Pitney Bowes
Annual Report
Pitney Bowes, a global shipping and mailing
company, provides technology, logistics and
financial services to help clients reduce the
complexities of sending parcels and mail.
Marc B. Lautenbach
President and
Chief Executive Officer
Fellow shareholders:
We have made tremendous progress over the past decade evolving Pitney Bowes
into a global shipping and mailing company to help clients reduce the complexities
of sending parcels and mail. Ten years ago, when I joined as CEO, Pitney Bowes
was stuck in secular decline with substantial debt. We are a much different company
today. We are a vibrant company with innovative technology, great capabilities
and a steely-eyed determination to serve our clients. We are also positioned to
grow with many new opportunities that could not have been previously envisioned.
And all this has happened while staying true to our core values.
While our progress has not always been a straight line — or easy — we continue to take the
necessary actions to create long-term value. We have invested in our business, our people and our
client relationships. This is reflected in our revenue results over the past five years, our employee
engagement scores — which are consistent with high-performance companies — and our
improving client satisfaction scores. While I am confident profitable revenue growth will follow,
I would be the first to admit that it has taken longer than I would have hoped. That said, I believe
the necessary ingredients are in place for sustained profitable revenue growth.
1
Pitney Bowes Annual Report 2022 Letter to Shareholders
Our Board of Directors and management team
remain focused on delivering sustainable future
value for our shareholders. Our strategy has always
been keenly focused on a simple truth: Build a great
business, consistent with the values that have
sustained Pitney Bowes for over 100 years, and
positive results will follow.
We continue to believe our portfolio is properly
aligned in markets where we have brand permission
to win. That being said, we are always on the lookout
for opportunities to drive shareholder value.
Pitney Bowes has been reimagined and reshaped,
strategically, with bold investment and a willingness
to make the hard decisions to create long-term value.
Our culture and resolve have never wavered. The
people of this great company continue to do the
right thing the right way.
Our watchwords going forward are agility, focus
and acceleration. We will benefit from the strong
alignment of businesses across our enterprise, which
are truly differentiated, better and stronger together.
Each of our businesses plays a critical role in driving
our strategy and each benefits from significant
competitive advantages as part of Pitney Bowes.
Transformation is never easy, but our people
continue to forge ahead with grit and resilience.
Recap of 2022
It was a good year overall, given all the external
factors our people, clients and markets faced and
had to overcome.
During 2022, we successfully reconfigured our
parcel network. We added many new, key customer
relationships. We established positive momentum
toward the end of the year, particularly in our
domestic parcel business.
2
G LO B A L E CO M M E R C E
Positioned to
pursue a large and
rapidly growing
ecommerce market
opportunity
In 2022, GEC largely completed the buildout
of its US Domestic Parcel network, comprising
17 hubs, a Pitney Bowes–owned transportation
fleet and a network of transportation partners.
The network is powered by a range of
digital capabilities, including shipping label
technology, compliance and accurate quoting
and tracking.
With our footprint largely established, we
continue to partner with some of the most
innovative companies in the world to deploy
technology solutions, including robotics and
autonomous vehicles, that are redefining
ecommerce logistics. These investments have
helped us achieve market-competitive service
levels with predictable costs. Our more
consistent service has resulted in higher
client satisfaction, new client acquisitions
and significantly lower churn.
Pitney Bowes Annual Report 2022 Pitney Bowes Results
• For the year, our revenue was $3.5 billion,
• Maintained high service levels and continued
contribution margin improvement during the
similar to 2021 on a comparable basis
holiday peak season
• Employee engagement scores were consistent
• Launched next-gen portfolio of ecommerce
with high-performance companies
• Continued improvement in client satisfaction scores
• Voted one of America’s Best Large Employers,
Best Employers for Diversity and Best Employers
for Women by Forbes
Presort Highlights
• Presort processed 16 billion pieces of mail
and grew revenue by 5%
• Three new markets entered: Las Vegas Mega
Center, Orlando and Salt Lake City
SendTech Highlights
• Grew equipment sales by 4% on a constant
currency basis and increased finance receivables
by $44 million to $1.2 billion
• 20%+ growth in identified Growth Initiatives
• Introduced the Shipping 360™ Platform and
launched PitneyShip Pro, which helped drive
shipping-related revenue growth of 22%
year over year
Global Ecommerce Highlights
• Processed Domestic Parcel volumes of 170 million,
grew Domestic Parcel revenue by 10% and
expanded unit margins by $0.34 versus prior year
• Based on new client wins, our annualized Domestic
Parcel volumes are now approximately 200 million
and we expect to build further on that level for
full-year 2023
• Substantial improvement in service levels, which
are now comparable to best-of-class providers
logistics service platforms: Designed Delivery,
Returns and Cross-Border and Fulfillment services
• Network buildout completed with attendant
automation
In early April of 2022, we were honored to be present
at the signing by President Biden of the historic Postal
Reform Bill. The legislation was 14 years in the making
and made many necessary changes to the laws
regulating the USPS. Our presence underscores the
essential role Pitney Bowes plays in how the United
States works. With new agreements in place, we look
forward to serving as an even greater partner
with the USPS in mail and parcels.
Our Past 10 Years — and Our Past 100+
Over the past decade of our stewardship of this
remarkable and iconic company, we undertook a
purposeful transformation. The Board and management
team have taken decisive action to remake the
business that is focused on creating long-term value.
And an entirely different company has emerged,
carrying our proud legacy strengths forward, but also
shaping and scaling for the future ahead of us all.
In 2012, it was clear that strategic transformation
was required to ensure the long-term viability of
Pitney Bowes as a profitable business. Therefore, we
simplified our portfolio, expanded our base outside
SendTech and Presort to have a strong presence in
Global Ecommerce and improved our credit profile,
including significantly reducing our debt.
Our focus on creating and bolstering a foundation for
sustainable, profitable growth continues. This includes:
• Shifting our business into growth markets that are
logical adjacencies
3
Pitney Bowes Annual Report 2022 Letter to Shareholders
S E N D I N G T EC H N O LO GY S O LU T I O N S
Providing global technology
solutions that reduce complexities
in shipping and mailing
True innovation is not invention for invention’s sake but invention plus commercialization.
The International Design Award–winning PitneyShip Cube,™ the first-ever wireless shipping label
printer with built-in scale, is an extraordinary example of just that: true innovation.
That’s not all. In 2022, our SendTech business launched more new shipping products than the previous
10 years combined. We continue to simplify our shipping and mailing portfolio for scale and growth
through client-focused product development that delivers meaningful innovation.
With the attitude of a start-up, SendTech is laser-focused on aggressively pursuing growth opportunities,
achieving efficiency in our traditional business and delivering an optimal client experience.
• Reducing complexity of shipping and mailing for
As we continue to navigate a turbulent market, we
our customers through our innovative offerings
believe our businesses are well positioned for future
• Optimizing our cost structure through rightsizing
and operational improvements
• Leveraging economies of scale to drive profitability
across the enterprise
success. We are confident that our shareholders will
share in the value that derives from this success in
the near future, especially as there has been recovery
in various macro factors impacting our business.
This strategic and, frankly, necessary transformation
over the past decade has required significant
A Note on ESG
While our business purpose is rooted in delivering
investment, but that CapEx is behind us, and we
quality and value for our clients and a good return for
believe the benefits from these investments will
our investors, at the same time, we are steadily raising
soon be realized.
Of course, along the way we have endured many
unforeseen challenges, chief among them the
global pandemic and its ensuing fallout, but also
two recessions and global supply chain issues across
all industries, which contributed to delaying our
transformation. But the people of Pitney Bowes
did what they always do: persevere.
the bar on environmental, social and governance
matters in keeping with our responsibilities as
employer, neighbor and corporate citizen. This broad
effort spans environmental sustainability; employee
health and safety; diversity, equity and inclusion;
ethics and compliance; community involvement;
and philanthropy. Our progress in this regard is
detailed in our latest ESG Report.
4
Pitney Bowes Annual Report 2022 Going Forward
We built Pitney Bowes for long-term success and
keep driving toward it. We see significant opportunity
in Domestic Parcel — a business only five years old
and on the rise, with a great runway ahead of it.
Global Ecommerce remains a strategic necessity
for how we navigate and succeed in the present,
with tremendous promise ahead.
Long term has always been our frame of reference,
in all that we do.
We continue to attract and retain talent that embodies
that perspective. We have great people who love
working here. You can see it from afar in our NPS
numbers, but it’s even more present and palpable
up close, in the voices, actions and spirit we share.
We all know that there is still a lot in front of us, but
we have the goods and the grit to keep Pitney Bowes
moving forward, as a leader and an integral part of
how the global economy works best.
Now is our time for acceleration as we work toward
bringing our favorable future to life.
Sincerely,
Marc B. Lautenbach
President and Chief Executive Officer
P R E S O R T S E R V I C E S
Welcome to
Las Vegas, home to
the world’s newest,
most advanced
presort mail center
In May, Pitney Bowes opened our first Presort
Services Mega Center. The 175,000-square-foot
facility located in North Las Vegas is our
largest-ever Presort Services operating center
and first to process First-Class™ letters and flats,
Marketing Mail® letters, flats and parcels, and
bound printed matter all in a single facility.
The Mega Center features some of the
industry’s fastest and most efficient conveyors
and automation equipment, helping meet the
demands of mailers and shippers from Arizona,
California, Nevada, Utah and throughout the
Pacific Northwest.
