Pitney Bowes 2004 Annual Report Download - page 31

RECONCILIATION OF REPORTED CONSOLIDATED RESULTS
TO ADJUSTED RESULTS Dollars in thousands, except per share amounts
FOR THE YEAR 2004 2003 2002
GAAP income from continuing operations
before income taxes, as reported $699,448 $721,091 $619,445
Capital services charges ––213,182
Contributions to charitable foundations –10,000 –
Legal settlements, net 19,666 (10,117) –
Restructuring charges 157,634 116,713 –
Income from continuing operations
before income taxes, as adjusted 876,748 837,687 832,627
Provision for income taxes, as adjusted 282,749 268,216 260,616
Income from continuing operations, as adjusted 593,999 569,471 572,011
Interest expense, net 168,746 164,941 179,154
Provision for income taxes, as adjusted 282,749 268,216 260,616
EBIT $1,045,494 $1,002,628 $1,011,781
GAAP diluted earnings per share, as reported $2.05 $2.11 $1.97
Income from discontinued operations –(0.01) (0.16)
GAAP diluted earnings per share from continuing
operations, as reported $2.05 $2.10 $1.81
Capital services charges ––0.56
Contributions to charitable foundations –0.03 –
Legal settlements, net 0.05 (0.03) –
Restructuring charges 0.43 0.32 –
Diluted earnings per share from continuing
operations, as adjusted $2.54 $2.41 $2.37
GAAP net cash provided by operating activities, as reported $944,639 $851,261 $502,559
Capital expenditures (316,982) (285,681) (224,834)
Free cash flow 627,657 565,580 277,725
Pension plan investment –50,000 338,579
Contributions to charitable foundations –10,000 –
Payments related to restructuring charges 66,055 62,751 49,032
Payments related to legal settlements, net ––11,856
Spin-off of Imagistics International Inc. ––4,772
Free cash flow, as adjusted $693,712 $688,331 $681,964
The sum of the earnings per share amounts may not equal the totals above due to rounding.
Management believes this presentation provides a reasonable basis on which to present the adjusted financial information. The Company’s financial results are reported in accordance
with generally accepted accounting principles (GAAP). The earnings per share and free cash flow results are adjusted to exclude the impact of special items such as restructuring
charges and write-downs of assets, which materially impact the comparability of the Company’s results of operations. The use of free cash flow has
limitations. GAAP cash flow has the advantage of including all cash available to the Company after actual expenditures for all purposes. Free cash
flow is the amount of cash that management could have available for discretionary uses if it made different decisions about employing its cash. It
adds back long-term commitments such as capital expenditures and pension plan contributions, as well as special items such as charitable contribu-
tions and cash used for restructuring charges. All of these items use cash that is not otherwise available to the Company and are important expendi-
tures. Management compensates for these limitations by using a combination of GAAP cash flow and free cash flow in doing its planning.
The adjusted financial information and certain financial measures such as EBIT and EBIT to interest are intended to be more indicative of the ongoing
operations and economic results of the Company. EBIT excludes interest and taxes, and as a result has the effect of showing a greater amount of
earnings than net income. The Company believes that interest and taxes, though important, do not reflect management effectiveness as these items
are largely outside of their control. In assessing performance, the Company uses both EBIT and net income.
This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with GAAP. Further,
our definition of this adjusted financial information may differ from similarly titled measures used by other companies.
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