Pitney Bowes Announces Full Year and Fourth Quarter 2018 Financial Results

STAMFORD, Conn., February 05, 2019 - Pitney Bowes Inc. (NYSE:PBI), a global technology company that provides commerce solutions in the areas of ecommerce, shipping, mailing, and data, today announced its financial results for the full year and fourth quarter 2018.

“The fourth quarter and 2018 were important moments in the transformation of our company,” said Marc B. Lautenbach, President and CEO, Pitney Bowes. “Revenue grew in 2018, marking the second year of consecutive growth and making the last two years the best revenue growth performance in a decade.”

Full Year 2018:

  • Revenue of $3.5 billion, an increase over prior year of 13 percent as reported and 2 percent on a proforma basis
  • GAAP EPS of $1.19; Adjusted EPS of $1.16
  • GAAP cash from operations of $392 million; free cash flow of $318 million
  • Total debt decreased by $565 million versus prior year

Fourth Quarter 2018:

  • Revenue of $947 million, an increase over prior year of 3 percent as reported
  • GAAP EPS of $0.24; Adjusted EPS of $0.38
  • GAAP cash from operations of $103 million; free cash flow of $153 million

Recent Announcements:

  • On January 31, 2019, the Company announced that it signed a definitive agreement to sell its SMB direct operations in six smaller European countries to BAVARIA Industries Group AG.
  • On February 4, 2019, the Board of Directors authorized an incremental $100 million share repurchase and revised the quarterly dividend to $0.05 on the Company’s common share.

Share Repurchase and Dividend

The Board of Directors authorized an incremental $100 million share repurchase, which brings the total authorization to $121 million, and declared a quarterly cash dividend of $0.05 per common share. The amount of dividend reflects a reduction from the previous quarter’s dividend of $0.1875 per share. The dividend will be payable on March 11, 2019 to stockholders of record on February 15, 2019. In addition, a quarterly cash dividend of $0.53 per share of the Company’s $2.12 convertible preference stock will be payable on April 1, 2019 to stockholders of record on March 15, 2019, and a quarterly cash dividend of $0.50 per share on the Company’s 4 percent convertible cumulative preferred stock will be payable on May 1, 2019 to stockholders of record on April 15, 2019.

“Six years ago, Pitney Bowes was in markets that were declining and our revenue was declining,” said Lautenbach. “Today, roughly half of Pitney Bowes revenue is coming from growth markets. Importantly, Pitney Bowes is winning in those markets and growing revenue as evidenced by the strong growth in our Global Ecommerce segment. Consequently, there are opportunities available for Pitney Bowes to create value for our shareholders and continue to grow. Therefore, it is appropriate for the Company’s capital allocation to evolve. Our new capital allocation policy provides sufficient flexibility for Pitney Bowes to take advantage of these opportunities and at the same time still return capital to our shareholders. I am confident our capital allocation will unlock value for our shareholders.”

Full Year 2018 Results

Revenue totaled $3.5 billion, an increase over prior year of 13 percent as reported and 12 percent at constant currency. On a proforma basis, revenue increased over prior year by 2 percent as reported and 1 percent at constant currency.

GAAP earnings per diluted share (GAAP EPS) were $1.19. Adjusted earnings per diluted share (Adjusted EPS) were $1.16.

GAAP cash from operations was $392 million and free cash flow was $318 million. During the year, the Company used cash to reduce debt by $565 million, return $140 million in dividends to shareholders and to pay $53 million for restructuring payments.

Fourth Quarter 2018 Results

Revenue totaled $947 million, which was an increase over prior year of 3 percent as reported and 4 percent at constant currency.

Commerce Services revenue grew 12 percent. Small and Medium Business (SMB) Solutions revenue declined 7 percent as reported and 6 percent at constant currency. Software Solutions revenue increased 17 percent as reported and 19 percent at constant currency.

GAAP EPS was $0.24. Adjusted EPS was $0.38.

GAAP cash from operations during the quarter was $103 million and free cash flow was $153 million. Compared to the prior year, free cash flow increased by $19 million largely due to the timing of accounts payable and higher net income. This was partly offset by other working capital items. During the quarter, the Company used cash to return $35 million in dividends to shareholders and to pay $14 million for restructuring payments.

