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Pitney Bowes –
An Essential
Enterprise
Annual Report 2021
Pitney Bowes has emerged from a long, patient and
purposeful transformation as a global force in shipping as
well as mailing. Recognized as a leader, with a century of
experience behind us, we continue our trajectory now
focused on delivering high performance.
Pitney Bowes has been recognized by J.D. Power for providing “An Outstanding
Customer Service Experience” for its Technology Service & Support Program.
J.D. Power 2021 Certified Technology Service & Support Program, developed in conjunction with TSIA. Based on successful completion of an audit and exceeding
a customer satisfaction benchmark for Technology Service and Support operations. For more information, visit http://www.jdpower.com or www.tsia.com.
Marc B. Lautenbach
President and
Chief Executive Officer
Fellow shareholders:
Our market and our economy continued to present unprecedented opportunities
and challenges in 2021. We were clear at the outset of the pandemic that it was our
intent to come out of this tumultuous period better than when we entered. I think
it’s safe to say we all thought this crisis would come to an end sooner than it has,
and with perhaps fewer peaks and valleys. But, true to our history, our Company has
proven resilient in addressing these rapid changes and is on the right trajectory to
be in a much better place when we get to the other side of this pandemic.
Even before the outset of the pandemic, I have been saying that the last chapter of a successful
transformation is to grow revenue and profit. In 2021, we made a step forward — increasing
revenue and earnings per share. For sure, more to do.
Two key indicators for longer-term success, client satisfaction and employee engagement,
affirmed we are on the right path. Client satisfaction in all of our businesses was on an improved
trajectory as we exited the year.
And, even though pundits and consultants have asserted it is very difficult — if not impossible —
to drive employee engagement and cultural change in this current environment, our most recent
employee engagement scores were at record highs in 2021. Our cultural change measurements
compared favorably with other high-performance companies, and our diversity and inclusion
measures were best of class. These achievements did not go unnoticed: Pitney Bowes was
1
Pitney Bowes Annual Report 2021 Letter to Shareholders
recognized on Forbes’ lists of World’s Best Employers,
T H E P OW E R O F O U R P L AT F O R M S
America’s Best Employers for Diversity and America’s
Best Employers for Women, plus the Human Rights
Campaign’s Best Places to Work for LGBTQ+ Equality
and The Wall Street Journal Management Top 250
Best Managed Companies in America, among others.
We also maintain our commitment to achieving
environmental sustainability with a target of carbon
neutrality by 2040, and were recognized with a 2021
Climate Leadership Award for Excellence in Greenhouse
Gas Management (Goal Achievement Award).
As proud as we are of the achievements of today,
they build on the Company’s long-standing legacy
from as far back as the 1940s when, led by the
visionary Walter Wheeler, we were already addressing
equal opportunity, equal pay or even just treating
people the right way.
Our long-standing businesses — Presort Services,
Sending Technology Solutions (SendTech) and
Financial Services — had terrific years in 2021.
In aggregate, these businesses grew revenue and
profit for the year. Not that long ago, conventional
wisdom characterized these businesses as melting
icebergs — meaning the best that could be hoped for
was to slow down an inexorable process. But last year
was clear proof that these businesses are participating
fully in the transformation of Pitney Bowes, with
each creating a bright future in its own right.
2021 Business Performance Highlights
In 2021, our revenue was $3.7 billion, which was
growth of 3 percent over the prior year and was
also our fifth consecutive year of constant currency
revenue growth. We generated very healthy levels
of free cash flow despite a material increase in
capital investment across the portfolio — which are
generating gains in productivity. And, our customer
2
These platforms deliver higher-quality
service for our clients, create a strong set of
capabilities available in many of our products
and solutions, and lower the cost of
management, improving our profitability.
In SendTech, the new Shipping 360™ platform
has created success with customization that
delivers unique capabilities to clients through
simple configurations instead of lengthy
development cycles. 2021 showed us what’s
possible: Powered by a new, cloud-based rules
engine, Shipping 360 enabled one of the
largest health-care/pharmaceutical companies
to send nearly 100,000 packages per day
from its 9,000 stores to serve its customers’
critical pharmaceutical needs.
The Shipping 360 platform also integrates our
ParcelPoint™ Smart Locker solution, which in
2021 enabled smoother transitions back to
the office for one of the world’s largest
financial institutions, and provided one of the
largest retailers on the planet the ability to
offer more value for their consumers to ship
from stores using parcel lockers.
Pitney Bowes Annual Report 2021 satisfaction continued to improve in 2021, which is
Presort continued with its year-over-year operational
a vital indicator of future success.
improvements plus further penetration into the
• SendTech equipment sales were up by 11 percent
for the year
• Presort Services grew revenue by 10 percent
and processed a total of 17.1 billion mail pieces
marketing mail segment of mail sortation. We began
applying data science to mail sortation to further
improve Presort margins. We also have the capability
to automatically create highly optimal sort plans that
enable us to respond more quickly to client needs
• New Global Ecommerce sites opened in Dallas,
and changes in the business. Presort also launched
Boston, Stockton and Columbus with state-of-the-
a state-of-the-art, cloud-based system that allows
art automation that has enhanced our logistics
clients to monitor their activity, see their mailing
management in key parts of our network
performance, track their spending and understand
• Cash and short-term investments ended the year
the savings presort discounts have provided.
at $747 million
Our Global Ecommerce business made important
• Debt was reduced by $241 million and we extended
steps to build and improve its capabilities — with
our maturity profile
• Shipping-related revenues represented 50 percent
of total revenue
• Global Ecommerce revenue was $1.7 billion and
grew by 5 percent over the prior year — growth
of 48 percent versus 2019
• SG&A for 2021 improved nearly 200 basis points
over the prior year
In SendTech, we continued to build out our shipping
capabilities for both small businesses and large
enterprises with new hardware and software
offerings. Over the past several years, we have
updated and upgraded our SendTech offerings.
Clients want integrated mailing, shipping, digital and
mobile solutions, and data and analytics to help make
better business decisions, and more options to deliver
packages to their customers. The value for clients
and impact for the business is clear. In the US,
revenue from new SendTech products is above the
benchmark for high-performing companies. Financial
Services expanded its offerings, with a particular
focus on adding capabilities for the shipping market.
significant investments in physical infrastructure,
automation, transportation and, importantly, our
team. The results were marked improvements in our
client satisfaction and service levels. Automation, data
intelligence, and improvements in employee tools and
experiences have enabled us to increase our capacity
and deliver to client expectations. We have been able
to rapidly integrate with new automation systems, and
have significantly expanded our ability to both drive
insights using data and transition to cloud-based
warehousing and parcel processing technologies.
The global pandemic, combined with client supply
chain issues, presented short-term challenges,
particularly in the fourth quarter. However, we
expect these issues to be short-lived. Global
Ecommerce shipping is a robust opportunity in a
market where Pitney Bowes has a clear right to win.
That belief in the long term drove our decisions to
invest in client satisfaction and capacity to handle
peak demand. Our bias in these moments is a bias
toward the long term. Our brand plays well in the
ecommerce market. We also know that our
3
Pitney Bowes Annual Report 2021 Letter to Shareholders
M E A N I N G F U L I N S I G H T S
Within the Pitney Bowes BOXtools suite of insights, BOXscore™,
our mystery shopping program, has amassed thousands of
shops across US retailers to automatically benchmark brands’
order experiences. BOXpoll™, our weekly consumer survey on
current events, culture and ecommerce logistics, has had its
findings shared in many industry publications. Both data sets
are used by our consultative team to help clients and prospects
accelerate their business.
experience building our Presort business provides
once again, how proud I am of the team and the
a clear blueprint for success.
incredible work done over the past two years to fulfill
So, while 2021 tested us all, I would characterize the
our role as an essential business.
year as successful, especially against the backdrop
I admit that there are aspects of these conversations
of the challenges of the year. SendTech, Presort and
that I am uncomfortable with. I believe making an
Financial Services are positioned to grow revenue and
acceptable return for investors is a precursor to
profit, and Global Ecommerce is positioned to now
everything else. If you don’t do that, the rest is not
drive meaningful incremental profit.
sustainable. At the same time, “purpose” seems very
Essentialness and purpose
There has been another conversation going on
amid all of the tumult of the past few years. The
conversation began around purpose. I suppose this
was a nod to a higher calling for businesses to be
about more than “just” making a profit — although
let’s all agree that making a competitive profit is the
meaningful to me for those enterprises that do an
obvious public good. The health-care profession
comes immediately to mind, but there are certainly
other entities that have a clear societal good. For the
rest of us that do important work, but perhaps with
a less obvious societal role, the conversation can
become a bit tortured.
starting point for any successful commercial business.
That said, it does seem to me there is something
With COVID-19, a parallel conversation began around
important to this conversation — at least for
“essential” businesses. This had to do with those
Pitney Bowes. When I joined Pitney Bowes in 2012,
businesses that were deemed critical by the federal
my assignment was clear: Find the next chapter for
government to keep our economy running. Pitney
this great company. We have done that. I’m proud that
Bowes fell into this category. It’s worth saying
Pitney Bowes was designated an essential company,
4
Pitney Bowes Annual Report 2021 but that recognition goes to our employees who
do the vital work to keep mail and parcels moving
across our country and around the world.
Here’s the intersection of all of this purpose and
essentialness. Embedded in all of these conversations
O U T S TA N D I N G C U S T O M E R E X P E R I E N C E
for Pitney Bowes is our enduring value.
At this particular moment, institutions are coming
under fire from all directions. Yet, when I reflect on
our accomplishments, I believe that our successes
all go back to our value system based on doing the
right thing the right way. So, at one level we can
say our purpose rests on the essential services we
provide, but I like to think we have another one:
Pitney Bowes can be an example of an institution that
provides a good return for its shareholders while also
providing real value to its clients, employees and
the broader society.
Maybe that is our purpose and part of why we
undertook this purposeful transformation that
continues to unfold. If it is, that’s good enough
for me.
We have more work to do, and we must accelerate
our profit growth, but we have created the core
conditions — competitive offerings, a highly engaged
team and satisfied customers — to create substantial
value for our shareholders. I like our hand.
Marc B. Lautenbach
President and Chief Executive Officer
In 2021, our Sending Technology Solutions
business achieved the prestigious J.D. Power
certification for technical support excellence
for the second consecutive year, recognizing
our deep commitment to its clients. This year’s
distinction expands the Company’s 2020
recognition for Assisted Support (Phone and
Chat) to certified Technology Service and
Support Distinction. The new certification
for 2021 recognizes further excellence in
Pitney Bowes onsite Field Service delivery
and self-service support, including web and
online/on-product support.
To achieve this recognition, Pitney Bowes passed
a rigorous audit with over 500 support processes
benchmarked against industry leaders in
technology, along with detailed self-assessments
and in-depth customer satisfaction research. The
research found that, from a survey of consumers,
delighted customers are four times more likely
to recommend Pitney Bowes services, three
times more likely to expand their relationship
with Pitney Bowes and 80 percent less likely
to leave than merely satisfied customers.
Disclaimer: J.D. Power 2021 Certified Technology Service & Support
Program, developed in conjunction with TSIA. Based on successful
completion of an audit and exceeding a customer satisfaction
benchmark for Technology Service and Support operations. For more
information, visit http://www.jdpower.com or www.tsia.com.
5
Pitney Bowes Annual Report 2021 Summary of Selected Financial Data
For the year ended December 31,
(amounts in thousands, except per share data and total employees)
2021
2020
2019
As reported
Revenue
Net (loss) income
Diluted earnings (loss) per share from continuing operations
Net cash provided by operating activities
Depreciation and amortization
Capital expenditures
Dividends per share of common stock
Weighted average diluted shares outstanding
Total assets
Total debt
Stockholders’ equity
Total employees
As adjusted
EBIT
Income before taxes
Diluted earnings per share
Free cash flow
EBIT to interest
EBITDA
$ 3,673,561
$
$
(1,351)
0.02
$ 301,515
$ 162,859
$ 184,042
$
0.20
179,105
$ 4,958,871
$ 2,323,838
$ 112,632
11,500
$ 202,689
$
$
58,744
0.32
$ 154,325
1.4x
$ 3,554,075
$ (180,376)
$
(1.11)
$ 301,972
$ 160,625
$ 104,987
$
0.20
171,519
$ 5,224,363
$ 2,564,393
$
70,621
11,500
$ 215,147
$
$
61,232
0.31
$ 283,110
1.4x
$ 3,205,125
$ 194,319
$
0.22
$ 267,883
$ 159,142
$ 137,253
$
0.20
177,449
$ 5,469,958
$ 2,739,722
$ 289,154
11,000
$ 278,930
$ 123,372
$
0.68
$ 184,335
1.8x
$ 365,548
$ 375,772
$ 438,072
6
Pitney Bowes Annual Report 2021
Reconciliation of Reported Consolidated
Results to Adjusted Results
For the year ended December 31,
(dollars in thousands, except per share data)
Net (loss) income
Loss (income) from discontinued operations, net of tax
(Benefit) provision for income taxes
(Loss) income from continuing operations before taxes
Restructuring charges and asset impairments
(Gain) loss on sale of assets/business
Loss on debt refinancing
Goodwill impairment
Transaction costs
Adjusted income before taxes
Interest expense, net
Adjusted EBIT
Depreciation and amortization
Adjusted EBITDA
2021
2020
2019
$
(1,351)
$ (180,376)
4,858
(10,922)
(7,415)
19,003
(11,635)
56,209
—
2,582
58,744
143,945
202,689
162,859
(10,115)
7,122
(183,369)
20,712
(11,908)
36,987
198,169
641
61,232
153,915
215,147
160,625
$ 365,548
$ 375,772
$ 194,319
(154,460)
(13,127)
26,732
69,606
17,683
6,623
—
2,728
123,372
155,558
278,930
159,142
$ 438,072
$
1.10
(0.87)
0.30
0.12
0.03
—
—
0.01
Diluted (loss) earnings per share
$
(0.01)
$
Loss (income) from discontinued operations, net of tax
Restructuring charges
(Gain) loss on sale of assets/business
Loss on debt refinancing
Goodwill impairment
Tax on surrender of investment securities
Transaction costs
0.03
0.08
(0.03)
0.24
—
—
0.01
(1.05)
(0.06)
0.09
(0.05)
0.16
1.13
0.07
—
Adjusted diluted earnings per share
$
0.32
$
0.31
$
0.68
Net cash provided by operating activities
$ 301,515
$ 301,972
$ 267,883
Net cash used in (provided by) operating activities —
discontinued operations
Capital expenditures
Restructuring payments
Changes in customer deposits at PB Bank
Transaction costs paid
—
(184,042)
21,990
14,862
—
37,912
(104,987)
20,014
26,082
2,117
(9,272)
(137,253)
27,148
16,341
19,488
Free cash flow
$ 154,325
$ 283,110
$ 184,335
The sum of earnings per share amounts may not equal the totals due to rounding.
The Company’s financial results are reported in accordance with generally accepted accounting principles (GAAP); however, the Company uses certain non-GAAP measures, such as
adjusted income before taxes, adjusted earnings before interest and taxes (EBIT), adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted earnings
per share (EPS) and free cash flow.
Adjusted income before taxes, Adjusted EBIT, Adjusted EBITDA and Adjusted EPS exclude the impacts of discontinued operations, restructuring charges, gains, losses and costs related to
acquisitions and dispositions, asset and goodwill impairment charges and other unusual or one-time items. Such items are often inconsistent in amount and frequency and as such, the
Company believes that these non-GAAP measures provide investors greater insight into the underlying operating trends of the business.
Free cash flow adjusts cash from operations calculated in accordance with GAAP for discontinued operations, capital expenditures, restructuring payments, changes in customer deposits
held at the Pitney Bowes Bank, transaction costs and other special items. The Company reports free cash flow to provide investors insight into the amount of cash that management could
have available for other discretionary uses.
The adjusted financial information may not be indicative of our overall consolidated performance and should therefore be read in conjunction with our consolidated financial results.
Further, our definitions of adjusted financial measures may differ from similarly titled measures used by other companies.
7
Pitney Bowes Annual Report 2021
*As of March 1, 2022
Stockholders may visit the Pitney Bowes
corporate governance website at
www.pitneybowes.com under
Our Company — Leadership &
Governance — Board of Directors for
information concerning charters of
the committees of the board and
Our Company — Leadership &
Governance — Corporate Governance
for information concerning governance
practices, including the Governance
Principles of the Board of Directors and
the directors’ Code of Business Conduct
and Ethics. Our Business Practices
Guidelines is also available at Corporate
Responsibility — Business Practices.
Directors and Corporate Officers*
Corporate Officers
Marc B. Lautenbach
President and
Chief Executive Officer
Bill Borrelle
Senior Vice President and
Chief Marketing Officer
Joseph R. Catapano
Vice President, Chief
Accounting Officer
Ana Maria Chadwick
Executive Vice President and
Chief Financial Officer
Jason Dies
Executive Vice President
and President, Sending
Technology Solutions
James Fairweather
Executive Vice President,
Chief Innovation Officer
Daniel J. Goldstein
Executive Vice President,
Chief Legal Officer and
Corporate Secretary
Debbie D. Salce
Vice President and Treasurer
Joseph B. Schmitt
Senior Vice President,
Chief Information Officer
Christoph Stehmann
Executive Vice President,
International, Sending
Technology Solutions
Johnna G. Torsone
Executive Vice President and
Chief Human Resources Officer
Gregg Zegras
Executive Vice President and
President, Global Ecommerce
Directors
Anne M. Busquet
Principal,
AMB Advisors, LLC
Robert M. Dutkowsky
Non-Executive
Chairman of the Board,
US Foods
Anne Sutherland Fuchs
Consultant
Mary J. Steele Guilfoile
Chairman,
MG Advisors, Inc.
S. Douglas Hutcheson
Executive Chairman,
Kymeta Corporation
Marc B. Lautenbach
President and
Chief Executive Officer,
Pitney Bowes Inc.
Michael I. Roth
Retired Executive Chairman,
The Interpublic Group
of Companies, Inc.
Non-Executive Chairman,
Pitney Bowes Inc.
Linda S. Sanford
Retired Senior Vice President,
Enterprise Transformation,
International Business Machines
Corporation (IBM)
David L. Shedlarz
Retired Vice Chairman,
Pfizer Inc.
Sheila A. Stamps
Former Commissioner and
Audit Committee Chair for
the board of the New York
State Insurance Fund
8
Pitney Bowes Annual Report 2021 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
Commission file number: 1-3579
PITNEY BOWES INC.
State of incorporation: Delaware
I.R.S. Employer Identification No.
06-0495050
Address:
Telephone Number:
3001 Summer Street, Stamford, Connecticut 06926
(203) 356-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $1 par value per share
6.7% Notes due 2043
Trading Symbol(s)
PBI
PBI.PRB
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files) Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ Accelerated filer
o Non-accelerated filer
o
Smaller reporting company
☐ Emerging growth company
☐
If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying
with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. Yes ☑ No ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
As of June 30, 2021, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $2 billion based on the
closing sale price as reported on the New York Stock Exchange. At January 31, 2022, there were 174,855,086 outstanding shares of common stock,
$1 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be filed within 120 days after our fiscal year end in connection with the Annual Meeting of
Stockholders to be held May 2, 2022, are incorporated by reference in Part III of this Form 10-K.
25702_AR2021 10-K for Annual Report.pdf 1
March 1, 2022 17:28:26
1
PITNEY BOWES INC.
TABLE OF CONTENTS
PART I
Page Number
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships, Related Transactions and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
PART IV
Consolidated Financial Statements and Supplemental Data
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25702_AR2021 10-K for Annual Report.pdf 2
March 1, 2022 17:28:26
2
PART I
Forward-Looking Statements
This Annual Report on Form 10-K (Annual Report) contains statements that are forward-looking. We believe that these forward-
looking statements are reasonable based on our current expectations and assumptions. However, we caution readers that any forward-
looking statement within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 are subject to risks and uncertainties and actual results could differ materially. Words such as "estimate," "target," "project,"
"plan," "believe," "expect," "anticipate," "intend" and similar expressions may identify such forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future
events or otherwise, except as required by law. Forward-looking statements in this Annual Report speak only as of the date hereof, and
forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in our forward-looking statements. Our future financial condition, results of operations and
forward-looking statements are subject to change and to inherent risks and uncertainties, as disclosed or incorporated by reference in
our filings with the Securities and Exchange Commission (the SEC). In particular, we continue to navigate the impacts of the
COVID-19 pandemic (COVID-19) and the effect that its unpredictability is having on our, and our client's business, financial
performance and results of operations. Other factors which could cause future financial performance to differ materially from the
expectations, and which may also be exacerbated by COVID-19 or a negative change in the economy, include, without limitation:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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•
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•
declining physical mail volumes
changes in postal regulations or the operations and financial health of posts in the U.S. or other major markets, or changes to
the broader postal or shipping markets
the loss of, or significant changes to, our contractual relationships with the United States Postal Service (USPS) or USPS'
performance under those contracts
our ability to continue to grow and manage unexpected fluctuations in volumes, gain additional economies of scale and
improve profitability within our Global Ecommerce segment
changes in labor and transportation availability and costs
global supply chain issues adversely impacting our third-party suppliers' ability to provide us products and services
declines in demand for our ecommerce services resulting from supply chain delays or interruptions affecting our retail clients,
or changes in retail consumer behavior or spending patterns
competitive factors, including pricing pressures, technological developments and the introduction of new products and
services by competitors
the loss of some of our larger clients in our Global Ecommerce and Presort Services segments
the impacts of inflation and rising prices on our costs and expenses, and to our clients and retail consumers
expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events
the potential impacts on our cost of debt due to potential interest rate increases
our success at managing customer credit risk
capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at
reasonable costs
our success in developing and marketing new products and services and obtaining regulatory approvals, if required
the continued availability and security of key information technology systems and the cost to comply with information
security requirements and privacy laws
changes in international trade policies, including the imposition or expansion of trade tariffs
changes in tax laws, rulings or regulations
our success at managing relationships and costs with outsource providers of certain functions and operations
changes in banking regulations or the loss of our Industrial Bank charter
changes in foreign currency exchange rates
increased environmental and climate change requirements or other developments in these areas
intellectual property infringement claims
the use of the postal system for transmitting harmful biological agents, illegal substances or other terrorist attacks
impact of acts of nature on the services and solutions we offer
Further information about factors that could materially affect us, including our results of operations and financial condition,
is contained in Item 1A. "Risk Factors" in this Annual Report.
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3
ITEM 1. BUSINESS
General
Pitney Bowes Inc. (we, us, our, or the company) is a global shipping and mailing company that provides technology, logistics, and
financial services to small and medium sized businesses, large enterprises, including more than 90 percent of the Fortune 500, retailers
and government clients around the world. These clients rely on us to remove the complexity and increase the efficiency in their
sending of mail and parcels. For additional information, visit www.pitneybowes.com.
Business Segments
Global Ecommerce
Domestic parcel services offers retailers a cost-effective parcel delivery and returns network for end consumers. We operate numerous
domestic parcel sortation centers connected by a nationwide transportation network, enabling us to pick up parcels from retailer
distribution centers and move them through our physical network. We also offer fulfillment services, providing pick, pack and ship
services for clients through four fulfillment centers co-located within four of our larger parcel sortation centers to facilitate same-day
entry into our parcel delivery network.
Cross-border solutions manages all aspects of the international shopping and shipping experience. Our proprietary technology enables
global tracking and logistics services; calculates duty, tax and shipping costs at checkout; enables multi-currency pricing, payment
processing and fraud management; ensures compliance with product restrictions and produces all documentation requirements to meet
export complexities and customs clearance. Our proprietary technology is utilized by direct merchants and major online marketplaces
facilitating millions of parcels to be shipped worldwide.
Digital delivery services enables clients to reduce transportation and logistics costs, select the best carrier based on need and cost,
improve delivery times and track packages in real-time. Powered by our shipping APIs, clients can purchase postage, print shipping
labels and access shipping and tracking services from multiple carriers that can be easily integrated into any web application such as
online shopping carts or ecommerce sites and provide guaranteed delivery times and flexible payment options.
Presort Services
We are a workshare partner of the USPS and national outsource provider of mail sortation services that allow clients to qualify large
volumes of First-Class Mail, Marketing Mail and Marketing Mail Flats and Bound Printed Matter for postal workshare discounts. Our
network of operating centers throughout the United States and fully-customized proprietary technology provides clients with end-to-
end solutions from pick up to delivery into the postal system network, expedited mail delivery and optimal postage savings.
Sending Technology Solutions
We provide clients with physical and digital mailing and shipping technology solutions and other applications to help simplify and
save on the sending, tracking and receiving of letters, parcels and flats. We also offer supplies and maintenance services for these
offerings. Our cloud enabled infrastructure provides software-as-a-service (SaaS) offerings delivered online and via connected or
mobile devices. Our latest offerings are designed on an open platform architecture that have the capabilities to leverage partnerships
with carriers, developers and other innovative companies to deliver value to our clients. We offer financing alternatives that enable
clients to finance equipment and product purchases.
Through our wholly owned subsidiary, The Pitney Bowes Bank (the Bank), we offer our clients in the United States a revolving credit
solution that enables clients to make meter rental payments and purchase postage, services and supplies and an interest-bearing deposit
solution to clients who prefer to prepay postage. Additionally, we offer financing alternatives that enable clients to finance or lease
other manufacturers’ equipment and provide working capital.
We provide revolving credit solutions to clients in Canada and the U.K. that enable them to make meter rental payments and purchase
postage, services and supplies.
We establish credit approval limits and procedures based on the credit quality of the client and the type of product or service provided.
We closely monitor the portfolio by analyzing industry sectors and delinquency trends by product line, industry and client to ensure
reserve levels and credit policies reflect current trends. Management continuously monitors credit lines and collection resources and
revises credit policies as necessary.
Seasonality
A larger percentage of our revenue is earned in the fourth quarter relative to the other quarters, driven primarily by higher shipping
volumes during the holiday season.
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Sales and Services
We market our products, solutions and services through a direct and inside sales force, global and regional partner channels, direct
mailings and digital channels. We provide call-center, online and on-site support services for our products and solutions. Support
services are primarily provided under maintenance contracts.
Competition
Our businesses face competition from large, multinational companies and smaller, more narrowly focused regional and local firms.
We compete on the basis of technology and innovation, breadth of product offerings, our ability to design and tailor targeted solutions
to meet client needs, performance, service and support, price, quality and brand.
We must continue to invest in our current technologies, products and solutions, and in the development of new technologies, products
and solutions in order to maintain and improve our competitive position. We frequently encounter new competitors as the markets in
which we participate evolve and newer businesses enter our existing markets.
A summary of the competitive environment for each of our segments is as follows:
Global Ecommerce
The domestic parcel services and cross-border solutions market includes competitors of various sizes, including companies with
greater financial resources than us. Some of these competitors specialize in point solutions or freight forwarding services, are full-
service ecommerce business process outsourcers and online marketplaces with international logistic support, or major global delivery
services companies. We also face competition from companies that can offer both domestic and cross-border solutions in a single
package which creates pricing leverage. The principal competitive factors include speed of delivery, price, ease of integration and use,
innovative services, reliability, functionality and scalability. We compete based on the accuracy, reliability and scalability of our
platform and logistics services, our ability to provide clients and their customers a one-stop full-service ecommerce experience and the
ability to provide a more customized shipping solution than some of the larger competitors in the industry.
Our digital delivery services business competes with technology providers who help make shipping easier and more cost-effective.
These technology providers range from large, established companies to smaller companies offering negotiated carrier rates. The
principal competitive factors include technology stability and reliability, innovation, access to preferred shipping rates and ease of
integration with existing systems.
Presort Services
We face competition from regional and local presort providers, cooperatives of multiple local presort providers, consolidators and
service bureaus that offer presort solutions as part of a larger bundle of outsourcing services. We also face competition from large
mailers that have sufficient volumes and the capability to sort their own mailings in-house and could use excess capacity to offer
presort services to others. The principal competitive factors include price, innovative service, delivery speed, tracking and reporting,
industry expertise and economies of scale. Our competitive advantages include our extensive network of presort facilities capable of
processing significant volumes and our innovative proprietary technology that provides clients with reliable, secure and precise
services and maximum postage discounts.
Sending Technology Solutions
We face competition from other mail equipment and solutions providers and those that offer online shipping and mailing products and
services solutions. Additionally, the growth of alternative communication methods as compared to physical mail continue to grow,
which creates competition to mail and also to our offerings that enable clients to use the mail efficiently. We differentiate ourselves
from our competitors through our breadth of physical and digital offerings, including cloud enabled SaaS and open platform
architecture offerings; pricing; available financing and payment offerings; product reliability; support services; and our extensive
knowledge of the shipping and mailing industry.
Our financing operations face competition, in varying degrees, from large, diversified financial institutions, including leasing
companies, commercial finance companies and commercial banks, as well as small, specialized firms. We believe our competitive
advantage that differentiates us from our competitors is the breadth of our financing and payment solutions and our ability to
seamlessly integrate these solutions into our clients' shipping and mailing operations.
Also see Item 1A. Risk Factors for further details regarding the competition our businesses face.