5
Pitney Bowes Annual Report 2022 Summary of Selected Financial Data
For the year ended December 31,
(amounts in thousands, except per share data and total employees)
2022
2021
2020
As reported
Revenue
Net income (loss)
Diluted earnings (loss) per share from continuing operations
Net cash from 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
$ 3,538,042
$
$
36,940
0.21
$ 175,983
$ 163,816
$ 124,840
$
0.20
177,252
$ 4,741,355
$ 2,205,266
60,653
$
11,000
$ 178,780
$
$
$
37,011
0.15
68,338
1.3x
$ 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
$ 342,596
$ 365,548
$ 375,772
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Pitney Bowes Annual Report 2022
Reconciliation of Reported Consolidated
Results to Adjusted Results
For the year ended December 31,
(dollars in thousands, except per share data)
Net income (loss)
2022
2021
2020
$ 36,940
$
(1,351)
$ (180,376)
Loss (income) from discontinued operations, net of tax
Provision (benefit) for income taxes
Income (loss) from continuing operations before taxes
Restructuring charges
Gain on sale of assets
(Gain) loss on sale of businesses, including transaction costs
Loss on debt redemption/refinancing
Goodwill impairment
Adjusted income before taxes
Interest expense, net
Adjusted EBIT
Depreciation and amortization
Adjusted EBITDA
—
2,940
39,880
18,715
(14,372)
(12,205)
4,993
—
37,011
141,769
178,780
163,816
4,858
(10,922)
(7,415)
19,003
(1,434)
(7,619)
56,209
—
58,744
143,945
202,689
162,859
$ 342,596
$ 365,548
(10,115)
7,122
(183,369)
20,712
(11,908)
641
36,987
198,169
61,232
153,915
215,147
160,625
$ 375,772
Diluted earnings (loss) per share
$
0.21
$
(0.01)
$
Loss (income) from discontinued operations, net of tax
Restructuring charges
Gain on sale of assets
(Gain) loss on sale of businesses, including transaction costs
Loss on debt redemption/refinancing
Goodwill impairment
Tax on surrender of investment securities
—
0.08
(0.06)
(0.09)
0.02
—
—
0.03
0.08
(0.01)
(0.01)
0.24
—
—
(1.05)
(0.06)
0.09
(0.05)
—
0.16
1.13
0.07
Adjusted diluted earnings per share
$
0.15
$
0.32
$
0.31
Net cash from operating activities
Net cash used in operating activities — discontinued operations
Capital expenditures
Restructuring payments
Change in customer deposits at PB Bank
Transaction costs paid
$ 175,983
—
(124,840)
15,406
(3,990)
5,779
$ 301,515
—
(184,042)
21,990
14,862
—
$ 301,972
37,912
(104,987)
20,014
26,082
2,117
Free cash flow
$ 68,338
$ 154,325
$ 283,110
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 impact of discontinued operations, restructuring charges, gains, losses and costs related to the
sale of assets, acquisitions and dispositions, goodwill impairment charges, losses on debt redemptions and refinancings, and other unusual or one-time items. Management 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. Management believes free cash flow provides investors better insight into the amount of cash 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 2022
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, 2022
Commission file number: 1-3579
PITNEY BOWES INC.
State of incorporation: Delaware
I.R.S. Employer Identification No.
06-0495050
Address:
3001 Summer Street, Stamford, Connecticut 06926
Telephone Number:
(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
☐
Accelerated filer
þ
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
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ¨
As of June 30, 2022, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $628 million based on
the closing sale price as reported on the New York Stock Exchange. At January 31, 2023, there were 174,184,551 outstanding shares of common
stock, $1 par value.
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, are incorporated by reference in Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
1
PITNEY BOWES INC.
TABLE OF CONTENTS
PART I
Page Number
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Item 6.
RESERVED
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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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 results of operations, financial condition and
forward-looking statements are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by
reference in our filings with the Securities and Exchange Commission. While conditions related to the COVID-19 pandemic have
improved, the pandemic continues to be dynamic, and near-term challenges across the economy remain; and the effects that they may
have on our, and our clients' businesses remain uncertain. Other factors which could cause future financial performance to differ
materially from expectations 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, United States Postal Service (USPS) commercial programs or our contractual
relationships with the 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
the impacts of inflation and rising prices, higher interest rates and a slow-down in economic activity, including a global
recession, to the company, our clients and retail consumers
the loss of some of our larger clients in our Global Ecommerce and Presort Services segments
changes in labor and transportation availability and costs
the impacts on our cost of debt due to recent increases in interest rates and the potential for future interest rate hikes
changes in foreign currency exchange rates, especially the impact a strengthening U.S. dollar could have on our global
operations
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
global supply chain issues adversely impacting our third-party suppliers' ability to provide us products and services
competitive factors, including pricing pressures, technological developments and the introduction of new products and
services by competitors
expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events
our success at managing customer credit risk
changes in tax laws, rulings or regulations
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, and other geopolitical risks
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
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.
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 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 services offers a range of services for our clients to choose from to manage their 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.
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 the largest 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. In 2022, we processed over 16 billion pieces of mail through our network of operating centers throughout the United States.
Using our fully-customized proprietary technology, we provide 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 (SendTech 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 them to 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.
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.
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.
4
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 and
national posts 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.
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 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
5
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
Employee Profile
We have approximately 11,000 employees, with 81% 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 provide competitive compensation and strive to maintain a diverse, inclusive and safe workplace, with
equitable opportunities for growth and development. Our compensation programs are designed to reward performance and
contribution. We regularly assess the business environments and labor markets in the areas we operate to ensure our compensation
programs reflect best practices and are market competitive. Depending on position and level, elements of our compensation packages
include base salary or wages, variable compensation based on individual and company objectives and equity. We provide a
competitive benefits package fostered on work/life balance, including medical, dental, life and disability insurance, and benefits that
provide additional support for our employees’ mental, physical, financial and social well being.
Diversity and Inclusion
Maintaining a diverse workforce and an inclusive environment is critical to our success and we view diversity and inclusion as a
competitive differentiator that helps us attract, grow, engage and retain the best talent. 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. Our global workforce is comprised of over 43% women and 35% of our global managers are
women. Our U.S. population is nearly 50% people of color and 36% of our U.S. managers are people of color.
We continue to increase diversity and inclusion awareness throughout our company through enhancements and improvements to our
talent acquisition processes, cultural awareness training and the creation of allies and mentors to help advance diversity and inclusion
in our workforce.
Employee Engagement and Development
We are committed to creating a culture where our employees feel supported and valued. We offer our employees many opportunities
to advance their skills, learn new skills and achieve career goals through virtual and in-person development and training programs,
professional development initiatives, experiential learning, mentoring and coaching programs and inclusion networks.
Through multiple platforms, we offer employees and candidates varied opportunities to find development opportunities and stay
informed about key changes to our business. We also conduct an independent annual employee engagement survey with demonstrated
high levels of employee participation. We benchmark our results against our previous year’s performance, as well as against an
external database of high-performing organization, with a particular focus on our strategic enablers and implement changes where
possible and financially prudent. Each year, we consider the feedback from employees, enhancing our relationship with them.
6
Health and Safety
We are committed to providing a safe workplace that protects against and limits personal injury and environmental harm. Through
regular evaluations of site safety performance, sharing of successes, and creating projects to engage employees in safety
improvements, we identify risks, provide guidance and training, review and learn from accidents, and reduce injuries. We also report
monthly to both local site management and senior leadership on safety metrics, trends, risks and regulatory activity. Through these
efforts and employee engagement, we have experienced seen significant improvements in our total recordable cases and total
recordable incident rates since 2019.
Since the inception of the COVID-19 pandemic, we implemented numerous protocols, policies and process changes in our warehouses
and offices to ensure the health and safety of our employees, suppliers and the surrounding communities. All our offices and facilities
are open to employees; however, we have adopted a flexible workplace strategy in our offices, allowing employees that can work
remotely the opportunity to continue to do so. For those employees that report to an office or facility, we continue to place an
emphasis on maintaining a high level of performance while ensuring a safe work environment.
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
Daniel J. Goldstein
Christoph Stehmann
Jason C. Dies
Gregg Zegras
Ana Maria Chadwick
James Fairweather
61
61
60
53
55
51
51
President and Chief Executive Officer
Executive Vice President and Chief Legal Officer and Corporate Secretary
Executive Vice President, International Sending Technology Solutions
Executive Vice President and Group Executive (1)
Executive Vice President and President, Global Ecommerce
Executive Vice President and Chief Financial Officer
Executive Vice President, Chief Innovation Officer
Executive
Officer Since
2012
2010
2016
2017
2020
2021
2021
(1) Effective January 3, 2023, Mr. Dies was named Executive Vice President and Group Executive. Prior to this, he was Executive Vice
President and President, Sending Technology Solutions.
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. 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 in January 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.
7
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.
Mailing and Shipping Industry Risks
The financial condition of the USPS, or the national posts in our other major markets, has affected, and could, in the future 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. Although Congress provided the USPS a measure of relief with
the enactment of the Postal Service Reform Act of 2022, the USPS, and national posts in our other major markets, still face financial
challenges. If these challenges interfere with these posts’ ability to continue to provide the services they currently provide, our
financial performance may 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 achieve profitable revenue growth may be
adversely affected. Our digital delivery options also depend upon certain contractual relationships with the USPS to enable us to offer
these services profitably, and the USPS has adjusted the terms of those contracts in the past. Should the USPS make additional
changes to how it contracts with us for this service, our profitability could 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 may 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, posts in other major markets, and the
governmental bodies that regulate the posts themselves. These postal authorities have the power to regulate some of our current
products and services and to establish guidelines for postage rates. 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 or there are
significant conditions to approval, favorable postage rates are reversed, regulations on our existing products or services are changed, if
posts utilize their position in the market or their role as product regulator to limit competition in areas where the posts themselves offer
solutions, or if we fall out of compliance with the posts’ 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 have declined and 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 one or more of the
following factors: changes in communication technologies and their use; changes in frequency and quality of mail delivery from
national posts; legislation incentivizing alternative means of communication, burdening mail, or limiting how the mail be used; or
pandemics or other external events affecting physical mail delivery. 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
8
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 from full-service ecommerce business process outsourcers, online marketplaces, freight forwarders, posts, 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 and national posts to smaller
companies offering negotiated carrier rates. If we cannot compete successfully in these markets 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-
related services to continue to grow; however, profit margins on these services are lower than those for our mailing-related offerings.
As a result, we need to achieve higher dollars of revenue to generate the same dollars of profit that we generate in our mailing
businesses. Accordingly, if we cannot continue to grow package volumes, 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
may 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 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, exchange rates, unemployment levels, pandemics, 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 demands of their clients.
This segment also relies upon the availability of labor and transportation at a reasonable cost and unexpected increases in these costs
due to higher demand or other macroeconomic factors (which have occurred in the past) could also impact the financial results of
Global Ecommerce. Further, Global Ecommerce's financial results are highly dependent on its performance in the fourth quarter, so if
any of these risk factors come to pass in that quarter, impact on the segment's performance could be more significant than other points
in the year.
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. If any of these larger clients or business partners leave our network or reduce their use of our services, which has occurred in
the past, and we are unable to replace that lost volume, it 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.