The Company’s earnings per share results for the fourth quarter and full year are summarized in the table below*

    Fourth Quarter   Full Year
    2018   2017   2018   2017
GAAP EPS   $ 0.24     $ 0.48     $ 1.19     $ 1.39  
Discontinued Operations   $ 0.08       ($0.07 )     ($0.13 )     ($0.21 )
GAAP EPS from Continuing Operations   $ 0.32     $ 0.41     $ 1.06     $ 1.18  
Pension Settlement   $ 0.12       -     $ 0.12       -  
Tax Legislation     ($0.11 )     ($0.21 )     ($0.20 )     ($0.21 )
Restructuring Charges and Asset Impairments, net   $ 0.03     $ 0.09     $ 0.11     $ 0.20  
Transaction Costs   $ 0.01     $ 0.01     $ 0.01     $ 0.02  
Loss on Extinguishment of Debt     -     $ 0.01     $ 0.03     $ 0.01  
State Tax Valuation Allowance – DMT Sale     -       -     $ 0.01       -  
Gain on Sale of Technology     -       -       -       ($0.03 )
Adjusted EPS   $ 0.38     $ 0.32     $ 1.16     $ 1.18  
* The sum of the earnings per share may not equal the totals above due to rounding.
 

Fourth Quarter 2018 Business Segment Reporting

The business reporting groups reflect how the Company manages these groups and the clients served in each market.

The Commerce Services group includes the Global Ecommerce and Presort Services segments. Global Ecommerce facilitates global cross-border ecommerce transactions and domestic retail and ecommerce shipping solutions, including fulfillment and returns. Presort Services provides sortation services to qualify large volumes of First Class Mail; Marketing Mail; and Bound and Packet Mail (Standard Flats and Bound Printed Matter) for postal workshare discounts.

The SMB Solutions group offers mailing and shipping solutions, financing, services, and supplies for small and medium businesses to help simplify and save on the sending, tracking and receiving of letters, parcels and flats. This group includes the North America Mailing and International Mailing segments.

Software Solutions provide customer engagement, customer information, location intelligence software and data.

The results for each segment within the group may not equal the subtotals for the group due to rounding.

Commerce Services

($ millions)   Fourth Quarter
Revenue   2018  

2017

 

Y/Y
Reported

 

Y/Y
Ex Currency

Global Ecommerce   $     304     $     263     16 %   16 %
Presort Services         133           128     4 %   4 %
Commerce Services   $     438     $     391     12 %   12 %
                   
EBITDA                  
Global Ecommerce   $     12     $     15     (20 %)    
Presort Services         24           34     (30 %)    
Commerce Services   $     36     $     49     (27 %)    
                   
EBIT                  
Global Ecommerce         ($4 )   $     -    

>(100

%)

   
Presort Services         17           28     (40 %)    
Commerce Services   $     12     $     28     (56 %)    
 

Global Ecommerce

Revenue increased from prior year driven by growth in domestic parcel, fulfillment and shipping solutions volumes partially offset by lower cross border volumes. This is the first quarter with Newgistics reporting in both periods. Newgistics revenue grew 23 percent over prior year.

The EBIT loss was driven primarily by investments in market growth opportunities and operational excellence initiatives, higher transportation and labor costs as well as the amortization of acquisition-related intangible assets.

Presort Services

Revenue growth was driven by higher volumes of First Class mail, Standard Class mail and Bound and Packet mail processed. EBIT and EBITDA margins declined from prior year primarily due to higher costs related to the launch of a marketing mail pilot program, as well as higher labor and transportation costs and lower revenue per piece.

SMB Solutions

($ millions)   Fourth Quarter
Revenue  

2018

 

2017

 

Y/Y
Reported

 

Y/Y
Ex Currency

North America Mailing   $     321     $     340     (6 %)   (6 %)
International Mailing         91           102     (10 %)   (7 %)
SMB Solutions   $     412     $     442     (7 %)   (6 %)
                 
EBITDA                
North America Mailing   $     134     $     144     (7 %)    
International Mailing         26           17     49 %    
SMB Solutions   $     160     $     162     (1 %)    
EBIT                
North America Mailing   $     117     $     129     (9 %)    
International Mailing         22           12     77 %    
SMB Solutions   $     139     $     141     (1 %)    
 

North America Mailing

The year-over-year decline in recurring revenue streams continues to stabilize and is in-line with the average of the last two quarters. Recurring revenue streams declined largely around rentals, supplies and support services, which was partially offset by growth in financing and business services. Revenue declined in equipment sales largely due to a decline in top of the line products. EBIT and EBITDA margins were lower than prior year due to the decline in revenue partly offset by lower expenses.