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5
Research, Development and Intellectual Property
We invest in research and development activities to develop new products and solutions, enhance the effectiveness and functionality
of existing products and solutions and deliver high value technology and differentiated services in high value segments of the market.
Third-Party Suppliers
Our Sending Technology Solutions (SendTech Solutions) segment depends on third-party suppliers and outsource providers for a
variety of services and product components and the hosting of our SaaS offerings. Our Global Ecommerce and Presort Services
segments rely on third party suppliers to help equip our facilities, provide warehouse support and assist with our logistical operations.
All of our businesses and corporate functions depend on third-party providers for a variety of data analytics, sales, reporting and other
functions. In certain instances, we rely on single-sourced or limited-sourced suppliers and outsourcing vendors around the world
because doing so is advantageous due to quality, price or lack of alternative sources. We have risk mitigation programs to monitor
conditions affecting our suppliers' ability to fulfill expected commitments. We believe that our available sources for services,
components, supplies, logistics and manufacturing are adequate.
Regulatory Matters
We are subject to the regulations of postal authorities worldwide related to product specifications of our postage meters. Our Presort
Services segment is also subject to regulations of the USPS. The Bank is chartered as an Industrial Bank under the laws of the State of
Utah. The Bank and certain company affiliates that provide services to the Bank are subject to the regulations of the Utah Department
of Financial Institutions and the Federal Deposit Insurance Corporation. We are also subject to transportation regulations for various
parts of our business, customs and trade regulations worldwide related to our cross-border shipping services and regulations
concerning data privacy and security for our businesses that use, process and store certain personal, confidential or proprietary data.
Climate Change
Although climate change has had no material impact on our operations to date, the risk of increasingly severe climate events or the
risk that those events happen more frequently could affect one or more of our facilities and our ability to conduct daily operations in
the future. Increasing regulatory restrictions in response to climate change could also materially affect our costs, especially with
respect to transportation.
Human Capital
We have approximately 11,500 employees, with approximately 80% located in the United States. We also rely on a contingent hourly
workforce to supplement our full-time workforce to meet fluctuating demand. We seek to create a high-performance culture that will
drive and sustain enhanced value for all our stakeholders. To attract, retain and engage the talent needed, we strive to maintain a
diverse, inclusive and safe workplace, with equitable opportunities for growth and development, supported by competitive
compensation, benefits and health and wellness programs, and by programs that build connections between our employees and their
communities.
Diversity and Inclusion
We believe that maintaining a diverse workforce and an inclusive environment for our workforce is important to our success. We
celebrate a rich mix of countries, cultures, ages, races, ethnicities, gender identities, sexual orientation, abilities and perspectives that
showcase our humanity, differentiate us as individuals and enhance our businesses.
Employee Engagement and Development
We emphasize employee development and training and provide professional development initiatives, training, experiential learning
and inclusion networks to our employees to enable them to advance their skills and achieve career goals. We also believe employee
engagement is important to the company's success and conduct a survey annually that has driven participation rates with scores
reflecting high levels of employee engagement.
Health, Safety and Wellness
We are committed to the health, safety and wellness of our employees. We provide our employees and their families with access to a
variety of flexible and convenient health and wellness programs.
In response to COVID-19, we implemented significant changes that we determined were in the best interest of our employees, and the
communities in which we operate, and which comply with local and federal government regulations. As the pandemic conditions
change, we adapt our approach to keep our employees safe, including allowing them to work remotely when they do not need to be in
any of our facilities and adapting our requirements around social distancing or the use of personal protective equipment. We have also
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taken steps to encourage-but not require-our employees to get vaccinated. We continuously monitor the rate of infection of our
employees both overall and in specific facilities.
All of our offices and facilities are open for employees. There are some employees who have been working full-time in our offices and
operating centers due to the nature of their work; some have chosen to come in regularly and others are predominantly working from
home, coming into our office for purposeful activities. Over the course of the pandemic, we have been developing and will continue to
adapt our workplace strategy to reflect the current changes in how people work. As we develop and adjust these approaches, we focus
on doing so with an emphasis on maintaining a high level of performance while ensuring an inclusive and safe work environment.
This approach provides a consistent framework for recognizing the evolving ways in which we work to deliver value to our
stakeholders – warehouse employees who are onsite every day, service technicians, salespeople and drivers travelling to client sites,
and office workers working in an array of flexible models. We continue to encourage our employees to get vaccinated, social distance
where appropriate, provide and encourage the use of personal protective equipment and monitor the health of our employees. We
expect to continue to implement safety measures as necessary and take further actions as government authorities require or
recommend, or as we determine to be in the best interests of our employees, customers, partners and suppliers.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto filed
with, or furnished to, the SEC, are available, free of charge, through the Investor Relations section of our website at
www.investorrelations.pitneybowes.com or from the SEC's website at www.sec.gov, as soon as reasonably practicable after these
reports are electronically filed with, or furnished to, the SEC. The other information found on our website is not part of this or any
other report we file with or furnish to the SEC.
Information About Our Executive Officers
Name
Age
Title
Marc B. Lautenbach
Johnna G. Torsone
Daniel J. Goldstein
Christoph Stehmann
Jason C. Dies
Gregg Zegras
Ana Maria Chadwick
James Fairweather
60
71
60
59
52
54
50
50
President and Chief Executive Officer
Executive Vice President and Chief Human Resources Officer
Executive Vice President and Chief Legal Officer and Corporate Secretary
Executive Vice President, International Sending Technology Solutions
Executive Vice President and President, Sending Technology Solutions
Executive Vice President and President, Global Ecommerce
Executive Vice President and Chief Financial Officer
Executive Vice President, Chief Innovation Officer
Executive
Officer Since
2012
1993
2010
2016
2017
2020
2021
2021
There are no family relationships among the above officers. The above officers have served in various executive positions with the
company for at least the past five years except as follows:
Mr. Dies was appointed Executive Vice President and President, Sending Technology Solutions in October 2017. He joined the
company in 2015 as President, Document Messaging Technologies (DMT). Prior to joining the company, Mr. Dies was employed at
IBM where he held several leadership positions in North America, Europe, and Asia across diverse business units.
Mr. Zegras was appointed Executive Vice President and President, Global Ecommerce in July 2020. He joined the company in 2013
as President, Imagitas. Prior to joining the company, Mr. Zegras held several executive leadership positions, including at NBC
Universal, Sharecare and Hearst Entertainment.
Ms. Chadwick joined the company as Executive Vice President and Chief Financial Officer on January 29, 2021. Prior to joining the
company, Ms. Chadwick was employed at GE Capital as President and CEO of GE Capital Global Legacy Solutions. Ms. Chadwick
spent over 20 years at GE Capital, where she held several executive positions, including Controller of GE Capital Americas and CFO
at GE Capital Energy Financial Services.
Mr. Fairweather was appointed Executive Vice President and Chief Innovation Officer in May 2021. Prior to this, he was Senior Vice
President and Chief Technology Officer, Commerce Services. He has been a leader in the company's strategic digital transformation
and technology initiatives across Design, SaaS, Data Science and Analytics, API Management, Security and Mobility.
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ITEM 1A. RISK FACTORS
Our operations face certain risks that should be considered in evaluating our business. We manage and mitigate these risks on a
proactive basis, using an enterprise risk management program. Nevertheless, the following risk factors, some of which may be beyond
our control, could materially affect our business, financial condition, results of operations, brand and reputation, and may cause future
results to be materially different than our current expectations. These risk factors are not intended to be all inclusive.
COVID-19 Pandemic Risks
Our business, financial condition and results of operations have been, and will continue to be, affected by the unpredictability,
duration, and severity of the ongoing COVID-19 pandemic.
The ongoing COVID-19 pandemic has impacted, and is expected to continue to impact, our business, operations, and financial
performance. Given the unpredictability, duration, and, at times, the severity of resurgences of the pandemic, its ultimate effect on our
business, operations and financial performance remains uncertain. There are many factors, not within our control, which could affect
the pandemic's ultimate impact on our businesses and our ability to execute our business strategies and initiatives in the expected time
frame. These include, but are not limited to: the response of governments, businesses and individuals to the pandemic; its impact on
the labor force, the global economy and economic activity (including inflation), and the spending habits of consumers and businesses;
disruptions in global supply chains; and significant volatility and disruption of financial markets. In addition to having the effect of
potentially heightening many of our other risk factors in this section, the COVID-19 pandemic has, and may continue to, adversely
affect the following to the detriment of our business, including:
• Our ability to sell products and provide services to our clients, fulfill orders, and install equipment on a timely basis and
market to prospective new clients due to social distancing rules and heightened security policies.
•
•
•
•
•
•
•
•
•
The acceleration of the decline of physical mail volumes in the geographies in which we operate, which adversely affects
both our Presort Services and SendTech Solutions segments. We cannot yet assess the extent to which these declines in mail
volumes, and resulting impact to our business, are permanent or temporary.
The financial health of posts around the world, especially that of the USPS, given the adverse effects associated with the
declines in physical mail volumes. If these financial difficulties are not resolved, or if any resolution requires posts to operate
differently, price in a manner that hurts their competitiveness or further reduces postal volume or causes them to change their
contractual relationships with their partners or vendors, these changes could have a material adverse effect on our business.
Costs and reduced labor productivity associated with extended safety protocols, higher levels of employees out sick, hiring
and training temporary labor, redirecting volumes to other facilities, and complying with government mandates.
Global Ecommerce’s costs, including those relating to postage, transportation, and warehouse space, resulting from sudden
and significant increases or decreases in volumes, due to unexpected short-term shifts in consumer spending patterns or short-
term interruptions or delays in our retail client’s supply chains.
Our ability to timely obtain parts, supplies, or finished goods from our vendors in order to meet our sales obligations or equip
our facilities.
The frequency of long-distance airplane flights, resulting in higher costs and at times, reduced demand for our Global
Ecommerce cross-border offerings.
Delinquencies in collections and bankruptcies in our clients, which could affect our cash flow. Client requests for potential
payment deferrals or other contract modifications could also reduce the profitability or ongoing cash flow from some of our
current customers.
Third-party service providers ability to satisfy their performance obligations to us, which in turn affects our ability to satisfy
our service commitments to our clients.
Our earnings or cash flows, which could result in additional credit rating downgrades, higher costs of borrowing, or limit our
access to additional debt.
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Mailing and Shipping Industry Risks
Further significant deterioration in the financial condition of the USPS, or the national posts in our other major markets, could affect
the ability of those posts to provide services to us or our clients, which could adversely affect client demand for our offerings and thus
our financial performance.
We are dependent on financially viable national posts in the geographic markets where we operate, particularly in the United States. A
significant portion of our revenue depends upon the ability of these posts, especially the USPS, to provide competitive mail and
package delivery services to our clients and the quality of the services they provide. Their ability to provide high quality service at
affordable rates in turn depends upon their ongoing financial strength. If the posts are unable to continue to provide these services into
the future, our financial performance will be adversely affected.
Our ability to compete in the package shipping market in the United States depends upon certain contractual relationships we have
with the USPS and the successful performance of those services.
The USPS is our primary provider for the “last mile” component of our parcel delivery services in the United States. This represents a
significant component of our cost in offering these services. If we are unable to receive competitive pricing from the USPS or take
advantage of lower cost USPS options, our ability to compete with private carriers and to achieve profitable revenue growth will be
adversely affected. The quality of service we provide to our clients also depends upon the quality of delivery services received from
the USPS. As the ecommerce market continues to evolve, and as the USPS implements changes to its network, if the USPS’ service
performance is materially worse than that of the private carriers, we may lose clients to competition and our financial performance will
be adversely affected.
We are subject to postal regulations and processes, which could adversely affect our financial performance.
A significant portion of our business is subject to regulation and oversight by the USPS and posts in other major markets. These postal
authorities have the power to regulate some of our current products and services. They also must approve many of our new or future
product and service offerings before we can bring them to market. If our new or future product and service offerings are not approved,
there are significant conditions to approval, regulations on our existing products or services are changed or, we fall out of compliance
with those regulations, our financial performance could be adversely affected.
If we are not able to respond to the continuing decline in the volume of physical mail delivered via traditional postal services, our
financial performance could be adversely affected.
Traditional mail volumes continue to decline and impact our current and future financial results, primarily within our SendTech
Solutions and Presort Services segments. An accelerated or sudden decline could result from changes in communication behavior or
available communication technologies, reductions to the Universal Service Obligation (USO) under which the USPS and other
national posts are required to deliver to every address in a country with similar pricing and frequency, pandemics, and legislation or
regulations that mandate electronic substitution for communication by mail, prohibit certain types of mailings, increase the difficulty
of using information or materials in the mail, or impose higher taxes or fees on postal services. If we are not successful at meeting the
continuing challenges faced in our mailing business, or if physical mail volumes were to experience an accelerated or sudden decline,
our financial performance could be adversely affected.
Significant changes to the laws regulating the USPS or other posts, or changes in their operating models could have an adverse effect
on our financial performance.
As a significant portion of our revenue and earnings is dependent on postal operations, changes in the laws and regulations that affect
how posts operate could have an adverse effect on our financial performance. As posts consider new strategies for their operations in
an era of declining mail volumes and increasing package volumes, if we are unable to work with posts to support those strategies, our
financial performance could be adversely affected.
Business Operational Risks
We face intense competition in the industries in which we operate.
The markets for our products and services in each of our segments are highly competitive. In our Global Ecommerce segment, we face
competition in our shipping business from full-service ecommerce business process outsourcers, online marketplaces, freight
forwarders, and major global delivery services companies, including those that can offer both domestic and cross-border solutions in a
single package. Our digital delivery business competes with technology providers ranging from large, established companies to
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smaller companies offering negotiated carrier rates. If we cannot compete against these competitors with, among other things, speed of
delivery, price, reliability, functionality and scalability of our platform and logistic services and ease of integration and use, we may
lose clients, incur additional costs and suffer from reduced margins, and the financial results of the segment may be adversely affected.
Our Presort Services segment faces competition from regional and local presort providers, cooperatives of multiple local presort
providers, consolidators and service bureaus that offer presort solutions as part of a larger bundle of outsourcing services and large
volume mailers that have sufficient volumes and the capability to presort their own mailings in-house and could use excess capacity to
offer presort services to others. If we are not able to effectively compete on price, innovative service, delivery speed, tracking and
reporting, we may lose clients and the financial results of the segment may be adversely affected. Our Sending Technology Solutions
segment faces competition from other mail equipment and solutions providers, companies that offer products and services as
alternative means of message communications and those that offer online shipping and mailing products and services solutions. In
addition, our financing operations face competition, in varying degrees, from large, diversified financial institutions, including leasing
companies, commercial finance companies and commercial banks, as well as small, specialized firms. If we are not able to
differentiate ourselves from our competitors or effectively compete with them, the financial results of the segment may be adversely
affected.
The evolution of our businesses to more digital and shipping-related services has resulted in a decline in our overall profit margins. If
we cannot increase our volumes while at the same time reduce our costs, our overall profitability could be adversely affected.
As our businesses shift to more digital and shipping-related services, the relative revenue contribution from our shipping-related
offerings now exceeds that of the revenue from our mailing-related offerings. We expect the revenue contribution from shipping
services to continue to grow; however, profit margins on these services are lower than those for our mailing-related offerings.
Accordingly, if we cannot gain additional economies of scale through increasing volumes, lowering our cost per piece and in turn,
improve margins and profitability, our short and long-term financial performance will be adversely affected.
Seasonality of the Global Ecommerce segment, unexpected declines in consumer demand or the performance of our retail customers,
or unexpected spikes in the costs of labor or transportation, especially during the fourth quarter, could adversely affect our overall
performance.
Our Global Ecommerce segment derives the majority of its revenue from its retail clients. The retail industry is subject to cyclical
trends in consumer sentiment and spending habits that are affected by many factors, including prevailing economic conditions,
recession or fears of recession, inflation, unemployment levels, pandemics (as continues to be the case with the COVID-19 pandemic)
or geopolitical events. Our retail clients are also dependent on third party suppliers to provide them with either raw materials or
finished goods to meet the product demands of their clients. Moreover, Global Ecommerce’s annual financial results are also highly
dependent on its performance during the peak holiday season in the fourth quarter. If consumer sentiment or spending habits
deteriorate or change such that the demand for our clients’ online products is negatively impacted, or if our clients encounter supply
chain challenges, we could incur unexpected costs and revenue declines, and if these factors impact our fourth quarter, as occurred in
2021 due to the COVID-19 pandemic, the impact on the segment's financial results could be more severe.
The loss of any of our largest clients in our Global Ecommerce segment could adversely affect the financial performance of that
segment.
The Global Ecommerce segment receives a large portion of its revenue from a relatively small number of clients and business
partners. The loss of any of these larger clients or business partners, or a substantial reduction in their use of our products or services,
could have a material adverse effect on the revenue and profitability of the segment. There can be no assurance that our larger clients
and business partners will continue to utilize our products or services at current levels, or that we would be able to replace any of these
clients or business partners with others who can generate revenue at current levels.
If we fail to effectively manage our third-party suppliers, or if their ability to perform were negatively impacted, our business,
financial performance and reputation could be adversely affected.
Our SendTech Solutions segment relies on third-party suppliers for services and components for our mailing equipment, spare parts,
supplies and services and for the hosting of our SaaS offerings. We also rely on third party suppliers to help us equip our Presort and
Ecommerce facilities and to provide us with services related to some of our operations. In certain instances, we rely on single-sourced
or limited-sourced suppliers around the world because of advantages in quality, price or lack of alternative sources. If our suppliers
are not able to provide these services, components or equipment to us in a timely manner, or if the supply chain constraints we are
currently experiencing due to the COVID-19 pandemic were to worsen, the quality of the goods or services received were to
deteriorate, our relationship with certain suppliers were to be terminated, or if the costs of using these third parties were to increase
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10
and we were not able to find alternate suppliers, we could lose clients, incur significant disruptions in manufacturing and operations
and increased costs, including higher freight and re-engineering costs.
Fluctuations in transportation costs or disruptions to transportation services in our Global Ecommerce or Presort Services segments
could adversely affect client satisfaction or our financial performance.
In addition to our reliance on the USPS, our Global Ecommerce and Presort Services segments rely upon independent third-party
transportation service providers to transport a significant portion of our parcel and mail volumes. Some of our providers may also be
our competitors. The use of these providers is subject to risks, including our ability to negotiate acceptable terms, increased
competition during peak periods, capacity issues, performance problems, extreme weather, natural or man-made disasters, pandemics,
increased fuel costs, labor shortages or disputes and other unforeseen difficulties. Any disruption to the timely supply of these services
for any reason, any dramatic increase in the cost of these services or any deterioration of the performance of these services (each of
which we experienced, at times, during the COVID-19 pandemic), could adversely affect client satisfaction or our financial
performance. Given our continued reliance upon these providers, any future unforeseen disruptions affecting these providers could
similarly adversely affect client satisfaction and our financial performance.
Our business depends on the our ability to attract, retain and maintain good relationships with, employees at a reasonable cost to
meet the needs of our business and to consistently deliver highly differentiated, competitive offerings.
The rapid growth of the ecommerce industry has resulted in intense competition for employees in the shipping, transportation and
logistics industry, including drivers and warehouse employees. The COVID-19 pandemic has accelerated this industry growth
resulting in our Global Ecommerce segment experiencing a higher demand, and increased competition, for labor, especially in our
warehouses. This increased demand and competition for workers has also impacted our Presort Services segment. We supplement our
Global Ecommerce and Presort Services workforce with contingent hourly workers from staffing agencies on an as-needed basis. Due
to increased demand and competition, concern over exposure to COVID-19 and other factors, at times during the COVID-19
pandemic, we experienced labor shortages, increased costs and reduced productivity. If we experience similar labor shortages again,
do not effectively manage our use of such contingent workers, or if our staffing agencies chose to terminate their relationship with us
and we cannot find alternative providers, it could result in increased costs and adversely affect our operations. Moreover, given the
nature of our Global Ecommerce and Presort Services employee base, if we cannot continue to maintain good relationships with those
employees resulting in employee dissatisfaction and turnover, our operating costs could significantly increase, and our operational
flexibility could be significantly reduced.
There is also significant competition for the talent needed to develop our other products and services. Increased competition for
employees has resulted in higher wages and costs of other benefits necessary to attract and retain employees with the right skill sets.
Additional labor costs which may also impact our business include those triggered by regulatory actions; increased health care and
workers’ compensation insurance expenses; and, those costs associated with the COVID-19 pandemic, which in our Global
Ecommerce and Presort Services segments, continues to include costs resulting from reduced productively (staggering shifts, breaks
to enhance social distancing and higher levels of employees out sick), costs for extended safety protocols in our warehouses and
incremental costs required to hire temporary labor.
Our inability to obtain and protect our intellectual property and defend against claims of infringement by others may negatively
impact our financial performance.
Our businesses are not materially dependent on any one patent or license or group of related patents and licenses; however, our
business success depends in part upon protecting our intellectual property rights, including proprietary technology developed or
obtained through acquisitions. We rely on copyrights, patents, trademarks and trade secrets and other intellectual property laws to
establish and protect our proprietary rights. If we are unable to protect our intellectual property rights, our competitive position may
suffer, which could adversely affect our revenue and profitability. The continued evolution of patent law and the nature of our
innovation work may affect the number of patents we are able to receive for our development efforts. As we continue to transition our
business to more software and service-based offerings, patent protection of these innovations will be more difficult to obtain. In
addition, from time to time, third parties may claim that we, our clients, or our suppliers, have infringed their intellectual property
rights. These claims, if successful, may require us to redesign affected products, enter into costly settlement or license agreements, pay
damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain products.
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If we fail to comply with government contracting regulations, our financial performance, brand name and reputation could suffer.
We have a significant number of contracts with governmental entities. Government contracts are subject to extensive and complex
procurement laws and regulations, along with regular audits and investigations by government agencies. If one or more government
agencies discovers contractual noncompliance by us or one of our subcontractors in the course of an audit or investigation, we may be
subject to various civil or criminal penalties and administrative sanctions, which could include the termination of the contract,
reimbursement of payments received, fines and debarment from doing business with one or more governments. Any of these events
could not only affect our financial performance, but also adversely affect our brand and reputation.
We may not fully realize the anticipated benefits of strategic acquisitions and divestitures which may harm our financial performance.
We may make strategic acquisitions or divest certain businesses. These actions may involve significant risks and uncertainties, which
could have an adverse effect on our financial performance, including:
•
•
•
•
•
difficulties in achieving anticipated benefits or synergies;
difficulties in integrating newly acquired businesses and operations, including combining product and service offerings and
entering new markets, or reducing fixed costs previously associated with divested businesses;
the loss of key employees or clients of businesses acquired or divested;
significant charges for employee severance and other restructuring costs, legal, accounting and financial advisory fees; and
possible goodwill and asset impairment charges as divestitures and changes in our business model may adversely affect the
recoverability of certain long- lived assets and valuation of our operating segments.
Our capital investments to develop new products and offerings or expand our current operations may not yield the anticipated
benefits.
We are making significant capital investments in new products, services, and facilities. If we are not successful in these new product
or service introductions at the levels anticipated when making the investments, there may be an adverse effect on our financial
performance.
Cybersecurity and Technology Risks
Our financial performance and our reputation could be adversely affected, and we could be subject to legal liability or regulatory
enforcement actions, if we or our suppliers are unable to protect against, or effectively respond to, cyberattacks or other cyber
incidents.
We depend on the security of our and our suppliers' information technology systems to support numerous business processes and
activities, to service our clients, and to enable consumer transactions and postal services. There are numerous cybersecurity risks to
these systems, including individual and group criminal hackers, industrial espionage, denial of service attacks, ransomware and
malware attacks, attacks on the software supply chain, and employee errors and/or malfeasance. These cyber threats are constantly
evolving, thereby increasing the difficulty of preventing, detecting, and successfully defending against them. Successful breaches
could, among other things, disrupt our operations or result in the unauthorized disclosure, theft and misuse of company, client,
consumer and employee sensitive and confidential information, all of which could adversely affect our financial performance.
Cybersecurity breaches could result in financial liability to other parties, governmental investigations, regulatory enforcement actions
and penalties, and our brand and reputation could be damaged. Although we maintain insurance coverage relating to cybersecurity
incidents, we may incur costs or financial losses that are either not insured against or not fully covered through our insurance.
We have security systems, procedures, and business continuity plans in place-and require our suppliers to have them as well. These
security systems, procedures, and business continuity plans are designed to ensure the continuous and uninterrupted performance of
our information technology systems, protect against unauthorized access to information or disruption to our services, and minimize the
impact of and the time to detect, respond, and recover from a breach should one occur. Despite the protections we have in place, we
have suffered cyber-events in the past. In response to these attacks, we implemented a variety of measures to further enhance our
cybersecurity protections and minimize the impact of any future attack. None of these systems are fool proof and like all companies,
intrusions will occur, and have occurred, from time to time. Our goal is to prevent meaningful incursions and minimize the overall
impact of those that occur.
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Failure to comply with data privacy and protection laws and regulations could subject us to legal liability and adversely affect our
reputation and our financial performance.
Our businesses use, process, and store proprietary information and personal, sensitive, or confidential data relating to our business,
clients, and employees. Privacy laws and similar regulations in many jurisdictions where we do business require that we take
significant steps to safeguard that information, and these laws and regulations continue to evolve. The scope of the laws that may be
applicable to us is often uncertain and may be conflicting. In addition, new laws may add a broad array of requirements on how we
handle or use information and increase our compliance obligations. For example, the European Union greatly increased the
jurisdictional reach of European Law by enacting the General Data Protection Regulation (GDPR), which, among other things,
enhanced an individual’s rights with respect to their information and ongoing litigation in the European Union continues to create
uncertainty in how to demonstrate compliance. In the United States, several states have enacted different laws regarding personal
information and privacy that impose significant new requirements on consumer personal information. Other countries or states may
enact laws or regulations in the future that have similar or additional requirements. Although we continually monitor and assess the
impact of these laws and regulations, their interpretation and enforcement are uncertain, subject to change, and may require substantial
costs to monitor and implement. Failure to comply with data privacy and protection laws and regulations could also result in
government enforcement actions (which could include substantial civil and/or criminal penalties) and private litigation, which could
adversely affect our reputation and financial performance.
If we or our suppliers encounter unforeseen interruptions or difficulties in the operation of our cloud-based applications, our business
could be disrupted, our reputation and relationships may be harmed, and our financial performance could be adversely affected.
Our business relies upon the continuous and uninterrupted performance of our and our suppliers' cloud-based applications and systems
to support numerous business processes, to service our clients and to support their transactions with their customers and postal
services. Our applications and systems, and those of our partners, may be subject to interruptions due to technological errors, system
capacity constraints, software errors or defects, human errors, computer or communications failures, power loss, adverse acts of nature
and other unexpected events. We have business continuity and disaster recovery plans in place to protect our business operations in
case of such events and we also require our suppliers to have the same. Nonetheless, there can be no guarantee that these plans will
function as designed. If we are unable to limit interruptions or successfully correct them in a timely manner or at all, it could result in
lost revenue, loss of critical data, significant expenditures of capital, a delay or loss in market acceptance of our services and damage
to our reputation, brand and relationships, any of which could have an adverse effect on our business and our financial performance.
Macroeconomic and General Regulatory Risks
Future credit rating downgrades or capital market disruptions could adversely affect our ability to maintain adequate liquidity to
provide competitive financing services to our clients and to fund various discretionary priorities.
We provide competitive finance offerings to our clients and fund discretionary priorities, such as business investments, strategic
acquisitions, dividend payments and share repurchases through a combination of cash generated from operations, deposits held at the
Bank and access to capital markets. Our ability to access U.S. capital markets and the associated cost of borrowing is dependent upon
our credit ratings and is subject to capital market volatility. Given our current credit rating, we may experience reduced financial or
strategic flexibility and higher costs when we do access the U.S. capital markets. We maintain a $500 million revolving credit facility
that requires we maintain certain financial and nonfinancial covenants.
A significant decline in cash flows, noncompliance with any of the covenants under the revolving credit facility, further credit rating
downgrades, material capital market disruptions, significant withdrawals by depositors at the Bank, adverse changes to our industrial
loan charter or an increase in our credit default swap spread could impact our ability to maintain adequate liquidity to provide
competitive finance offerings to our clients, refinance maturing debt and fund other financing activities, which in turn, could adversely
affect our financial performance.
Our Global Ecommerce segment is exposed to increased foreign exchange rate fluctuations.
The sales generated from many of our clients’ internationally focused websites running on our cross-border platform are exposed to
foreign exchange rate fluctuations. Currently, our platforms are located in the U.S. and the U.K. and a majority of consumers making
purchases through these platforms are in a limited number of foreign countries. A strengthening of the U.S. Dollar or British Pound
relative to currencies in the countries where we do the most business impacts our ability to compete internationally as the cost of
similar international products improves relative to the cost of U.S. and U.K. retailers' products. A strong U.S. Dollar or British Pound
would likely result in a decrease in international sales volumes, which would adversely affect the segment's revenue and profitability.
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Our operations and financial performance may be negatively affected by changes in trade policies, tariffs and regulations.