9
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 and productivity initiatives. 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. During the past few years, like many other companies, we and our suppliers experienced supply chain
interruptions and increased supply costs, due to, among other things, lockdowns associated with COVID-19, disruptions in the
container transportation market, volatility in the semiconductor industry, shortage of raw materials such as rubber and resin, threats of
rail strikes, rising inflation and geopolitical instability. Although our 2022 financial results were not significantly impacted, these
factors, at times, caused us to experience longer wait times for supplies or increased costs. If these supply chain constraints were to
worsen or, if other unknown events cause our suppliers to not be able to provide their services, components or equipment to us in a
timely manner, or, if 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 continue to increase 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) and delay automation and productivity initiatives in our warehouses.
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. Given our continued reliance upon these providers,
any disruption to the timely supply of these services for any reason, any future unforeseen disruptions affecting these providers, any
dramatic increase in the cost of these services or any deterioration of the performance of these services (each of which we have
experienced, at times),have adversely affected or could adversely affect client satisfaction and our financial performance.
Our business depends on our ability to attract, retain, and engage 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. At times, both our Global Ecommerce and Presort Services segments
have experienced increased demand and competition for labor, especially for our warehouses, driving up costs. We supplement our
workforce with contingent hourly workers from staffing agencies on an as-needed basis; however, if we experience labor shortages, do
not effectively manage our use of 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 for research and development of new products and services and talent
needed to sell and service our other products and services within all our business units. Increased competition for employees has
resulted in higher costs for wages and 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 costs associated with the health and safety of our employees.
Difficulty in obtaining and protecting our intellectual property, and the risks of infringement claims 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
10
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.
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
integrating financial reporting and other IT systems;
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;
reducing fixed costs previously associated with divested businesses; 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 made and are continuing to make 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, or our investments in facilities do
not yield the expected productivity improvements, 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. The risk of cyberattacks has increased
in the past year by cyberwarfare in connection with the ongoing Russia/Ukraine conflict, including proliferation of malware from the
conflict into systems unrelated to the conflict. 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 damage to our brand and reputation.
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, like the 2019 and 2020 ransomware attacks that were previously discussed in Item 7 of our
Annual Reports for the periods ended December 31, 2019 and December 31, 2020.. In response to these attacks, as well as the
constantly evolving cyber threat landscape, we continually implement and update measures to 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.
11
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. However, ongoing litigation in the European Union on how to
comply with GDPR requirements continues to create uncertainty in how to demonstrate compliance, and the outcome of these cases
could impact how companies do business in the European Union. In the United States, several states have enacted different laws
regarding personal information and privacy that impose significant new requirements on consumer personal information. In some
instances (e.g., California), these laws also expand the definition of consumer personal information to include information related to
employees and business contacts. 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, and continually update our
systems to protect our data and comply with these laws, 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
Periods of difficult economic conditions, other macroeconomic events, or a public health crisis, such as the ongoing global COVID-19
pandemic, could adversely affect our business.
Our operations and financial performance are impacted by the economic conditions in the United States and the other countries where
we and our clients do business. Any significant or perceived weakening of these economies, reduction in business confidence or
change in business or consumer spending habits, concerns of a domestic or global recession, rising inflation or interest rates, limited
availability of credit, or other macroeconomic events, not within our control, may reduce our client’s demand for shipping and mailing
products and services (especially in our Global Ecommerce business, which is subject to cyclical trends in consumer sentiment and
spending habits) and thus, negatively affect our financial performance. These economic conditions, at times, have arisen and can arise
suddenly, and the duration and full impact of such conditions can be difficult to predict. Moreover, while our financial results for the
fiscal year 2022 were not significantly impacted by the COVID-19 pandemic, due to variants of the virus that continue to appear,
COVID-19, or the emergence of another public health crisis, could also adversely impact our business, financial condition, and results
of operations.
Future credit rating downgrades or capital market disruptions could adversely affect our ability to maintain adequate liquidity,
provide competitive financing services and to fund various discretionary priorities.
We provide competitive finance offerings 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
12
loan charter or an increase in our credit default swap spread could impact our ability to maintain adequate liquidity, which could
impact our ability to provide competitive finance offerings, repay or refinance maturing debt, and fund other strategic or discretionary
activities, which could adversely affect our operational and financial performance.
Changes in tax rates, laws or regulations could adversely impact our financial results.
We are subject to taxes in the U.S. and in the foreign jurisdictions where we do business. Due to economic and political conditions, tax
rates, assessments and enforcement approaches in the U.S. and various foreign jurisdictions have been and may be subject to
significant change. In addition, changes in tax laws including further regulatory developments arising from U.S. tax reform legislation
and/or regulations around the world could result in a tax expense or benefit. For example, in light of continuing global fiscal
challenges, various levels of government and international organizations such as the Organization for Economic Co-operation and
Development (OECD) and EU are increasingly focused on tax reform and other legislative or regulatory action to increase tax
revenue. These tax reform efforts, such as the OECD-led Base Erosion and Profit Shifting project (BEPS), are designed as anti-abuse
measures, including a global minimum tax. Although some countries have passed tax laws based on findings from the BEPS project,
the final nature, timing and extent of any such tax reforms or other legislative or regulatory actions is unpredictable, and it is difficult
to assess their overall effect. These changes could increase our effective tax rate and adversely impact our financial results.
Our Global Ecommerce segment is exposed to increased foreign exchange rate fluctuations.
The sales generated from many of our clients who use our cross-border services are exposed to foreign exchange rate fluctuations.
Currently, merchants using our cross-border services are located primarily 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. The current strength of the U.S. Dollar relative
to currencies in the countries where we do the most business continues to impact our client’s ability to compete internationally as the
cost of similar international products improved relative to the cost of U.S. retailer’s products. This in turn, adversely affected Global
Ecommerce’s revenue and profitability during 2022. If the strength of the U.S. dollar continues, or if the British Pound were to
strengthen relative to other currencies, our retailers may continue to experience a decrease in international sales volumes, which, in
turn would adversely affect this segment’s revenue and profitability.
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 regulations 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.
Shareholder Activism Risks
Our business could be negatively affected as a result of shareholder activism.
We value constructive input from investors and regularly engage in dialogue with our stockholders regarding strategy and
performance. Our board of directors and management team are committed to acting in the best interests of all of our stockholders.
There is no assurance that the actions taken by our board and management in seeking to maintain constructive engagement with
certain stockholders will be successful.
The company recently received a notice from Hestia Capital Partners, LP (together with its affiliates, “Hestia”) of Hestia’s intention to
nominate seven director candidates for election to our board at our 2023 annual meeting of stockholders. Hestia has also made public
13
statements critical of our board, management and strategy. Responding to Hestia’s actions or potential actions by another activist
stockholder could be time-consuming, disrupt our operations and divert the attention of management, our board and our employees. It
could also require us to incur substantial legal, communications and other advisory fees and proxy solicitation expenses. Further, we
may choose to initiate, or may become subject to, litigation as a result of proposals by activist stockholders or proxy contests or
matters relating thereto, which would serve as a further distraction to our board of directors and management and could require us to
incur significant additional costs.
Additionally, perceived uncertainties as to our future direction as a result of activist stockholders or changes to the composition of our
board may lead to the perception of a change in the direction of our business or other instability, which may be exploited by our
competitors and/or other activist stockholders and cause concern to our current or potential customers, employees, investors, rating
agencies, strategic partners and other constituencies, which could result in lost sales and business opportunities, make it more difficult
to attract and retain qualified personnel and business partners and adversely impact our ability to access capital markets at reasonable
costs. Further, actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative
market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We lease numerous facilities worldwide, including administrative offices, fulfillment centers, parcel operations and mail sortation
facilities, service locations, data centers and call centers. Our corporate headquarters is located in Stamford, Connecticut.
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 our research and development activities in facilities located in Noida and Pune, India, Bielsko-Biala, Poland, Austin,
Texas 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.
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, 2023, we
had 12,394 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 2022, we repurchased 2.8 million shares of our common stock at an aggregate price of $13 million. We
did not repurchase any additional shares of our common stock in 2021 or 2020. At December 31, 2022, we have authorization from
our Board of Directors to repurchase up to of $3 million of our common stock.
Stock Performance Graph
Our peer group is comprised of: ACCO Brands Corporation, Bread Financial Holdings, Inc. (formerly 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 accompanying graph shows the annual change in the value of a $100 investment in Pitney Bowes Inc., the Standard and Poor's
(S&P) SmallCap 600 Composite Index and our peer group over a five-year period assuming the reinvestment of dividends. On a total
return basis, a $100 investment on December 31, 2017, in Pitney Bowes Inc., the S&P SmallCap 600 Composite Index and our peer
group would have been worth $44, $133, and $111 respectively, on December 31, 2022.
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 SmallCap 600 Composite Index 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.
ITEM 6. [RESERVED]
15
Comparison of Cumulative Five Year Total Return to ShareholdersPitney BowesS&P SmallCap 600Peer Group201720182019202020212022—50100150200 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 and is calculated by converting the current period non-
U.S. dollar denominated revenue using the prior year's exchange rate. Management believes that excluding the impacts of currency
exchange rates provides investors a better understanding of the underlying revenue performance. 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, 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 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, 2020, 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, 2021, filed with the SEC on February 22, 2022.
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
Global Ecommerce
Presort Services
SendTech Solutions
Total Segment EBIT
Revenue
Years Ended December 31,
2022
2021
$ 2,249,941
$ 2,334,674
438,191
274,508
354,960
154,186
66,256
460,888
294,418
350,138
159,438
74,005
$ 3,538,042
$ 3,673,561
$ 1,576,348
$ 1,702,580
602,016
573,480
1,359,678
1,397,501
$ 3,538,042
$ 3,673,561
Actual %
change
Constant
Currency %
Change
(4) %
(5) %
(7) %
1 %
(3) %
(10) %
(4) %
(7) %
5 %
(3) %
(4) %
(3) %
(3) %
(5) %
4 %
— %
(9) %
(3) %
(7) %
5 %
(1) %
(3) %
EBIT
Years Ended December 31,
2022
2021
% change
$ (100,308) $
(98,673)
82,430
79,721
400,909
429,415
$ 383,031 $ 410,463
(2) %
3 %
(7) %
(7) %
16
Revenue decreased 4% (3% at constant currency) in 2022 compared to 2021 primarily due to a decrease in business services revenue
primarily driven by lower Global Ecommerce volumes, lower support services revenue driven by a declining meter population and a
shift to cloud-enabled products and lower financing revenue primarily due to lower lease extensions. Global Ecommerce revenue
decreased 7%, Presort Services revenue increased 5% and SendTech Solutions revenue declined 3% (1% at constant currency).
