pitney bowes topquestions_2

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January 2003 PBI internal use only 1 Join us at the Sheraton Hotel only 1 mile from Grand Central Station! VALUED INVESTOR c/o SHERATON HOTEL 811 7TH AVENUE NEW YORK, NY 10019-6002 Top Investor Questions Investor Update – September 10, 2008

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Page 1: pitney bowes  TopQuestions_2

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

Page 2: pitney bowes  TopQuestions_2

Top Investor Questions

Page 3: pitney bowes  TopQuestions_2

Why did the company decide to retain PBMS and what are the drivers of growth and profitability?

Page 4: pitney bowes  TopQuestions_2

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

Page 5: pitney bowes  TopQuestions_2

What is the status of the company’s restructuring initiatives? Is the company on target to get $150 million in savings?

Page 6: pitney bowes  TopQuestions_2

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

Page 7: pitney bowes  TopQuestions_2

What is the company’s capital allocation policy with regard to dividends, share repurchase and acquisitions?

Page 8: pitney bowes  TopQuestions_2

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

Page 9: pitney bowes  TopQuestions_2

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%

Page 10: pitney bowes  TopQuestions_2

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

Page 11: pitney bowes  TopQuestions_2

What are the company’s plans for future acquisitions?

Page 12: pitney bowes  TopQuestions_2

$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

Page 13: pitney bowes  TopQuestions_2

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

Page 14: pitney bowes  TopQuestions_2

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)

Page 15: pitney bowes  TopQuestions_2

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%

Page 16: pitney bowes  TopQuestions_2

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

Page 17: pitney bowes  TopQuestions_2

What will drive growth in the Mailing business, both in the U.S. and internationally?

Page 18: pitney bowes  TopQuestions_2

-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

Page 19: pitney bowes  TopQuestions_2

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

Page 20: pitney bowes  TopQuestions_2

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)

Page 21: pitney bowes  TopQuestions_2

Why does the company do its own leasing and incur all the debt?

Page 22: pitney bowes  TopQuestions_2

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

Page 23: pitney bowes  TopQuestions_2

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

Page 24: pitney bowes  TopQuestions_2

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

Page 25: pitney bowes  TopQuestions_2

How does declining mail volume affect the business? Is the business being hurt by electronic substitution for mail?

Page 26: pitney bowes  TopQuestions_2

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.

Page 27: pitney bowes  TopQuestions_2

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.

Page 28: pitney bowes  TopQuestions_2

How does the economy affect the business? What is the company’s exposure to the financial services sector and other business sectors?

Page 29: pitney bowes  TopQuestions_2

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

Page 30: pitney bowes  TopQuestions_2

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

Page 31: pitney bowes  TopQuestions_2

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

Page 32: pitney bowes  TopQuestions_2

With the dollar getting stronger, how will changes in currency impact the company’s results?

Page 33: pitney bowes  TopQuestions_2

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