Our Global Ecommerce segment is subject to significant trade regulations, taxes, and duties throughout the world. Any changes to
these regulations could potentially impose increased documentation and delivery requirements, delay delivery times and subject us to
increased costs and additional liabilities, which could adversely affect our financial performance. Within the last four years, the United
States increased tariffs for certain goods, which triggered other nations to also increase tariffs on certain of their goods. For our Global
Ecommerce segment, tariff increases, or even an environment of uncertainty surrounding trade issues, could reduce demand and
adversely affect its financial performance. For our SendTech Solutions segment, increased tariffs resulted in additional costs on certain
components used in some of our products.
If we do not keep pace with evolving expectations and regulators in the areas of Environmental, Social and Governance (ESG) and
address the potential impact of climate change on our costs and operations, our reputation and results of operations may be adversely
affected.
The set of topics incorporated within the term ESG in general, and climate change in particular, cover a range of issues that pose
potential risks to our operations. From an environmental perspective, the impact of climate change and a potential increase in extreme
weather events may pose risk to the operation of our sortation facilities and the ability to transport mail and packages. The increased
focus on alternative energy sources and the need to reduce our carbon footprint over time, could result in higher investments in capital
spending and increased operational costs. There are also a series of laws related to product stewardship and waste disposal to which
we need to comply. From a “social” perspective, a failure to meet employee expectations around safety and diversity, equity and
inclusion could impact our ability to recruit new employees and retain talent. Finally, from a “governance” perspective, if we do not
maintain a good governance processes in general or do not satisfy investor stakeholder expectations on ESG, our reputation and
attractiveness to portions of the investment community could be adversely affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We lease numerous facilities worldwide, including our corporate headquarters located in Stamford, Connecticut, fulfillment centers,
parcel operations and mail sortation facilities, service locations, data centers and call centers.
Our Global Ecommerce segment leases four fulfillment centers that comprise the majority of our fulfillment operations. Our Global
Ecommerce and Presort Services segments conduct parcel operations and mail sortation operations through a network of over 50
operating centers throughout the United States. Our SendTech Solutions segment leases a manufacturing and distribution facility in
Indianapolis. This facility is significant as it stores a majority of the SendTech Solutions products, supplies and inventories.
Should any facility be unable to function as intended for an extended period of time, our ability to service our clients and operating
results could be impacted.
We conduct most of our research and development activities in facilities located in Noida and Pune, India and Shelton, Connecticut.
Management believes that our facilities are in good operating condition, materially utilized and adequate for our current business
needs.
ITEM 3. LEGAL PROCEEDINGS
See Note 16 Commitments and Contingencies for additional information.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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14
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our common stock is principally traded on the New York Stock Exchange (NYSE) under the symbol "PBI". At January 31, 2022, we
had 12,812 common stockholders of record.
Share Repurchases
We periodically repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans
and for other purposes. During 2021 and 2020, we did not repurchase any additional shares of our common stock and in 2019, we
repurchased 18.6 million shares of our common stock at an aggregate price of $105 million. At December 31, 2021, we have
authorization from our Board of Directors to repurchase up to of $16 million of our common stock.
Stock Performance Graph
We revised our peer group from last year to exclude companies that were no longer publicly listed on an exchange and to include
additional companies to align with our changing business offerings.
Our new peer group is comprised of: ACCO Brands Corporation, Alliance Data Systems Corporation, Avery Dennison Corporation,
Cimpress plc, Deluxe Corporation, Diebold Nixdorf, Incorporated, Etsy, Inc., Fidelity National Information Services, Inc., Fiserv,
Inc., Hub Group, Inc., NCR Corporation, Overstock.com, Inc., Rockwell Automation, Inc., Ryder System, Inc., Schneider National,
Inc., The Western Union Company, W.W. Grainger, Inc. and Xerox Holdings Corporation.
The old peer group was comprised of: ACCO Brands Corporation, Alliance Data Systems Corporation, Deluxe Corporation, Diebold
Nixdorf, Incorporated, Echo Global Logistics, Inc., Fidelity National Information Services, Inc., Fiserv, Inc., Hub Group, Inc., NCR
Corporation, R.R. Donnelley & Sons Company, Rockwell Automation, Inc., Stamps.com Inc., The Western Union Company and
Xerox Holdings Corporation.
The accompanying graph shows the annual change in the value of a $100 investment in Pitney Bowes Inc., the Standard and Poor's
(S&P) 500 Composite Index, the S&P SmallCap 600 Composite Index, the old peer group and our new peer group over a five-year
period assuming the reinvestment of dividends. On a total return basis, a $100 investment on December 31, 2016 in Pitney Bowes
Inc., the S&P 500 Composite Index, the S&P SmallCap 600 Composite Index, the old peer group and our new peer group would have
been worth $57, $233, $180, $173 and $147 respectively, on December 31, 2021.
All information is based upon data independently provided to us by Standard & Poor's Corporation and is derived from their official
total return calculation. Total return for the S&P 500 and S&P SmallCap 600 Composite Indexes and our peer group is based on
market capitalization, weighted for each year. The stock price performance is not necessarily indicative of future stock price
performance.
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15
Comparison of Cumulative Five Year Total Return to Shareholders
250
200
150
100
50
—
2016
2017
2018
2019
2020
2021
Pitney Bowes
Old Peer Group
S&P 500
New Peer Group
S&P SmallCap 600
ITEM 6. [RESERVED]
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16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our financial condition and operating results should be read in conjunction with our risk factors,
consolidated financial statements and related notes. This discussion includes forward-looking statements based on management's
current expectations, estimates and projections and involves risks and uncertainties. Actual results may differ significantly from those
currently expressed. A detailed discussion of risks and uncertainties that could cause actual results to differ materially from such
forward-looking statements is outlined under "Forward-Looking Statements" and "Item 1A. Risk Factors" in this Form 10-K. All table
amounts are presented in thousands of dollars.
Throughout this discussion, we refer to revenue growth on a constant currency basis. Constant currency measures exclude the impact
of changes in currency exchange rates from the prior period under comparison. We believe that excluding the impacts of currency
exchange rates provides investors a better understanding of the underlying revenue performance. Constant currency change is
calculated by converting the current period non-U.S. dollar denominated revenue using the prior year’s exchange rate. Where constant
currency measures are not provided, the actual change and constant currency change are the same.
Management measures segment profitability and performance using segment earnings before interest and taxes (EBIT). Segment EBIT
is calculated by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes
interest, taxes, general corporate expenses, restructuring charges, asset and goodwill impairment charges and other items not allocated
to a business segment. Management believes that it provides investors a useful measure of operating performance and underlying
trends of the business. Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in
conjunction with our consolidated results of operations.
A discussion of our financial condition and results of operations for the year ended December 31, 2019, can be found under Item 7
“Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2020, filed with the SEC on February 19, 2021.
Overview
Financial Results Summary - Year Ended December 31:
Business services
Support services
Financing
Equipment sales
Supplies
Rentals
Total revenue
Global Ecommerce
Presort Services
SendTech Solutions
Total
Revenue
Years Ended December 31,
2021
2020
$ 2,334,674
$ 2,191,306
460,888
294,418
350,138
159,438
74,005
473,292
341,034
314,882
159,282
74,279
$ 3,673,561
$ 3,554,075
Actual %
change
Constant
Currency %
Change
7 %
(3) %
(14) %
11 %
— %
— %
3 %
6 %
(3) %
(15) %
10 %
(1) %
(1) %
3 %
Revenue
Years Ended December 31,
2021
2020
$ 1,702,580
$ 1,618,897
573,480
521,212
1,397,501
1,413,966
$ 3,673,561
$ 3,554,075
Actual %
change
Constant
currency %
change
5 %
10 %
(1) %
3 %
4 %
10 %
(2) %
3 %
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17
Global Ecommerce
Presort Services
SendTech Solutions
Total Segment EBIT
EBIT
Years Ended December 31,
2021
2020
% change
$
(98,673) $
(82,894)
79,721
55,799
429,415
442,648
$ 410,463 $ 415,553
(19) %
43 %
(3) %
(1) %
Revenue increased 3% in 2021 compared to 2020. Business services revenue, which primarily includes revenue from Presort Services
and Global Ecommerce, increased 7% (6% at constant currency) compared to the prior year. Presort Services revenue increased 10%
primarily due to higher mail volumes, pricing actions and investments made in the network and technology to enable a higher level of
five-digit sortation services. Global Ecommerce revenue increased 5% (4% at constant currency) primarily due to higher cross-border
volumes. SendTech Solutions revenue declined 1% (2% at constant currency) primarily due to lower financing revenue and support
services revenue, partially offset by higher equipment sales. Financing revenue declined 14% (15% at constant currency) primarily
due to lower lease extensions and lower fee income and prior year gains from the sales of investment securities. Support services
revenue declined 3% driven by a declining meter population and a shift to cloud-enabled products. Equipment sales increased 11%
(10% at constant currency) primarily due to the effect of COVID-19 on prior year equipment sales.
Segment EBIT in 2021 decreased 1% compared to 2020. Global Ecommerce EBIT declined 19% primarily due to a $14 million
unfavorable vendor price adjustment driven by lower domestic parcel delivery volumes, SendTech Solutions EBIT decreased 3%
primarily driven by a decline in revenue. and Presort Services EBIT increased 43% primarily due to higher revenue and improved
productivity from investments made in the network and technology. Refer to Results of Operations section for further information.
Outlook
We continue to invest in market opportunities and new solutions and services across all our businesses, optimizing our operations and
implementing cost savings initiatives to drive long-term value. During 2021, we invested significantly in our facilities, network and
technologies to expand operations, improve productivity and gain economies of scale. Going forward, we will focus our investments
on gaining further network efficiencies and economies of scale within our Global Ecommerce and Presort Services operations and in
market opportunities and new solutions and services across all our businesses. Our portfolio continues to shift to higher growth, lower
margin, markets. As we continue to invest in Global Ecommerce with a view to, and ahead of, our expectations for long term growth,
it is possible that near term margins will be under pressure. However, we expect margins to improve as we build scale and realize the
full benefits of our investments and optimizations.
The impacts of COVID-19 on our businesses and financial results remain uncertain. Supply chain issues continue to pose challenges
for us and our clients' ability to meet their customers' demand. These supply chain issues could continue to impact our customers'
behavior as well as that of end consumers, which could impact our shipping and delivery volumes. The duration and severity of these
supply chain issues is unknown and unpredictable. There are some unique factors not within our control that could affect our business;
however, we believe we can navigate the current conditions and will continue to take proactive steps to manage our operations and
mitigate related financial impacts.
On a consolidated basis, we expect revenue growth in the low to mid-single digit range in 2022 compared to 2021. Within Global
Ecommerce, we anticipate revenue growth in 2022 and margin and profit improvements from pricing initiatives and productivity
improvements from the benefits of the investments we made in our facilities and network. However, we also expect continued growth
of the market's need for transportation services and labor to generate increased costs. Within Presort Services, we expect revenue
growth in 2022 and margin and profit improvements as productivity initiatives, increased automation and facilities consolidation and
optimization will more than offset expected higher labor and transportation costs. Within SendTech Solutions, we expect overall
revenue to decline, growth in our cloud-enabled shipping solutions and margins to remain strong.
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18
REVENUE AND SEGMENT EBIT
Global Ecommerce
RESULTS OF OPERATIONS
Global Ecommerce includes the revenue and related expenses from domestic parcel services, cross-border solutions and digital
delivery services.
Revenue
Cost of Revenue
Gross Margin
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
Business services
2021
$ 1,702,580
2020
$ 1,618,897
Actual %
change
Constant
Currency %
change
5 %
4 % $
2021
1,577,628
$
2020
1,480,612
2021
2020
7.3 %
8.5 %
Segment EBIT
Years Ended December 31,
2021
2020
Actual %
change
Segment EBIT
$
(98,673) $
(82,894)
(19) %
Global Ecommerce revenue increased 5% as reported (4% at constant currency) in 2021 compared to 2020 due to revenue growth of
7% from higher cross-border volumes, partially offset by revenue decline of 2% from lower domestic parcel delivery volumes.
Total gross margin declined $13 million and gross margin percentage declined to 7.3% from 8.5% primarily due to a $14 million
unfavorable vendor price adjustment driven by lower domestic parcel delivery volumes and higher transportation, postal and labor
costs, partially offset by the impact of higher revenue.
Segment EBIT for 2021 was a loss of $99 million compared to a loss of $83 million in the prior year. The increase in EBIT loss was
driven by the decline in gross margin and $2 million in higher operating expenses.
Presort Services
Presort Services includes revenue and related expenses from sortation services to qualify large volumes of First Class Mail, Marketing
Mail, Marketing Mail Flats and Bound Printed Matter for postal worksharing discounts.
Revenue
Cost of Revenue
Gross Margin
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2021
2020
Actual %
change
Constant
Currency %
change
2021
2020
2021
2020
Business services
$
573,480
$
521,212
10 %
10 % $
431,382 $
402,599
24.8 %
22.8 %
Segment EBIT
Years Ended December 31,
2021
2020
Actual %
change
Segment EBIT
$
79,721
$
55,799
43 %
Presort Services revenue increased 10% in 2021 compared to 2020. The processing of Marketing Mail, First Class Mail and Marketing
Mail Flats and Bound Printed Matter contributed revenue growth of 5%, 4% and 1%, respectively, primarily due to the impact of
increased mail volumes, improvements in five-digit sortation, pricing actions and benefits from the impacts of COVID-19 that
adversely affected mail volumes in 2020.
Gross margin increased $23 million and gross margin percentage increased to 24.8% from 22.8% primarily due to the increase in
revenue and improved productivity, partially offset by increased labor and transportation costs of $16 million and $6 million,
respectively, due to increased competition and demand for these resources.
Segment EBIT increased $24 million or 43% in 2021 compared to 2020 due to the increase in revenue and gross margin.
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SendTech Solutions
SendTech Solutions includes the revenue and related expenses from physical and digital mailing and shipping technology solutions,
financing, services, supplies and other applications to help simplify and save on the sending, tracking and receiving of letters, parcels
and flats.
Revenue
Cost of Revenue
Gross Margin
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2021
2020
Actual %
change
Constant
Currency %
change
2021
2020
2021
2020
Business services
$
58,614
$
51,197
Support services
Financing
Equipment sales
Supplies
Rentals
Total
460,888
294,418
350,138
159,438
74,005
473,292
341,034
314,882
159,282
74,279
$ 1,397,501
$ 1,413,966
14 %
(3) %
(14) %
11 %
— %
— %
(1) %
15 % $
25,174 $
20,694
(3) %
147,716
(15) %
47,059
10 %
251,714
(1) %
(1) %
43,980
24,427
148,293
48,162
234,987
41,679
25,600
(2) % $
540,070 $
519,415
57.1 %
67.9 %
84.0 %
28.1 %
72.4 %
67.0 %
61.4 %
59.6 %
68.7 %
85.9 %
25.4 %
73.8 %
65.5 %
63.3 %
Segment EBIT
Years Ended December 31,
2021
2020
Actual %
change
Segment EBIT
$
429,415
$
442,648
(3) %
SendTech Solutions revenue decreased 1% (2% at constant currency) in 2021 compared to 2020. Financing revenue declined 14%
(15% at constant currency) primarily due to lower lease extensions of $18 million as more clients opted to lease new equipment rather
than simply extend leases on existing equipment, lower fee income of $10 million and a prior year gain of $10 million from sales of
investment securities. Support services revenue declined 3% primarily due to a declining meter population and shift to cloud-enabled
products, which generally require less service due to ease of use. Partially offsetting these decreases, equipment sales increased 11%
(10% at constant currency), primarily due to the adverse impact on demand and our inability to perform on-site service and
installations in the prior year due to COVID-19 and business services revenue increased 14% (15% at constant currency) primarily due
to growth in our shipping products.
Gross margin decreased to 61.4% from 63.3% in the prior year primarily due to declines in financing and support services gross
margin, partially offset by an increase in equipment sales gross margin. Financing gross margin decreased to 84.0% from 85.9% due
to declining revenue and rising interest rates. Support services gross margin decreased to 67.9% from 68.7% primarily due to the
decline in revenue. Equipment sales gross margin increased to 28.1% from 25.4% primarily driven by lower engineering costs.
Segment EBIT decreased $13 million, or 3% in 2021 compared to 2020, primarily driven by the decline in gross margin of $38
million, partially offset by lower credit loss provision of $23 million.
UNALLOCATED CORPORATE EXPENSES
The majority of our selling, general and administrative (SG&A) expense is recorded directly or allocated to our reportable segments.
SG&A expenses not recorded directly or allocated to our reportable segments are reported as unallocated corporate expenses.
Unallocated corporate expenses primarily represents corporate administrative functions such as finance, marketing, human resources,
legal, information technology and innovation.
Unallocated corporate expenses
Years Ended December 31,
2021
2020
Actual %
change
$
207,774
$
200,406
4 %
Unallocated corporate expenses in 2021 increased 4% compared to the prior year primarily driven by higher employee-related
expenses of $5 million and higher insurance costs of $5 million.
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CONSOLIDATED EXPENSES
Selling, general and administrative
SG&A expense of $924 million in 2021 decreased 4%, or $39 million, compared to 2020, primarily due to lower credit loss provision
of $34 million and lower professional fees of $16 million, partially offset by higher employee-related expenses of $24 million.
Research and development (R&D)
R&D expense increased 22%, or $8 million in 2021 compared to 2020, primarily due to investments in our Global Ecommerce
segment.
Restructuring charges and asset impairments
Restructuring charges and asset impairments for the year ended December 31, 2021 were $19 million and primarily includes costs for
employee severance and facility closures. See Note 12 to the Consolidated Financial Statements for further information.
Other components of net pension and postretirement cost (income)
Other components of net pension and postretirement cost (income) for the year ended December 31, 2021 was $1 million. The amount
of other components of net pension and postretirement cost (income) recognized each year will vary based on actuarial assumptions
and actual results of our pension plans. See Note 14 to the Consolidated Financial Statements for further information.
Other expense, net
Other expense for the year ended December 31, 2021 was $42 million and includes a $56 million loss from the refinancing of debt, a
$10 million gain from the sale of a business, $3 million of insurance proceeds and a $1 million gain from an asset sale. See Note 11 to
the Consolidated Financial Statements for further information.
INCOME TAXES AND DISCONTINUED OPERATIONS
Income taxes
The effective tax rate for 2021 includes benefits of $7 million from the resolution of tax matters, $5 million due to tax legislation in
the U.K., $3 million from an affiliate reorganization and $2 million from the vesting of restricted stock, partially offset by a charge of
$6 million on the pre-tax gain of $10 million from the sale of a business as the tax basis was lower than the book basis and a charge of
$1 million for the write-off of deferred tax assets associated with the expiration of out-of-the-money stock options. See Note 15 to the
Consolidated Financial Statements for further information.
Discontinued operations, net of tax
Loss from discontinued operations, net of tax for 2021 of $5 million includes adjustments related to the sale of our Software Solutions
business in 2019 and Production Mail business in 2018. See Note 4 to the Consolidated Financial Statements for further information.
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March 1, 2022 17:28:27
21
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2021 we had cash, cash equivalents and short-term investments of $747 million, which includes $162 million held at
our foreign subsidiaries used to support the liquidity needs of those subsidiaries. Our ability to maintain adequate liquidity for our
operations is dependent upon a number of factors, including our revenue and earnings, our clients ability to pay their balances on a
timely basis, the impacts of COVID-19 on macroeconomic conditions and our ability to take further cost savings and cash
conservation measures if necessary. At this time, we believe that existing cash and investments, cash generated from operations and
borrowing capacity under our $500 million revolving credit facility will be sufficient to fund our cash needs for the next 12 months.
Cash Flow Summary
The change in cash and cash equivalents is as follows:
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Operating activities
2021
2020
Increase/
(decrease)
$ 301,515 $ 301,972 $
(155,251)
(330,371)
(4,863)
(75,692)
(235,371)
6,099
(457)
(79,559)
(95,000)
(10,962)
$ (188,970) $
(2,992) $ (185,978)
Cash provided by operating activities in 2021 of $302 million was flat compared to the prior year. Cash flow from operations was
positively impacted by $3 million from changes in working capital and by $38 million due to a tax payment related to a discontinued
operation in the prior year. These improvements in cash were offset by lower earnings before noncash charges.
Investing activities
Cash used in investing activities for 2021 increased $80 million compared to the prior year, primarily due to higher capital
expenditures as we invested significantly during the year in our facilities, our network and technologies to expand operations, improve
productivity and gain economies of scale in our Global Ecommerce and Presort Services operations. In 2020, we prioritized and
limited our capital expenditures in connection with COVID-19.
Net cash from investing activities in 2021 also benefited by $43 million from the timing of purchases and maturities of investment
securities, but was negatively impacted by lower proceeds from the sale of assets and businesses of $29 million and higher acquisition
spending of $8 million. Proceeds from the sale of assets and businesses in 2021 includes $28 million from the sale of a business and
$2 million of asset sales, while proceeds in 2020 included $46 million from the surrender of company-owned life insurance policies
and $12 million from the sale of an equity investment. In November 2021, we acquired CrescoData, a Platform-as-a-Service business,
for $15 million.
Financing activities
Cash used in financing activities for 2021 increased $95 million compared to the prior year primarily due to higher net repayments of
debt of $61 million, higher premiums and fees paid to refinance debt of $18 million and a reduction in reserve deposits of $11 million.
Debt Activity
In 2021, we refinanced a significant amount of our near-term maturities, reducing our total debt and extending our maturity profile.
Specifically, we issued a $400 million 6.875% unsecured note due March 2027, a $350 million 7.25% unsecured note due March 2029
and entered into a seven-year $450 million secured term loan maturing March 2028. We redeemed all the October 2021 notes, an
aggregate $363 million of the May 2022 notes, April 2023 notes and March 2024 notes under a tender offer, the remaining balance of
the May 2022 notes and the remaining balance of the January 2025 term loan. We also extended the maturities of our $500 million
secured revolving credit facility and our $380 million secured term loan from November 2024 to March 2026. A $56 million pre-tax
loss was incurred on the refinancing of debt.
In connection with the refinancing, we terminated interest rate swap agreements with an aggregate notional amount of $500 million
and entered into new interest rate swap agreements with an aggregate notional amount of $200 million. Under the terms of the new
swap agreements, we pay fixed-rate interest of 0.56% and receive variable-rate interest based on one-month LIBOR. The variable
interest rate under the term loans and the swaps reset monthly.
22
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The credit agreement that governs the revolving credit facility and term loans contains financial and non-financial covenants. At
December 31, 2021, we were in compliance with all covenants and there were no outstanding borrowings under the revolving credit
facility.
Future Cash Requirements
The following table summarizes our known and contractually committed cash requirements at December 31, 2021 (in millions):
Debt maturities
Lease obligations
Purchase obligations
Retiree medical payments
Total
Payments due in
Total
2022
2023
2024
2025
2026
Thereafter
$ 2,365
286
240
104
$ 2,995
$
$
25
53
240
13
331
$
$
120
47
—
12
179
$
$
282
42
—
12
336
$
$
43
34
—
11
88
$
$
261
29
—
11
301
$ 1,634
81
—
45
$ 1,760
Debt
We have debt with a principal balance of $2.4 billion outstanding at December 31, 2021. Approximately 74% of this debt is at fixed
rates, including the effect of interest rate swaps, and the remaining 26% of debt is at variable rates based on LIBOR or other similar
rates. The weighted average interest rate of our variable rate debt at December 31, 2021 was 3.1%. We estimate that cash interest
payments for the next 12 months will be $130 - $140 million.
Required debt repayments over the next 12 months are $25 million and we do not have material principal maturities until 2024.
Accordingly, we do not anticipate the need to access the U.S. capital markets in the next 12 months. See Note 13 to the Consolidated
Financial Statements for information regarding our debt.
Lease obligations
We lease real estate and equipment under operating and capital lease arrangements. These leases have terms of up to 15 years and
include renewal options.
In November 2021, we entered into an agreement to sell our Shelton, Connecticut facility for approximately $50 million and
simultaneously enter into a ten year lease agreement. Total base lease payments over the ten-year term will be approximately $41
million and are not included in the table above. This transaction is expected to close in the first quarter of 2022. Additionally, lease
payments in the table above do not include $21 million of payments for leases signed but not yet commenced at December 31, 2021.
See Note 8 and Note 17 to the Consolidated Financial Statements for further information.
Purchase obligations
Purchase obligations include unrecorded agreements to purchase goods and services that are enforceable and legally binding upon us
and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable without
penalty.
In addition to the above known and contractually committed cash payments, we anticipate using cash for the following items:
Capital Expenditures
We continue to invest in our facilities, products, solutions and technology to grow our businesses, gain additional economies of scale,
provide new and innovative products and solutions and compete effectively in our markets. Capital expenditures are evaluated and
approved by senior leadership based on several factors, including expected impacts on revenue growth, productivity enhancements,
service improvements and cost savings.
Capital expenditures totaled $184 million and $105 million for the years ended December 31, 2021 and 2020, respectively. During
2021, we invested significantly in our facilities, network and technologies to expand operations, improve productivity and gain
economies of scale in our Global Ecommerce and Presort operations. In 2020, in response to COVID-19, we prioritized and limited
our capital expenditures.
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23
Dividends
We have historically paid a quarterly dividend to our shareholders. Each quarter, our Board of Directors considers our recent and
projected earnings and other capital needs and priorities in deciding whether to approve a dividend. We expect to continue to pay a
quarterly dividend of $0.05 per share; however, our Board of Directors may decide to increase or decrease this amount or to not
approve the payment of a dividend at any time and for any reason without notice. Assuming the current $0.05 per quarter dividend
payment, we estimate that dividend payments will be approximately $35 million in 2022. There are no material restrictions on our
ability to declare dividends.
Share Repurchases
We may repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans and for
other purposes. At December 31, 2021, we have authorization from our Board of Directors to repurchase up to of $16 million of our
common stock. As of February 16, 2022, we have spent $8 million to repurchase 1.5 million shares of our common stock.
Off Balance Sheet Arrangements
At December, 31, 2021, we had approximately $25 million outstanding letters of credit guarantees with financial institutions that are
primarily issued as security for insurance, leases, customs and other performance obligations. In general, we would only be liable for
the amount of these guarantees in the event of default in the performance of our obligations, the probability of which we believe is
remote.
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24
Critical Accounting Estimates
The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions about
certain items that affect the reported amounts of assets, liabilities, revenues, expenses and accompanying disclosures, including the
disclosure of contingent assets and liabilities. The accounting policies below have been identified by management as those policies
that are most critical to our financial statements due to the estimates and assumptions required. Management believes that the
estimates and assumptions used are reasonable and appropriate based on the information available at the time the financial statements
were prepared; however, actual results could differ from those estimates and assumptions. See Note 1 to the Consolidated Financial
Statements for a summary of our accounting policies.
Revenue recognition
We derive revenue from multiple sources including the sale and lease of equipment, equipment rentals, financing, support services and
business services. Certain transactions are consummated at the same time and can therefore generate revenue from multiple sources.
The most common form of these arrangements involves a sale or noncancelable lease of equipment, meter services and an equipment
maintenance agreement. We are required to determine whether each product and service within the contract should be treated as a
separate performance obligation (unit of accounting) for revenue recognition purposes. We recognize revenue for performance
obligations when control is transferred to the customer. Transfer of control may occur at a point in time or over time, depending on
the nature of the contract and the performance obligation.
Revenue is allocated among performance obligations based on relative standalone selling prices (SSP), which are a range of selling
prices that we would sell the good or service to a customer on a separate basis. SSP are established for each performance obligation at
the inception of the contract and can be observable prices or estimated. Revenue is allocated to the meter service and equipment
maintenance agreement elements using their respective observable selling prices charged in standalone and renewal transactions. For
sale and lease transactions, the SSP of the equipment is based on a range of observable selling prices in standalone transactions. We
recognize revenue on non-lease transactions when control of the equipment transfers to the customer, which is upon delivery for
customer installable models and upon installation or customer acceptance for other models. We recognize revenue on equipment for
lease transactions upon shipment for customer installable models and upon installation or customer acceptance for other models.
Impairment review
Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or sooner if circumstances indicate an
impairment may exist. The impairment test for goodwill determines the fair value of each reporting unit and compares it to the
reporting unit's carrying value, including goodwill. If the fair value of a reporting unit is less than its carrying value, an impairment
loss is recognized for the difference, not to exceed the carrying amount of goodwill.
Testing goodwill for impairment requires us to identify our reporting units and assign assets and liabilities, including goodwill, to each
reporting unit. The fair value of a reporting unit is based on one or a combination of techniques, which include a discounted cash flow
model, multiples of competitors, and/or multiples from sales of like businesses. To determine fair value using a discounted cash flow
model, management's cash flow projections include significant judgements and assumptions relating to revenue growth rates,
projected operating income and discount rate. Changes in any of these estimates or assumptions could materially affect the
determination of fair value and the associated goodwill impairment assessment for each reporting unit. Events and circumstances that
could materially impact the fair value determination of a reporting unit and potentially result in a non-cash impairment charge in future
periods, include, but are not limited to, changing consumer behaviors, our ability to manage volumes, gain economies of scale and
improve profitability in the Global Ecommerce business, prolonged supply chain issues, inflation and rising interest rates.