International Mailing

Equipment sales and recurring revenue streams both contributed to the revenue decline. The equipment sales decline was driven by weakness in the UK and France, partly offset by growth in Japan. EBIT and EBITDA margins increased versus prior year primarily driven by lower expenses.

Software Solutions

($ millions)   Fourth Quarter
   

2018

 

2017

 

Y/Y
Reported

 

Y/Y
Ex Currency

Revenue   $     97     $     83     17 %   19 %
EBITDA   $     25     $     11     121 %    
EBIT   $     23     $     9     155 %    
 

Software Solutions

Revenue increased from prior year driven by higher license revenue, primarily in Data and Location Intelligence, strong growth in SaaS revenues, as well as from the implementation of the new revenue recognition standard (ASC 606). Revenue also benefited from growth in smaller deals. EBIT and EBITDA margins increased from prior year largely driven by operating leverage on the higher revenue.

2019 Guidance

The Company expects for the full year 2019:

  • Revenue, on a constant currency (CC) basis, to be in the range of 1 percent to 4 percent growth, when compared to 2018.
  • Adjusted EPS from continuing operations to be in the range of $1.05 to $1.20.
  • Free cash flow to be in the range of $225 million to $275 million. Free cash flow will be impacted by third party leasing initiatives.

The Company’s 2019 guidance has been adjusted for the financial results related to the sale of SMB direct operations in six smaller European countries as a result of the recently signed definitive agreement. The year-to-year revenue comparison will be adversely impacted by approximately $40 million, or 1 percent, as a result of this sale. The Company’s 2019 guidance also considers the incremental expense associated with the current tariff level of 10 percent with China.

In aggregate, these items are expected to adversely impact EPS by approximately $0.04 to $0.05. Additionally, if the current tariff level with China increases to 25 percent, the Company has estimated that this would have an additional adverse impact of approximately $0.04 to $0.06 on EPS results.

The Company’s 2019 guidance reflects the new lease accounting standard (ASC 842), which is not expected to have a material impact on overall 2019 results. Prior years will be recast in the first quarter to conform to the new standard.

This guidance discusses future results, which are inherently subject to unforeseen risks and developments. As such, discussions about the business outlook should be read in the context of an uncertain future, as well as the risk factors identified in the safe harbor language at the end of this release and as more fully outlined in the Company's 2017 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. This guidance excludes any unusual items that may occur or additional portfolio or restructuring actions, not specifically identified, as the Company implements plans to further streamline its operations and reduce costs. Revenue guidance is provided on a constant currency basis. The Company cannot reasonably predict the impact that future changes in currency exchange rates will have on revenue and net income. Additionally, the Company cannot provide GAAP EPS and GAAP cash from operations guidance due to the uncertainty of future potential restructurings, goodwill and asset write-downs, unusual tax settlements or payments, special contributions to its pension funds, acquisitions, divestitures and other potential adjustments, which could, individually or in the aggregate, have a material impact on the Company’s performance. The Company’s guidance is based on an assumption that the global economy and foreign exchange markets in 2019 will not change significantly. The Company’s guidance also includes changes in accounting standards implemented at the beginning of the year.

Conference Call and Webcast

Management of Pitney Bowes will discuss the Company’s results in a broadcast over the Internet today at 8:00 a.m. ET. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the Company’s web site at www.pitneybowes.com.

About Pitney Bowes

Pitney Bowes (NYSE:PBI) is a global technology company providing commerce solutions that power billions of transactions. Clients around the world, including 90 percent of the Fortune 500, rely on the accuracy and precision delivered by Pitney Bowes solutions, analytics, and APIs in the areas of ecommerce fulfillment, shipping and returns; cross-border ecommerce; presort services; office mailing and shipping; location data; and software. For nearly 100 years Pitney Bowes has been innovating and delivering technologies that remove the complexity of getting commerce transactions precisely right. For additional information visit Pitney Bowes, the Craftsmen of Commerce, at www.pitneybowes.com.