Segment EBIT for 2022 decreased 7% compared to 2021. Global Ecommerce EBIT decreased 2%, primarily due to higher operating
expenses and a decline in revenue from cross-border services and digital delivery services, partially offset by the increase in domestic
parcel delivery services gross margin. Presort Services EBIT increased 3%, primarily due to higher revenue, partially offset by higher
transportation costs. SendTech Solutions EBIT decreased 7%, primarily driven by the decline in revenue and lower margins. Refer to
Results of Operations section for further information.
Factors Affecting Comparability
Certain transactions and changes occurred during the year that impact the comparability of our 2022 financial results to the prior
periods. These transactions and changes include:
•
•
•
The sale of our Borderfree cross-border ecommerce solutions business (Borderfree);
A change in the presentation of revenue for digital delivery services primarily related to our Global Ecommerce business
from a gross basis to a net basis due to an adjustment in terms of one of our contracts with the USPS; and
A refinement in the methodology of allocating transportation costs between our Global Ecommerce and Presort Services
segments
Effective July 1, 2022, we sold Borderfree, which was reported in our Global Ecommerce segment. Prior year results were not recast
to exclude the revenue and expenses from Borderfree. Accordingly, revenue and costs for 2022 include only six months of operations
for Borderfree, whereas 2021 includes a full year of operations. Net income of Borderfree was not significant in any period presented.
The change in revenue presentation became effective October 1, 2022. Accordingly, revenue and cost of revenue for certain digital
delivery services for the first nine months of 2022 and full year 2021 are reported as business services revenue and cost of business
services, respectively, and beginning for the fourth quarter of 2022, the revenue and cost of revenue for these services are reported on
a net basis as business services revenue.
The refinement to the methodology of allocating transportation costs between Global Ecommerce and Presort Services resulted in an
increase to Global Ecommerce EBIT and a corresponding decrease to Presort Services EBIT of approximately $10 million in 2022.
Outlook
We expect consolidated revenue growth in 2023 to be flat to a mid-single digit increase, on a comparable basis, and the percentage of
EBIT growth to outpace revenue growth, primarily due to an anticipated improvement in profitability in our Global Ecommerce
segment.
Within Global Ecommerce, we anticipate growth in Domestic Parcel, partially offset by continued softness in our Cross-border
operations. We anticipate Domestic Parcel margin and profit improvements from higher volumes and continued productivity
improvements from the investments we made in our facilities and network. In 2022, we saw significant productivity improvements in
labor, transportation and warehouse operations and expect further improvements in 2023. We expect our cross-border operations to
continue to be adversely impacted by a strong U.S. dollar and headwinds from changes in how certain of our clients may access cross-
border services in 2023 compared to 2022.
Within Presort Services, we expect margin and profit improvements from continued productivity improvements driven by our
investments in increased automation and facilities consolidation. Revenue is expected to benefit from growth in Marketing Mail and
Bound and Packet Mail and from a full year of volumes from our recent acquisitions, which we expect to offset the impact on revenue
from the expected decline in First Class Mail volumes.
In SendTech Solutions, we expect revenue growth from new products and our cloud-enabled shipping solutions to partially offset an
expected decline in mailing related revenues. We expect a stabilization in financing revenue due to new product offerings and an
increasing finance receivable portfolio. Overall segment margins are expected to remain strong.
Certain factors beyond our control could have adverse impacts on our 2023 results including, but not limited to, reduced consumer
spending due to inflationary pressures and rising prices, higher interest rates, a slow-down in economic activity, higher fuel and
transportation costs and other adverse geopolitical developments. Inflationary pressures and rising prices could put increase pressure
on wages, particularly warehouse and transportation employees, and result in higher component costs. Higher fuel and freight costs
could also adversely impact our operations. We expect that interest expense for 2023 will be about $30 million higher due to the recent
increases in interest rates and additional increases anticipated in 2023.
17
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
2022
$ 1,576,348
2021
$ 1,702,580
Actual %
change
Constant
Currency %
change
(7) %
(7) % $
2022
1,440,807
$
2021
1,577,628
2022
2021
8.6 %
7.3 %
Segment EBIT
Years Ended December 31,
2022
(100,308) $
2021
Actual %
change
(98,673)
(2) %
Segment EBIT
$
Global Ecommerce revenue decreased 7% in 2022 compared to 2021. The sale of Borderfree and the change in revenue presentation
each contributed a revenue decline of 2%. Lower cross-border services volumes contributed a revenue decline of 5% and lower digital
delivery services contributed a revenue decline of 2% compared to the prior year. Offsetting these declines, domestic parcel delivery
services contributed revenue growth of 5% compared to the prior year due to pricing actions.
Gross margin increased $11 million in 2022 compared to 2021 and gross margin percentage increased to 8.6% from 7.3% compared to
the prior year. Domestic parcel delivery services gross margin increased $59 million over the prior year due to pricing actions,
improved warehouse productivity and a $14 million prior year charge reflecting the estimated cost of a price assessment. Cross-border
gross margin declined $33 million compared to the prior year period primarily due to the decline in volumes driven by a strong U.S.
dollar and the loss of $21 million of gross margin due to the sale of Borderfree. Digital delivery services gross margin declined $18
million compared to the prior year period primarily due to the decline in volumes and revenue.
Segment EBIT for 2022 was a loss of $100 million compared to a loss of $99 million in 2021. The slight increase in loss was driven
by higher operating expenses of $12 million primarily due to higher employee-related expenses, which more than offset the increase in
gross margin of $11 million.
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,
2022
2021
Actual %
change
Constant
Currency %
change
2022
2021
2022
2021
Business services
$
602,016
$
573,480
5 %
5 % $
454,923 $
431,382
24.4 %
24.8 %
Segment EBIT
Years Ended December 31,
2022
2021
Actual %
change
Segment EBIT
$
82,430
$
79,721
3 %
Presort Services revenue increased 5% in 2022 compared to 2021. The processing of First Class Mail, Marketing Mail and Marketing
Mail Flats and Bound Printed Matter contributed revenue growth of 3%, 1%, and 1%, respectively, primarily due to the impact of
pricing actions.
18
Gross margin increased $5 million and segment EBIT increased $3 million, or 3% in 2022 compared to 2021 primarily due to higher
revenue from pricing actions and productivity improvements driven by investments in automation, partially offset by higher
transportation costs of $23 million driven by increased demand, higher fuel costs and higher allocated costs due to the revised
transportation cost allocation methodology. Gross margin percentage in 2022 was consistent with 2021.
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,
2022
2021
Actual %
change
Constant
Currency %
change
2022
2021
2022
2021
Business services
$
71,578
$
58,614
Support services
Financing
Equipment sales
Supplies
Rentals
Total
438,191
274,508
354,960
154,186
66,256
460,888
294,418
350,138
159,438
74,005
$ 1,359,679
$ 1,397,501
22 %
(5) %
(7) %
1 %
(3) %
(10) %
(3) %
23 % $
37,272 $
25,174
(3) %
(5) %
147,653
51,789
4 %
251,916
— %
(9) %
43,537
24,864
147,716
47,059
251,714
43,980
24,427
(1) % $
557,031 $
540,070
47.9 %
66.3 %
81.1 %
29.0 %
71.8 %
62.5 %
59.0 %
57.1 %
67.9 %
84.0 %
28.1 %
72.4 %
67.0 %
61.4 %
Segment EBIT
Years Ended December 31,
2022
2021
Actual %
change
Segment EBIT
$
400,909
$
429,415
(7) %
SendTech Solutions revenue decreased 3% (1% at constant currency) in 2022 compared to 2021. Support services revenue declined
5% (3% at constant currency) primarily due to a declining meter population and shift to cloud-enabled products. Financing revenue
declined 7% (5% at constant currency) primarily due to lower lease extensions as more clients are deciding to lease new equipment
rather than extend leases on existing equipment. Rentals revenue declined 10% (9% at constant currency). Partially offsetting these
decreases, business services revenue increased 22% (23% at constant currency) primarily due to growth in subscription services.
Gross margin for 2022 decreased $55 million and gross margin percentage decreased to 59% from 61.4%, primarily due to declines in
financing and support services revenue which have high gross margins. Segment EBIT decreased $29 million, or 7%, due to the
decline in gross margin, partially offset by lower operating expenses of $26 million, due in part, to lower employee-related expenses,
lower professional fees, lower credit loss provision and other cost savings.
19
CONSOLIDATED EXPENSES
Selling, general and administrative (SG&A)
SG&A expense of $906 million in 2022 decreased 2%, or $19 million, compared to 2021, primarily due to lower employee-related
expenses of $23 million, lower depreciation expense of $7 million, and lower professional fees of $7 million, partially offset by higher
travel expenses of $6 million and higher credit card fees of $5 million.
The majority of our SG&A expenses are 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,
2022
2021
Actual %
change
$
204,251
$
207,774
(2) %
Unallocated corporate expenses decreased $4 million in 2022 compared to 2021 primarily driven by lower salaries and variable-
compensation expenses of $9 million and lower marketing expenses of $6 million, partially offset by higher pension costs of $5
million and higher travel expenses, rent expense and insurance costs of $2 million each.
Research and development (R&D)
R&D expense decreased 7%, or $3 million in 2022 compared to 2021, primarily due to cost savings, partially offset by higher R&D
spending in our SendTech Solutions segment.
Restructuring charges
Restructuring charges, consisting of costs for employee severance and facility closures, were $19 million for each of the years ended
December 31, 2022 and 2021. See Note 12 to the Consolidated Financial Statements for further information.
Other components of net pension and postretirement cost
Other components of net pension and postretirement cost for the year ended December 31, 2022, was $4 million compared to $1
million in 2021. 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 (income) expense
Other income for the year ended December 31, 2022, of $22 million consists of a $14 million gain from the sale of our Shelton,
Connecticut office building, a $5 million gain from the sale of Borderfree, and a gain of $7 million from deferred proceeds received
related to the sale of businesses in prior years, and a charge of $5 million from the early redemption of debt. See Notes 9, 11 and 13 to
the Consolidated Financial Statements for further information.
Income taxes
The effective tax rate for 2022 includes a tax benefit of $5 million on the pre-tax gain from the sale of Borderfree as the tax basis was
higher than book basis, and a $1 million benefit associated with the 2019 sale of a business. See Note 15 to the Consolidated Financial
Statements for further information.