Long-lived and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be fully recoverable. The estimated future undiscounted cash flows expected to result from the use and
eventual disposition of the assets is compared to the carrying value. If the sum of the undiscounted cash flows is less than the asset's
carrying value, an impairment charge is recorded for an amount by which the carrying value exceeds its fair value. The fair value of
the impaired asset is determined using probability weighted expected cash flow estimates, quoted market prices when available and
appraisals, as appropriate. We derive the cash flow estimates from our long-term business plans and historical experience. Changes in
the estimates and assumptions incorporated in our impairment assessment could materially affect the determination of fair value and
the associated impairment charge.
Allowances for credit losses
Finance receivables are comprised of sales-type leases, secured loans and unsecured revolving loans. We provide an allowance for
probable credit losses based on historical loss experience, adverse situations that may affect a client's ability to pay and current
economic conditions and outlook based on reasonable and supportable forecasts.
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25
Total allowance for credit losses as a percentage of finance receivables was 2% at December 31, 2021 and 3% at December 31, 2020.
Holding all other assumptions constant, a 0.25% change in the allowance rate at December 31, 2021 would have reduced pre-tax
income by $3 million.
Trade accounts receivable are generally due within 30 days after the invoice date. Accounts deemed uncollectible are written off
against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We
believe that our accounts receivable credit risk is low because of the geographic and industry diversification of our clients and small
account balances for most of our clients.
The allowance for credit losses as a percentage of trade accounts receivables was 3% at December 31, 2021 and 5% at December 31,
2020. Holding all other assumptions constant, a 0.25% change in the allowance rate at December 31, 2021 would have reduced pre-tax
income by $1 million.
Income taxes and valuation allowance
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our annual tax rate is based on income, statutory tax
rates, tax reserve changes and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant
judgment is required in determining the annual tax rate and in evaluating our tax positions. We regularly assess the likelihood of tax
adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications.
We have established tax reserves that we believe are appropriate given the possibility of tax adjustments. Determining the appropriate
level of tax reserves requires judgment regarding the uncertain application of tax laws. Reserves are adjusted when information
becomes available or when an event occurs indicating a change in the reserve is appropriate. Changes in tax reserves could have a
material impact on our financial condition or results of operations.
Significant judgment is also required in determining the amount of deferred tax assets that will ultimately be realized and
corresponding deferred tax asset valuation allowance. When estimating the necessary valuation allowance, we consider all available
evidence for each jurisdiction including historical operating results, estimates of future taxable income and the feasibility of ongoing
tax planning strategies. If new information becomes available that would alter our estimate of the amount of deferred tax assets that
will ultimately be realized, we adjust the valuation allowance through income tax expense. Changes in the deferred tax asset valuation
allowance could have a material impact on our financial condition or results of operations.
Pension benefits
The calculation of net periodic pension expense and determination of net pension obligations are dependent on assumptions and
estimates relating to, among other things, the discount rate (interest rate used to discount the future estimated liability) and the
expected rate of return on plan assets. These assumptions are evaluated and updated annually.
The discount rate for our largest plan, the U.S. Qualified Pension Plan (the U.S. Plan) and our largest foreign plan, the U.K. Qualified
Pension Plan (the U.K. Plan) used in the determination of net periodic pension expense for 2021 was 2.55% and 1.30%, respectively.
For 2022, the discount rate used in the determination of net periodic pension expense for the U.S. Plan and the U.K. Plan will be
2.85% and 1.85%, respectively. A 0.25% change in the discount rate would not materially impact annual pension expense for the U.S.
Plan or the U.K. Plan. A 0.25% change in the discount rate would impact the projected benefit obligation of the U.S. Plan and U.K.
Plan by $45 million and $27 million, respectively.
The expected rate of return on plan assets used in the determination of net periodic pension expense for 2021 was 5.60% for the U.S.
Plan and 4.75% for the U.K. Plan. For 2022, the expected rate of return on plan assets used in the determination of net periodic
pension expense for the U.S. Plan will be 5.10% and the U.K. Plan will be 4.0%. A 0.25% change in the expected rate of return on
plan assets would impact annual pension expense for the U.S. Plan by $4 million and the U.K. Plan by $1 million.
Actual pension plan results that differ from our assumptions and estimates are accumulated and amortized primarily over the life
expectancy of plan participants and affect future pension expense. Net pension expense is also based on a market-related valuation of
plan assets where differences between the actual and expected return on plan assets are recognized over a five-year period. Plan
benefits for participants in a majority of our U.S. and foreign pension plans are frozen.
Residual value of leased assets
Equipment residual values are determined at the inception of the lease using estimates of the equipment's fair value at the end of the
lease term. Residual value estimates impact the determination of whether a lease is classified as an operating lease or a sales-type
lease. Fair value estimates of equipment at the end of the lease term are based on historical renewal experience, used equipment
markets, competition and technological changes.
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26
We evaluate residual values on an annual basis or sooner if circumstances warrant. Declines in estimated residual values considered
"other-than-temporary" are recognized immediately. Increases in estimated future residual values are not recognized until the
equipment is remarketed. If the actual residual value of leased assets were 10% lower than management's current estimates and
considered "other-than-temporary", pre-tax income would be $5 million lower.
Legal and Regulatory Matters
See Regulatory Matters in Item 1, Other Tax Matters in Note 15 to the Consolidated Financial Statements for regulatory matters
regarding our tax returns and Note 16 to the Consolidated Financial Statements for information regarding our legal proceedings.
Foreign Currency Exchange
The functional currency for most of our foreign operations is the local currency. Changes in the value of the U.S. dollar relative to the
currencies of countries in which we operate impact our reported assets, liabilities, revenue and expenses. Exchange rate fluctuations
can also impact the settlement of intercompany receivables and payables between our subsidiaries in different countries. During 2021,
15% of our consolidated revenue was from operations outside the United States and the translation of foreign currencies to the U.S.
dollar did not have a material impact on revenues or operating results for the year ended December 31, 2021.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. To manage these market
risks, we employ derivatives according to established policies and procedures, including foreign currency contracts and interest rate
swaps. We do not use derivatives for speculative purposes. We are also exposed to credit risk on our accounts receivable and finance
receivable portfolio.
Foreign Exchange Risk
Our foreign currency risks include the translation of local currency balances of foreign subsidiaries and transaction gains and losses
associated with intercompany loans, transactions denominated in currencies other than a location’s functional currency and forecasted
inventory purchases between affiliates and third parties. Our objective in managing exposure to foreign currency is to reduce the
volatility in earnings and cash flows associated with fluctuations in foreign currency exchange rates. The principal currencies actively
hedged are the British Pound, Canadian Dollar and the Euro.
At December 31, 2021 and 2020, we had outstanding foreign currency exchange rate contracts to mitigate the currency risk associated
with forecasted inventory purchases between affiliates and third parties. These contracts are designated as cash flow hedges and
changes in fair value are recognized in accumulated other comprehensive income, a component of stockholders’ equity. At December
31, 2021 and 2020, we also had outstanding foreign currency exchange rate contracts to mitigate the currency risk associated with
intercompany loans and related interest denominated in foreign currencies. These contracts are not designated as hedging instruments
and changes in fair value of the derivative contract and transaction gains and losses associated with the revaluation of the
intercompany loans are recorded in earnings. Changes in the fair values of foreign currency derivative contracts recognized in earnings
are generally offset by transaction gains and losses on the underlying intercompany loans.
Interest Rate Risk
We are exposed to interest rate risk principally in relation to our variable-rate debt borrowings. At December 31, 2021 and 2020, 26%
and 27% or our debt was at variable rates, respectively. The weighted average interest rate of our variable rate debt at December 31,
2021 and 2020 was 3.1% and 4.5%, respectively. A 100 basis point change in the effective interest rate of our variable rate debt in
2021 would have increased interest expense approximately $6 million.
We also maintain a significant investment portfolio comprised of fixed-rate interest-bearing money market funds, government and
municipal securities, corporate securities and mortgage and asset-backed securities. Changes in interest rates impact the fair value of
these investments; however, these securities are designated as available-for-sale, and changes in fair value due to changes in interest
rates are recognized as accumulated other comprehensive income, a component of equity, and does not impact net income. We have
the intent and ability to hold securities to maturity and therefore, do not expect to recognize impairment losses on investment securities
in an unrealized loss position.
Credit Risk
We are exposed to credit risk on our accounts receivable and finance receivable balances. This risk is mitigated due to our large,
diverse client base, dispersed over various geographic regions and industrial sectors. No single client comprised more than 10% of our
consolidated net sales in 2021 or 2020. We maintain provisions for potential credit losses based on historical experience, age of
27
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March 1, 2022 17:28:28
receivable, current economic conditions and future outlook and other relevant factors that may impact our customers’ ability to pay.
We continually evaluate the adequacy of our allowance for credit losses and adjust as necessary.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Consolidated Financial Statements and Schedules" in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the Exchange Act)), that are designed to reasonably assure that information required to be disclosed in reports
filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and to reasonably assure that such information is accumulated and
communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely
decisions regarding required disclosure.
Any system of controls and procedures, no matter how well designed and operated, can provide only reasonable (and not absolute)
assurance of achieving the desired control objectives. Under the direction of our CEO and CFO, management evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as required by Rule 13a-15 or Rule 15d-15 under
the Exchange Act. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and
procedures were effective as of December 31, 2021.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act. Management assessed the effectiveness of the internal control over financial
reporting as of December 31, 2021 under the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control - Integrated Framework (2013) and concluded that the internal control over financial
reporting was effective.
The effectiveness of our
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report in this Form 10-K.
internal control over financial reporting as of December 31, 2021 has been audited by
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended December 31, 2021, that
have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
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28
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Other than information regarding our executive officers disclosed in Part I of this Annual Report, the information required by this Item
is incorporated by reference to our Proxy Statement to be filed in connection with the 2022 Annual Meeting of Stockholders.
Code of Ethics
We have Business Practices Guidelines (BPG) that apply to all our officers and other employees and a Code of Business Conduct and
Ethics (the Code) that applies to our Board of Directors. The BPG and the Code are posted on our corporate governance website
located at www.pb.com/us/our-company/leadership-and-governance/corporate-governance.html. Amendments to either the BPG or
the Code and any waiver from a provision of the BPG or the Code requiring disclosure will be disclosed on our corporate governance
website.
Audit Committee - Audit Committee Financial Expert
The information regarding the Audit Committee, its members and the Audit Committee financial experts is incorporated by reference
to our Proxy Statement to be filed in connection with the 2022 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2022
Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table provides information as of December 31, 2021 regarding the number of shares of common stock that may be
issued under our equity compensation plans.
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans excluding
securities reflected in
column (a)
11,120,069
—
11,120,069
$10.64
—
$10.64
119,940,056
—
119,940,056
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
Other than information regarding securities authorized for issuance under equity compensation plans, the information required by this
Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2022 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2022
Annual Meeting of Stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2022
Annual Meeting of Stockholders.
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29
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Index to Consolidated Financial Statements and Schedules
(a)(1)
Consolidated Statements of Income (Loss) for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019
Consolidated Balance Sheets at December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2021, 2020 and 2019
Page
Number in
Form 10-K
37
38
39
40
41
42
87
(a)(2) Exhibits
Reg. S-K
exhibits
3(a)
Description
Amended and Restated Certificate of Incorporation of Pitney Bowes Inc.
3(b)
Pitney Bowes Inc. Amended and Restated By-laws (effective May 10,
2013)
4
Description of Registered Securities
4(a)
Form of Indenture between the Company and SunTrust Bank, as Trustee
Status or incorporation by reference
Incorporated by reference to Exhibit 3(i)(a) to Form 8-K
filed with the Commission on September 30, 2019
(Commission file number 1-3579)
Incorporated by reference to Exhibit 3(d) to Form 8-K
filed with
the Commission on May 13, 2013
(Commission file number 1-3579)
Exhibit 4
Incorporated by reference to Exhibit 4.4 to Registration
Statement on Form S-3 (No. 333-72304) filed with the
Commission on October 26, 2001
Supplemental Indenture No. 1 dated April 18, 2003 between the
Company and SunTrust Bank, as Trustee
Incorporated by reference to Exhibit 4.1 to Form 8-K
filed with the Commission on August 18, 2004
First Supplemental Indenture, by and among Pitney Bowes Inc., The
Bank of New York, and Citibank, N.A., to the Indenture, dated as of
February 14, 2005, by and between the Company and Citibank
Incorporated by reference to Exhibit 4.1 to Form 8-K
filed with
the Commission on October 24, 2007
(Commission file number 1-3579)
Supplemental Indenture No. 2 dated as of February 26, 2020, by and
between the Company and The Bank of New York Mellon, as trustee
Indenture, dated March 19, 2021, among Pitney Bowes Inc., the
guarantors party thereto and Truist Bank, as trustee, with respect to Pitney
Bowes Inc.'s 6.875% Senior Notes due 2027.
Indenture, dated March 19, 2021, among Pitney Bowes Inc., the
guarantors party thereto and Truist Bank, as trustee, with respect to Pitney
Bowes Inc.'s 7.250% Senior Notes due 2029.
10(a) * Retirement Plan for Directors of Pitney Bowes Inc.
10(b.3) * Pitney Bowes Inc. Directors' Stock Plan (Amended and Restated effective
May 12, 2014)
10(c) *
Pitney Bowes Stock Plan (as amended and restated as of January 1, 2002)
10(d) *
Pitney Bowes Inc. 2007 Stock Plan (as amended November 7, 2009)
10(e) *
Pitney Bowes Inc. Key Employees' Incentive Plan (as amended and
restated February 4, 2019)
10(f) *
Pitney Bowes Severance Plan (as amended and restated as of January 1,
2008)
30
Incorporated by reference to Exhibit 4.1 to Form 8-K
filed with the Commission on February 26, 2020
(Commission file number 1-3579)
Incorporated by reference to Exhibit 4.1 to the Form 8-K
filed with
the Commission on March 23, 2021
(Commission file number 1-3579).
Incorporated by reference to Exhibit 4.2 to the Form 8-K
filed with
the Commission on March 23, 2021
(Commission file number 1-3579).
Incorporated by reference to Exhibit 10(a) to Form 10-K
filed with
the Commission on March 30, 1993
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(b.3) to Form 10-
K filed with the Commission on February 20, 2015
(Commission file number 1-3579)
Incorporated by reference to Annex 1 to the Definitive
Proxy Statement for the 2002 Annual Meeting of
Stockholders filed with the Commission on March 26,
2002 (Commission file number 1-3579)
Incorporated by reference to Exhibit (v) to Form 10-K
filed with the Commission on February 26, 2010
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(e) to Form 10-K
filed with the Commission on February 20, 2019
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(e) to Form 10-K
filed with the Commission on February 29, 2008
(Commission file number 1-3579)
4(b)
4(d)
4(e)
4(f)
4(g)
25702_AR2021 10-K for Annual Report.pdf 30
March 1, 2022 17:28:28
PART IV
Reg. S-K
exhibits
10(g) *
Description
Pitney Bowes Senior Executive Severance Policy (as amended and
restated as of February 4, 2019)
10(h) *
Pitney Bowes Inc. Deferred Incentive Savings Plan for the Board of
Directors, as amended and restated effective January 1, 2009
10(i) *
Pitney Bowes Inc. Deferred Incentive Savings Plan as amended and
restated effective January 1, 2009
10(j) *
Pitney Bowes Inc. 1998 U.K. S.A.Y.E. Stock Option Plan
10(k) *
Form of Long Term Incentive Award Agreement
10(m)* Pitney Bowes Director Equity Deferral plan dated November 8, 2013
(effective May 12, 2014)
10(o)*
Pitney Bowes Executive Equity Deferral Plan dated November 7, 2014
10(p)*
Pitney Bowes Inc. 2013 Stock Plan
10(q)* Amended and Restated Pitney Bowes Inc. 2018 Stock Plan
Status or incorporation by reference
Incorporated by reference to Exhibit 10(g) to Form 10-K
filed with the Commission on February 20, 2019
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(g) to Form 10-K
filed with the Commission on February 26, 2009
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(h) to Form 10-K
filed with the Commission on February 26, 2009
(Commission file number 1-3579)
Incorporated by reference to Annex II to the Definitive
Proxy Statement for the 2006 Annual Meeting of
Stockholders filed with the Commission on March 23,
2006 (Commission file number 1-3579)
Incorporated by reference to Exhibit 10(k) to Form 10-K
filed with the Commission on February 25, 2013
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(o) to Form 10-K
filed with the Commission on February 22, 2016
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10(p) to Form 10-K
filed with the Commission on February 22, 2016
(Commission file number 1-3579)
Incorporated by reference to Annex A to the Definitive
Proxy Statement for the 2013 Annual Meeting of
Stockholders filed with the Commission on March 25,
2013 (Commission file number 1-3579)
Incorporated by reference to Annex A to the Definitive
Proxy Statement for the 2019 Annual Meeting of
Stockholders filed with the Commission on March 18,
2020 (Commission file number 1-3579)
10(r)
10(s)
10(t)
10(u)
18
21
23
31.1
31.2
32.1
32.2
Credit Agreement, dated as of November 1, 2019 (the "Credit
Agreement"), among the company, the lenders and issuing banks party
thereto and JPMorgan Chase Bank, N.A., as administrative agent.
Incorporated by reference to Exhibit 10.1 to the Form 8-
K filed with the Commission on November 5, 2019
(Commission file number 1-3579)
First Incremental Facility Amendment, dated as of February 19, 2020, to
the Credit Agreement, among the company, the lenders and issuing banks
party thereto and JPMorgan Chase Bank, N.A., administrative agent.
Incorporated by reference to Exhibit 10.1 to the Form 8-
K filed with the Commission on February 20, 2020
(Commission file number 1-3579)
First Amendment, dated as of March 19, 2021, among Pitney Bowes Inc.,
the subsidiaries of Pitney Bowes Inc. party thereto, the lenders and
issuing banks party thereto, and JPMorgan Chase Bank, N.A., as
administrative agent
First Refinancing Agreement, dated as of March 19, 2021, among Pitney
Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto and
JPMorgan Chase Bank, N.A., as administrative agent and refinancing
tranche B term lender.
Preferability letter on change in accounting principle
Subsidiaries of the registrant
Consent of independent registered accounting firm
Incorporated by reference to Exhibit 10.1 to the Form 8-
K filed with the Commission on March 23, 2021
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10.2 to the Form 8-
K filed with the Commission on March 23, 2021
(Commission file number 1-3579)
Exhibit 18
Exhibit 21
Exhibit 23
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as amended.
Exhibit 31.1
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as amended.
Exhibit 31.2
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350
Exhibit 32.1
Exhibit 32.2
25702_AR2021 10-K for Annual Report.pdf 31
March 1, 2022 17:28:28
31
PART IV
Reg. S-K
exhibits
Description
Status or incorporation by reference
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.DEF XBRL Taxonomy Definition Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document
104
The cover page from the Company's Annual Report on Form 10-K for the
year ended December 31, 2021, formatted in Inline XBRL (included as
Exhibit 101).
* The Exhibits identified above with an asterisk (*) are management contracts or compensatory plans or arrangements.
The Company has outstanding certain other long-term indebtedness. Such long-term indebtedness does not exceed 10% of the total assets of the Company; therefore,
copies of instruments defining the rights of holders of such indebtedness are not included as exhibits. The Company agrees to furnish copies of such instruments to the
SEC upon request.
ITEM 16. FORM 10-K SUMMARY
None
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March 1, 2022 17:28:28
32
PART IV
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 22, 2022
PITNEY BOWES INC.
Registrant
By: /s/ Marc B. Lautenbach
Marc B. Lautenbach
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ Marc B. Lautenbach
Marc B. Lautenbach
Title
Date
President and Chief Executive Officer - Director (Principal Executive
Officer)
February 22, 2022
/s/ Ana Maria Chadwick
Ana Maria Chadwick
Executive Vice President, Chief Financial Officer (Principal
Financial Officer)
February 22, 2022
/s/ Joseph R. Catapano
Joseph R. Catapano
/s/ Michael I. Roth
Michael I. Roth
/s/ Anne M. Busquet
Anne M. Busquet
/s/ Robert M. Dutkowsky
Robert M. Dutkowsky
/s/ Anne Sutherland Fuchs
Anne Sutherland Fuchs
/s/ Mary J. Steele Guilfoile
Mary J. Steele Guilfoile
/s/ S. Douglas Hutcheson
S. Douglas Hutcheson
/s/ Linda S. Sanford
Linda S. Sanford
/s/ David L. Shedlarz
David L. Shedlarz
/s/ Sheila A. Stamps
Sheila A. Stamps
Vice President, Chief Accounting Officer (Principal Accounting
Officer)
February 22, 2022
Non-Executive Chairman - Director
February 22, 2022
Director
Director
Director
Director
Director
Director
Director
Director
February 22, 2022
February 22, 2022
February 22, 2022
February 22, 2022
February 22, 2022
February 22, 2022
February 22, 2022
February 22, 2022
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March 1, 2022 17:28:28
33
PART IV
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) .........................................................................
Consolidated Financial Statements of Pitney Bowes Inc.
Consolidated Statements of Income (Loss) for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019
Consolidated Balance Sheets at December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2021, 2020 and 2019
Page
Number
35
37
38
39
40
41
42
87
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March 1, 2022 17:28:28
34
To the Board of Directors and Stockholders of Pitney Bowes Inc.
Report of Independent Registered Public Accounting Firm
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Pitney Bowes Inc. and its subsidiaries (the “Company”) as of
December 31, 2021 and 2020, and the related consolidated statements of income (loss), comprehensive income (loss), stockholders’
equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial
statement schedule listed in the index appearing under Item 15(a)(1) (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for inventory
in 2021 and the manner in which it accounts for credit losses on financial assets in 2020.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
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35
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment – Global Ecommerce Reporting Unit
As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,135
million as of December 31, 2021, and the goodwill balance associated with the Global Ecommerce reporting unit was $395 million.
Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or sooner if circumstances indicate an
impairment may exist. The impairment test for goodwill determines the fair value of each reporting unit and compares it to the
reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit is less than its carrying value an impairment
loss is recognized for the difference, not to exceed the carrying amount of goodwill. During the fourth quarter of 2021, management
performed its annual goodwill impairment test to assess the recoverability of the carrying value of goodwill and determined that the
fair value of the Global Ecommerce reporting unit exceeded its carrying value and therefore no impairment was recorded. As disclosed
by management, the fair value of the Global Ecommerce reporting unit was estimated by management using a discounted cash flow
model. Management’s cash flow projections included judgments and assumptions relating to revenue growth rates, projected operating
income, and the discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the
Global Ecommerce reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair
value of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating
management’s significant assumptions related to revenue growth rates, certain forecasted costs included in the determination of
projected operating income and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and
knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
goodwill impairment assessment, including controls over the valuation of the Global Ecommerce reporting unit. These procedures also
included, among others (i) testing management’s process for developing the fair value estimate; (ii) evaluating the appropriateness of
the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating
the reasonableness of the significant assumptions used by management related to the revenue growth rates, certain forecasted costs
included in the determination of projected operating income, and the discount rate. Evaluating management’s assumptions related to
revenue growth rates and certain forecasted costs included in the determination of projected operating income involved evaluating
whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit,
(ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained
in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s
discounted cash flow model and the discount rate assumption.
/s/ PricewaterhouseCoopers LLP
Stamford, Connecticut
February 22, 2022
We have served as the Company’s auditor since 1934.
36
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March 1, 2022 17:28:28
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts)
Revenue:
Business services
Support services
Financing
Equipment sales
Supplies
Rentals
Total revenue
Costs and expenses:
Cost of business services
Cost of support services
Financing interest expense
Cost of equipment sales
Cost of supplies
Cost of rentals
Selling, general and administrative
Research and development
Restructuring charges and asset impairments
Goodwill impairment
Interest expense, net
Other components of net pension and postretirement cost (income)
Other expense, net
Total costs and expenses
(Loss) income from continuing operations before income taxes
(Benefit) provision for income taxes
Income (loss) from continuing operations
(Loss) income from discontinued operations, net of tax
Net (loss) income
Basic (loss) earnings per share attributable to common stockholders (1):
Continuing operations
Discontinued operations
Net (loss) income
Diluted (loss) earnings per share attributable to common stockholders (1):
Continuing operations
Discontinued operations
Net (loss) income
(1)
The sum of the earnings per share amounts may not equal the totals due to rounding.