Use of Non-GAAP Measures

The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP); however, in its disclosures the Company uses certain non-GAAP measures, such as adjusted earnings before interest and taxes (EBIT), adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted earnings per share (EPS), revenue growth on a constant currency basis and free cash flow.

The Company reports measures such as adjusted EBIT, adjusted EPS and adjusted net income to exclude the impact of special items like restructuring charges, tax adjustments, goodwill and asset write-downs, and costs related to dispositions and acquisitions. While these are actual Company expenses, they can mask underlying trends associated with its business. Such items are often inconsistent in amount and frequency and as such, the adjustments allow an investor greater insight into the current underlying operating trends of the business.

In addition, revenue growth is presented on a constant currency basis to exclude the impact of changes in foreign currency exchange rates since the prior period under comparison. Constant currency measures are intended to help investors better understand the underlying operational performance of the business excluding the impacts of shifts in currency exchange rates over the period. Constant currency is calculated by converting our current quarter reported results using the prior year’s exchange rate for the comparable quarter. This comparison allows an investor insight into the underlying revenue performance of the business and true operational performance from a comparable basis to prior period. A reconciliation of reported revenue to constant currency revenue can be found in the Company’s attached financial schedules.

The Company reports free cash flow in order to provide investors insight into the amount of cash that management could have available for other discretionary uses. Free cash flow adjusts GAAP cash from operations for capital expenditures, restructuring payments, unusual tax settlements, special contributions to the Company’s pension fund and cash used for other special items. A reconciliation of GAAP cash from operations to free cash flow can be found in the Company’s attached financial schedules.

Segment EBIT is the primary measure of profitability and operational performance at the segment level. Segment EBIT is determined by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges and goodwill and asset impairments, which are recognized on a consolidated basis. The Company has also included segment EBITDA as a useful measure for profitability and operational performance, and an additional way to look at the economics of the segments, especially in light of some of the Company’s more recent, larger acquisitions. Segment EBITDA further excludes depreciation and amortization expense for the segment. A reconciliation of segment EBIT and EBITDA to net income can be found in the attached financial schedules.

Pitney Bowes has provided a quantitative reconciliation to GAAP in supplemental schedules. This information can be found at the Company's web site www.pb.com/investorrelations.

This document contains “forward-looking statements” about the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not limited to, statements about its future revenue and earnings guidance and other statements about future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: declining physical mail volumes; competitive factors, including pricing pressures, technological developments and the introduction of new products and services by competitors; our success in developing new products and services, including digital-based products and services; obtaining regulatory approvals, if required, and the market’s acceptance of these new products and services; changes in postal or banking regulations; changes in, or loss of, our contractual relationships with the United States Postal Service or posts in our other major markets; changes in labor conditions and transportation costs; macroeconomic factors, including global and regional business conditions that adversely impact customer demand, foreign currency exchange rates, interest rates and tariffs; economic tensions between governments and changes in international trade policies, Brexit and other factors as more fully outlined in the Company's 2017 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three months and twelve months ended December 31, 2018 and 2017, and consolidated balance sheets as of December 31, 2018 and December 31, 2017 are attached

Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited; in thousands, except share and per share amounts)
 
    Three months ended December 31,   Twelve months ended December 31,
    2018   2017  

2018

 

2017

Revenue:                
Equipment sales   $ 113,393     $ 127,290     $ 430,451     $ 476,691  
Supplies     52,451       58,091       218,304       231,412  
Software     96,832       83,452       340,855       331,843  
Rentals     85,507       94,036       363,057       384,123  
Financing     81,274       80,508       314,778       330,985  
Support services     74,103       76,736       293,413       299,792  
Business services     443,580       396,293       1,561,522       1,068,426  
Total revenue     947,140       916,406       3,522,380       3,123,272  
                 
Costs and expenses:                
Cost of equipment sales     49,253       55,666       181,766       201,116  
Cost of supplies     14,308       18,025       60,960       66,302  
Cost of software     25,424       24,411       100,681       95,033  
Cost of rentals     19,371       20,834       86,330       82,703  
Financing interest expense     12,332       12,219       48,857       50,665  
Cost of support services     42,276       41,000       168,271       163,889  
Cost of business services     363,555       302,162       1,246,084       773,052  
Selling, general and administrative (1)     275,835       309,167       1,123,116       1,170,905  
Research and development     31,433       30,105       125,588       118,703  
Restructuring charges and asset impairments, net     7,438       27,114       27,077       56,223  
Other components of net pension and postretirement cost (1)     28,495       1,334       22,425       5,413  
Interest expense, net     24,941       31,620       110,900       113,497  
Other expense     -       3,856       7,964       3,856  
Total costs and expenses     894,661       877,513       3,310,019       2,901,357  
                 
