1.20 $1.22 $1.24$1.28 $1.32
$1.40
$0.00
$0.30
$0.60
$0.90
$1.20
$1.50
2003 2004 2005 2006 2007 2008
2% 2% 2% 3%3%
Forecast
= = Percent increasePercent increase6%
Reduced average shares outstanding through share repurchases
0
100
200
300
2003 2004 2005 2006 2007 2008
Decline in Shares Outstanding = 11%
236 234 232 225 221 211
YTD
What are the company’s plans for future acquisitions?
$0
$500
$1,000
$1,500
$2,000
$2,500
2001 2002 2003 2004 2005 2006 2007 Total
Major Acquisitions
PSI
Siemens (4 Locations)
Mailcode
DDD Co.
Bryce
Sure-Feed Engineering
Group 1AncoraCapital & Mgmt.Groupe Mag
Mapinfo
Digital Cement
Asterion SAS
Ibis Consulting
Print Inc.AAS & PMHEmtex
Imagitas
Compulit
Danka Canada
$572$572$206$206
$135$135
$512$512
$293$293
$240$240
$594$594 $2,552$2,552
DankaServices Int’l
Secap
Acquisitions have added to earnings
Cumulative Transactions 56 64 84
Investment (billions) $1.8 $1.9 $2.6
Revenue (billions) $1.3 $1.6 $1.9
Earnings Per Share 18¢ 22¢ 24¢
EBITDA (millions) $178 $210 $267
EBIT (millions) $139 $160 $200
2005 2006 2007
Acquisitions have added to free cash flow
$0
$50
$100
$150
$200
$250
$300
2005 2006 2007
$173
$218
$267
EBIT Amortization of Intangibles
$200$168
$136
($ in millions)
PBMS 18%
U.S. Mailing 10%
Mail Services
14%
Marketing Services
13%
International 13%
Total Pitney Bowes acquisition spend by business unit 2001-2007
Software 32%
Acquisition Strategy
•• Focus on strategic acquisitions in adjacent market spaces Focus on strategic acquisitions in adjacent market spaces
•• Use a riskUse a risk--adjusted hurdle rate and target incremental return adjusted hurdle rate and target incremental return above that for future acquisitionsabove that for future acquisitions
•• Fewer, more Fewer, more impactfulimpactful acquisitionsacquisitions
What will drive growth in the Mailing business, both in the U.S. and internationally?
-15%
-10%
-5%
0%
5%
10%
15%
2007 2008--10.9% 10.9%
+5.7%+5.7%
2009
Equipment sales benefit from timing and value of maturing leases
+8.6%+8.6%
Sales ≈25%
Rentals ≈25%
Financing ≈25%
Service ≈15%
Supplies ≈10%
U.S. Mailing Revenue
New mailing products are faster with more features
0 50 100 150 200 250 300
0
0
60 - 65
90 - 95
100
115 - 120
120
145
Auto Feed Letters / Minute
Neopost/Hasler Pitney Bowes
WOW Letters / Minute
IM440
WJ220
WJ185
IM480
IM460
WJ250
DM400
DM925
DM1100
DM875
DM825
DM575
DM525
DM450
A Competitor Pitney Bowes
International markets offer meter incentives
UK
UK Expands Discounts
France
Singapore
Canada
Spain
Ireland
India(since 1981)
AustraliaUK Expands Discounts
Value of metering recognized by international posts
Finland
Norway
Sweden(since 2004)
Denmark
Belgium
2006
2007
2008
2005
Germany(since 1995)
Holland(since 2000)
Why does the company do its own leasing and incur all the debt?
Customers prefer leasing
•• Convenience of payment Convenience of payment
•• Better management of cashBetter management of cash
•• Reduced risk if business needs changeReduced risk if business needs change
•• Reduced risk if technology changesReduced risk if technology changes
Benefits of leasing equipment
0
2000
4000
6000
8000
10000
12000
Sales of Equipment and Related
Services
Sales of Equipment and Related
Services
1.0x1.0x
1.8x1.8x
2.0x2.0x
Financing and Fee Income
Net Income
1.0x1.0x
Straight Sale – 6 Years Leasing Model – 4 Years
Net Income
Financing and Fee Income
1%
2%
3%
4%
5%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Lease financing has excellent credit experience
Payment Solutions Leasing Payment Solutions Leasing
1,848 1,958 2,067 2,092 2,089 2,161 2,215 2,257 2,380 2,479
163235
278 280 284317
358 404473
553
($ in
mill
ions
)
Avg. Earning Assets (1)
Avg. Write-offs/Avg. Earning Assets
(1) Represents global leasing and Payment Solutions receivables
2,415
573
YTD
How does declining mail volume affect the business? Is the business being hurt by electronic substitution for mail?
Impact of declining mail volumes
•• No significant, immediate impact since what customers pay is No significant, immediate impact since what customers pay is not based on volume processed not based on volume processed
•• Most of the decline in mail volume is in consumerMost of the decline in mail volume is in consumer--toto--business business mail which does not impact metered mailmail which does not impact metered mail
•• Internet generates business through eBayInternet generates business through eBay
•• Continue to diversify our business to mitigate the impact of Continue to diversify our business to mitigate the impact of declining mail volumesdeclining mail volumes
•• Mail volumes in other parts of the world are growingMail volumes in other parts of the world are growing
•• Between 2000 and 2007 mail volumes have moved in the Between 2000 and 2007 mail volumes have moved in the range of about +/range of about +/-- 2% per year. Mail volumes are up, on 2% per year. Mail volumes are up, on average, 0.3% per year over the same period.average, 0.3% per year over the same period.
We continue to expand into underserved areas of the Mailstream
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2003* 2007
U.S. Mailing Revenue
51%
Other Pitney Bowes
Revenue 49%
U.S. Mailing Revenue
38%
Other Pitney Bowes
Revenue 62%
$4,464
$6,130
+73.8%
+2.3%
* Excludes discontinued operations.
How does the economy affect the business? What is the company’s exposure to the financial services sector and other business sectors?
Pitney Bowes has performed consistently through different economic cycles
* Includes acquisitions and divestitures.
U.S. Recession
400
600
800
1,000
1,200
1,400
1,600
1,800
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
EBIT
DA
(500)
500
1,500
2,500
3,500
4,500
5,500
6,500
Rev
enue
s
EBITDA Revenues
23%21%
13%
10%
6% 5% 5% 5% 4% 4% 3% 2%
0%
5%
10%
15%
20%
25%
2007 Pitney Bowes U.S. revenue by industry vertical
Real Estate
EducationTranspor-tation
Telecoms & Utilities
Whole-sale
Trade
RetailOther Services
Govern-ment
Manu-facturing
Mail and Print
Providers
Financial Services
Profess-ional
Service
29%
15%
8% 8% 8% 7% 7%5% 5%
3% 3% 2%
0%
5%
10%
15%
20%
25%
30%
2007 U.S. Mailing revenue by industry vertical
Real Estate
Education Transpor-tation
Telecoms & Utilities
Whole-sale
Trade
RetailOther Services
Govern-ment
Manu-facturing
Mail and Print
Providers
Financial Services
Profess-ional
Service
With the dollar getting stronger, how will changes in currency impact the company’s results?
Impact of a change in exchange rates
One percent change in average foreign currency:One percent change in average foreign currency:
•• Revenue = 0.3%Revenue = 0.3%
•• EPS = $0.01EPS = $0.01
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