Years Ended December 31,
2021
2020
2019
$
$
$
$
$
$
$
2,334,674
460,888
294,418
350,138
159,438
74,005
3,673,561
2,034,477
149,706
47,059
251,914
43,980
24,427
924,163
46,777
19,003
—
96,886
1,010
41,574
3,680,976
(7,415)
(10,922)
3,507
(4,858)
(1,351) $
$
0.02
(0.03)
(0.01) $
$
0.02
(0.03)
(0.01) $
$
2,191,306
473,292
341,034
314,882
159,282
74,279
3,554,075
1,904,078
149,988
48,162
235,153
41,679
25,600
963,323
38,384
20,712
198,169
105,753
(1,708)
8,151
3,737,444
(183,369)
7,122
(190,491)
10,115
(180,376) $
(1.11) $
0.06
(1.05) $
(1.11) $
0.06
(1.05) $
1,710,801
506,187
368,090
352,104
187,287
80,656
3,205,125
1,389,569
162,300
44,648
244,620
49,882
31,530
1,003,989
51,258
69,606
—
110,910
(4,225)
24,306
3,178,393
26,732
(13,127)
39,859
154,460
194,319
0.23
0.88
1.10
0.22
0.87
1.10
See Notes to Consolidated Financial Statements
37
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March 1, 2022 17:28:28
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net (loss) income
Other comprehensive income, net of tax:
Foreign currency translations, net of tax of $(767), $2,374 and $3,071, respectively
Net unrealized gain (loss) on cash flow hedges, net of tax of $1,738, $(583) and $49,
respectively
Net unrealized (loss) gain on available for sale securities, net of tax of $(2,217), $(816)
and $1,970, respectively
Adjustments to pension and postretirement plans, net of tax of $17,986, $(20,440) and
$(1,270), respectively
Amortization of pension and postretirement costs, net of tax of $12,755, $11,930 and
$9,497, respectively
Other comprehensive income, net of tax
Comprehensive income (loss)
Years Ended December 31,
2021
2020
2019
$
(1,351)
$
(180,376)
$
194,319
(34,168)
37,252
75,319
5,214
(6,651)
(1,748)
(2,447)
146
5,910
54,618
(70,623)
(845)
39,806
58,819
38,578
1,012
$
57,468
$
(179,364)
$
28,288
108,818
303,137
See Notes to Consolidated Financial Statements
38
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March 1, 2022 17:28:28
PITNEY BOWES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments (includes $2,658 and $18,974, respectively, reported at fair value)
Accounts and other receivables (net of allowance of $11,168 and $18,899 respectively)
Short-term finance receivables (net of allowance of $12,812 and $18,012, respectively)
Inventories
Current income taxes
Other current assets and prepayments
Total current assets
Property, plant and equipment, net
Rental property and equipment, net
Long-term finance receivables (net of allowance of $13,406 and $17,857, respectively)
Goodwill
Intangible assets, net
Operating lease assets
Noncurrent income taxes
Other assets (includes $318,754 and $355,799, respectively, reported at fair value)
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Customer deposits at the Bank
Current operating lease liabilities
Current portion of long-term debt
Advance billings
Current income taxes
Total current liabilities
Long-term debt
Deferred taxes on income
Tax uncertainties and other income tax liabilities
Noncurrent operating lease liabilities
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (See Note 16)
Stockholders' equity:
December 31,
2021
December 31,
2020
$
732,480
$
921,450
14,440
334,630
560,680
78,588
13,894
157,341
1,892,053
429,162
34,774
587,427
1,135,103
132,442
208,428
68,398
471,084
4,958,871
922,543
632,062
40,299
24,739
99,280
9,017
1,727,940
2,299,099
286,445
31,935
192,092
308,728
4,846,239
$
$
18,974
389,240
568,050
71,480
23,219
120,145
2,112,558
391,280
38,435
605,292
1,152,285
159,839
201,916
71,244
491,514
5,224,363
880,616
617,200
39,182
216,032
114,550
2,880
1,870,460
2,348,361
279,451
38,163
180,292
437,015
5,153,742
$
$
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost (148,606,517 and 151,362,724 shares, respectively)
Total stockholders’ equity
Total liabilities and stockholders’ equity
323,338
2,485
5,169,270
(780,312)
(4,602,149)
112,632
4,958,871
$
323,338
68,502
5,205,421
(839,131)
(4,687,509)
70,621
5,224,363
$
See Notes to Consolidated Financial Statements
39
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March 1, 2022 17:28:28
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net (loss) income
Loss (income) from discontinued operations, net of tax
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
$
(1,351)
4,858
$
(180,376)
(10,115)
$
194,319
(154,460)
Years Ended December 31,
2021
2020
2019
Depreciation and amortization
Allowance for credit losses
Stock-based compensation
Amortization of debt fees
Loss on debt refinancing
Restructuring charges and asset impairments
Restructuring payments
Pension contributions and retiree medical payments
(Gain) loss on sale of assets/businesses
Goodwill impairment
Deferred tax (benefit) provision
Changes in operating assets and liabilities, net of acquisitions/divestitures:
Accounts and other receivables
Finance receivables
Inventories
Other current assets and prepayments
Accounts payable and accrued liabilities
Current and noncurrent income taxes
Advance billings
Other, net
Net cash from operating activities: continuing operations
Net cash from operating activities: discontinued operations
Net cash from operating activities
Cash flows from investing activities:
Capital expenditures
Purchases of investment securities
Proceeds from sales/maturities of investment securities
Net investment in loan receivables
Proceeds from sale of assets/businesses, net of cash sold
Acquisitions, net of cash acquired
Other investing activities
Net cash from investing activities: continuing operations
Net cash from investing activities: discontinued operations
Net cash from investing activities
Cash flows from financing activities:
Proceeds from the issuance of debt, net of discount
Principal payments of debt
Premiums and fees to refinance debt
Dividends paid to stockholders
Customer deposits at the Bank
Common stock repurchases
Other financing activities
Net cash from financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
162,859
7,808
20,862
7,163
56,209
19,003
(21,990)
(27,534)
(11,635)
—
(19,883)
37,503
20,934
(8,008)
(1,184)
57,780
2,971
(14,029)
9,179
301,515
—
301,515
(184,042)
(74,923)
97,358
(6,288)
29,413
(14,996)
—
(153,478)
(1,773)
(155,251)
160,625
42,193
17,476
10,871
36,987
20,712
(20,014)
(31,828)
(21,969)
198,169
15,280
(47,236)
70,505
1,582
(19,581)
94,851
8,622
11,009
(17,879)
339,884
(37,912)
301,972
(104,987)
(596,841)
576,536
(4,174)
58,248
(6,608)
4,636
(73,190)
(2,502)
(75,692)
1,195,500
(1,445,734)
(50,763)
(34,800)
14,862
—
(9,436)
(330,371)
(4,863)
(188,970)
921,450
732,480
$
916,544
(1,105,650)
(32,645)
(34,291)
26,082
—
(5,411)
(235,371)
6,099
(2,992)
924,442
921,450
$
$
159,142
28,488
23,149
10,482
6,623
69,606
(27,148)
(37,747)
17,683
—
4,811
(8,027)
29,171
(5,178)
(27,096)
22,081
(40,119)
(10,361)
3,192
258,611
9,272
267,883
(137,253)
(137,194)
108,548
(15,676)
—
(22,100)
(8,905)
(212,580)
670,130
457,550
389,986
(930,189)
(4,704)
(35,361)
16,341
(105,000)
(1,372)
(670,299)
2,046
57,180
867,262
924,442
See Notes to Consolidated Financial Statements
40
25702_AR2021 10-K for Annual Report.pdf 40
March 1, 2022 17:28:29
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Preferred
stock
Preference
stock
Common
Stock
Additional
Paid-in
Capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total equity
Balance at December 31, 2018
$
1 $
396 $ 323,338 $ 121,475 $ 5,279,682 $
(948,961) $ (4,674,089) $
101,842
Cumulative effect of accounting change
Net income
Other comprehensive income
Cash dividends
Common ($0.20 per share)
Preference
Issuance of treasury stock
Conversions to common stock
Redemption of preferred/preference
stock
Stock-based compensation
Repurchase of common stock
Balance at December 31, 2019
Cumulative effect of accounting change
Net loss
Other comprehensive income
Dividends ($0.20 per share)
Issuance of treasury stock
Stock-based compensation
Balance at December 31, 2020
Net loss
Other comprehensive income
Dividends ($0.20 per share)
Issuance of treasury stock
Stock-based compensation
—
—
—
—
—
—
—
—
—
—
—
—
—
(130)
(1)
(266)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(43,062)
(2,804)
(10)
23,149
—
3,348
194,319
—
—
—
108,818
(35,353)
(8)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
41,378
2,934
—
—
3,348
194,319
108,818
(35,353)
(8)
(1,684)
—
(277)
23,149
(105,000)
(105,000)
323,338
98,748
5,441,988
(840,143)
(4,734,777)
289,154
—
—
—
—
—
—
—
—
—
—
(47,722)
17,476
(21,900)
(180,376)
—
—
—
1,012
(34,291)
—
—
—
—
—
—
—
—
—
47,268
—
323,338
68,502
5,205,421
(839,131)
(4,687,509)
—
—
—
—
—
—
—
—
(86,879)
20,862
(1,351)
—
(34,800)
—
—
—
58,819
—
—
—
—
—
—
85,360
—
(21,900)
(180,376)
1,012
(34,291)
(454)
17,476
70,621
(1,351)
58,819
(34,800)
(1,519)
20,862
Balance at December 31, 2021
$
— $
— $ 323,338 $
2,485 $ 5,169,270 $
(780,312) $ (4,602,149) $
112,632
See Notes to Consolidated Financial Statements
41
25702_AR2021 10-K for Annual Report.pdf 41
March 1, 2022 17:28:29
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements of Pitney Bowes Inc. and its wholly owned subsidiaries (we, us, our, or the
company) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).
Intercompany transactions and balances have been eliminated. Certain prior year amounts have been reclassified to conform to the
current year presentation.
Effective October 1, 2021, we elected to adopt the FIFO inventory valuation methodology where we had previously valued inventory
on a last-in, first-out (LIFO) basis. We believe that the FIFO basis provides a better matching of revenues and expenses, more closely
resembles the physical flow of inventory, provides a consistent valuation methodology throughout our locations and improves
comparability with industry peers. We retrospectively applied this change in accounting principle and recorded a cumulative effect
adjustment to increase the 2019 opening inventory balance by $4 million and retained earnings by $3 million (net of tax). Financial
statements for the years ended December 31, 2020 and 2019 and at December 31, 2020 have been recast and the impact on our
previously issued financial statements is presented in the following tables. Had we not elected to adopt the FIFO inventory valuation
methodology, 2021 cost of equipment sales would have been approximately $2 million higher and inventory would have been
approximately $2 million lower.
Consolidated Statement of Income (Loss)
Cost of equipment sales
Total costs and expenses
(Loss) income from continuing operations before income taxes
(Benefit) provision for income taxes
Income (loss) from continuing operations
Net (loss) income
Basic (loss) earnings per share - continuing operations
Basic (loss) earnings per share
Diluted (loss) earnings per share - continuing operations
Diluted (loss) earnings per share
Consolidated Statement of Income (Loss)
Cost of equipment sales
Total costs and expenses
(Loss) income from continuing operations before income taxes
(Benefit) provision for income taxes
Income (loss) from continuing operations
Net (loss) income
Basic (loss) earnings per share - continuing operations
Basic (loss) earnings per share
Diluted (loss) earnings per share - continuing operations
Diluted (loss) earnings per share
Year Ended December 31, 2020
As Previously
Reported
Adjustments
As Revised
$
236,716 $
(1,563) $
235,153
$ 3,739,007 $
(1,563) $ 3,737,444
$
$
$
$
$
$
$
$
(184,932) $
1,563 $
(183,369)
6,727 $
395 $
7,122
(191,659) $
1,168 $
(190,491)
(181,544) $
1,168 $
(180,376)
(1.12) $
(1.06) $
(1.12) $
(1.06) $
0.01 $
0.01 $
0.01 $
0.01 $
(1.11)
(1.05)
(1.11)
(1.05)
Year Ended December 31, 2019
As Previously
Reported
Adjustments
As Revised
$
244,210 $
410 $
244,620
$ 3,177,983 $
410 $ 3,178,393
$
$
$
$
$
$
$
$
27,142 $
(13,007) $
40,149 $
194,609 $
0.23 $
1.10 $
0.23 $
1.10 $
(410) $
(120) $
(290) $
(290) $
— $
— $
(0.01) $
— $
26,732
(13,127)
39,859
194,319
0.23
1.10
0.22
1.10
25702_AR2021 10-K for Annual Report.pdf 42
March 1, 2022 17:28:29
42
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Consolidated Balance Sheet
Inventories
Total current assets
Noncurrent income taxes
Total assets
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
Consolidated Statement of Cash Flows
Net (loss) income
Deferred tax (benefit) provision
(Increase) decrease in inventories
Consolidated Statement of Cash Flows
Net (loss) income
Deferred tax (benefit) provision
(Increase) decrease in inventories
Use of Estimates
December 31, 2020
As Previously
Reported
Adjustments
As Revised
$
65,845 $
$ 2,106,923 $
$
72,653 $
$ 5,220,137 $
$ 5,201,195 $
66,395 $
$
5,635 $
71,480
5,635 $ 2,112,558
(1,409) $
71,244
4,226 $ 5,224,363
4,226 $ 5,205,421
70,621
4,226 $
$ 5,220,137 $
4,226 $ 5,224,363
Year Ended December 31, 2020
As Previously
Reported
Adjustments
As Revised
$
$
$
(181,544) $
1,168 $
(180,376)
14,885 $
395 $
3,145 $
(1,563) $
15,280
1,582
Year Ended December 31, 2019
As Previously
Reported
Adjustments
As Revised
$
$
$
194,609 $
(290) $
194,319
4,931 $
(5,588) $
(120) $
4,811
410 $
(5,178)
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, expenses and accompanying disclosures, including the disclosure of contingent assets
and liabilities. These estimates and assumptions are based on management's best knowledge of current events, historical experience
and other information available when the financial statements are prepared. These estimates include, but are not limited to, goodwill
and intangible asset impairment review, deferred tax asset valuation allowance, income tax reserves, revenue recognition for multiple
element arrangements, pension and other postretirement costs, allowance for credit losses, residual values of leased assets, useful lives
of long-lived and intangible assets, restructuring costs, the allocation of purchase price to assets and liabilities acquired in business
combinations, stock-based compensation expense and loss contingencies. Actual results could differ from those estimates and
assumptions.
Cash Equivalents
Cash equivalents include interest-earning investments with maturities of three months or less at the date of purchase.
Marketable Securities
Marketable investment securities are classified as available-for-sale or hold-to-maturity. Investment securities classified as available-
for-sale are recorded at fair value with changes in fair value due to market conditions (i.e., interest rates) recorded in accumulated
other comprehensive loss (AOCL), and changes in fair value due to credit conditions recorded in earnings. Purchase premiums and
discounts are amortized using the effective interest method over the term of the security. Gains and losses on the sale of available-for-
sale securities are recorded on the trade date using the specific identification method. There were no unrealized losses due to credit
losses charged to earnings in 2021, 2020, or 2019.
Investment securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity and are
carried at amortized cost.
25702_AR2021 10-K for Annual Report.pdf 43
March 1, 2022 17:28:29
43
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Accounts and Other Receivables and Allowance for Credit Losses
Accounts receivable are generally due within 30 days after the invoice date. We provide an allowance for credit losses based on
historical loss experience, the age of the receivables, specific troubled accounts and other currently available information.
Accounts receivable are written off against the allowance after all collection efforts have been exhausted and management deems the
account to be uncollectible, or when they are 365 days past due, if sooner. We believe that our accounts receivable credit risk is low
because of the geographic and industry diversification of our clients and small account balances for most of our clients. We
continually evaluate the adequacy of the allowance for credit losses and adjust as necessary.
Finance Receivables and Allowance for Credit Losses
Finance receivables are comprised of sales-type leases, secured loans and unsecured loans. Sales-type leases and secured loans are
from financing options provided to clients for Pitney Bowes equipment or leasing of other manufacturers' equipment and are generally
due in installments over periods ranging from three to five years. Unsecured loans comprise revolving credit lines offered to our
clients for postage and supplies and working capital purposes. These revolving credit lines are generally due monthly; however, clients
may rollover outstanding balances. Interest is recognized on finance receivables using the effective interest method. Annual fees are
recognized ratably over the annual period covered and client acquisition costs are expensed as incurred.
We provide an allowance for credit losses based on historical loss experience, the nature of our portfolios, adverse situations that may
affect a client's ability to pay and current economic conditions and outlook based on reasonable and supportable forecasts. We
continually evaluate the adequacy of the allowance for credit losses and adjust as necessary.
Credit approval limits are established based on the credit quality of the client and the type of equipment financed. We cease financing
revenue recognition for lease receivables that are more than 120 days past due and for unsecured loan receivables that are more than
90 days past due. Revenue recognition is resumed when the client's payments reduce the account aging to less than 60 days past due.
Finance receivables are written off against the allowance after all collection efforts have been exhausted and management deems the
account to be uncollectible. We believe that our finance receivable credit risk is low because of the geographic and industry
diversification of our clients and small account balances for most of our clients.
Inventories
Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) basis or net realizable value.
Fixed Assets
Property, plant and equipment and rental equipment are stated at cost and depreciated principally using the straight-line method over
their estimated useful lives, which are 50 years for buildings, 10 to 20 years for building improvements, up to 3 years for internal use
software development costs, 3 to 12 years for machinery and equipment and 4 to 6 years for rental equipment. Major improvements
that add to the productive capacity or extend the life of an asset are capitalized while repairs and maintenance are charged to expense.
Leasehold improvements are amortized over the shorter of their estimated useful life or the remaining lease term. Fully depreciated
assets are retained in fixed assets and accumulated depreciation until they are removed from service.
Intangible Assets
Finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives of up to 10 years.
Deferred Costs
Certain incremental costs to obtain a contract are capitalized if we expect the benefit of those costs to be realized over a period greater
than one year. These costs primarily relate to sales commissions on multi-year equipment and Global Ecommerce contracts and are
amortized in a manner consistent with the timing of the related revenue over the contract performance period or longer, if renewals are
expected and the renewal commission is not commensurate with the initial commission. Unamortized deferred costs at December 31,
2021 and December 31, 2020, included in other assets, were $48 million and $40 million, respectively. Amortization expense for these
costs for the years ended December 31, 2021, 2020 and 2019 was $18 million, $10 million and $7 million, respectively.
Revenue Recognition
We derive revenue from multiple sources including sales, rentals, financing and services. Certain transactions are consummated at the
same time and can therefore generate revenue from multiple sources. The most common form of these transactions involves a sale or
noncancelable lease of equipment, meter services and an equipment maintenance agreement. We determine whether each product and
service within the contract should be treated as a separate performance obligation (unit of accounting) for revenue recognition
purposes. For contracts that include multiple performance obligations, the transaction price is allocated based on relative standalone
selling prices (SSP), which are a range of selling prices that we would sell a product or service to a customer on a separate basis. SSP
are established for each performance obligation at the inception of the contract and can be observable prices or estimated. The
44
25702_AR2021 10-K for Annual Report.pdf 44
March 1, 2022 17:28:29
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
allocation of the transaction price to the various performance obligations impacts the timing of revenue recognition, but does not
change the total revenue recognized. More specifically, revenue related to our offerings is recognized as follows:
Business services
Business services includes fulfillment, delivery and return services, cross-border solutions, mail processing services and shipping
subscription solutions, Revenue for fulfillment, delivery and return services, cross-border solutions and mail processing services is
recognized over time using an output method based on the number of parcels or mail pieces either processed or delivered, depending
on the service type, since that measure best depicts the value of goods and services transferred to the client over the contract period.
Revenue for shipping subscription solutions is recognized ratably over the contract period as the client obtains equal benefit from
these services through the period. We review third party relationships and record revenue on a gross basis when we act as a principal
in a transaction and on a net basis when we act as an agent between a client and vendor. In determining whether we are acting as
principal or agent, we consider several factors such as whether we are the primary obligor to the client or have control over pricing.
Support services
Support services revenue includes revenue from maintenance, professional and subscription services for our mailing equipment and
professional services for our digital delivery services. Revenue is allocated to these services using selling prices charged in standalone
replacement and renewal transactions. Revenue for maintenance and subscription services is recognized ratably over the contract
period and revenue for professional services is recognized when services are provided.
Financing
We provide financing for our products primarily through sales-type leases and revolving lines of credit for the purchase of postage and
supplies. Financing revenue also includes finance income, late fees and investment income, gains and losses at the Bank. We record
financing income over the lease term using the effective interest method. Financing revenue also includes amounts related to sales-
type leases that customers have extended or renewed for an additional term. Revenue for these contracts is recognized over the term of
the modified lease using the effective interest method. We believe that our sales-type lease portfolio contains only normal collection
risk.
Equipment residual values are determined at the inception of the lease using management's best estimate of fair value at the end of the
lease term. Fair value estimates are determined based on historical renewal experience, used equipment markets, competition and
technological changes. We evaluate residual values on an annual basis or sooner if circumstances warrant. Declines in estimated
residual values considered "other-than-temporary" are recognized immediately. Increases in estimated future residual values are not
recognized until the equipment is remarketed.
Equipment sales
We sell and lease equipment directly to customers and to distributors (re-sellers) throughout the world. The amount of revenue
allocated to the equipment is based on a range of observable selling prices in standalone transactions. Revenue from the sale of
equipment under sales-type leases is recognized as control of the equipment transfers to the customer, which is upon shipment for self-
installed products and upon installation or customer acceptance for other products. Revenue from the direct sale of equipment is
recognized as control of the equipment transfers to the customer, which is upon delivery for self-installed products and upon
installation or customer acceptance for other products. We do not typically offer any rights of return.
Supplies
Supplies revenue includes revenue from supplies for our mailing equipment and is recognized upon delivery.
Rentals
Rentals revenue includes revenue from mailing equipment that does not meet the criteria to be accounted for as a sales-type lease. We
may invoice in advance for rentals according to the terms of the agreement. Advanced billings are initially deferred and recognized on
a straight-line basis over the billing period. Revenue generated from financing clients for the continued use of equipment subsequent
to the expiration of the original lease is recognized as rentals revenue.
Shipping and Handling
Shipping and handling costs are recognized as costs of revenue as incurred.
Research and Development Costs
Research and development costs are charged to expense as incurred. Costs include research, development and engineering activities
relating to the development of new products and solutions and enhancements of existing products and solutions. Costs primarily
25702_AR2021 10-K for Annual Report.pdf 45
March 1, 2022 17:28:29
45
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
include salaries, benefits and other employee-related expenses, materials, contract services, information systems and facilities and
equipment costs.
Restructuring Charges
Costs associated with restructuring actions primarily include employee severance and related separation costs and contract termination
costs, primarily real estate leases. Employee severance and related costs are recognized when a liability is incurred, which is generally
upon communication to the affected employees, and the amount to be paid is both probable and reasonably estimable. Severance
accruals are based on company policy, historical experience and negotiated settlements. Contract termination costs for real estate
leases are recognized as incurred.
Stock-based Compensation
We primarily issue restricted stock units and non-qualified stock options under our stock award plans. Compensation expense for
stock-based awards is measured based on the estimated fair value of the awards expected to vest and recognized ratably over the
requisite service period. The fair value of restricted stock units is estimated based on the fair value of our common stock on the grant
date, less the present value of expected dividends. The fair value of non-qualified stock options is determined using the Black-Scholes
valuation model. We believe that these valuation techniques and the underlying assumptions are appropriate in estimating the fair
value of stock awards. Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to vest
and are based on our historical forfeiture rates. Stock-based compensation expense is recognized primarily in selling, general and
administrative expense.
Retirement Plans
Net periodic benefit cost includes current service cost, interest cost, expected return on plan assets and the amortization of actuarial
gains and losses. Actuarial gains and losses arise from actual results that differ from previous assumptions and changes in
assumptions. The expected return on plan assets is based on a market-related valuation of plan assets where differences between the
actual and expected return on plan assets are recognized over a five-year period. Actuarial gains and losses are recognized in other
comprehensive loss, net of tax, and amortized to benefit cost primarily over the life expectancy of plan participants. The funded status
of pension and other postretirement benefit plans is recognized in the consolidated balance sheets.
Impairment Review
Long-lived assets and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be fully recoverable. The estimated undiscounted future cash flows expected to result from the use
and eventual disposition of the asset is compared to the asset's carrying value. The fair value of the asset is determined using
probability weighted expected cash flow estimates, derived from our long-term business plans and historical experience, quoted
market prices when available and appraisals, as appropriate.
Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or sooner if circumstances indicate an
impairment may exist. The impairment test for goodwill determines the fair value of each reporting unit and compares it to the
reporting unit's carrying value, including goodwill. If the fair value of a reporting unit exceeds the carrying value of the net assets
assigned to that reporting unit, goodwill is not impaired and no further testing is required. If the carrying value of the net assets
assigned to the reporting unit exceeds the fair value of the reporting unit, the goodwill impairment loss is calculated as the difference
between these amounts, limited to the amount of goodwill allocated to the reporting unit.
During the fourth quarter of 2021, we performed our annual goodwill impairment test to assess the recoverability of the carrying value
of goodwill and determined that the fair value of each reporting unit exceeded its carrying value and no impairment was recorded.
Derivative Instruments
In the normal course of business, we are exposed to the impact of changes in foreign currency exchange rates and interest rates. We
limit these risks by following established risk management policies and procedures, including the use of derivatives. We use derivative
instruments to limit the effects of currency exchange rate fluctuations on financial results and manage the related cost of debt. We do
not use derivatives for trading or speculative purposes.
Derivative instruments are measured at fair value and reported as assets and liabilities on the consolidated balance sheets, as
applicable. The accounting for changes in fair value depends on the intended use of the derivative, the resulting designation and the
effectiveness of the instrument in offsetting the risk exposure it is designed to hedge. To qualify as a hedge, a derivative must be
highly effective in offsetting the risk designated for hedging purposes. The hedge relationship must be formally documented at
inception, detailing the particular risk management objective and strategy for the hedge. The effectiveness of the hedge relationship is
evaluated on a retrospective and prospective basis.
25702_AR2021 10-K for Annual Report.pdf 46
March 1, 2022 17:28:29
46
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
The use of derivative instruments exposes us to counterparty credit risk. To mitigate such risks, we only enter into agreements with
financial institutions that meet stringent credit requirements. We regularly review our credit exposure and the creditworthiness of our
counterparties. We have not seen a material change in the creditworthiness of our derivative counterparties.
Income Taxes
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the carrying
amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the
enactment date of such change. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be
realized. In estimating the necessity and amount of a valuation allowance, we consider all available evidence for each jurisdiction,
including historical operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. We
adjust the valuation allowance through income tax expense when new information becomes available that would alter our
determination of the amount of deferred tax assets that will ultimately be realized.
Earnings per Share
Basic earnings per share is computed based on the weighted-average number of common shares outstanding during the year. Diluted
earnings per share is computed based on the weighted-average number of common shares outstanding during the year plus the dilutive
effect of common stock equivalents.
Translation of Non-U.S. Currency Amounts
In general, the functional currency of our foreign operations is the local currency. Assets and liabilities of subsidiaries operating
outside the U.S. are translated at rates in effect at the end of the period and revenue and expenses are translated at average monthly
rates during the period. Net deferred translation gains and losses are included as a component of accumulated other comprehensive
loss.
Loss Contingencies
In the ordinary course of business, we are routinely defendants in, or party to, a number of pending and threatened legal actions. On a
quarterly basis, we review the status of each significant matter and assess the potential financial exposure. If the potential loss from
any claim or legal action is considered probable and can be reasonably estimated, we establish a liability for the estimated loss. The
assessment of the ultimate outcome of each claim or legal action and the determination of the potential financial exposure requires
significant judgment. Estimates of potential liabilities for claims or legal actions are based only on information that is available at that
time. As additional information becomes available, we may revise our estimates, and these revisions could have a material impact on
our results of operations and financial position. Legal fees are expensed as incurred.
New Accounting Pronouncements
New Accounting Pronouncements - Standards Adopted in 2021
In January 2021, we adopted ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for
income taxes by removing certain exceptions to the general principles and also clarifies and amends existing guidance. The adoption
of this standard did not have a material impact on our consolidated financial statements.
In December 2021, we adopted ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers. The ASU requires that an entity (the acquirer) recognize and measure contract assets and
contract liabilities acquired in a business combination in accordance with ASC 606. The adoption of this standard did not have a
material impact on our consolidated financial statements.
New Accounting Pronouncements - Standards Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting. The transition to new reference interest rates will require certain contracts to be modified and the
ASU is intended to provide temporary optional expedients and exceptions to U.S. GAAP guidance on contract modifications and
hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered
Rate (LIBOR) and other interbank offered rates to alternative reference rates. The accommodations provided by the ASU are effective
through December 31, 2022 and may be applied at the beginning of any interim period within that time frame.
We have matched LIBOR-based debt with LIBOR based interest rate swaps and have elected to apply the practical expedient related
to probability and the assessment of the effectiveness for future LIBOR-indexed cash flows, which assumes that the debt instrument
will use the same index rate as its corresponding interest rate swap once a new reference rate is established to replace LIBOR. We may
apply other expedients as additional reference rate changes occur. We continue to assess the impact of this standard on our
consolidated financial statements.
47
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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
2. Revenue
Disaggregated Revenue
The following tables disaggregate our revenue by source and timing of recognition:
Year Ended December 31, 2021
Global
Ecommerce
Presort
Services
SendTech
Solutions
Revenue from
products and
services
Revenue from
leasing
transactions
and financing
Total
consolidated
revenue
Revenue from products and services
Business services
Support services
Financing
Equipment sales
Supplies
Rentals
Subtotal
Revenue from leasing transactions and financing
Financing
Equipment sales
Rentals
Total revenue
Timing of revenue recognition from products and services
Products/services transferred at a point in time
Products/services transferred over time
Total
Revenue from products and services
Business services
Support services
Financing
Equipment sales
Supplies
Rentals
Subtotal
Revenue from leasing transactions and financing
Financing
Equipment sales
Rentals
Total revenue
$ 1,702,580 $ 573,480 $ 58,614 $ 2,334,674 $
460,888
— $ 2,334,674
460,888
—
294,418
— 294,418
350,138
91,015 259,123
159,438
—
159,438
74,005
74,005
—
1,702,580 573,480 769,955 3,046,015 $ 627,546 $ 3,673,561
— 460,888
—
—
—
91,015
— 159,438
—
—
—
—
—
—
—
—
—
—
294,418
— 294,418
259,123
— 259,123
74,005
74,005
—
$ 1,702,580 $ 573,480 $ 1,397,501 $ 3,673,561
— $
$
— $ 318,077 $ 318,077
1,702,580 573,480 451,878 2,727,938
$ 1,702,580 $ 573,480 $ 769,955 $ 3,046,015
Year Ended December 31, 2020
Global
Ecommerce
Presort
Services
SendTech
Solutions
Revenue from
products and
services
Revenue from
leasing
transactions
and financing
Total
consolidated
revenue
$ 1,618,897 $ 521,212 $ 51,197 $ 2,191,306 $
— 473,292 473,292
—
—
—
74,660
— 159,282 159,282
—
—
—
— $ 2,191,306
— 473,292
— 341,034 341,034
74,660 240,222 314,882
— 159,282
74,279
1,618,897 521,212 758,431 2,898,540 $ 655,535 $ 3,554,075
—
—
—
—
—
74,279
—
—
—
— 341,034 341,034
— 240,222 240,222
74,279
—
$ 1,618,897 $ 521,212 $ 1,413,966 $ 3,554,075
74,279
Timing of revenue recognition from products and services
Products/services transferred at a point in time
Products/services transferred over time
Total
— $
— $ 293,648 $ 293,648
$
1,618,897 521,212 464,783 2,604,892
$ 1,618,897 $ 521,212 $ 758,431 $ 2,898,540
48
25702_AR2021 10-K for Annual Report.pdf 48
March 1, 2022 17:28:29
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Year Ended December 31, 2019
Global
Ecommerce
Presort
Services
SendTech
Solutions
Revenue from
products and
services
Revenue from
leasing
transactions
and financing
Total
consolidated
revenue
Revenue from products and services
Business services
Support services
Financing
Equipment sales
Supplies
Rentals
Subtotal
Revenue from leasing transactions and financing
Financing
Equipment sales
Rentals
Total revenue
$ 1,151,510 $ 529,588 $ 29,703 $ 1,710,801 $
— 506,187 506,187
—
—
—
80,562
— 187,287 187,287
—
—
—
— $ 1,710,801
— 506,187
— 368,090 368,090
80,562 271,542 352,104
— 187,287
80,656
1,151,510 529,588 803,739 2,484,837 $ 720,288 $ 3,205,125
—
—
—
—
—
80,656
—
—
—
— 368,090 368,090
— 271,542 271,542
80,656
—
$ 1,151,510 $ 529,588 $ 1,524,027 $ 3,205,125
80,656
Timing of revenue recognition from products and services
Products/services transferred at a point in time
$
— $
— $ 334,046 $ 334,046
Products/services transferred over time
Total
1,151,510 529,588 469,693 2,150,791
$ 1,151,510 $ 529,588 $ 803,739 $ 2,484,837
Our performance obligations for revenue from products and services are as follows:
Business services includes fulfillment, delivery and return services, cross-border solutions, mail processing services and shipping
subscription solutions. Revenue for fulfillment, delivery and return services, cross-border solutions and mail processing services is
recognized over time using an output method based on the number of parcels or mail pieces either processed or delivered, depending
on the service type, since that measure best depicts the value of goods and services transferred to the client over the contract period.