20
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2022 we had cash, cash equivalents and short-term investments of $681 million, which includes $182 million held at
our foreign subsidiaries used to support the liquidity needs of those subsidiaries. Our primary sources of liquidity include existing cash
and investments, cash generated from operations and borrowing capacity under our $500 million revolving credit facility. We
currently believe these sources of liquidity 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
2022
2021
Increase/
(decrease)
$ 175,983 $ 301,515 $ (125,532)
(24,269)
(155,251)
(198,083)
(330,371)
130,982
132,288
(16,130)
(4,863)
(11,267)
$
(62,499) $ (188,970) $ 126,471
Operating activities
Cash flows from operating activities in 2022 declined $126 million compared to 2021, primarily due to growth in our trade and
finance receivables which reduced year-over-year cash flow by $100 million. Cash flow from operations was also impacted by higher
tax payments of $10 million, higher interest payments of $10 million due to increases in variable rates and a postage payment of $14
million in 2022 related to a 2021 volume-related vendor price adjustment.
Investing activities
Cash flows from investing activities for 2022 improved $131 million compared to the prior year. Proceeds from the sale of businesses
and assets increased $133 million, primarily due to the sale of Borderfree ($95 million) and our Shelton, CT office building ($51
million), and capital expenditures were $59 million lower than the prior year. These improvements were partially offset by increased
investments in our financing products of $47 million and net payments of $28 million for the settlement of foreign currency exchange
contracts due to increased volatility in foreign exchange rates during 2022. We enter into foreign currency exchange contracts with
third-parties to offset the earnings volatility caused by changes in foreign currency exchange rates and the revaluation of intercompany
loans denominated in a foreign currency. Although there is minimal impact to our reported earnings, the settlement of these derivative
contracts results in cash outflows or inflows.
Financing activities
Cash flows from financing activities for 2022 improved $132 million compared to the prior year primarily due to lower net
repayments of debt of $126 million and lower premiums and fees paid to refinance debt of $42 million. These improvements were
partially offset by lower cash flow from changes in customer deposits at the PB Bank of $19 million and common stock repurchases of
$13 million .
Debt Activity
During 2022, we have reduced debt by $124 million, primarily from the redemption of the remaining $90 million of outstanding April
2023 notes, scheduled term loan repayments of $24 million and the purchase of $9 million of our debt in the open market. Through
February 16, 2023, we have purchased an additional $12 million of our debt in the open market.
The credit agreement that governs our $500 million secured revolving credit facility and term loans contains financial and non-
financial covenants. At December 31, 2022, we were in compliance with all covenants and there were no outstanding borrowings
under the revolving credit facility. In December 2022, we amended our $500 million credit facility to adjust our financial covenants
and provide additional financial flexibility. Borrowings under the revolving credit facility and term loans are secured by assets of the
company.
During 2022, The PB Bank (the Bank), a wholly owned subsidiary, has become a member of the Federal Home Loan Bank (FHLB) of
Des Moines. As a member, the Bank has access to certain credit products as a funding source known as "advances." As of December
31, 2022, the Bank had yet to apply for any advances.
21
Future Cash Requirements
The following table summarizes our known and contractually committed cash requirements at December 31, 2022 (in millions):
Debt maturities
Lease obligations
Purchase obligations
Retiree medical payments
Total
Payments due in
Total
2023
2024
2025
2026
2027
Thereafter
$ 2,240
$
405
217
93
33
74
215
12
$
281
$
70
1
11
51
63
1
11
$
245
$
401
$ 1,229
53
—
10
46
—
10
99
—
39
$ 2,955
$
334
$
363
$
126
$
308
$
457
$ 1,367
Debt
At December 31, 2022, we have outstanding debt of $2.2 billion. Approximately 65% of this debt is at fixed rates, including the effect
of interest rate swaps, and the remaining 35% is at variable rates. The weighted average interest rate of our variable rate debt at
December 31, 2022 was 7.5%. We estimate that cash interest payments for the next 12 months will be $170 - $180 million.
Required debt repayments over the next 12 months are $33 million, which we anticipate satisfying through available cash on hand and
cash generated from operations. Our next material principal maturity is in March 2024. We expect to satisfy this obligation with a
cost-effective capital market solution, available cash, or revolver access. 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. Lease obligations in the table above do not include $53 million of payments for leases signed but not yet
commenced at December 31, 2022. 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 will continue to invest in new solutions and services across our businesses to capitalize on market opportunities, and in our
facilities and technology to grow our businesses, improve productivity and gain additional economies of scale. 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 $125 million and $184 million for the years ended December 31, 2022 and 2021, respectively. In 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. During 2022, we continued to make necessary investments in our facilities,
network and technologies.
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 2023. There are no material restrictions on our
ability to declare dividends.
22
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, 2022, we have authorization from our Board of Directors to repurchase up to of $3 million of our
common stock.
Off Balance Sheet Arrangements
At December 31, 2022, we had approximately $26 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.
23
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 exceeds the carrying value of the net assets
assigned to that reporting unit, goodwill is not impaired, If the fair value of the reporting unit is less than the carrying value of the net
assets assigned to the reporting unit, a goodwill impairment loss is calculated as the difference between these amounts, limited to the
amount of goodwill allocated to the reporting unit.
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. The results of our annual goodwill impairment test
indicated that the fair value of our reporting units exceeded their fair value and no impairment existed.
During 2022, we determined that the agreement to sell Borderfree was a triggering event and an impairment test was performed as of
July 1, 2022. Further, we determined that the shortfall in fourth quarter performance of the Global Ecommerce reporting unit was an
additional triggering event. Accordingly, we performed another goodwill impairment test as of December 31, 2022 to assess whether
the goodwill of the Global Ecommerce reporting unit was impaired. We engaged a third-party to assist in the determination of the
reporting unit fair value. The fair value was estimated using a discounted cash flow model based on management developed cash flow
projections, which included judgements and assumptions related to revenue growth rates, operating margins, operating income, and
discount rate.
The results of our impairment analysis indicated that the Global Ecommerce reporting unit was not impaired. However, the fair value
of the reporting unit exceeded the carrying value by less than 10%. The judgements and assumptions used to estimate the fair value of
the reporting unit are inherently subjective and changes in any of the judgements or assumptions used to determine the fair value of
this reporting unit at December 31, 2022, could result in a different fair value determination. In order to evaluate the sensitivity of the
fair value calculations on the goodwill impairment test, we applied hypothetical changes to our most significant judgments and
assumptions. The most significant judgements and assumptions used in our analysis to determine the fair value of the reporting unit
was the discount rate and operating margins. Assuming all other factors remain constant, a 100 basis point increase in the discount rate
or a 100 basis point reduction in operating margins in each year would have resulted in a reporting unit fair value less than its carrying
value. The carrying value of goodwill for the Global Ecommerce reporting unit at December 31, 2022 was $339 million.
24
Events and circumstances that could change our estimates and assumptions and impact the fair value determination of the Global
Ecommerce reporting unit, include, but are not limited to, continued financial and operating performance below expectations, reduced
consumer spending due to inflationary pressures and rising prices, a continued and prolonged slow-down in economic activity,
increased competition and pricing pressures, changing consumer behaviors, our ability to increase volumes, gain economies of scale
and improve margins, 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, 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. Total allowance for credit
losses as a percentage of finance receivables was 2% at both December 31, 2022 and 2021. Holding all other assumptions constant, a
0.25% increase in the allowance rate at December 31, 2022 would have reduced pre-tax income by $3 million.
Trade 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
deemed uncollectible 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. The allowance
for credit losses as a percentage of trade accounts receivables was 2% at December 31, 2022 and 3% at December 31, 2021. Holding
all other assumptions constant, a 0.25% increase in the allowance rate at December 31, 2022 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 2022 was 2.85% and 1.85%, respectively.
For 2023, the discount rate used in the determination of net periodic pension expense for the U.S. Plan and the U.K. Plan will be
5.55% and 4.8%, respectively. A 0.25% change in the discount rate would not materially impact annual pension expense for the U.S.
25
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 $24 million and $12 million, respectively.
The expected rate of return on plan assets used in the determination of net periodic pension expense for 2022 was 5.1% for the U.S.
Plan and 4.0% for the U.K. Plan. For 2023, the expected rate of return on plan assets used in the determination of net periodic pension
expense for the U.S. Plan will be 6.5% and the U.K. Plan will be 5.25%. A 0.25% change in the expected rate of return on plan assets
would impact annual pension expense for the U.S. Plan by $3 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.
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 and 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 2022,
13% 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, 2022.
26
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, including foreign currency contracts and interest rate swaps, according to established policies and
procedures. 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, 2022 and 2021, 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, 2022 and 2021, 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. While there is typically minimal impact to
our reported earnings, the settlement of these derivative contracts results in cash outflows or inflows, which could be significant.
Interest Rate Risk
We are exposed to interest rate risk on our variable-rate debt borrowings. At December 31, 2022 and 2021, 35% and 26% or our debt
was at variable rates, respectively. The weighted average interest rate of our variable rate debt at December 31, 2022 and 2021 was
7.5% and 3.1%, respectively. A 100 basis point change in the weighted average interest rate of our variable rate debt in 2022 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, mortgage-backed securities 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 in accumulated other comprehensive income, a component of equity, and not net income. We do not
expect to recognize impairment losses on investment securities in an unrealized loss position as we have the intent and ability to hold
these securities until recovery of unrealized losses or maturity.
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 2022 or 2021. We maintain provisions for potential credit losses based on historical experience, age of
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.
27
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, 2022.
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, 2022 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, 2022 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, 2022, 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.
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 2023 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 2023 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 2023
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, 2022 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 (1)
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights (2)
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans excluding
securities reflected in
column (a)
18,036,423
—
18,036,423
$9.91
—
$9.91
17,217,552
—
17,217,552
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
(1)
(2)
Includes 10,027,048 shares issuable pursuant to outstanding stock options, 7,197,755 shares issuable pursuant to outstanding
RSUs and 811,620 shares issuable pursuant to outstanding PSUs.
Excludes RSUs and PSUs that convert to common stock from determination of weighted average exercise price.
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 2023 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 2023
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 2023
Annual Meeting of Stockholders.
29
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)
Index to Consolidated Financial Statements and Schedules
Consolidated Statements of Income (Loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated Balance Sheets at December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2022, 2021 and 2020
Page
Number in
Form 10-K
38
39
40
41
42
43
87
(a)(2) Exhibits
Reg. S-K
exhibits
3(a)
3(b)
4
4(a)
4(b)
4(c)
Amended and Restated Certificate of Incorporation of Pitney Bowes Inc.