Income from continuing operations before taxes     52,479       38,893       212,361       221,915  
(Benefit) provision for income taxes     (8,362 )     (38,147 )     12,383       553  
Income from continuing operations     60,841       77,040       199,978       221,362  
(Loss) income from discontinued operations, net of tax     (15,856 )     12,908       23,687       39,978  
Net income   $ 44,985     $ 89,948     $ 223,665     $ 261,340  
                 
Basic earnings (loss) per share attributable to common stockholders (2):                
Continuing operations   $ 0.32     $ 0.41     $ 1.07     $ 1.19  
Discontinued operations     (0.08 )     0.07       0.13       0.21  
Net income   $ 0.24     $ 0.48     $ 1.19     $ 1.40  
                 
Diluted earnings (loss) per share attributable to common stockholders (2):                
Continuing operations   $ 0.32     $ 0.41     $ 1.06     $ 1.18  
Discontinued operations     (0.08 )     0.07       0.13       0.21  
Net income   $ 0.24     $ 0.48     $ 1.19     $ 1.39  
                 
Weighted-average shares used in diluted earnings per share     188,806,855       188,046,578       188,381,647       187,435,080  

(1)

  Effective January 1, 2018, components of net periodic pension and postretirement costs, other than service costs, are required to be reported separately. Accordingly, for the three and twelve months ended December 30, 2017, $1.3 million and $5.4 million of costs have been reclassified from selling, general and administrative expense to other components of net pension and postretirement cost.
     

(2)

  The sum of the earnings per share amounts may not equal the totals due to rounding.
     

 

Pitney Bowes Inc.
Consolidated Balance Sheets
(Unaudited; in thousands, except share amounts)
 

Assets

 

December 31,
2018

 

December 31,
2017

Current assets:        
Cash and cash equivalents   $ 866,742     $ 1,009,021  
Short-term investments     56,449       48,988  
Accounts receivable, net     455,807       427,022  
Short-term finance receivables, net     789,661       828,003  
Inventories     41,964       40,769  
Current income taxes     5,947       58,439  
Other current assets and prepayments     99,332       83,293  
Assets of discontinued operations     4,854       334,848  
Total current assets     2,320,756       2,830,383  
         
Property, plant and equipment, net     410,114       373,503  
Rental property and equipment, net     178,099       183,956  
Long-term finance receivables, net     592,165       652,087  
Goodwill     1,766,511       1,774,645  
Intangible assets, net     227,137       272,186  
Noncurrent income taxes     61,420       59,909  
Other assets     416,701       540,751  
Total assets   $ 5,972,903     $ 6,687,420  
         

Liabilities and stockholders' equity

       
Current liabilities:        
Accounts payable and accrued liabilities   $ 1,401,635     $ 1,458,854  
Current income taxes     15,165       8,823  
Current portion of long-term debt     199,535       271,057  
Advance billings     237,529       257,766  
Liabilities of discontinued operations     3,276       72,808  
Total current liabilities     1,857,140       2,069,308  
         
Deferred taxes on income     295,808       249,143  
Tax uncertainties and other income tax liabilities     39,548       102,051  
Long-term debt     3,066,073       3,559,278  
Other noncurrent liabilities     474,862       519,079  
Total liabilities     5,733,431       6,498,859  
         
Stockholders' equity:        
Cumulative preferred stock, $50 par value, 4% convertible     1       1  
Cumulative preference stock, no par value, $2.12 convertible     396       441  
Common stock, $1 par value     323,338       323,338  
Additional paid-in-capital     121,475       138,367  
Retained earnings     5,416,777       5,229,584  
Accumulated other comprehensive loss     (948,426 )     (792,173 )
Treasury stock, at cost     (4,674,089 )     (4,710,997 )
Total stockholders' equity     239,472       188,561  
Total liabilities and stockholders' equity   $ 5,972,903     $ 6,687,420  
 

 

Pitney Bowes Inc.