Contract terms for these services range from one to five years followed by annual renewal periods. Revenue for shipping subscription
solutions is recognized ratably over the contract period as the client obtains equal benefit from these services through the period.
Support services includes providing maintenance, professional and subscription services for our equipment and digital mailing and
shipping technology solutions. Contract terms range from one to five years, depending on the term of the lease contract for the related
equipment. Revenue for maintenance and subscription services is recognized ratably over the contract period and revenue for
professional services is recognized when services are provided.
Equipment sales generally includes the sale of mailing and shipping equipment, excluding sales-type leases. We recognize revenue
upon delivery for self-install equipment and upon acceptance or installation for other equipment. We provide a warranty that the
equipment is free of defects and meets stated specifications. The warranty is not considered a separate performance obligation.
Supplies revenue includes revenue from supplies for our mailing equipment and is recognized upon delivery.
Revenue from leasing transactions and financing includes revenue from sales-type and operating leases, finance income, late fees and
investment income, gains and losses at the Bank.
Advance Billings from Contracts with Customers
Advance billings, current
Advance billings, noncurrent
Balance Sheet Location
Advance billings
Other noncurrent liabilities
December 31,
2021
December 31,
2020
Increase/
(decrease)
$
$
92,926 $ 106,498 $
1,277 $
1,109 $
(13,572)
(168)
49
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March 1, 2022 17:28:29
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Advance billings are recorded when cash payments are due in advance of our performance. Revenue is recognized ratably over the
contract term. Items in advance billings primarily relate to support services on mailing equipment. Revenue recognized during the
twelve months ended December 31, 2021 includes $106 million of advance billings at the beginning of the period. Advance billings,
current at December 31, 2021 and 2020 also includes $6 million and $8 million, respectively, from leasing transactions.
Future Performance Obligations
Future performance obligations include revenue streams bundled with our leasing contracts, primarily maintenance and subscription
services. The transaction prices allocated to future performance obligations will be recognized as follows:
SendTech Solutions
$
276,314 $
196,265 $
213,395 $
685,974
2022
2023
2024-2026
Total
The table above does not include revenue for performance obligations under contracts with terms less than 12 months or revenue for
performance obligations where revenue is recognized based on the amount billable to the customer.
3. Segment Information
Our reportable segments are Global Ecommerce, Presort Services and SendTech Solutions. The principal products and services of
each reportable segment are as follows:
Global Ecommerce: Includes the revenue and related expenses from domestic parcel services, cross-border solutions and digital
delivery services.
Presort Services: Includes the revenue and related expenses from sortation services to qualify large volumes of First Class Mail,
Marketing Mail, Marketing Mail Flats and Bound Printed Matter for postal worksharing discounts.
SendTech Solutions: Includes the revenue and related expenses from physical and digital mailing and shipping technology solutions,
financing, services, supplies and other applications to help simplify and save on the sending, tracking and receiving of letters, parcels
and flats.
Management measures segment profitability and performance using segment earnings before interest and taxes (EBIT). Segment EBIT
is calculated by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes
interest, taxes, general corporate expenses, restructuring charges, asset and goodwill impairment charges and other items not allocated
to a particular business segment. Costs related to shared assets are allocated to the relevant segments. Management believes that it
provides investors a useful measure of operating performance and underlying trends of the business. Segment EBIT may not be
indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of
operations. The following tables provide information about our reportable segments and reconciliation of segment EBIT to net (loss)
income. As a result of change from LIFO to FIFO inventory valuation discussed in Note 1, SendTech Solutions EBIT for 2020 and
2019 has also been recast.
Global Ecommerce
Presort Services
SendTech Solutions
Total revenue
Geographic data:
United States
Outside United States
Total revenue
Revenue
Years Ended December 31,
2021
2020
2019
$ 1,702,580
$ 1,618,897
$ 1,151,510
573,480
1,397,501
521,212
1,413,966
529,588
1,524,027
$ 3,673,561
$ 3,554,075
$ 3,205,125
$ 3,114,905
$ 3,112,285
$ 2,745,928
558,656
441,790
459,197
$ 3,673,561
$ 3,554,075
$ 3,205,125
25702_AR2021 10-K for Annual Report.pdf 50
March 1, 2022 17:28:29
50
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Global Ecommerce
Presort Services
SendTech Solutions
Total segment EBIT
Reconciling items:
Interest, net
Unallocated corporate expenses
Restructuring charges and asset impairments
Goodwill impairment
Loss on debt refinancing
Gain (loss) on sale of assets/businesses
Transaction costs
Benefit (provision) for income taxes
Income (loss) from continuing operations
(Loss) income from discontinued operations, net of tax
Net (loss) income
Global Ecommerce
Presort Services
SendTech Solutions
Total for reportable segments
Corporate
Total depreciation and amortization
Global Ecommerce
Presort Services
SendTech Solutions
Total for reportable segments
Corporate
Total capital expenditures
EBIT
Years Ended December 31,
2021
2020
2019
$
(98,673) $
79,721
429,415
(82,894) $
55,799
442,648
410,463
415,553
(70,146)
70,693
489,912
490,459
(143,945)
(207,774)
(19,003)
—
(56,209)
11,635
(2,582)
10,922
3,507
(4,858)
(153,915)
(200,406)
(20,712)
(198,169)
(36,987)
11,908
(641)
(7,122)
(190,491)
10,115
(155,558)
(211,529)
(69,606)
—
(6,623)
(17,683)
(2,728)
13,127
39,859
154,460
$
(1,351) $
(180,376) $
194,319
Depreciation and amortization
Years Ended December 31,
2021
2020
2019
$
79,128
$
69,676
$
27,243
29,950
136,321
26,538
31,769
34,316
135,761
24,864
68,385
29,440
39,758
137,583
21,559
$
162,859
$
160,625
$
159,142
Capital expenditures
Years Ended December 31,
2021
2020
2019
$
$
89,488
36,628
26,028
152,144
31,898
184,042
$
$
$
46,427
15,795
28,823
91,045
13,942
104,987
$
53,374
27,394
32,276
113,044
24,209
137,253
25702_AR2021 10-K for Annual Report.pdf 51
March 1, 2022 17:28:29
51
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Global Ecommerce
Presort Services
SendTech Solutions
Total for reportable segments
Cash and cash equivalents
Short-term investments
Assets of discontinued operations
Long-term investments
Other corporate assets
Consolidated assets
Identifiable long-lived assets:
United States
Outside United States
Total
Assets
December 31,
$
2020
994,554
523,690
2,071,028
3,589,272
921,450
18,974
—
364,212
330,455
$ 5,224,363
2021
$ 1,032,434
479,392
2,013,361
3,525,187
732,480
14,440
—
333,052
353,712
$ 4,958,871
2019
$ 1,102,313
524,817
2,156,806
3,783,936
924,442
115,879
17,229
238,882
389,590
$ 5,469,958
$
$
658,070
14,294
672,364
$
$
613,990
17,641
631,631
$
$
596,694
21,460
618,154
In 2021, $35 million of assets were transferred from Presort Services to Global Ecommerce.
4. Discontinued Operations
Discontinued operations includes net working capital and other adjustments relating to the sale of Software Solutions business in 2019
(except for the software business in Australia, which closed in January 2020), and the Production Mail business in 2018. Discontinued
operations for the year ended December 31, 2021 also includes a tax charge related to the sale of the Production Mail business.
Discontinued operations for the year ended December 31, 2019 also includes the operating results of the Software Solutions business.
Selected financial information of discontinued operations is as follows:
Loss on sale
Tax provision
$
(1,827) $
— $
Loss from discontinued operations, net of tax
$
(1,827)
3,031
(4,858)
Year Ended December 31, 2021
Software Solutions
Production Mail
Total
Gain (loss) on sale
Tax benefit
Income from discontinued operations, net of tax
Year Ended December 31, 2020
Software Solutions
Production Mail
Total
$
7,972 $
(167) $
$
7,805
(2,310)
10,115
25702_AR2021 10-K for Annual Report.pdf 52
March 1, 2022 17:28:29
52
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Revenue
Earnings (loss) from discontinued operations
Gain (loss) on sale
Income (loss) from discontinued operations before taxes
Tax provision
Income from discontinued operations, net of tax
5. Earnings per Share (EPS)
Year Ended December 31, 2019
Software Solutions
Production Mail
Total
$
$
$
272,565 $
— $
272,565
22,160 $
195,957
218,117 $
(663) $
(14,644)
(15,307)
$
21,497
181,313
202,810
48,350
154,460
The calculations of basic and diluted earnings per share are presented below. The sum of earnings per share amounts may not equal
the totals due to rounding.
Numerator:
Income (loss) from continuing operations
(Loss) income from discontinued operations, net of tax
Net (loss) income (numerator for diluted EPS)
Less: Preference stock dividend
(Loss) income attributable to common stockholders (numerator for basic EPS)
Denominator:
Weighted-average shares used in basic EPS
Dilutive effect of common stock equivalents (1)
Weighted-average shares used in diluted EPS
Basic (loss) earnings per share:
Continuing operations
Discontinued operations
Net (loss) income
Diluted (loss) earnings per share:
Continuing operations
Discontinued operations
Net (loss) income
Years Ended December 31,
2021
2020
2019
$
3,507 $
(190,491) $
(4,858)
(1,351)
—
10,115
(180,376)
—
39,859
154,460
194,319
8
$
(1,351) $
(180,376) $
194,311
173,914
5,191
179,105
171,519
—
171,519
176,251
1,198
177,449
$
$
$
$
0.02 $
(0.03)
(0.01) $
0.02 $
(0.03)
(0.01) $
(1.11) $
0.06
(1.05) $
(1.11) $
0.06
(1.05) $
0.23
0.88
1.10
0.22
0.87
1.10
Common stock equivalents excluded from calculation of diluted earnings per
share because their impact would be anti-dilutive:
6,514
11,626
15,751
(1) Due to the loss from continuing operations for the year ended December 31, 2020, common stock equivalents of 2,483 were
excluded from the calculation of diluted earnings per share as the impact would have been anti-dilutive.
25702_AR2021 10-K for Annual Report.pdf 53
March 1, 2022 17:28:29
53
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
6. Inventories
Inventories consisted of the following:
Raw materials
Supplies and service parts
Finished products
Total inventory, net
7. Finance Assets and Lessor Operating Leases
Finance Assets
December 31,
2021
2020
$
$
22,352
26,076
30,160
78,588
$
$
16,570
24,061
30,849
71,480
All finance receivables are in our SendTech segment. We segregate our finance receivables into a North America portfolio and
International portfolio. Finance receivables consisted of the following:
Sales-type lease receivables
Gross finance receivables
Unguaranteed residual values
Unearned income
Allowance for credit losses
December 31, 2021
December 31, 2020
North
America
International
Total
North
America
International
Total
$ 958,440 $
187,831 $ 1,146,271 $ 994,985 $
211,944 $ 1,206,929
37,896
10,717
48,613
36,405
12,140
48,545
(246,381)
(56,643)
(303,024)
(275,359)
(61,686)
(337,045)
(19,546)
(3,246)
(22,792)
(22,917)
(6,006)
(28,923)
Net investment in sales-type lease receivables
730,409
138,659
869,068
733,114
156,392
889,506
Loan receivables
Loan receivables
262,310
20,155
282,465
268,690
22,092
290,782
Allowance for credit losses
(3,259)
(167)
(3,426)
(6,484)
(462)
(6,946)
Net investment in loan receivables
259,051
19,988
279,039
262,206
21,630
283,836
Net investment in finance receivables
$ 989,460 $
158,647 $ 1,148,107 $ 995,320 $
178,022 $ 1,173,342
Maturities of finance receivables at December 31, 2021 were as follows:
2022
2023
2024
2025
2026
Thereafter
Total
Sales-type Lease Receivables
Loan Receivables
North America
International
Total
North America
International
Total
$
379,948
276,501
177,005
93,071
31,092
823
$
75,525
53,695
32,799
17,958
6,508
1,346
$ 455,473
330,196
$
226,322
15,383
$
20,155
—
$ 246,477
15,383
209,804
111,029
37,600
2,169
12,278
6,880
1,447
—
—
—
—
—
12,278
6,880
1,447
—
$
958,440
$ 187,831
$ 1,146,271
$
262,310
$
20,155
$ 282,465
25702_AR2021 10-K for Annual Report.pdf 54
March 1, 2022 17:28:30
54
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Allowance for Credit Losses
Activity in the allowance for credit losses on finance receivables was as follows:
Sales-type Lease Receivables
Loan Receivables
North
America
International
North
America
International
Total
$
Balance at December 31, 2018
Amounts charged to expense
Write-offs
Recoveries
Other
Balance at December 31, 2019
Cumulative effect of accounting change
Amounts charged to expense
Write-offs
Recoveries
Other
Balance at December 31, 2020
Amounts charged to expense
Write-offs
Recoveries
Other
$
10,253
5,672
(6,971)
1,717
249
10,920
9,271
10,789
(7,609)
2,070
(2,524)
22,917
648
(7,120)
3,097
4
$
2,355
1,157
(1,505)
181
(103)
2,085
1,750
2,902
(1,068)
194
143
6,006
(1,788)
(846)
173
(299)
$
6,777
4,746
(8,971)
3,519
(165)
5,906
(1,116)
8,158
(9,955)
3,474
17
6,484
(426)
(6,045)
3,245
1
$
837
569
(849)
9
174
740
(402)
555
(551)
4
116
462
19
(302)
3
(15)
20,222
12,144
(18,296)
5,426
155
19,651
9,503
22,404
(19,183)
5,742
(2,248)
35,869
(1,547)
(14,313)
6,518
(309)
Balance at December 31, 2021
$
19,546
$
3,246
$
3,259
$
167
$
26,218
Aging of Receivables
The aging of gross finance receivables was as follows:
Amounts 0 - 90 days
Amounts > 90 days
Total
Amounts > 90 days
Still accruing interest
Not accruing interest
Total
Amounts 0 - 90 days
Amounts > 90 days
Total
Amounts > 90 days
Still accruing interest
Not accruing interest
Total
December 31, 2021
Sales-type Lease Receivables
Loan Receivables
North
America
International
North
America
International
Total
950,138
$
185,057
$
258,514
$
20,018
$
1,413,727
8,302
958,440
$
2,774
187,831
$
3,796
262,310
$
137
20,155
15,009
1,428,736
$
4,964
$
682
$
—
$
—
$
3,338
8,302
$
2,092
2,774
$
3,796
3,796
$
137
137
$
5,646
9,363
15,009
December 31, 2020
Sales-type Lease Receivables
Loan Receivables
North
America
International
North
America
International
Total
972,266
$
208,968
$
264,484
$
21,932
$
1,467,650
22,719
994,985
5,128
17,591
$
$
2,976
211,944
463
2,513
$
$
4,206
268,690
1,797
2,409
$
$
22,719
$
2,976
$
4,206
$
160
22,092
59
101
160
$
$
$
30,061
1,497,711
7,447
22,614
30,061
$
$
$
$
$
$
$
$
55
25702_AR2021 10-K for Annual Report.pdf 55
March 1, 2022 17:28:30
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Credit Quality
The extension of credit and management of credit lines to new and existing clients uses a combination of a client's credit score, where
available, a detailed manual review of their financial condition and payment history or an automated process. Once credit is granted,
the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up
should an account become delinquent. We have robust automated collections and extensive portfolio management processes to ensure
that our global strategy is executed, collection resources are allocated and enhanced tools and processes are implemented as needed.
Over 85% of our finance receivables are within our North American portfolio. We use a third party to score the majority of this
portfolio on a quarterly basis using a proprietary commercial credit score. The relative scores are determined based on a number of
factors, including financial information, payment history, company type and ownership structure. We stratify the third party's credit
scores of our clients into low, medium and high-risk accounts. Due to timing and other issues, our entire portfolio may not be scored at
period end. We report these amounts as "Not Scored"; however, absence of a score is not indicative of the credit quality of the
account. The third-party credit score is used to predict the payment behaviors of our clients and the probability that an account will
become greater than 90 days past due during the subsequent 12-month period.
•
• Medium risk accounts are companies with average to good credit scores and a predicted delinquency rate between 5% and 10%.
•
High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent. The predicted
delinquency rate would be greater than 10%.
Low risk accounts are companies with very good credit scores and a predicted delinquency rate of less than 5%.
We do not use a third party to score our International portfolio because the cost to do so is prohibitive as there is no single credit score
model that covers all countries. Accordingly, the entire International portfolio is reported in the Not Scored category. This portfolio
comprises approximately 15% of our total finance receivables. Most of our International credit applications are small dollar
applications (i.e. below $50 thousand) and are subjected to an automated review process. Larger credit applications are manually
reviewed, which includes obtaining client financial information, credit reports and other available information.
The table below shows the gross sales-type lease receivable and loan receivable balances by relative risk class and year of origination
based on the relative scores of the accounts within each class as of December 31, 2021 and 2020.
Sales Type Lease Receivables
2021
2020
2019
2018
2017
Prior
Loan
Receivables
Total
Low
Medium
High
Not Scored
$ 274,191
$ 195,421
$ 162,479
$ 95,661
$ 33,698
$ 14,862
$ 192,161
$ 968,473
43,403
5,474
45,644
34,955
5,017
54,097
31,038
4,044
47,973
17,895
2,708
33,998
6,981
849
19,161
3,619
889
12,214
55,708
4,822
29,774
193,599
23,803
242,861
Total
$ 368,712
$ 289,490
$ 245,534
$ 150,262
$ 60,689
$ 31,584
$ 282,465
$ 1,428,736
Sales Type Lease Receivables
Low
Medium
High
Not Scored
2020
2019
2018
2017
2016
Prior
$ 256,573
50,785
$ 228,344
49,946
$ 165,244
37,168
$ 87,346
21,388
$ 30,518
6,470
$ 12,249
2,375
6,182
80,854
5,396
77,362
3,782
48,704
1,974
24,291
1,051
7,813
143
971
Loan
Receivables
$ 192,971
61,625
4,518
31,668
Total
$ 973,245
229,757
23,046
271,663
Total
$ 394,394
$ 361,048
$ 254,898
$ 134,999
$ 45,852
$ 15,738
$ 290,782
$ 1,497,711
25702_AR2021 10-K for Annual Report.pdf 56
March 1, 2022 17:28:30
56
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Lease Income
Lease income from sales-type leases, excluding variable lease payments, was as follows:
Profit recognized at commencement
Interest income
Total lease income from sales-type leases
Lessor Operating Leases
Years Ended December 31,
2021
2020
2019
$
$
127,469
186,532
314,001
$
$
117,359
206,517
323,876
$
$
146,923
229,719
376,642
We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as
follows:
2022
2023
2024
2025
2026
Thereafter
Total
8. Fixed Assets
Fixed assets consisted of the following:
Land
Machinery and equipment
Capitalized software
Buildings and improvements
Accumulated depreciation
Property, plant and equipment, net
Rental property and equipment
Accumulated depreciation
Rental property and equipment, net
$
22,782
13,607
16,444
4,185
902
59
$
57,979
December 31,
2021
2020
$
—
$
9,333
707,843
488,837
126,456
617,748
443,400
203,788
1,323,136
1,274,269
(893,974)
(882,989)
429,162
$
391,280
125,967
$
145,954
(91,193)
(107,519)
34,774
$
38,435
$
$
$
Depreciation expense was $132 million, $127 million and $123 million for the years ended December 31, 2021, 2020 and 2019,
respectively.
In November 2021, we entered into an agreement to sell our Shelton, Connecticut facility and simultaneously entered into a ten year
lease agreement. This transaction did not close as of December 31, 2021, and accordingly, the net book value for the building and land
of $36 million was classified as assets held-for-sale in other current assets and prepayments in the December 31, 2021 Consolidated
Balance Sheet. See also Note 21 Subsequent Events.
25702_AR2021 10-K for Annual Report.pdf 57
March 1, 2022 17:28:30
57
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
9. Intangible Assets and Goodwill
Intangible Assets
Intangible assets consisted of the following:
December 31, 2021
December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Customer relationships
$
268,187 $
(141,492) $
126,695 $
268,199 $
(115,010) $
153,189
Software & technology
Total intangible assets, net
21,981
290,168 $
(16,234)
(157,726) $
5,747
132,442 $
19,000
287,199 $
(12,350)
(127,360) $
6,650
159,839
$
Amortization expense was $30 million, $33 million and $36 million for the years ended December 31, 2021, 2020 and 2019,
respectively.
Future amortization expense for intangible assets at December 31, 2021 is as follows:
2022
2023
2024
2025
2026
Thereafter
Total
$
29,812
26,962
26,962
20,302
14,148
14,256
$
132,442
Actual amortization expense may differ from the amounts above due to, among other things, fluctuations in foreign currency exchange
rates, acquisitions, divestitures and impairment charges.
Goodwill
Changes in the carrying amount of goodwill by reporting segment are shown in the tables below.
Global Ecommerce
Presort Services
SendTech Solutions
Total goodwill
Global Ecommerce
Presort Services
SendTech Solutions
Total goodwill
Goodwill
before
accumulated
impairment
Accumulated
impairment
December 31,
2020
Acquisitions/
dispositions
FX Impact
$
609,431
$
(198,169) $
411,262
$
(16,200) $
220,992
520,031
—
—
220,992
520,031
—
13,804
(14,786)
—
—
December 31,
2021
$
395,062
220,992
519,049
$ 1,350,454
$
(198,169) $ 1,152,285
$
(2,396) $
(14,786) $ 1,135,103
December 31,
2019
Acquisitions
Impairment
FX Impact
December 31,
2020
$
609,431
$
—
$ (198,169) $
—
$
411,262
212,529
502,219
8,463
—
—
—
—
17,812
220,992
520,031
$ 1,324,179
$
8,463
$ (198,169) $
17,812
$ 1,152,285
During the second quarter of 2021, we sold a U.K. based software consultancy business ("Tacit") acquired as part of our 2017
acquisition of Newgistics. We received net proceeds of $28 million and recognized a pre-tax gain of $10 million (after-tax gain of
$4 million), which included a goodwill allocation of $16 million attributable to Tacit. In the fourth quarter of 2021, we acquired
CrescoData for $15 million in cash plus potential additional payments of up to $7 million based on the achievement of revenue targets
during 2022-2024. CrescoData is a Singapore based, Platform-as-a-Service business that enables mapping and automating of product,
stock and order data between platforms and is included in our SendTech Solutions segment.
58
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March 1, 2022 17:28:30
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
10. Fair Value Measurements and Derivative Instruments
We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is a market-based measure considered
from the perspective of a market participant rather than an entity-specific measure. An entity is required to classify certain assets and
liabilities measured at fair value based on the following fair value hierarchy that prioritizes the inputs used to measure fair value:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities
in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity, may be derived from internally developed
methodologies based on management's best estimate of fair value and that are significant to the fair value of the asset or
liability.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect
its placement within the fair value hierarchy. The following tables show, by level within the fair value hierarchy, our financial assets
and liabilities that are accounted for at fair value on a recurring basis.
Assets:
Investment securities
Money market funds
Equity securities
Commingled fixed income securities
Government and related securities
Corporate debt securities
Mortgage-backed / asset-backed securities
Derivatives
Interest rate swap
Foreign exchange contracts
Total assets
Liabilities:
Derivatives
Level 1
Level 2
Level 3
Total
December 31, 2021
$
88,705 $
338,043 $
— $
426,748
—
1,692
9,790
—
—
—
—
29,356
16,815
25,439
65,167
172,018
3,103
2,474
—
—
—
—
—
—
—
29,356
18,507
35,229
65,167
172,018
3,103
2,474
$
100,187 $
652,415 $
— $
752,602
Foreign exchange contracts
Total liabilities
$
$
— $
— $
(304) $
(304) $
— $
— $
(304)
(304)
25702_AR2021 10-K for Annual Report.pdf 59
March 1, 2022 17:28:30
59
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Assets:
Investment securities
Money market funds
Equity securities
Commingled fixed income securities
Government and related securities
Corporate debt securities
Mortgage-backed / asset-backed securities
Derivatives
Foreign exchange contracts
Total assets
Liabilities:
Derivatives
Interest rate swaps
Foreign exchange contracts
Total liabilities
Investment Securities
Level 1
Level 2
Level 3
Total
December 31, 2020
$
$
$
$
73,228 $
—
1,722
16,776
—
—
434,791 $
26,583
19,669
16,757
71,433
220,678
— $
—
—
—
—
—
508,019
26,583
21,391
33,533
71,433
220,678
—
91,726 $
3,776
793,687 $
—
— $
3,776
885,413
— $
—
— $
(2,163) $
(1,960)
(4,123) $
— $
—
— $
(2,163)
(1,960)
(4,123)
The valuation of investment securities is based on a market approach using inputs that are observable, or can be corroborated by
observable data, in an active marketplace. The following information relates to our classification within the fair value hierarchy:
• Money Market Funds: Money market funds typically invest in government securities, certificates of deposit, commercial paper
and other highly liquid, low risk securities. Money market funds are principally used for overnight deposits and are classified as
Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an
exchange.
•
•
•
•
Equity Securities: Equity securities are comprised of mutual funds investing in U.S. and foreign stocks. These mutual funds are
classified as Level 2.
Commingled Fixed Income Securities: Commingled fixed income securities are comprised of mutual funds that invest in a variety
of fixed income securities, including securities of the U.S. government and its agencies, corporate debt, mortgage-backed
securities and asset-backed securities. Fair value is based on the value of the underlying investments owned by each fund, minus
its liabilities, divided by the number of shares outstanding, as reported by the fund manager. These mutual funds are classified as
Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an
exchange.
Government and Related Securities: Debt securities are classified as Level 1 where active, high volume trades for identical
securities exist. Valuation adjustments are not applied to these securities. Debt securities are classified as Level 2 where fair value
is determined using quoted market prices for similar securities or benchmarking model derived prices to quoted market prices and
trade data for identical or comparable securities.
Corporate Debt Securities: Corporate debt securities are valued using recently executed comparable transactions, market price
quotations or bond spreads for the same maturity as the security. These securities are classified as Level 2.
• Mortgage-Backed Securities / Asset-Backed Securities: These securities are valued based on external pricing indices or on
external price/spread data. These securities are classified as Level 2.
Derivative Securities
•
•
Foreign Exchange Contracts: The valuation of foreign exchange derivatives is based on a market approach using observable
market inputs, such as foreign currency spot and forward rates and yield curves. These securities are classified as Level 2.
Interest Rate Swaps: The valuation of interest rate swaps is based on an income approach using inputs that are observable or that
can be derived from, or corroborated by, observable market data. These securities are classified as Level 2.
60
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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Available-For-Sale Securities
Available-for-sale securities consisted of the following:
Government and related securities
Corporate debt securities
Commingled fixed income securities
Mortgage-backed / asset-backed securities
Total
Government and related securities
Corporate debt securities
Commingled fixed income securities
Mortgage-backed / asset-backed securities
Total
Investment securities in a loss position were as follows:
Greater than 12 continuous months
Government and related securities
Corporate debt securities
Mortgage-backed / asset-backed securities
Total
Less than 12 continuous months
Government and related securities
Corporate debt securities
Commingled fixed income securities
Mortgage-backed / asset-backed securities
Total
December 31, 2021
Gross
unrealized
gains
Gross
unrealized
losses
Estimated fair
value
81
259
—
144
484
$
$
(1,012) $
(2,998)
(33)
(4,685)
(8,728) $
35,229
65,167
1,692
172,018
274,106
Amortized cost
$
$
36,160
67,906
1,725
176,559
282,350
$
$
December 31, 2020
Amortized cost
Gross unrealized
gains
Gross unrealized
losses
Estimated fair
value
$
31,882
$
71,174
1,706
220,659
157
614
16
734
$
(78) $
(355)
—
(715)
31,961
71,433
1,722
220,678
$
325,421
$
1,521
$
(1,148) $
325,794
December 31, 2021
December 31, 2020
Fair Value
Gross unrealized
losses
Fair Value
Gross unrealized
losses
$
16,018
$
579
$
51,385
135,441
2,658
4,057
$
—
—
2,369
$
202,844
$
7,294
$
2,369
$
$
15,438
$
$
8,500
$
8,859
1,692
30,754
56,743
$
433
339
33
629
1,434
$
$
39,313
—
84,454
132,267
$
—
—
76
76
78
355
—
639
1,072
At December 31, 2021, approximately 37% of total securities in the investment portfolio were in a net loss position. Our allowance for
credit losses on available-for-sale investment securities is not significant, but we believe it is adequate as our investments are primarily
in highly liquid U.S. government and agency securities, high grade corporate bonds and municipal bonds. We have not recognized an
impairment on investment securities in an unrealized loss position because we have the ability and intent to hold these securities until
recovery of the unrealized losses or expect to receive the stated principal and interest at maturity.
25702_AR2021 10-K for Annual Report.pdf 61
March 1, 2022 17:28:30
61
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
At December 31, 2021, scheduled maturities of available-for-sale securities were as follows:
Within 1 year
After 1 year through 5 years
After 5 years through 10 years
After 10 years
Total
Amortized cost
Estimated fair
value
$
$
2,430
14,811
75,630
189,479
282,350
$
$
2,405
14,544
72,616
184,541
274,106
The actual maturities may not coincide with scheduled maturities as certain securities contain early redemption features and/or allow
for the prepayment of obligations with or without penalty.