Description
Pitney Bowes Inc. Amended and Restated By-laws (effective May 10,
2013)
Description of Registered Securities
Senior Debt Indenture, dated as of February 14, 2005, by and between the
Company and Citibank N.A., 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
the Commission on May 13, 2013
filed with
(Commission file number 1-3579)
Exhibit 4
Incorporated by reference to Exhibit 4(a) to Registration
Statement on Form S-3 filed with the Commission on
June 18, 2008 (Commission file number 1-3579)
First Supplemental Indenture, dated as of October 23, 2007, by and among
Pitney Bowes Inc., The Bank of New York, as successor trustee, and
Citibank, N.A., as resigning trustee
Supplemental Indenture No. 2 dated as of February 26, 2020, by and
between Pitney Bowes Inc. and The Bank of New York Mellon, as
successor trustee to Citibank N.A.
Incorporated by reference to Exhibit 4.1 to Form 8-K
filed with
the Commission on October 24, 2007
(Commission file number 1-3579)
Incorporated by reference to Exhibit 4.1 to Form 8-K
filed with the Commission on February 26, 2020
(Commission file number 1-3579)
4(d)
Form of 5.25% Global Medium-Term Note due 2037
4(e)
4(f)
4(g)
4(h)
Officer's Certificate establishing the terms of the Notes, dated March 7,
2013, and Specimen of 6.70% Notes due 2043
Officer's Certificate establishing the terms of the 4.625% Notes due 2024,
dated March 13, 2014, and Specimen of 4.625% Notes due 2024.
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(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)
Incorporated by reference to Exhibit 4(d)(1) to Form 8-K
filed with the Commission on November 16, 2006
(Commission file number 1-3579)
Incorporated by reference to Exhibits 4.1 and 4.2 to
Form 8-K filed with the Commission on March 7, 2013
(Commission file number 1-3579)
Incorporated by reference to Exhibits 4.1 and 4.2 to
Form 8-K filed with the Commission on March 13, 2014
(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 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)
30
PART IV
Reg. S-K
exhibits
10(f) *
Description
Pitney Bowes Severance Plan (as amended and restated as of January 1,
2008)
10(g) *
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(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(e) to Form 10-K
filed with the Commission on February 29, 2008
(Commission file number 1-3579)
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 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)
10(v)
10(w)
10(x)
21
23
31.1
31.2
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.
Second Amendment, dated as of May 11, 2022, to the Credit Agreement,
among Pitney Bowes Inc., the Lenders and issuing banks party thereto and
JP Morgan Chase, N.A., as administrative agent
Third Amendment, dated as of December 7, 2022, to the Credit Agreement,
among Pitney Bowes Inc., the Lenders and issuing banks party thereto and
JP Morgan Chase, N.A., as administrative agent.
Fourth Amendment, dated as of December 8, 2022, to the Credit
Agreement, among Pitney Bowes Inc., the Lenders and issuing banks party
thereto and JP Morgan Chase, N.A., as administrative agent
Subsidiaries of the registrant
Consent of independent registered accounting firm
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as amended.
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)
Incorporated by reference to Exhibit 10.1 to the Form
10-Q filed with the Commission on November 4, 2022
(Commission file number 1-3579)
Incorporated by reference to Exhibit 10.1 to the Form 8-
K filed with the Commission on December 8, 2022
(Commission file number 1-3579)
Exhibit 10(x)
Exhibit 21
Exhibit 23
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
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 Exhibit 32.1
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 Exhibit 32.2
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, 2022, 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 certain outstanding long-term indebtedness that 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
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 17, 2023
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 17, 2023
/s/ Ana Maria Chadwick
Ana Maria Chadwick
Executive Vice President, Chief Financial Officer (Principal
Financial Officer)
February 17, 2023
/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/ 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 17, 2023
Non-Executive Chairman - Director
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
February 17, 2023
Director
Director
Director
Director
Director
Director
Director
33
PART IV
Page
Number
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) .........................................................................
35
Consolidated Financial Statements of Pitney Bowes Inc.
Consolidated Statements of Income (Loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020
Consolidated Balance Sheets at December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2022, 2021 and 2020
38
39
40
41
42
43
87
34
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Pitney Bowes Inc.
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, 2022 and 2021, 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, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2022 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, 2022, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed 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.
35
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.
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
$1,067 million as of December 31, 2022, and the goodwill balance associated with the Global Ecommerce reporting unit
was $339 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 exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired. If the
fair value of the reporting unit is less than the carrying value of the net assets assigned to the reporting unit, a goodwill
impairment loss is calculated as the difference between these amounts, limited to the amount of goodwill allocated to the
reporting unit. Management determined that the agreement to sell Borderfree was a triggering event and an impairment
test was performed as of July 1, 2022. Further, management determined that the shortfall in fourth quarter performance
of the Global Ecommerce reporting unit was an additional triggering event. Accordingly, management performed another
goodwill impairment test as of December 31, 2022 to assess whether the goodwill of the Global Ecommerce reporting unit
was impaired. The results of management’s annual test and triggering event tests indicated that the fair value of the
Global Ecommerce reporting unit exceeded its carrying value and no impairment existed. However, the estimated fair
value of the reporting unit at December 31, 2022 exceeded its carrying value by less than 10%. The fair value of the Global
Ecommerce reporting unit was estimated by management using a discounted cash flow model based on management
developed cash flow projections, which included judgments and assumptions related to revenue growth rates, operating
margins and operating income, and 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 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
36
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 17, 2023
We have served as the Company’s auditor since 1934.
37
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
Goodwill impairment
Interest expense, net
Other components of net pension and postretirement cost (income)
Other (income) expense
Total costs and expenses
Income (loss) from continuing operations before income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
(Loss) income from discontinued operations, net of tax
Net income (loss)
Basic earnings (loss) per share attributable to common stockholders (1):
Continuing operations
Discontinued operations
Net income (loss)
Diluted earnings (loss) per share attributable to common stockholders (1):
Continuing operations
Discontinued operations
Net income (loss)
(1)
The sum of the earnings per share amounts may not equal the totals due to rounding.
Years Ended December 31,
2022
2021
2020
$
$
$
$
$
$
2,249,941
438,191
274,508
354,960
154,186
66,256
3,538,042
1,934,206
148,829
51,789
253,843
43,778
25,105
905,570
43,657
18,715
—
89,980
4,308
(21,618)
3,498,162
39,880
2,940
36,940
—
36,940
0.21
—
0.21
0.21
—
0.21
$
$
$
$
$
$
$
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)
See Notes to Consolidated Financial Statements
38
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net income (loss)
Other comprehensive (loss) income, net of tax:
Foreign currency translations, net of tax of $(3,942), $(767) and $2,374, respectively
Net unrealized gain (loss) on cash flow hedges, net of tax of $2,900, $1,738 and $(583),
respectively
Net unrealized loss on available for sale securities, net of tax of $(10,424), $(2,217) and
$(816), respectively
Adjustments to pension and postretirement plans, net of tax of $4,312, $17,986 and
$(20,440), respectively
Amortization of pension and postretirement costs, net of tax of $9,315, $12,755 and
$11,930, respectively
Other comprehensive (loss) income, net of tax
Comprehensive (loss) income
Years Ended December 31,
2022
2021
2020
$
36,940
$
(1,351)
$
(180,376)
(71,344)
(34,168)
37,252
8,700
5,214
(33,191)
(6,651)
(1,748)
(2,447)
9,297
54,618
(70,623)
31,286
(55,252)
39,806
58,819
38,578
1,012
$
(18,312)
$
57,468
$
(179,364)
See Notes to Consolidated Financial Statements
39
PITNEY BOWES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments (includes $1,882 and $2,658, respectively, reported at fair value)
Accounts and other receivables (net of allowance of $5,344 and $11,168 respectively)
Short-term finance receivables (net of allowance of $11,395 and $12,812, 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 $10,555 and $13,406, respectively)
Goodwill
Intangible assets, net
Operating lease assets
Noncurrent income taxes
Other assets (includes $229,936 and $318,754, 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,
2022
December 31,
2021
$
669,981
$
732,480
11,172
343,557
564,972
83,720
8,790
115,824
1,798,016
420,672
27,487
627,124
1,066,951
77,944
296,129
46,613
380,419
4,741,355
907,083
628,072
52,576
32,764
105,207
2,101
1,727,803
2,172,502
263,131
23,841
265,696
227,729
4,680,702
$
$
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
$
$
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 (149,307,325 and 148,606,517 shares, respectively)
Total stockholders’ equity
Total liabilities and stockholders’ equity
323,338
—
5,125,677
(835,564)
(4,552,798)
60,653
4,741,355
$
323,338
2,485
5,169,270
(780,312)
(4,602,149)
112,632
4,958,871
$
See Notes to Consolidated Financial Statements
40
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income (loss)
Loss (income) from discontinued operations, net of tax
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
$
36,940
—
$
(1,351)
4,858
$
(180,376)
(10,115)
Years Ended December 31,
2022
2021
2020
Depreciation and amortization
Allowance for credit losses
Stock-based compensation
Amortization of debt fees
Loss on debt refinancing
Restructuring charges
Restructuring payments
Pension contributions and retiree medical payments
Gain on sale of businesses, including transaction costs
Gain on sale of assets
Goodwill impairment
Deferred taxes
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 business, net of cash sold
Proceeds from asset sales
Acquisitions, net of cash acquired
Settlement of derivative contracts
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
163,816
8,937
16,629
8,674
4,993
18,715
(15,406)
(26,769)
(12,205)
(14,372)
—
3,688
(29,303)
(12,591)
(4,942)
2,727
18,577
(14,464)
8,342
13,997
175,983
—
175,983
(124,840)
(8,863)
28,724
(53,114)
111,593
50,766
(5,139)
(27,660)
4,264
(24,269)
—
(24,269)
—
(124,101)
(8,535)
(34,718)
(3,990)
(13,446)
(13,293)
(198,083)
(16,130)
(62,499)
732,480
669,981
$
162,859
7,808
20,862
7,163
56,209
19,003
(21,990)
(27,534)
(10,201)
(1,434)
—
(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)
27,573
1,840
(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
$
See Notes to Consolidated Financial Statements
41
PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Balance at December 31, 2019
$ 323,338 $
98,748 $ 5,441,988 $
(840,143) $ (4,734,777) $
289,154
Common
Stock
Additional
Paid-in
Capital
Retained
earnings
Accumulated
other
comprehensive
loss
Treasury
stock
Total equity
Cumulative effect of accounting change
Net loss
Other comprehensive income
Dividends ($0.20 per share)
Issuance of common stock
Stock-based compensation
Balance at December 31, 2020
Net loss
Other comprehensive income
Dividends ($0.20 per share)
Issuance of common stock
Stock-based compensation
Balance at December 31, 2021
Net income
Other comprehensive loss
Dividends ($0.20 per share)
Issuance of common stock
Stock-based compensation
Repurchase of common stock
Balance at December 31, 2022
—
—
—
—
—
—
—
—
—
—
(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
323,338
2,485
5,169,270
(780,312)
(4,602,149)
112,632
36,940
—
—
(55,252)
—
—
—
—
—
—
—
—
—
(34,718)
(19,114)
(45,815)
16,629
—
—
—
—
—
—
62,797
—
36,940
(55,252)
(34,718)
(2,132)
16,629
(13,446)
(13,446)
—
—
—
—
$ 323,338 $
— $ 5,125,677 $
(835,564) $ (4,552,798) $
60,653
See Notes to Consolidated Financial Statements
42
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 January 1, 2020, we adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses,
applicable to financial assets measured at amortized cost, including finance receivables, trade and other receivables and investments in
debt securities classified as available-for-sale and held-to-maturity. We adopted the standard using the modified retrospective
transition approach with a cumulative effect adjustment to retained earnings, which resulted in an increase in the allowance for credit
losses on accounts receivable of $15 million and the allowance for credit losses on finance receivables of $10 million and a net
reduction to retained earnings of $22 million.
