Tax benefits boost Pitney Bowes’ flagging revenues

Pitney Bowes has recorded a big increase in its share earnings for the full 2011 year, largely thanks to a sizeable tax benefit, which concealed declines in revenues. The US mail equipment manufacturer turned customer-communications-management enabler revealed today that it had a difficult final quarter of the year, up to the end of December.

Revenue was down 6.5% to $1.3bn for the quarter, topping off a full year in which revenues declined 3% to $5.3bn.

But, the Connecticut-based corporation said its diluted earnings per share more than doubled to $3.05 for the full year, compared to $1.41 for the prior year.

The share earnings came partly because of revised tax calculations after an examination of its tax records from 2001 to 2008 by the Internal Revenue Service, which added $1.41 per share to the company’s earnings for the quarter.

Chairman Murray D Martin described 2011 as “unexpectedly challenging”.

“Despite improvement in our equipment sales in the first half of the year, persistent economic uncertainty worldwide resulted in some of our customers deferring new equipment purchases,” he explained.

Q4 Sales

Lower equipment sales activity saw a 6% decline for revenues, to $666m, for the small and medium-sized business segment, with concerns about economic conditions prompting businesses to delay purchase decisions.

North America led the sales decline with a 9% drop in revenues to $483m, while international equipment sales actually saw some growth, particularly in France and the Nordic countries, leading to a 1% revenue rise to $183m.

Within Pitney Bowes’ enterprise segment, large businesses and public sector organisations were also delaying orders of equipment and “cautious” about investing in software, while continued investment in digital mail platform Volly ate into earnings. A 7% drop in revenues, to $675m, and 15% drop in earnings before tax, to $83m, came with a 9% drop in production mail equipment sales and 10% drop in software sales.

The company’s mail services division saw its revenue declining 2% to $145m for the year, but earnings before tax rocketed 92% thanks in large part to insurance payouts in the wake of a major fire at the company’s largest mail pre-sorting plant, in Dallas.

Martin said his staff performed a “remarkable job” recovering from the fire and said operations at the new site had allowed growth to resume in the fourth quarter. “We are now positioned to continue the profitable growth trend in our presort business that we were experiencing before the fire,” he said.


Looking ahead, Pitney Bowes executives forecast growth in 2012 to be in the range of -2% to +2% compared to 2011, reflecting a postal and economic environment that is expected to remain flat.

The company said it expects a gradual improvement in equipment sales this year, particularly for its Connect+ digital mailing system, and growth is expected to return in the enterprise segment of the business.

However, declines are expected to continue in the small and medium-sized business segment.

Martin said he was “confident” the right actions were being made to grow the business in 2012 and beyond, and that investment would continue in new technologies.

“We will continue to invest in innovative new solutions that enable our customers to manage their physical, digital and hybrid communications with their customers,” he said.

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