Held-to-Maturity Securities
Held-to-maturity securities at December 31, 2021 and 2020 totaled $20 million and $75 million, respectively.
Derivative Instruments
Foreign Exchange Contracts
We enter into foreign exchange contracts to mitigate the currency risk associated with anticipated inventory purchases between
affiliates and from third parties. These contracts are designated as cash flow hedges. The effective portion of the gain or loss on cash
flow hedges is included in AOCL in the period that the change in fair value occurs and is reclassified to earnings in the period that the
hedged item is recorded in earnings. At December 31, 2021 and 2020, outstanding contracts associated with these anticipated
transactions had a notional amount of $1 million and $8 million, respectively.
Interest Rate Swaps
We enter into interest rate swaps to manage the cost of debt. At December 31, 2021, we had outstanding interest rate swap agreements
with a notional value of $200 million that are designated as cash flow hedges. The fair value of the interest rate swaps is recorded as a
derivative asset or liability at the end of each reporting period with the change in fair value reflected in AOCL. At December 31, 2020,
we had interest rate swap agreements with a notional value of $500 million that was terminated during 2021.
The fair value of our derivative instruments was as follows:
Designation of Derivatives
Balance Sheet Location
2021
2020
December 31,
Derivatives designated as hedging instruments
Foreign exchange contracts
Other current assets and prepayments
Accounts payable and accrued liabilities
$
$
21
(10)
96
(112)
Interest rate swaps
Other assets (Other noncurrent liabilities)
3,103
(2,163)
Derivatives not designated as hedging instruments
Foreign exchange contracts
Other current assets and prepayments
Accounts payable and accrued liabilities
Total derivative assets
Total derivative liabilities
2,453
(294)
5,577
(304)
Total net derivative asset (liability)
$
5,273
$
3,680
(1,848)
3,776
(4,123)
(347)
The amounts included in AOCL at December 31, 2021 will be recognized in earnings within the next 12 months. No amount of
ineffectiveness was recorded in earnings for these designated cash flow hedges.
25702_AR2021 10-K for Annual Report.pdf 62
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62
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
The following represents the results of cash flow hedging relationships:
Derivative Gain (Loss)
Recognized in AOCI
(Effective Portion)
Derivative Instrument
2021
2020
Foreign exchange contracts
Interest rate swaps
$
$
198
$
(317)
5,266
5,464
$
(2,163)
(2,480)
Years Ended December 31,
Location of Gain (Loss)
(Effective Portion)
Revenue
Cost of sales
Interest Expense
Gain (Loss) Reclassified
from AOCI to Earnings
(Effective Portion)
2021
2020
$
$
$
289
(117)
(366)
(194) $
(161)
11
—
(150)
We also enter into foreign exchange contracts to minimize the impact of exchange rate fluctuations on short-term intercompany loans
and related interest that are denominated in a foreign currency. The revaluation of the intercompany loans and interest and the mark-
to-market adjustment on the derivatives are both recorded in earnings. All outstanding contracts at December 31, 2021 mature over the
next three months.
The following represents the mark-to-market adjustment on our non-designated derivative instruments:
Years Ended December 31,
Derivative Gain (Loss)
Recognized in Earnings
Derivatives Instrument
Location of Derivative Gain (Loss)
2021
2020
Foreign exchange contracts
Selling, general and administrative expense
$
(4,540) $
5,298
Fair Value of Financial Instruments
Our financial instruments include cash and cash equivalents, investment securities, accounts receivable, loan receivables, derivative
instruments, accounts payable and debt. The carrying value for cash and cash equivalents, accounts receivable, loans receivable, held-
to-maturity investment securities and accounts payable approximate fair value. The fair value of available-for-sale investment
securities and derivative instruments are presented above. The fair value of our debt is estimated based on recently executed
transactions and market price quotations. The inputs used to determine the fair value of our debt were classified as Level 2 in the fair
value hierarchy. The carrying value and estimated fair value of our debt was as follows:
Carrying value
Fair value
December 31,
2021
2020
$
$
2,323,838
2,355,894
$
$
2,564,393
2,479,895
11. Supplemental Financial Statement Information
Activity in the allowance for credit losses on accounts receivable is presented below.
2021
2020
2019
Balance at
beginning of
year
Cumulative
effect of
accounting
change
Amounts
charged to
expense
Write-offs,
recoveries and
other
Balance at end
of year
Accounts and
other
receivables
Other assets
$
$
$
35,344 $
17,830 $
17,443 $
— $
15,336 $
— $
9,355 $
19,789 $
16,345 $
(15,520) $
(17,611) $
(15,958) $
29,179 $
35,344 $
17,830 $
11,168 $
18,899 $
17,830 $
18,011
16,445
—
25702_AR2021 10-K for Annual Report.pdf 63
March 1, 2022 17:28:30
63
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Other expense, net consisted of the following:
Loss on refinancing of debt
Insurance proceeds
(Gain) loss on sale of assets/businesses
Other expense, net
Supplemental cash flow information is as follows:
Purchases of property and equipment in accounts payable
Cash interest paid
Cash income tax payments, net of refunds
Selected balance sheet information is as follows:
Other assets:
Long-term investments
Other (net of allowance of $18,011 and $16,445, respectively)
Total
Accounts payable and accrued liabilities:
Accounts payable
Customer deposits
Employee related liabilities
Other
Total
Other noncurrent liabilities:
Pension liabilities
Postretirement medical benefits
Other
Total
Years Ended December 31,
2021
2020
2019
$
56,209 $
36,987 $
(3,000)
(11,635)
(16,928)
(11,908)
$
41,574 $
8,151 $
6,623
—
17,683
24,306
Years Ended December 31,
2021
2020
2019
$
$
$
5,305 $
16,098 $
1,301
124,084 $
151,857 $
157,709
4,337 $
20,185 $
27,109
December 31,
2021
2020
$
$
333,052
$
364,212
138,032
127,302
471,084
$
491,514
$
310,993
$
295,173
185,528
233,876
192,146
165,774
232,236
187,433
$
922,543
$
880,616
$
115,457
$
235,439
126,675
66,596
153,838
47,738
$
308,728
$
437,015
25702_AR2021 10-K for Annual Report.pdf 64
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64
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
12. Restructuring Charges and Asset Impairments
Activity in our restructuring reserves was as follows:
Balance at December 31, 2019
Expenses, net
Cash payments
Noncash activity
Balance at December 31, 2020
Expenses, net
Cash payments
Noncash activity
Balance at December 31, 2021
The majority of the remaining restructuring reserves are expected to be paid over the next 12-24 months.
Severance and
other exit costs
$
$
12,006
20,712
(20,014)
(2,641)
10,063
19,003
(21,990)
(1,329)
5,747
25702_AR2021 10-K for Annual Report.pdf 65
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65
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
13. Debt
Notes due October 2021
Notes due May 2022
Notes due April 2023
Notes due March 2024
Notes due March 2027
Notes due March 2029
Notes due January 2037
Notes due March 2043
Term loan due March 2026
Term loan due January 2025
Term loan due March 2028
Other debt
Principal amount
Less: unamortized costs, net
Total debt
Less: current portion long-term debt
Long-term debt
December 31,
Interest rate
2021
4.875%
5.625%
6.20%
4.625%
6.875%
7.25%
5.25%
6.70%
LIBOR + 1.75%
LIBOR + 5.5%
LIBOR + 4.0%
—
—
90,259
242,603
400,000
350,000
35,841
425,000
370,500
—
446,625
2020
152,588
148,792
271,000
374,000
—
—
35,841
425,000
380,000
818,125
—
3,685
2,364,513
4,900
2,610,246
40,675
45,853
2,323,838
2,564,393
24,739
216,032
$ 2,299,099
$ 2,348,361
In 2021, we issued a $400 million 6.875% unsecured note due March 2027, a $350 million 7.25% unsecured note due March 2029 and
entered into a seven-year $450 million secured term loan maturing March 2028. We redeemed all the outstanding October 2021 notes
and an aggregate $363 million of the May 2022 notes, April 2023 notes and March 2024 notes under a tender offer, the remaining
balance of the May 2022 notes and the remaining balance of the January 2025 term loan. We also extended the maturities of our
$500 million secured revolving credit facility and our $380 million secured term loan from November 2024 to March 2026. A
$56 million pre-tax loss was incurred on the refinancing of debt.
The credit agreement that governs the revolving credit facility and term loans contains financial and non-financial covenants. At
December 31, 2021, we were in compliance with all covenants and there were no outstanding borrowings under the revolving credit
facility.
We also terminated interest rate swap agreements with an aggregate notional value of $500 million and entered into new interest rate
swap agreements with an aggregate notional amount of $200 million. Under the terms of the new swap agreements, we pay fixed-rate
interest of 0.56% and receive variable-rate interest based on one-month LIBOR. The variable interest rate under the term loans and the
swaps reset monthly. We received $2 million from the termination of the $500 million interest rate swap agreements, which was
recorded in AOCL and will be recognized ratably in income through 2024.
At December 31, 2021, the interest rate of the 2028 Term Loan was 4.1% and the interest rate on the 2026 Term Loan was 1.9%.
Annual maturities of outstanding principal at December 31, 2021 are as follows:
2022
2023
2024
2025
2026
Thereafter
Total
$
24,739
119,748
281,560
42,500
261,000
1,634,966
$
2,364,513
25702_AR2021 10-K for Annual Report.pdf 66
March 1, 2022 17:28:30
66
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
14. Retirement Plans and Postretirement Medical Benefits
Retirement Plans
We provide retirement benefits to eligible employees in the U.S. and outside the U.S. under various defined benefit retirement plans.
Benefit accruals under most of our significant defined benefit plans have been frozen. The benefit obligations and funded status of
defined benefit pension plans are as follows:
Accumulated benefit obligation
$ 1,609,125
$ 1,729,515
$
762,558
$
829,413
United States
Foreign
2021
2020
2021
2020
Projected benefit obligation
Benefit obligation - beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Foreign currency changes
Settlements and curtailments
Benefits paid
$
$ 1,729,959
102
42,434
(53,133)
—
(1,429)
$ 1,613,054
86
52,103
185,306
—
(3,854)
(108,425)
(116,736)
$
830,674
1,528
11,811
(37,197)
(10,747)
—
(25,601)
746,942
1,650
13,379
76,006
29,128
(15,171)
(21,260)
Benefit obligation - end of year
$ 1,609,508
$ 1,729,959
$
770,468
$
830,674
Fair value of plan assets
Fair value of plan assets - beginning of year
$ 1,601,786
$ 1,487,018
$
742,639
$
668,308
Actual return on plan assets
Company contributions
Settlements and curtailments
Foreign currency changes
Benefits paid
51,828
5,397
(1,429)
—
225,812
9,546
(3,854)
—
(108,425)
(116,736)
17,929
9,686
—
(7,210)
(25,601)
78,120
9,674
(15,171)
22,968
(21,260)
Fair value of plan assets - end of year
$ 1,549,157
$ 1,601,786
$
737,443
$
742,639
Amounts recognized in the Consolidated Balance Sheets
Noncurrent asset
Current liability
Noncurrent liability
Funded status
$
—
$
465
$
29,309
$
(5,883)
(54,468)
(5,843)
(122,795)
(1,345)
(60,989)
26,053
(1,444)
(112,644)
$
(60,351) $
(128,173) $
(33,025) $
(88,035)
Information provided in the table below is only for pension plans with an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
United States
Foreign
2021
2020
2021
2020
$ 1,609,508
$ 1,609,125
$ 1,729,638
$ 1,729,194
$ 1,549,157
$ 1,601,000
$
$
$
59,859
59,352
—
$
$
$
691,909
690,887
577,821
25702_AR2021 10-K for Annual Report.pdf 67
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67
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Pretax amounts recognized in AOCI consist of:
Net actuarial loss
Prior service (credit) cost
Transition asset
Total
United States
Foreign
2021
2020
2021
2020
$
$
716,585
(149)
—
716,436
$
$
783,211
(209)
—
783,002
$
$
301,913
7,804
(7)
309,710
$
$
334,520
8,072
(7)
342,585
The components of net periodic benefit cost (income) for defined benefit pension plans were as follows:
United States
2021
2020
2019
2021
Foreign
2020
Service cost
Interest cost
Expected return on plan assets
Amortization of net transition asset
Amortization of prior service (credit) cost
Amortization of net actuarial loss
Settlements and curtailments
$
102 $
86 $
83 $
42,434
(77,119)
—
(60)
38,233
551
52,103
(84,719)
—
(60)
32,490
1,364
63,171
(92,726)
—
(60)
26,146
2,381
1,528 $
11,811
(31,869)
1,650 $
13,379
(34,391)
—
268
9,350
—
(4)
245
7,842
5,060
2019
1,543
17,853
(34,363)
(6)
243
6,337
397
Net periodic benefit cost (income)
$
4,141 $
1,264 $
(1,005) $
(8,912) $
(6,219) $
(7,996)
Other changes in plan assets and benefit obligations for defined benefit pension plans recognized in other comprehensive income were
as follows:
United States
Foreign
2021
2020
2021
2020
Net actuarial (gain) loss
Amortization of net actuarial loss
Amortization of prior service credit (cost)
Net transition asset
Settlements and curtailments
$
(27,842) $
44,216
$
(23,257) $
(38,233)
(32,490)
60
—
60
—
(551)
(1,364)
(9,350)
(268)
—
—
Total recognized in other comprehensive income
$
(66,566) $
10,422
$
(32,875) $
32,103
(7,842)
(245)
4
(5,060)
18,960
25702_AR2021 10-K for Annual Report.pdf 68
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68
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Weighted-average actuarial assumptions used to determine year end benefit obligations and net periodic benefit cost for defined
benefit pension plans include:
United States
Used to determine benefit obligations
Discount rate
Rate of compensation increase
Used to determine net periodic benefit cost
Discount rate
Expected return on plan assets
Rate of compensation increase
Foreign
Used to determine benefit obligations
Discount rate
Rate of compensation increase
Used to determine net periodic benefit cost
Discount rate
Expected return on plan assets
Rate of compensation increase
2021
2020
2019
2.85%
N/A
2.54%
5.60%
N/A
2.54%
N/A
3.34%
6.25%
N/A
3.34%
N/A
4.34%
6.75%
N/A
0.85 % - 2.85%
1.50 % - 3.65%
0.70 % - 2.40%
1.50 % - 2.50%
0.65 % - 2.95%
1.50 % - 2.50%
0.70 % - 2.40%
3.50 % - 5.75%
1.50 % - 2.50%
0.65 % - 2.95%
4.25 % - 6.00%
1.50 % - 2.50%
0.75 % - 3.55%
4.25 % - 6.25%
1.50 % - 2.50%
A discount rate is used to determine the present value of our future benefit obligations. The discount rate for our U.S. pension and
postretirement medical benefit plans is determined by matching the expected cash flows associated with our benefit obligations to a
pool of corporate long-term, high-quality fixed income debt instruments available as of the measurement date. The discount rate for
our largest foreign plan, the U.K. Qualified Pension Plan (the U.K. Plan), is determined using a model that discounts each year's
estimated benefit payments by an applicable spot rate derived from a yield curve created from a large number of high quality corporate
bonds. For our other smaller foreign pension plans, the discount rate is selected based on high-quality fixed income indices available
in the country in which the plan is domiciled.
The expected return on plan assets is based on the target asset allocation for the applicable pension plan and expected rates of return
for various asset classes in the investment portfolio after analyzing historical experience and future expectations of returns and
volatility of the asset classes.
Investment Strategy and Asset Allocation
The investment strategy for our pension plans is to maximize returns within reasonable and prudent risk levels, achieve and maintain
full funding of the accumulated benefit obligation and the actuarial liabilities and earn the expected rate of return while adhering to
local regulations and restrictions.
Pension plan assets are invested in accordance with our strategic asset allocation policy. Pension plan assets are exposed to various
risks, including interest rate risks, market risks and credit risks. Investments are diversified across asset classes and within each class
to reduce the risk of large losses and are periodically rebalanced. Derivatives, such as swaps, options, forwards and futures contracts
may be used for market exposure, to alter risk/return characteristics and to manage foreign currency exposure. We do not have any
significant concentrations of credit risk within the plan assets.
25702_AR2021 10-K for Annual Report.pdf 69
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69
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
U.S. Pension Plans
Investment objectives and investment managers are reviewed periodically. Target and actual asset allocations for the U.S. pension
plans were as follows:
Asset category
Equities
Multi-asset credit
Fixed income
Real estate
Private equity
Total
Foreign Pension Plans
Target
allocation
Percent of Plan Assets at
December 31,
2022
2021
2020
20 %
3 %
70 %
6 %
1 %
100 %
18 %
3 %
73 %
5 %
1 %
100 %
33 %
— %
62 %
4 %
1 %
100 %
Our foreign pension plan assets are managed by outside investment managers and monitored regularly by local trustees and our
corporate personnel. Target and actual asset allocations for the U.K. Plan, which comprises 79% of the total foreign pension plan
assets, were as follows:
Asset category
Global equities
Fixed income
Real estate
Diversified growth
Cash
Total
Target
Allocation
Percent of Plan Assets at
December 31,
2022
2021
2020
10 %
70 %
10 %
10 %
— %
12 %
69 %
9 %
9 %
1 %
22 %
60 %
8 %
9 %
1 %
100 %
100 %
100 %
25702_AR2021 10-K for Annual Report.pdf 70
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70
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Fair Value Measurements of Plan Assets
The following tables show the U.S. and foreign pension plans' assets, by level within the fair value hierarchy. The plan asset categories
presented in the following tables are subsets of the broader asset allocation categories.
United States Pension Plans
Money market funds
Equity securities
Commingled fixed income securities
Government and related securities
Corporate debt securities
Mortgage-backed /asset-backed securities
Real estate
Securities lending collateral
Total plan assets at fair value
Securities lending payable
Investments valued at NAV
Cash
Other
Fair value of plan assets
Money market funds
Equity securities
Commingled fixed income securities
Government and related securities
Corporate debt securities
Mortgage-backed /asset-backed securities
Real estate
Securities lending collateral
Total plan assets at fair value
Securities lending payable
Investments valued at NAV
Cash
Other
Fair value of plan assets
December 31, 2021
Level 1
Level 2
Level 3
Total
$
$
—
—
—
202,416
—
—
—
—
$
3,725
195,037
229,300
26,582
771,529
12,486
—
145,855
$
202,416
$ 1,384,514
$
$
—
—
—
—
—
—
77,494
—
77,494
3,725
195,037
229,300
228,998
771,529
12,486
77,494
145,855
$ 1,664,424
(145,855)
16,820
20,569
(6,801)
$ 1,549,157
December 31, 2020
Level 1
Level 2
Level 3
Total
$
—
—
—
322,851
—
—
—
—
$
14,442
$
323,311
264,896
22,549
586,998
45,861
—
151,049
—
—
—
—
—
—
69,347
—
$
322,851
$ 1,409,106
$
69,347
$
14,442
323,311
264,896
345,400
586,998
45,861
69,347
151,049
$ 1,801,304
(151,049)
17,132
15,449
(81,050)
$ 1,601,786
25702_AR2021 10-K for Annual Report.pdf 71
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71
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Foreign Plans
Money market funds
Equity securities
Commingled fixed income securities
Government and related securities
Corporate debt securities
Real estate
Diversified growth funds
Total plan assets at fair value
Cash
Other
Fair value of plan assets
Money market funds
Equity securities
Commingled fixed income securities
Government and related securities
Corporate debt securities
Real estate
Diversified growth funds
Total plan assets at fair value
Cash
Other
Fair value of plan assets
December 31, 2021
Level 1
Level 2
Level 3
Total
—
—
—
—
—
—
—
—
$
$
8,577
96,596
431,845
46,522
33,583
7,168
—
624,291
$
$
—
—
—
—
—
52,491
52,169
104,660
$
$
$
8,577
96,596
431,845
46,522
33,583
59,659
52,169
728,951
7,966
526
737,443
December 31, 2020
Level 1
Level 2
Level 3
Total
—
—
—
—
—
—
—
—
$
10,072
$
166,683
379,656
46,268
37,002
—
—
—
—
—
—
—
45,275
50,750
$
10,072
166,683
379,656
46,268
37,002
45,275
50,750
$
639,681
$
96,025
$
735,706
$
$
$
$
6,448
485
$
742,639
The following information relates to our classification of investments into the fair value hierarchy:
• Money Market Funds: Money market funds typically invest in government securities, certificates of deposit, commercial paper
and other highly liquid, low risk securities. Money market funds are principally used for overnight deposits and are classified as
Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an
exchange.
•
•
•
Equity Securities: Equity securities are comprised of mutual funds investing in U.S. and foreign stocks. These mutual funds are
classified as Level 2.
Commingled Fixed Income Securities: Commingled fixed income securities are comprised of mutual funds that invest in a variety
of fixed income securities, including securities of the U.S. government and its agencies, corporate debt, mortgage-backed
securities and asset-backed securities. Fair value is based on the value of the underlying investments owned by each fund, minus
its liabilities, divided by the number of shares outstanding, as reported by the fund manager. These mutual funds are classified as
Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an
exchange.
Government and Related Securities: Debt securities are classified as Level 1 where active, high volume trades for identical
securities exist. Valuation adjustments are not applied to these securities. Debt securities are classified as Level 2 where fair value
is determined using quoted market prices for similar securities or benchmarking model derived prices to quoted market prices and
trade data for identical or comparable securities.
25702_AR2021 10-K for Annual Report.pdf 72
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72
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
•
Corporate Debt Securities: Corporate debt securities are valued using recently executed comparable transactions, market price
quotations or bond spreads for the same maturity as the security. These securities are classified as Level 2.
• Mortgage-Backed Securities / Asset-Backed Securities: These securities are valued based on external pricing indices or on
external price/spread data. These securities are classified as Level 2.
•
•
•
Real Estate: include units in open-ended commingled real estate funds. Funds that are valued and traded on a daily basis in an
active market are classified as Level 2. Investments that are valued on an annual basis by certified appraisers are classified as
Level 3. The valuation techniques used to value Level 3 investments include the cost approach, sales-comparison method and the
income approach.
Diversified Growth Funds: comprised of units in commingled diversified growth funds that comprise a mix of different asset
classes. The underlying investments may not be listed on an exchange in an active market or traded on a daily basis and may fall
into all three fair value categories. Accordingly, these securities are classified as Level 3.
Securities Lending Fund: represents a commingled fund through our custodian's securities lending program. The U.S. pension
plan lends securities that are held within the plan to other banks and/or brokers, and receives collateral, typically cash. This
collateral is invested in a commingled fund that invests in short-term fixed income securities. This investment is classified as
Level 2. This amount invested in the fund is offset by a corresponding liability reflected in the U.S. pension plan's net assets
available for benefits.
Investments Valued at Net Asset Value (NAV)
Represents investments in private equity limited partnerships that are measured at fair value using the Net Asset Value (NAV) per
share as a practical expedient and are not categorized in the fair value hierarchy. There is no active market for these investments and
the pension plan receives a proportionate share of the gains, losses and expenses in accordance with the partnership agreements. There
is a remaining unfunded commitment of $8 million at December 31, 2021. These investments comprise 1.1% of total U.S. Pension
Fund assets at both December 31, 2021 and 2020.
Level 3 Gains and Losses
The following table summarizes the changes in the fair value of Level 3 assets:
Balance at December 31, 2019
Realized gains
Unrealized losses
Net purchases, sales and settlements
Foreign currency and other
Balance at December 31, 2020
Realized gains
Unrealized gains
Net purchases, sales and settlements
Foreign currency and other
Balance at December 31, 2021
U.S. Plans
Foreign Plans
Real estate
Real estate
Diversified
Growth Funds
$
71,337
$
45,335
$
47,621
1,554
(3,360)
(184)
—
69,347
1,791
6,958
(602)
—
—
(2,134)
1,221
853
45,275
—
6,357
1,663
(804)
—
1,493
56
1,580
50,750
—
1,995
—
(576)
$
77,494
$
52,491
$
52,169
25702_AR2021 10-K for Annual Report.pdf 73
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73
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Postretirement Medical Benefits
We provide certain employer subsidized health care and employer provided life insurance benefits in the U.S. and Canada to eligible
retirees and their dependents. The cost of these benefits is recognized over the period the employee provides credited service to the
company. The benefit obligation and funded status for postretirement medical benefit plans are as follows:
Benefit obligation
Benefit obligation - beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Foreign currency changes
Benefits paid, net
Benefit obligation - end of year (1)
Fair value of plan assets
Fair value of plan assets - beginning of year
Company contribution
Benefits paid, net
Fair value of plan assets - end of year
Amounts recognized in the Consolidated Balance Sheets
Current liability
Non-current liability
Funded status
2021
2020
$
$
$
169,210
909
3,755
(22,305)
123
(12,176)
139,516
—
12,176
(12,176)
164,104
885
4,993
11,496
340
(12,608)
169,210
—
12,608
(12,608)
—
$
—
$
$
$
$
$
(12,841) $
(15,372)
(126,675)
(153,838)
$
(139,516) $
(169,210)
(1) The benefit obligation for U.S. postretirement medical benefits plan was $126 million and $153 million at December 31, 2021 and 2020,
respectively.
Pretax amounts recognized in AOCI consist of:
Net actuarial loss
Prior service cost
Total
2021
2020
$
$
15,175
$
41,570
—
129
15,175
$
41,699
The components of net periodic benefit cost for postretirement medical benefit plans were as follows:
Service cost
Interest cost
Amortization of prior service cost
Amortization of net actuarial loss
Net periodic benefit cost
2021
2020
2019
$
909
$
885
$
3,755
129
4,090
8,883
$
4,993
373
3,198
9,449
$
$
967
6,584
321
2,026
9,898
25702_AR2021 10-K for Annual Report.pdf 74
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74
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Other changes in benefit obligation for postretirement medical benefit plans recognized in other comprehensive income were as
follows:
Net actuarial (gain) loss
Amortization of net actuarial loss
Amortization of prior service cost
Total recognized in other comprehensive income
2021
2020
$
$
(22,305) $
(4,090)
(129)
(26,524) $
11,496
(3,198)
(373)
7,925
The weighted-average discount rates used to determine end of year benefit obligation and net periodic pension cost include:
Discount rate used to determine benefit obligation
U.S.
Canada
Discount rate used to determine net period benefit cost
U.S.
Canada
2021
2020
2019
2.80 %
2.90 %
2.35 %
2.50 %
2.35 %
2.50 %
3.20 %
3.00 %
3.20 %
3.00 %
4.20 %
3.60 %
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for the U.S. plan was
6.8% and 7.0% for 2021 and 2020, respectively. The assumed health care trend rate is 6.50% for 2022 and will gradually decline to
5.0% by the year 2028 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, are expected to be paid.
2022
2023
2024
2025
2026
Thereafter
Pension Benefits
Postretirement
Medical Benefits
$
130,497
$
131,204
124,812
125,765
123,679
601,374
12,854
12,338
11,819
11,299
10,778
45,383
$ 1,237,331
$
104,471
During 2022, we estimate making contributions of $6 million to our U.S. pension plans and $10 million to our foreign pension plans.
Savings Plans
We offer voluntary defined contribution plans to our U.S. employees designed to help them accumulate additional savings for
retirement. We provide a core contribution to all employees, regardless if they participate in the plan, and match a portion of each
participating employees' contribution, based on eligible pay. Total contributions to our defined contribution plans were $27 million in
2021 and $28 million in 2020.
25702_AR2021 10-K for Annual Report.pdf 75
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75
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
15. Income Taxes
Income (loss) from continuing operations before taxes consisted of the following:
U.S.
International
Total
Years Ended December 31,
2021
2020
2019
$
$
(85,258) $
77,843
(7,415) $
(243,760) $
60,391
(183,369) $
500
26,232
26,732
The provision (benefit) for income taxes from continuing operations consisted of the following:
U.S. Federal:
Current
Deferred
U.S. State and Local:
Current
Deferred
International:
Current
Deferred
Total current
Total deferred
Years Ended December 31,
2021
2020
2019
$
(7,419)
(13,825)
(21,244)
$
(10,582)
6,516
(4,066)
$
(18,789)
11,500
(7,289)
5,401
(5,827)
(426)
10,979
(231)
10,748
8,961
(19,883)
(2,569)
4,100
1,531
4,993
4,664
9,657
(8,158)
15,280
(9,142)
8,000
(1,142)
9,993
(14,689)
(4,696)
(17,938)
4,811
Total (benefit) provision for income taxes
$
(10,922)
$
7,122
$
(13,127)
Effective tax rate
147.3 %
(3.9) %
(49.1) %
The effective tax rate for 2021 includes benefits of $7 million from the resolution of tax matters, $5 million due to tax legislation in
the U.K., $3 million from an affiliate reorganization and $2 million from the vesting of restricted stock, partially offset by charges of
$6 million on the pre-tax gain of $10 million from the sale of a business as the tax basis was lower than the book basis and $1 million
for the write-off of deferred tax assets associated with the expiration of out-of-the-money stock options.
