Pitney Bowes 2006 Annual Report Download - page 32

Financial Highlights From Our CFO
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Pitney Bowes enjoyed a successful year in 2006 as the company
achieved its financial and strategic objectives.
Our revenue grew by 7 percent to $5.7 billion. Excluding strategic
transactions and currency translation, our “organic” revenue
grew by 5 percent.
On a GAAP basis, our earnings per share from continuing
operations grew by 23 percent to $2.51. Excluding restructuring
charges and other items, our earnings per share grew by 9 percent to $2.69. This compares
with our earnings guidance of $2.64 to $2.72 when we started the year and marked the third
straight year of being within or above our targeted range of 8 percent to 10 percent.
Our free cash flow was $523 million. This included a net investment of $208 million
in finance receivables, which reflected growth in our financing services for customer
purchases of equipment, postage, and supplies.
We continued to deploy our cash through a balanced allocation among dividends, share
repurchases, and acquisitions. We paid $1.28 per share in dividends, for total payments
to shareholders of $285 million. In February 2007, our Board of Directors approved an
increase in our quarterly dividend to 33 cents, which makes 25 consecutive years of
greater dividends to our shareholders.
We used $400 million of cash in 2006 to repurchase 9.2 million of our shares. At year-end
2006, our shares outstanding declined by 2.6 percent from the prior year-end.
We also invested $231 million in 10 acquisitions during the year. These acquisitions
strengthened our presence in software, litigation support, marketing services, print
management, and distribution capabilities.
We completed our restructuring program during the fourth quarter. For the year, our
pre-tax restructuring charges were $36 million, which brought the four-year total
(2003-2006) to $394 million. We estimate that we will have generated $380 million of
annual cost savings from this program, including an incremental $20 million of benefits
that we expect to realize in 2007. The program strengthened our business processes,
improved our customer service capabilities, and better positioned us for future growth.
We were especially pleased this year to complete the divestiture of our Capital Services
business and to settle all of our pre-2001 tax issues with the Internal Revenue Service—
and to have done so on a cash neutral basis. We are now a pure play mailstream company
and have excellent visibility into our future results.
The net effect of all of this activity is that our total debt at year-end 2006 was about $370 million
less than the prior year-end and our deferred taxes declined by around $1.5 billion.
We delivered a total return to shareholders of over 12 percent in 2006, including about
9 percent of share price appreciation and the assumed reinvestment of dividends in
Pitney Bowes stock. Since the end of 2000—when we launched our mailstream strategies—
we have delivered a compound annual return to our shareholders of about 11 percent,
which is substantially better than the market and peer group averages over the period.