Pre-tax income for the twelve months ended December 31, 2022 includes a benefit of $3 million to correct misstatements related to
prior periods. The impact of these misstatements is not material to the consolidated financial statements of the current annual period or
for any prior quarterly or annual periods.
Factors Affecting Comparability
Certain transactions and changes occurred during 2022 that impact the comparability of our 2022 financial results to the prior periods.
These transactions and changes include:
•
•
•
The sale of our Borderfree cross-border ecommerce solutions business (Borderfree);
A change in the presentation of revenue from digital delivery services primarily related to our Global Ecommerce business
from a gross basis to a net basis due to an adjustment in terms of one of our contracts with the USPS; and
A refinement in our methodology for allocating transportation costs between our Global Ecommerce and Presort Services
segments.
Effective July 1, 2022, we sold Borderfree, which was reported in our Global Ecommerce segment. Prior year results were not recast
to exclude the revenue and expenses from Borderfree. Accordingly, revenue and expenses for 2022 include only six months of
operations for Borderfree, whereas the prior years presented include a full year of operations. Net income of Borderfree was not
significant in any period presented.
The change in revenue presentation became effective October 1, 2022. Accordingly, revenue and related costs of revenue for these
services for the first nine months of 2022 and full year 2021 and 2020 are reported on a gross basis as business services revenue and
cost of business services, respectively, and on a net basis in business services revenue beginning in the fourth quarter of 2022.
The refinement to the methodology of allocating transportation costs between Global Ecommerce and Presort Services resulted in an
increase to Global Ecommerce EBIT and a corresponding decrease to Presort Services EBIT of approximately $10 million in 2022.
Use of Estimates
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 held-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
43
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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 sales 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 2022, 2021, or 2020.
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.
Accounts and Other Receivables and Allowance for Credit Losses
Accounts receivables 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 receivables 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 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 3 to 6 years for rental equipment. Leasehold
improvements are amortized over the shorter of their estimated useful life or the remaining lease term. 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. 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. Costs 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,
2022 and December 31, 2021, included in other assets, were $41 million and $48 million, respectively. Amortization expense for these
costs for the years ended December 31, 2022, 2021 and 2020 was $22 million, $18 million and $10 million, respectively.
44
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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
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 throughout 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
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 is recognized as control
of the equipment transfers to the customer. Revenue from the sale of equipment under sales-type leases is recognized upon shipment
for self-installed products and upon installation or customer acceptance for other products. Revenue from the direct sale of equipment
is recognized 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 when control transfers to
the customer.
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
45
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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 includes research, development and engineering activities relating to the development of new products and
solutions and enhancements of existing products and solutions. Costs primarily include salaries, benefits and other employee-related
expenses, materials, contract services, information systems and facilities and equipment costs. Research and development costs are
charged to expense as incurred.
Restructuring Charges
Restructuring costs primarily include employee severance and related separation costs and real estate lease early termination costs.
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. Costs for the early termination of real estate leases are recognized as incurred.
Stock-based Compensation
We primarily issue restricted stock 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 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. If the fair value of the reporting unit is less than the carrying value of the net
assets assigned to the reporting unit, a goodwill impairment loss is calculated as the difference between these amounts, limited to the
amount of goodwill allocated to the reporting unit.
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 existed. Further, the significant shortfall in the
fourth quarter performance of the Global Ecommerce reporting unit caused us to reassess this reporting unit’s goodwill for
impairment. See Note 9 for further details.
46
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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.
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.
Accounting Pronouncements 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, 2024, and may be applied at the beginning of any interim period within that time frame.
47
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Effective in December 2022 with the modification of our revolving credit facility, we elected to apply the practical expedient to the
replacement of LIBOR reference rate and our assessment of hedge effectiveness. 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.
In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and
Vintage Disclosures, which requires disclosure of gross write-offs and recoveries of finance receivables by year of origination. The
standard is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We will adopt
this standard in the first quarter of 2023 and the adoption will not have a material impact on our financial statement disclosures.
2. Revenue
Disaggregated Revenue
The following tables disaggregate our revenue by source and timing of recognition:
Year Ended December 31, 2022
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
Total revenue
$ 1,576,348 $ 602,016 $ 71,577 $ 2,249,941 $
438,191
— $ 2,249,941
438,191
—
274,508
— 274,508
354,960
88,022 266,938
154,186
—
154,186
66,256
66,256
—
1,576,348 602,016 751,976 2,930,340 $ 607,702 $ 3,538,042
— 438,191
—
—
—
88,022
— 154,186
—
—
—
—
—
—
—
—
607,702
$ 1,576,348 $ 602,016 $ 1,359,678 $ 3,538,042
— 607,702
Timing of revenue recognition from products and services
Products/services transferred at a point in time
Products/services transferred over time
Total
— $
— $ 318,438 $ 318,438
$
1,576,348 602,016 433,538 2,611,902
$ 1,576,348 $ 602,016 $ 751,976 $ 2,930,340
48
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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
$ 1,702,580 $ 573,480 $ 58,614 $ 2,334,674 $
— 460,888 460,888
—
—
91,015
—
— 159,438 159,438
—
—
—
— $ 2,334,674
— 460,888
— 294,418 294,418
91,015 259,123 350,138
— 159,438
74,005
1,702,580 573,480 769,955 3,046,015 $ 627,546 $ 3,673,561
—
—
—
—
—
74,005
Revenue from leasing transactions and financing
Total revenue
—
— 627,546 627,546
$ 1,702,580 $ 573,480 $ 1,397,501 $ 3,673,561
Timing of revenue recognition from products and services
Products/services transferred at a point in time
Products/services transferred over time
Total
— $
$
— $ 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
Revenue from products and services
Business services
Support services
Financing
Equipment sales
Supplies
Rentals
Subtotal
$ 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
Revenue from leasing transactions and financing
Total revenue
—
— 655,535 655,535
$ 1,618,897 $ 521,212 $ 1,413,966 $ 3,554,075
Timing of revenue recognition from products and services
Products/services transferred at a point in time
$
— $
— $ 293,648 $ 293,648
Products/services transferred over time
Total
1,618,897 521,212 464,783 2,604,892
$ 1,618,897 $ 521,212 $ 758,431 $ 2,898,540
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 initially range from one to five years and contain annual renewal options. Revenue for shipping
subscription solutions is recognized ratably over the contract period as the client obtains equal benefit from these services throughout
the period.
49
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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,
2022
December 31,
2021
Increase/
(decrease)
$
$
97,904 $
92,926 $
4,978
906 $
1,109 $
(203)
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, 2022 includes $93 million of advance billings at the beginning of the period. Advance billings,
current at December 31, 2022 and 2021 also includes $7 million and $6 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
$
260,058 $
191,558 $
235,328 $
686,944
2023
2024
2025-2027
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, 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
50
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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 income (loss).
Global Ecommerce
Presort Services
SendTech Solutions
Total revenue
Geographic data:
United States
Outside United States
Total revenue
Global Ecommerce
Presort Services
SendTech Solutions
Total segment EBIT
Reconciling items:
Interest, net
Unallocated corporate expenses
Restructuring charges
Goodwill impairment
Gain on sale of assets
Gain on sale of businesses, including transaction costs
Loss on debt redemption/refinancing
(Provision) benefit for income taxes
Income (loss) from continuing operations
(Loss) income from discontinued operations, net of tax
Net income (loss)
Global Ecommerce
Presort Services
SendTech Solutions
Total for reportable segments
Corporate
Total depreciation and amortization
51
Revenue
Years Ended December 31,
2022
2021
2020
$ 1,576,348
$ 1,702,580
$ 1,618,897
602,016
1,359,678
573,480
521,212
1,397,501
1,413,966
$ 3,538,042
$ 3,673,561
$ 3,554,075
$ 3,065,211
$ 3,114,905
$ 3,112,285
472,831
558,656
441,790
$ 3,538,042
$ 3,673,561
$ 3,554,075
EBIT
Years Ended December 31,
2022
2021
2020
$
(100,308) $
(98,673) $
(82,894)
82,430
400,909
383,031
(141,769)
(204,251)
(18,715)
—
14,372
12,205
(4,993)
(2,940)
36,940
—
79,721
429,415
410,463
(143,945)
(207,774)
(19,003)
—
1,434
7,619
(56,209)
10,922
3,507
(4,858)
55,799
442,648
415,553
(153,915)
(200,406)
(20,712)
(198,169)
11,908
(641)
(36,987)
(7,122)
(190,491)
10,115
$
36,940
$
(1,351) $
(180,376)
Depreciation and amortization
Years Ended December 31,
2022
2021
2020
$
78,296
$
79,128
$
28,039
29,489
135,824
27,992
27,243
29,950
136,321
26,538
69,676
31,769
34,316
135,761
24,864
$
163,816
$
162,859
$
160,625
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Capital expenditures
Years Ended December 31,
2022
2021
2020
$
51,430
$
89,488
$
23,363
33,364
108,157
16,683
36,628
26,028
152,144
31,898
46,427
15,795
28,823
91,045
13,942
$
124,840
$
184,042
$
104,987
Assets
December 31,
2022
2021
2020
$
996,297
$ 1,032,434
$
994,554
510,345
2,023,020
3,529,662
669,981
11,172
259,977
270,563
479,392
2,013,361
3,525,187
732,480
14,440
333,052
353,712
523,690
2,071,028
3,589,272
921,450
18,974
364,212
330,455
$ 4,741,355
$ 4,958,871
$ 5,224,363
$
$
730,347
$
658,070
$
613,990
13,941
14,294
17,641
744,288
$
672,364
$
631,631
Global Ecommerce
Presort Services
SendTech Solutions
Total for reportable segments
Corporate
Total capital expenditures
Global Ecommerce
Presort Services
SendTech Solutions
Total for reportable segments
Cash and cash equivalents
Short-term investments
Long-term investments
Other corporate assets
Consolidated assets
Identifiable long-lived assets:
United States
Outside United States
Total
4. Discontinued Operations
Discontinued operations for the years ended December 31, 2021 and 2020 primarily include net working capital and other adjustments
relating to the sale of the Software Solutions business in 2019 (except for the software business in Australia, which closed in January
2020). Discontinued operations for the year ended December 31, 2021 also includes a tax charge related to the sale of the Production
Mail business in 2018.