The effective tax rate for 2020 includes a $12 million charge for the surrender of company owned life insurance policies, a $5 million
benefit for the correction of tax balances in certain domestic and international tax jurisdictions, a $3 million benefit due to regulations
enacted into law, a $2 million benefit for the carryback of net operating losses resulting from the CARES Act and a benefit of
$2 million on the $198 million goodwill impairment charge as the majority of this charge is nondeductible.
The effective tax rate for 2019 includes benefits of $23 million from the release of a foreign valuation allowance and $9 million from
the resolution of certain tax examinations. The effective tax rate for 2019 also includes a tax of $3 million on the $18 million book loss
from the disposition of operations in certain international markets, primarily due to nondeductible basis differences.
25702_AR2021 10-K for Annual Report.pdf 76
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76
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
A reconciliation of income taxes computed at the federal statutory rate and our provision for income taxes consist of the following:
Federal statutory provision
State and local income taxes (1)
Impact of foreign operations taxed at rates other than the U.S. statutory rate (2)
Accrual/release of uncertain tax amounts related to foreign operations
U.S. tax impacts of foreign income in the U.S.
$
CARES Act carryback benefit
Tax incentives/credits/exempt income
Unrealized stock compensation benefits
Surrender of company-owned life insurance policies
Goodwill impairment
Other, net (3)
(Benefit) provision for income taxes
Years Ended December 31,
2021
2020
2019
(1,558) $
(336)
(2,220)
(7,288)
4,441
(2,270)
(500)
(505)
—
—
(686)
(38,507) $
1,209
(3,345)
1,802
(2,300)
(1,646)
(750)
2,312
10,313
40,328
(2,294)
5,613
(901)
(18,541)
191
5,587
—
(5,437)
2,176
—
—
(1,815)
$
(10,922) $
7,122
$
(13,127)
(1)
(2)
Includes a charge of $2 million for the surrender of company-owned life insurance for the year ended December 31, 2020.
Includes a benefit of $5 million for a deferred rate change for the year ended December 31, 2021, a benefit of $3 million for tax
balance corrections and a deferred tax rate change benefit of $2 million for the year ended December 31, 2020 and a foreign
valuation allowance release of $23 million and a $3 million tax on the disposition of operations in certain international markets
for the year ended December 31, 2019.
(3) Includes a $3 million benefit from an affiliate reorganization and charge of $3 million related to the sale of a business for the year
ended December 31, 2021, as well as a $2 million benefit related to tax balance corrections and a $1 million charge related to
interest for the year ended December 31, 2020.
25702_AR2021 10-K for Annual Report.pdf 77
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77
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Deferred tax liabilities and assets consisted of the following:
Deferred tax liabilities:
Depreciation
Deferred profit (for tax purposes) on sale to finance subsidiary
Lease revenue and related depreciation
Intangible assets
Operating lease liability
Other
Gross deferred tax liabilities
Deferred tax assets:
Postretirement medical benefits
Pension
Operating lease asset
Inventory and equipment capitalization
Restructuring charges
Long-term incentives
Net operating loss
Tax credit carry forwards
Tax uncertainties gross-up
Other
Gross deferred tax assets
Less: Valuation allowance
Net deferred tax assets
Total deferred taxes, net
December 31,
2021
2020
$
(85,544) $
(26,745)
(202,862)
(76,672)
(46,496)
(25,438)
(463,757)
(69,900)
(28,101)
(190,852)
(81,816)
(50,071)
(27,865)
(448,605)
34,681
20,472
52,271
1,866
1,548
12,308
113,025
65,931
6,929
58,457
367,488
(121,778)
245,710
42,423
48,385
54,538
3,903
2,022
12,905
82,823
64,070
6,656
42,079
359,804
(116,543)
243,261
$
(218,047) $
(205,344)
The valuation allowance relates primarily to certain foreign, state and local net operating loss and tax credit carryforwards that will
more-likely-than-not expire unutilized.
We have a federal net operating loss carryforward of $157 million as of December 31, 2021, the majority of which has an indefinite
carryforward period. We have net operating loss carryforwards in international jurisdictions of $163 million as of December 31, 2021,
of which $150 million can be carried forward indefinitely and the remainder expire over the next 20 years. We also have net operating
loss carryforwards in most states totaling $1.1 billion that will expire over the next 20 years. In addition, we have tax credit
carryforwards of $66 million, of which $51 million can be carried forward indefinitely and the remainder expire over the next 11
years.
As of December 31, 2021, we assert that we are permanently reinvested in our pre-1987 and post-2017 undistributed earnings of $264
million as well as all other outside basis differences. While a determination of the full liability that would be incurred if these earnings
were repatriated is not practicable, we have estimated the withholding taxes would be approximately $2 million.
25702_AR2021 10-K for Annual Report.pdf 78
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78
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Uncertain Tax Positions
A reconciliation of the amount of unrecognized tax benefits is as follows:
2021
2020
2019
Balance at beginning of year
Increases from prior period positions
Decreases from prior period positions
Increases from current period positions
Decreases relating to settlements with tax authorities
Reductions from lapse of applicable statute of limitations
$
$
50,064
3,016
(4,247)
492
(1,270)
(2,983)
$
60,302
2,147
(47)
3,472
(12,508)
(3,302)
Balance at end of year
$
45,072
$
50,064
$
71,458
510
(9,711)
5,052
(2,626)
(4,381)
60,302
The amount of the unrecognized tax benefits at December 31, 2021, 2020 and 2019 that would affect the effective tax rate if
recognized was $39 million, $44 million and $54 million, respectively.
On a regular basis, we conclude tax return examinations, statutes of limitations expire, and court decisions interpret tax law. We
regularly assess tax uncertainties in light of these developments. As a result, it is reasonably possible that the amount of our
unrecognized tax benefits will decrease in the next 12 months, and we expect this change could be up to 10% of our unrecognized tax
benefits. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes. Amounts included in
our provision for income taxes related to interest and penalties on uncertain tax positions for each of the years ended December 31,
2021, 2020 and 2019 were not significant. We had approximately $4 million accrued for the payment of interest and penalties at both
December 31, 2021 and 2020.
Other Tax Matters
The Internal Revenue Service examinations of our consolidated U.S. income tax returns for tax years prior to 2018 are closed to audit;
however, various post-2016 U.S. state and local tax returns are still subject to examination, with some states in appeals from 2011. For
our significant non-U.S. jurisdictions, Canada is closed to examination through 2016 except for a specific issue arising in earlier years,
France is closed through 2019, Germany is closed through 2016 and the U.K. is closed through 2018. We also have other less
significant tax filings currently subject to examination.
We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the
related financial statement implications. We believe we have established tax reserves that are appropriate given the possibility of tax
adjustments. However, determining the appropriate level of tax reserves requires judgment regarding the uncertain application of tax
law and the possibility of tax adjustments. Future changes in tax reserve requirements could have a material impact, positive or
negative, on our results of operations, financial position and cash flows.
16. Commitments and Contingencies
In the ordinary course of business, we are routinely defendants in, or party to, a number of pending and threatened legal actions. These
may involve litigation by or against us relating to, among other things, contractual rights under vendor, insurance or other contracts;
intellectual property or patent rights; equipment, service, payment or other disputes with clients; or disputes with employees. Some of
these actions may be brought as a purported class action on behalf of a purported class of employees, clients or others. In
management's opinion, it is not reasonably possible that the potential liability, if any, that may result from these actions, either
individually or collectively, will have a material effect on our financial position, results of operations or cash flows. However, as
litigation is inherently unpredictable, there can be no assurances in this regard.
25702_AR2021 10-K for Annual Report.pdf 79
March 1, 2022 17:28:31
79
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
17. Leased Assets and Liabilities
We lease real estate and equipment under operating and finance lease agreements. Our leases have terms of up to 15 years, and may
include an option to extend the lease for up to 5 years. At lease commencement, a lease liability and corresponding right-of-use asset is
recognized. Lease liabilities represent the present value of future lease payments over the expected lease term, including options to
extend or terminate the lease when it is reasonably certain those options will be exercised. Lease payments include all fixed payments
and variable payments tied to an index, but exclude costs such as common area maintenance charges, property taxes, insurance and
mileage. The present value of our lease liability is determined using our incremental borrowing rate at lease commencement.
Information regarding operating and financing leases are as follows:
Leases
Balance Sheet Location
December 31, 2021 December 31, 2020
Assets
Operating
Finance
Total leased assets
Liabilities
Operating
Finance
Total lease liabilities
Lease Cost
Operating lease expense
Finance lease expense
Amortization of leased assets
Interest on lease liabilities
Variable lease expense
Sublease income
Total expense
Operating lease assets
Property, plant and equipment, net
Current operating lease liabilities
Noncurrent operating lease liabilities
Accounts payable and accrued liabilities
Other noncurrent liabilities
$
$
$
$
208,428 $
46,770
255,198 $
201,916
23,973
225,889
40,299 $
192,092
10,694
39,535
282,620 $
39,182
180,292
4,714
18,862
243,050
Years Ended December 31,
2021
2020
2019
$
62,269 $
54,718 $
48,503
9,191
2,826
33,924
3,792
949
21,413
(1,761)
(979)
$
106,449 $
79,893 $
3,372
700
23,188
(1,948)
73,815
Operating lease expense includes immaterial amounts related to leases with terms of 12 months or less.
Future Lease Payments
Operating Leases
Finance Leases
Total
2022
2023
2024
2025
2026
Thereafter
Total
Less: present value discount
Lease liability
$
53,380 $
13,444 $
46,776
41,731
34,202
29,406
80,900
286,395
11,226
9,889
8,280
6,751
9,357
58,947
54,004
232,391 $
$
8,718
50,229 $
66,824
58,002
51,620
42,482
36,157
90,257
345,342
62,722
282,620
Future lease payments exclude $21 million of payments for leases signed but not yet commenced at December 31, 2021.
25702_AR2021 10-K for Annual Report.pdf 80
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80
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Lease Term and Discount Rate
Weighted-average remaining lease term
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Cash Flow Information
Operating cash outflows - operating leases
Operating cash outflows - finance leases
Financing cash outflows - finance leases
Leased assets obtained in exchange for new lease obligations
Operating leases
Finance leases
18. Stockholders' Equity
December 31, 2021
December 31, 2020
6.7 years
5.5 years
7.2 years
5.6 years
6.5%
6%
7.1%
7.1%
Years Ended December 31,
2021
2020
2019
59,748 $
2,826 $
7,707 $
52,565 $
949 $
4,223 $
44,252
700
3,096
48,662 $
30,840 $
38,641 $
17,741 $
87,160
4,072
$
$
$
$
$
The following table summarizes the changes in shares of Common Stock outstanding and Treasury Stock:
Balance at December 31, 2018
Repurchases of common stock
Issuance of treasury stock
Conversions to common stock
Balance at December 31, 2019
Issuance of treasury stock
Balance at December 31, 2020
Issuance of treasury stock
Balance at December 31, 2021
Common Stock
Outstanding
Treasury Stock
187,675,082
135,662,830
(18,595,315)
18,595,315
1,276,797
(1,276,797)
92,379
(92,379)
170,448,943
152,888,969
1,526,245
(1,526,245)
171,975,188
151,362,724
2,756,207
(2,756,207)
174,731,395
148,606,517
At December 31, 2021, 36,722,032 shares were reserved for issuance under our stock plans and dividend reinvestment program.
25702_AR2021 10-K for Annual Report.pdf 81
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81
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
19. Accumulated Other Comprehensive Loss
Reclassifications out of accumulated other comprehensive loss were as follows:
Cash flow hedges
Revenue
Cost of sales
Interest expense
Total before tax
Tax (benefit) provision
Net of tax
Available for sale securities
Financing revenue
Selling, general and administrative expense
Total before tax
Tax (benefit) provision
Net of tax
Pension and Postretirement Benefit Plans (b)
Transition asset
Prior service costs
Actuarial losses
Settlement
Total before tax
Tax benefit
Net of tax
$
$
$
$
$
Gain (Loss) Reclassified from AOCL (a)
Years Ended December 31,
2021
2020
2019
$
289
(117)
(366)
(194)
(49)
(145) $
(161)
11
—
(150)
(37)
(113)
$
$
(6) $
10,124
$
(7)
(13)
(2)
(11) $
231
10,355
2,589
7,766
$
72
104
—
176
44
132
1,079
—
1,079
270
809
—
$
4
$
(337)
(51,673)
(551)
(52,561)
(12,755)
(558)
(43,530)
(6,424)
(50,508)
(11,930)
6
(504)
(34,509)
(2,778)
(37,785)
(9,497)
$
(39,806) $
(38,578)
$
(28,288)
(a) Amounts in parentheses indicate reductions to income and increases to other comprehensive income.
(b) Reclassified from accumulated other comprehensive loss to other components of net pension and postretirement cost. These amounts are included in net periodic
costs for defined benefit pension plans and postretirement medical benefit plans (see Note 14 for additional details).
25702_AR2021 10-K for Annual Report.pdf 82
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82
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Changes in accumulated other comprehensive loss, net of tax, were as follows:
Balance at December 31, 2018
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive income
Balance at December 31, 2019
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive (loss) income
Balance at December 31, 2020
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive income (loss)
Cash flow
hedges
Available-for-
sale securities
Pension and
postretirement
benefit plans
Foreign
currency
adjustments
Total
$
191 $
278
(3,061) $
6,719
(846,461) $
(845)
(99,630) $
75,319
(948,961)
81,471
(132)
146
337
(1,861)
113
(1,748)
(1,411)
5,069
145
5,214
(809)
5,910
2,849
5,319
(7,766)
(2,447)
402
(6,662)
11
(6,651)
28,288
27,443
(819,018)
—
75,319
(24,311)
27,347
108,818
(840,143)
(70,623)
37,252
(29,913)
38,578
(32,045)
(851,063)
—
37,252
12,941
30,925
1,012
(839,131)
54,618
(34,168)
18,857
39,806
94,424
—
(34,168)
39,962
58,819
Balance at December 31, 2021
$
3,803 $
(6,249) $
(756,639) $
(21,227) $
(780,312)
20. Stock-Based Compensation Plans
We may grant restricted stock units, non-qualified stock options and performance stock units to eligible employees. All stock-based
awards are approved by the Executive Compensation Committee of the Board of Directors. We settle stock awards with treasury
shares. At December 31, 2021, there were 119,940,056 shares available for future grants.
Restricted Stock Units
Restricted stock units (RSUs) typically vest ratably over a three-year service period and entitle the holder to shares of common stock
as the units vest. The following table summarizes information about RSUs:
Outstanding - beginning of the year
Granted
Vested
Forfeited
Outstanding - end of the year
2021
2020
Shares
Weighted
average fair
value
6,560,372
$
2,100,126
(2,504,189)
(418,016)
5,738,293
$
6.27
8.36
6.72
6.61
6.95
Shares
4,480,847
$
4,123,544
(1,486,371)
(557,648)
6,560,372
$
Weighted
average fair
value
9.51
3.92
9.65
5.06
6.27
The fair value of RSUs is determined based on the stock price on the grant date less the present value of expected dividends. At
December 31, 2021, there was $9 million of unrecognized compensation cost related to RSUs that is expected to be recognized over a
weighted-average period of 1.6 years. The intrinsic value of RSUs outstanding at December 31, 2021 was $38 million. The fair value
of RSUs vested during 2021, 2020 and 2019 was $22 million, $6 million and $8 million, respectively. During 2019, we granted
3,113,886 RSUs at a weighted average fair value of $6.56.
In 2021 and 2020, we granted 121,455 and 282,131 RSUs, respectively, to non-employee directors. These RSUs vest one year from
the grant date.
25702_AR2021 10-K for Annual Report.pdf 83
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83
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Performance Stock Units
Performance stock units (PSUs) are stock awards where the number of shares ultimately received by the employee is conditional upon
the attainment of certain performance targets and total shareholder return relative to peer companies. PSUs vest at the end of a three-
year service period and the actual number of shares awarded may range from 0% to 200% of the target award. The final determination
of the number of shares to be issued is made by the Board of Directors, who may reduce, but not increase, the number of shares to be
awarded (negative discretion). PSUs are accounted for as variable awards until the end of the service period when the grant date is
established.
The following table summarizes share information about PSUs:
Outstanding - beginning of the year
Vested
Forfeited
Outstanding - end of the year
2021
2020
Shares
1,730,002
(287,109)
(433,802)
1,009,091
Weighted
average fair
value
$
$
9.31
9.33
9.33
6.60
Shares
2,778,362
(303,460)
(744,900)
1,730,002
$
$
Weighted
average fair
value
10.09
4.00
11.57
9.31
Share-based compensation expense for PSUs is recognized ratably over the service period based on the number shares expected to be
awarded and the fair value of an award. The fair value of PSUs is determined using a Monte Carlo simulation model. Due to the
variability of these awards, significant fluctuations in share-based compensation expense for PSUs recognized from one period to the
next are possible. During 2019, we granted 1,368,182 PSUs at an initial award date fair value of $6.60.
Stock Options
Stock options are granted at an exercise price equal to or greater than the stock price of our common stock on the grant date. Options
vest ratably over three years and expire ten years from the grant date. At December 31, 2021, there was $2 million of unrecognized
compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.4 years. The intrinsic
value of options outstanding at December 31, 2021 was $7 million and the intrinsic value of options exercisable was not significant.
The following table summarizes information about stock option activity:
Options outstanding - beginning of the year
12,814,365
$
11.81
12,822,684
$
14.08
2021
2020
Per share
weighted
average
exercise prices
Per share
weighted
average exercise
prices
Shares
Shares
Granted
Exercised
Canceled
Expired
Options outstanding - end of the year
Options exercisable - end of the year
There were no stock option exercises in 2019.
737,842
(777,429)
(604,101)
(1,050,608)
11,120,069
8,853,859
$
$
8.48
6.11
11.71
25.85
10.65
11.94
2,801,982
(33,501)
(1,653,126)
(1,123,674)
12,814,365
7,027,974
$
$
3.98
6.82
10.09
22.09
11.81
16.76
25702_AR2021 10-K for Annual Report.pdf 84
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84
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
The following table provides additional information about stock options outstanding and exercisable at December 31, 2021:
Range of per share exercise prices
Shares
Options Outstanding
Options Exercisable
Per share
weighted-average
exercise price
Weighted-average
remaining
contractual life
Shares
Per share
weighted-average
exercise price
Weighted-average
remaining
contractual life
$3.98 - $8.76
$12.64 - $16.88
$17.20 - $23.94
5,460,787 $
4,857,128 $
802,154 $
11,120,069 $
5.65
14.40
21.93
10.64
7.7 years
4.5 years
1.2 years
5.8 years
3,194,577 $
4,857,128 $
802,154 $
8,853,859 $
5.69
14.40
21.93
11.94
7.2 years
4.5 years
1.2 years
5.2 years
The fair value of stock options is determined using a Black-Scholes valuation model and requires assumptions be made regarding the
expected stock price volatility, risk-free interest rate, life of the award and dividend yield. The expected stock price volatility is based
on historical price changes of our stock. The risk-free interest rate is based on U.S. Treasuries with a term equal to the expected life of
the award. The expected life of the award and expected dividend yield are based on historical experience.
The following table lists the weighted average of assumptions used to calculate the fair value of stock options granted:
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life
Weighted-average fair value per option granted
Fair value of options granted
Years Ended December 31,
2021
2020
2019
2.4%
70.0%
1.1%
7 years
$4.53
$3,342
5.0%
43.0%
1.5%
7 years
$1.01
$2,830
3.0 %
41.5 %
2.5 %
5 years
$1.98
$1,722
Employee Stock Purchase Plan (ESPP)
We maintain a non-compensatory ESPP that enables substantially all U.S. and Canadian employees to purchase shares of our common
stock at an offering price of 95% of the average market price on the offering date. At no time will the exercise price be less than the
lowest price permitted under Section 423 of the Internal Revenue Code. Employees purchased 182,899 shares and 291,540 shares in
2021 and 2020, respectively. We have reserved 1,818,727 common shares for future purchase under the ESPP.
21. Subsequent Event
In February 2022, we closed on the sale and leaseback of our Shelton, Connecticut office building and received net proceeds, after fees
and expenses, of $51 million and will recognize a pre-tax gain of $14 million. Total base lease payments under the leaseback
agreement will be approximately $41 million over the ten year lease term.
25702_AR2021 10-K for Annual Report.pdf 85
March 1, 2022 17:28:32
85
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
22. Quarterly Financial Data (unaudited)
Effective October 1, 2021, we elected to adopt the FIFO inventory valuation methodology where we had previously valued inventory
on the LIFO basis. Accordingly, amounts previously reported for all quarters of 2020 and the first, second and third quarters of 2021
have been recast from what was previously reported in our quarterly filings on Form 10-Q and annual filing on Form 10-K.
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2021
Revenue
Cost of revenue
Operating expenses
(Loss) income from continuing operations before income taxes
(Benefit) provision for income taxes
(Loss) income from continuing operations
Income (loss) from discontinued operations
Net (loss) income
Basic (loss) earnings per share (1)
Continuing operations
Discontinued operations
Net (loss) income
Diluted (loss) earnings per share (1)
Continuing operations
Discontinued operations
Net (loss) income
2020
Revenue
Cost of revenues
Operating expenses
Income (loss) from continuing operations before income taxes
Provision (benefit) for income taxes
(Loss) income from continuing operations
(Loss) income from discontinued operations
Net (loss) income
Basic (loss) earnings per share (1):
Continuing operations
Discontinued operations
Net (loss) income
Diluted (loss) earnings per share (1):
Continuing operations
Discontinued operations
Net (loss) income
$ 915,197 $ 899,203 $ 875,449 $ 983,712 $ 3,673,561
2,551,563
712,039
601,582
610,307
627,635
329,209
(41,647)
(13,992)
(27,655)
(3,886)
(31,541) $
263,105
25,791
4,915
20,876
(1,020)
19,856 $
266,897
6,970
(1,525)
8,495
572
9,067 $
270,202
1,471
(320)
1,791
(524)
1,267 $
1,129,413
(7,415)
(10,922)
3,507
(4,858)
(1,351)
(0.16) $
0.12 $
0.05 $
0.01 $
(0.02)
(0.01)
—
—
(0.18) $
0.11 $
0.05 $
0.01 $
(0.16) $
0.12 $
0.05 $
0.01 $
(0.02)
(0.01)
—
—
(0.18) $
0.11 $
0.05 $
0.01 $
0.02
(0.03)
(0.01)
0.02
(0.03)
(0.01)
$
$
$
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$ 796,268 $ 837,492 $ 891,898 $ 1,028,417 $ 3,554,075
502,891
521,954
(228,577)
(10,026)
(218,551)
565,532
255,477
16,483
16,957
608,242
272,380
11,276
541
727,995
2,404,660
282,973
1,332,784
17,449
(183,369)
(350)
7,122
(474)
10,735
17,799
(190,491)
10,064
$ (208,487) $
(3,032)
(3,506) $
616
11,351 $
10,115
2,467
20,266 $ (180,376)
$
$
$
$
(1.28) $
0.06
(1.22) $
— $
(0.02)
(0.02) $
(1.28) $
0.06
(1.22) $
— $
(0.02)
(0.02) $
0.06 $
—
0.07 $
0.06 $
—
0.06 $
0.10 $
0.01
0.12 $
0.10 $
0.01
0.11 $
(1.11)
0.06
(1.05)
(1.11)
0.06
(1.05)
(1) The sum of earnings per share amounts may not equal the totals due to rounding.
86
25702_AR2021 10-K for Annual Report.pdf 86
March 1, 2022 17:28:32
PITNEY BOWES INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in thousands)
Description
Valuation allowance for deferred tax asset
2021
2020
2019
Balance at
beginning of year
Additions charged
to expense
Deductions
Balance at end of
year
$
$
$
116,543
110,781
142,496
$
$
$
7,490
23,150
5,324
$
$
$
(2,255)
(17,388)
(37,039)
$
$
$
121,778
116,543
110,781
25702_AR2021 10-K for Annual Report.pdf 87
March 1, 2022 17:28:32
87
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Marc B. Lautenbach, certify that:
1. I have reviewed this Annual Report on Form 10-K of Pitney Bowes Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 22, 2022
/s/ Marc B. Lautenbach
Marc B. Lautenbach
President and Chief Executive Officer
25702_AR2021 10-K for Annual Report.pdf 88
March 1, 2022 17:28:32
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Ana Maria Chadwick, certify that:
1. I have reviewed this Annual Report on Form 10-K of Pitney Bowes Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 22, 2022
/s/ Ana Maria Chadwick
Ana Maria Chadwick
Executive Vice President and Chief Financial Officer
25702_AR2021 10-K for Annual Report.pdf 89
March 1, 2022 17:28:32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Pitney Bowes Inc. (the "Company") on Form 10-K for the year ended December 31,
2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marc B. Lautenbach, President
and Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Marc B. Lautenbach
Marc B. Lautenbach
President and Chief Executive Officer
Date: February 22, 2022
The foregoing certification is being furnished solely to accompany this report pursuant to 18 U.S.C. §1350, and is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference
into any filing of the Company.
25702_AR2021 10-K for Annual Report.pdf 90
March 1, 2022 17:28:32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Pitney Bowes Inc. (the "Company") on Form 10-K for the year ended December 31,
2021 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ana Maria Chadwick,
Executive Vice President and Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Ana Maria Chadwick
Ana Maria Chadwick
Executive Vice President and Chief Financial
Officer
Date: February 22, 2022
The foregoing certification is being furnished solely to accompany this report pursuant to 18 U.S.C. §1350, and is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference
into any filing of the Company.
25702_AR2021 10-K for Annual Report.pdf 91
March 1, 2022 17:28:32
25702_AR2021 10-K for Annual Report.pdf 92
March 1, 2022 17:31:05
Stockholder Information
World Headquarters
Pitney Bowes Inc.
3001 Summer Street, Stamford, CT 06926
203.356.5000
www.pitneybowes.com
Annual Meeting
Stockholders are cordially invited to attend the Virtual Annual
Meeting at 9:00 a.m., Monday, May 2, 2022, via live webcast. Notice
of the meeting will be mailed or made available to stockholders
of record as of March 4, 2022. Please refer to the Proxy Statement
for information concerning admission to the meeting.
10-K Report
Included in this Annual Report to Stockholders is a copy of our
Annual Report on Form 10-K for the fiscal year ended December 31,
2021, as filed with the Securities and Exchange Commission (SEC).
This Annual Report contains statements that are forward-looking.
These statements are based on current expectations and
assumptions that are subject to risks and uncertainties. Actual
results could differ materially because of factors discussed in the
Forward-Looking Statements section of the Form 10-K. The
CEO/CFO certifications required to be filed with the SEC under
Section 302 of the Sarbanes-Oxley Act of 2002 were filed as
exhibits to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021. The CEO certification required to be
submitted to the NYSE pursuant to Section 303A.12(a) of the
NYSE Listed Company Manual was submitted on June 2, 2021.
Copies of our Form 10-K are available without charge at
www.pb.com/investorrelations or upon written request to:
Investor Relations
Pitney Bowes Inc.
3001 Summer Street, Stamford, CT 06926
Stock Exchange
Pitney Bowes common stock is traded under the symbol “PBI.”
The principal market on which it is listed is the New York
Stock Exchange.
Investor Inquiries
All investor inquiries about Pitney Bowes should be addressed to:
Investor Relations
Pitney Bowes Inc.
3001 Summer Street, Stamford, CT 06926
Comments concerning the Annual Report
should be sent to:
Corporate Communications
Pitney Bowes Inc.
3001 Summer Street, Stamford, CT 06926
Transfer Agent and Registrar
Regular Mail: Broadridge Corporate Issuer Solutions
PO Box 1342
Brentwood, NY 11717
Overnight Mail: Broadridge Corporate Issuer Solutions
ATTN: IWS
1155 Long Island Avenue
Edgewood, NY 11717
Email: shareholder@broadridge.com
Website: https://shareholder.broadridge.com/PBI
Stockholders may call Broadridge at (800) 648-8170.
Stockholder Inquiries
To provide or obtain information concerning transfer
requirements, lost certificates, dividends, changes of address
and other matters, please call: (800) 648-8170, TDD phone
service for the hearing impaired (855) 627-5080, for foreign
holders (720) 414-6868; or write to an address above.
Dividend Reinvestment Plan
Owners of Pitney Bowes Inc. common stock may purchase
common stock, $1 par value, with their dividends through the
Dividend Reinvestment Plan. A prospectus and enrollment card
may be obtained by calling (800) 648-8170 or (720) 414-6868
(int’l) or by writing to the agent at an address above.
Direct Deposit of Dividends
For information about direct deposit of dividends, please call
(800) 648-8170 or (720) 414-6868 (int’l) or write to the agent
at an address above.
Duplicate Mailings
If you receive duplicate mailings because you have more than
one account listing, you may wish to save your company money
by consolidating your accounts. Please call (800) 648-8170 or
(720) 414-6868 (int’l) or write to the agent at an address above.
The materials used in this publication are recyclable.
The paper is certified to Forest Stewardship Council® (FSC®) standards.
Pitney Bowes, the Corporate Logo and other secondary marks are
trademarks of Pitney Bowes Inc. All other trademarks are the intellectual
property of their respective owners.
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3001 Summer Street, Stamford, CT 06926 203.356.5000 www.pitneybowes.com