Business Segments

(Unaudited; in thousands)

 
    Three months ended December 31,   Twelve months ended December 31,
    2018   2017   % Change   2018   2017   % Change
REVENUE                        
Global Ecommerce   $ 304,327     $ 263,403     16 %   $ 1,022,862     $ 552,242     85 %
Presort Services     133,273       127,698     4 %     515,795       497,901     4 %
Commerce Services     437,600       391,101     12 %     1,538,657       1,050,143     47 %
                         
North America Mailing     320,945       340,412     (6 %)     1,275,025       1,357,405     (6 %)
International Mailing     91,478       101,615     (10 %)     367,843       384,097     (4 %)
Small & Medium Business Solutions     412,423       442,027     (7 %)     1,642,868       1,741,502     (6 %)
                         
Software Solutions     97,117       83,278     17 %     340,855       331,627     3 %
Total revenue   $ 947,140     $ 916,406     3 %   $ 3,522,380     $ 3,123,272     13 %
                         
EBIT                        
Global Ecommerce   $ (4,345 )   $ (5 )   >(100%)   $ (32,379 )   $ (17,899 )   (81 %)
Presort Services     16,742       28,045     (40 %)     73,768       97,506     (24 %)
Commerce Services     12,397       28,040     (56 %)     41,389       79,607     (48 %)
                         
North America Mailing     117,435       128,567     (9 %)     470,268       498,571     (6 %)
International Mailing     21,780       12,292     77 %     63,820       48,531     32 %
Small & Medium Business Solutions     139,215       140,859     (1 %)     534,088       547,102     (2 %)
                         
Software Solutions     22,644       8,890     >100%     47,094       33,818     39 %
Segment EBIT (1)   $ 174,256     $ 177,789     (2 %)   $ 622,571     $ 660,527     (6 %)
                         
EBITDA                        
Global Ecommerce   $ 11,654     $ 14,523     (20 %)   $ 28,667     $ 18,763     53 %
Presort Services     23,928       34,158     (30 %)     100,606       124,047     (19 %)
Commerce Services     35,582       48,681     (27 %)     129,273       142,810     (9 %)
                         
North America Mailing     134,190       144,431     (7 %)     538,518       563,374     (4 %)
International Mailing     25,738       17,246     49 %     79,962       67,093     19 %
Small & Medium Business Solutions     159,928       161,677     (1 %)     618,480       630,467     (2 %)
                         
Software Solutions     24,860       11,267     >100%     56,634       42,796     32 %
Segment EBITDA (2)   $ 220,370     $ 221,625     (1 %)   $ 804,387     $ 816,073     (1 %)
                         
                         

Reconciliation of segment EBITDA to net income

                       
                         
Segment EBITDA   $ 220,370     $ 221,625         $ 804,387     $ 816,073      
Less: Segment depreciation and amortization (3)     (46,114 )     (43,836 )         (181,816 )     (155,546 )    
Segment EBIT     174,256       177,789           622,571       660,527      
Corporate expenses     (43,224 )     (62,599 )         (180,481 )     (214,072 )    
Adjusted EBIT     131,032       115,190           442,090       446,455      
Interest, net (4)     (37,273 )     (43,839 )         (159,757 )     (164,162 )    
Pension settlement     (31,329 )     -           (31,329 )     -      
Restructuring charges and asset impairments, net     (7,438 )     (27,114 )         (27,077 )     (56,223 )    
Loss on extinguishment of debt     -       (3,856 )         (7,964 )     (3,856 )    
Gain on sale of technology     -       -           -       6,085      
Transaction costs     (2,513 )     (1,488 )         (3,602 )     (6,384 )    
Benefit (provision) for income taxes     8,362       38,147           (12,383 )     (553 )    
Income from continuing operations     60,841       77,040           199,978       221,362      
(Loss) income from discontinued operations, net of tax     (15,856 )     12,908           23,687       39,978      
Net income   $ 44,985     $ 89,948         $ 223,665     $ 261,340      
(1)   Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges, and other items that are not allocated to a particular business segment.
(2)   Segment EBITDA is calculated as Segment EBIT plus segment depreciation and amortization expense.
(3)   Includes depreciation and amortization expense of reporting segments only. Does not include corporate depreciation and amortization expense.
(4)   Includes financing interest expense and interest expense, net.
 

