PBI Pitney Bowes Inc

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/YReported

 

Y/YEx 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/YReported

 

Y/YEx 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/YReported

 

Y/YEx 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 endedDecember 31,

 

Twelve months endedDecember 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  

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Editorial -Bill HughesChief Communications Officer203/351-6785

Financial -Adam DavidVP, Investor Relations203/351-7175