 

Pitney Bowes Inc.
Reconciliation of Reported Consolidated Results to Adjusted Results
(Unaudited; in thousands, except per share amounts)
 
   

Three months ended
December 31,

   

Twelve months ended
December 31,

 
    2018   2017   Y/Y Chg.   2018   2017   Y/Y Chg.
                             
Reconciliation of reported revenue to revenue excluding currency                            
Revenue, as reported   $ 947,140     $ 916,406       3 %   $ 3,522,380     $ 3,123,272       13 %
Currency impact on revenue     6,787       -             (12,797 )     -        
Revenue, at constant currency   $ 953,927     $ 916,406       4 %   $ 3,509,583     $ 3,123,272       12 %
                             
Reconciliation of reported revenue growth to pro forma revenue growth                            
Revenue, as reported                 $ 3,522,380     $ 3,123,272       13 %
Less: Newgistics revenue included in PBI revenue                   555,022       139,794        
PBI excluding Newgistics                   2,967,358       2,983,478       (1 %)
Actual Newgistics revenue, including preacquisition period                   555,022       480,018       16 %
Proforma revenue                   3,522,380       3,463,496       2 %
Currency impact on revenue                   (12,797 )          
Proforma revenue, at constant currency                 $ 3,509,583     $ 3,463,496       1 %
                             
Reconciliation of reported net income to adjusted earnings                            
Net income   $ 44,985     $ 89,948           $ 223,665     $ 261,340        
Loss (income) from discontinued operations, net of tax     15,856       (12,908 )           (23,687 )     (39,978 )      
Pension settlement     23,402       -             23,402       -        
Restructuring charges and asset impairments, net     6,530       17,813             20,950       37,248        
Tax legislation     (20,316 )     (38,774 )           (36,909 )     (38,774 )      
State tax valuation allowance - Production Mail Business sale     -       -             2,628       -        
Transaction costs     1,876       953             2,690       4,052        
Loss on extinguishment of debt     -       2,375             5,933       2,375        
Gain on sale of technology     -       -             -       (5,605 )      
Adjusted net income     72,333       59,407             218,672       220,658        
Provision for income taxes, as adjusted     21,426       11,944             63,661       61,635        
Interest, net     37,273       43,839             159,757       164,162        
Adjusted EBIT     131,032       115,190             442,090       446,455        
Depreciation and amortization     51,112       49,762             203,293       179,650        
Adjusted EBITDA   $ 182,144     $ 164,952           $ 645,383     $ 626,105        
                             
                             
Reconciliation of reported diluted earnings per share to adjusted diluted earnings per share                            
Diluted earnings per share   $ 0.24     $ 0.48           $ 1.19     $ 1.39        
Loss (income) from discontinued operations, net of tax     0.08       (0.07 )           (0.13 )     (0.21 )      
Pension settlement     0.12       -             0.12       -        
Restructuring charges and asset impairments, net     0.03       0.09             0.11       0.20        
Tax legislation     (0.11 )     (0.21 )           (0.20 )     (0.21 )      
State tax valuation allowance - Production Mail Business sale     -       -             0.01       -        
Transaction costs     0.01       0.01             0.01       0.02        
Loss on extinguishment of debt     -       0.01             0.03       0.01        
Gain on sale of technology     -       -             -       (0.03 )      
Adjusted diluted earnings per share   $ 0.38     $ 0.32           $ 1.16     $ 1.18        
                             
Note: The sum of the earnings per share amounts may not equal the totals due to rounding.    
                             
                             
Reconciliation of reported net cash from operating activities to free cash flow                            
Net cash provided by operating activities   $ 102,660     $ 165,236           $ 392,261     $ 495,813        
Net cash (used in) provided by operating activities - discontinued operations     72,278       (10,986 )           29,103       (29,006 )      
Capital expenditures     (50,911 )     (49,746 )           (191,444 )     (168,097 )      
Restructuring payments     13,898       9,012             52,974       37,454        
Reserve account deposits     14,144       13,462             21,008       10,954        
Transaction costs paid     961       7,396             14,203       7,396        
Free cash flow   $ 153,030     $ 134,374           $ 318,105     $ 354,514