52
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
5. Earnings per Share (EPS)
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
Income (loss) attributable to common stockholders (numerator for EPS)
Denominator:
Weighted-average shares used in basic EPS
Dilutive effect of common stock equivalents (1)
Weighted-average shares used in diluted EPS
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Net income (loss)
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Net income (loss)
Years Ended December 31,
2022
2021
2020
36,940 $
3,507 $
(190,491)
—
(4,858)
10,115
36,940 $
(1,351) $
(180,376)
173,912
3,340
177,252
173,914
5,191
179,105
171,519
—
171,519
0.21 $
—
0.21 $
0.21 $
—
0.21 $
0.02 $
(0.03)
(0.01) $
0.02 $
(0.03)
(0.01) $
(1.11)
0.06
(1.05)
(1.11)
0.06
(1.05)
$
$
$
$
$
$
Common stock equivalents excluded from calculation of diluted earnings per
share because their impact would be anti-dilutive:
10,234
6,514
11,626
(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.
6. Inventories
Inventories consisted of the following:
Raw materials
Supplies and service parts
Finished products
Total inventory, net
December 31,
2022
2021
$
$
25,539
27,573
30,608
83,720
$
$
22,352
26,076
30,160
78,588
53
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
7. Finance Assets and Lessor Operating Leases
Finance Assets
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, 2022
December 31, 2021
North
America
International
Total
North
America
International
Total
$ 967,298 $
158,167 $ 1,125,465 $ 958,440 $
187,831 $ 1,146,271
38,832
8,798
47,630
37,896
10,717
48,613
(239,238)
(48,334)
(287,572)
(246,381)
(56,643)
(303,024)
(14,131)
(2,893)
(17,024)
(19,546)
(3,246)
(22,792)
Net investment in sales-type lease receivables
752,761
115,738
868,499
730,409
138,659
869,068
Loan receivables
Loan receivables
311,887
16,636
328,523
262,310
20,155
282,465
Allowance for credit losses
(4,787)
(139)
(4,926)
(3,259)
(167)
(3,426)
Net investment in loan receivables
307,100
16,497
323,597
259,051
19,988
279,039
Net investment in finance receivables
$ 1,059,861 $
132,235 $ 1,192,096 $ 989,460 $
158,647 $ 1,148,107
Maturities of finance receivables at December 31, 2022 were as follows:
2023
2024
2025
2026
2027
Thereafter
Total
Sales-type Lease Receivables
Loan Receivables
North America
International
Total
North America
International
Total
$
367,414
$
62,334
$ 429,748
$
242,529
$
16,636
$ 259,165
274,086
181,627
104,521
39,018
632
45,140
28,088
15,769
5,631
1,205
319,226
209,715
120,290
44,649
1,837
26,861
20,702
12,308
7,331
2,156
—
—
—
—
—
26,861
20,702
12,308
7,331
2,156
$
967,298
$ 158,167
$ 1,125,465
$
311,887
$
16,636
$ 328,523
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, 2019
$
10,920
$
2,085
$
5,906
$
740
$
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
Balance at December 31, 2021
Amounts charged to expense
Write-offs
Recoveries
Other
9,271
10,789
(7,609)
2,070
(2,524)
22,917
648
(7,120)
3,097
4
19,546
(2,476)
(6,043)
3,184
(80)
1,750
2,902
(1,068)
194
143
6,006
(1,788)
(846)
173
(299)
3,246
712
(791)
39
(313)
(1,116)
8,158
(9,955)
3,474
17
6,484
(426)
(6,045)
3,245
1
3,259
3,992
(4,903)
2,447
(8)
(402)
555
(551)
4
116
462
19
(302)
3
(15)
167
288
(295)
1
(22)
19,651
9,503
22,404
(19,183)
5,742
(2,248)
35,869
(1,547)
(14,313)
6,518
(309)
26,218
2,516
(12,032)
5,671
(423)
Balance at December 31, 2022
$
14,131
$
2,893
$
4,787
$
139
$
21,950
Aging of Receivables
The aging of gross finance receivables was as follows:
Past due amounts 0 - 90 days
Past due amounts > 90 days
Total
Past due amounts 0 - 90 days
Past due amounts > 90 days
Total
Past due amounts > 90 days (1)
Still accruing interest
Not accruing interest
Total
$
$
$
$
$
$
December 31, 2022
Sales-type Lease Receivables
Loan Receivables
North
America
International
North
America
International
Total
959,203
$
155,596
$
308,872
$
16,503
$
1,440,174
8,095
967,298
$
2,571
158,167
$
3,015
311,887
$
133
16,636
13,814
1,453,988
$
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
2,774
3,796
137
15,009
958,440
$
187,831
$
262,310
$
20,155
$
1,428,736
4,964
$
682
$
—
$
—
$
3,338
2,092
3,796
8,302
$
2,774
$
3,796
$
137
137
5,646
9,363
$
15,009
(1) In 2021, our policy was to cease financing revenue recognition for sales-type lease receivables that were more than 120 days past
due.
55
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.
•
Low risk accounts are companies with very good credit scores and a predicted delinquency rate of less than 5%.
• 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%.
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 less than 15% of total finance receivables. Most of the 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 gross finance receivables by relative risk class and year of origination based on the relative scores of the
accounts within each class as of December 31, 2022 and 2021.
Sales Type Lease Receivables
2022
2021
2020
2019
2018
Prior
Loan
Receivables
Total
Low
Medium
High
Not Scored
$ 286,297
$ 206,511
$ 140,800
$ 95,485
$ 34,721
$ 12,674
$ 239,635
$ 1,016,123
53,419
6,492
71,435
40,669
3,840
53,831
27,013
3,119
29,957
19,668
1,942
19,232
6,751
750
5,889
3,441
508
1,021
56,048
6,800
26,040
207,009
23,451
207,405
Total
$ 417,643
$ 304,851
$ 200,889
$ 136,327
$ 48,111
$ 17,644
$ 328,523
$ 1,453,988
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
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
56
Years Ended December 31,
2022
2021
2020
$
$
134,717
163,485
298,202
$
$
127,469
186,532
314,001
$
$
117,359
206,517
323,876
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Lessor Operating Leases
We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as
follows:
2023
2024
2025
2026
2027
Thereafter
Total
8. Fixed Assets
Fixed assets consisted of the following:
Machinery and equipment
Capitalized software
Leasehold improvements
Accumulated depreciation
Property, plant and equipment, net
Rental property and equipment
Accumulated depreciation
Rental property and equipment, net
$
24,375
17,423
18,656
4,398
2,008
5
$
66,865
December 31,
2022
2021
$
673,898
$
707,843
516,816
127,357
488,837
126,456
1,318,071
1,323,136
(897,399)
(893,974)
420,672
$
429,162
111,188
$
125,967
(83,701)
(91,193)
27,487
$
34,774
$
$
$
Depreciation expense was $140 million, $132 million and $127 million for the years ended December 31, 2022, 2021 and 2020,
respectively.
57
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
9. Acquisitions, Divestitures, Intangible Assets and Goodwill
Acquisitions/Divestitures
Effective July 1, 2022, we sold Borderfree for proceeds of $95 million, net of cash transferred, and recognized a pre-tax gain of
$5 million, which included a goodwill allocation of $56 million attributable to Borderfree and write-off of intangible assets of
$34 million. During 2022, we also received additional proceeds of $7 million related to the 2021 sale of a business and recognized a
pre-tax gain of $4 million, and spent $5 million on acquisitions for our Presort Services segment.
During 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. Additionally, 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.
Intangible Assets
Intangible assets consisted of the following:
December 31, 2022
December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Customer relationships
Software & technology
$
155,715 $
(80,188) $
75,527 $
268,187 $
(141,492) $
126,695
22,000
(19,583)
2,417
21,981
(16,234)
5,747
Total intangible assets, net
$
177,715 $
(99,771) $
77,944 $
290,168 $
(157,726) $
132,442
Amortization expense was $24 million, $30 million and $33 million for the years ended December 31, 2022, 2021 and 2020,
respectively.
Future amortization expense for intangible assets at December 31, 2022 is as follows:
2023
2024
2025
2026
2027
Thereafter
Total
$
$
15,724
15,724
15,520
14,530
11,475
4,971
77,944
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.
58
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Goodwill
During 2022, we determined that the agreement to sell Borderfree was a triggering event and an impairment test was performed as of
July 1, 2022. Further, we determined that the shortfall in fourth quarter performance of the Global Ecommerce reporting unit was an
additional triggering event. Accordingly, we performed another goodwill impairment test as of December 31, 2022 to assess whether
the goodwill of the Global Ecommerce reporting unit was impaired. We engaged a third-party to assist in the determination of the
reporting unit fair value. The fair value was estimated using a discounted cash flow model based on management developed cash flow
projections, which included judgements and assumptions related to revenue growth rates, operating margins and operating income,
and discount rate.
The results of our annual test and triggering event tests indicated that the fair value of the Global Ecommerce reporting unit exceeded
its carrying value and no impairment existed. However, the estimated fair value of the reporting unit at December 31, 2022 exceeded
its carrying value by less than 10%. Further, the judgements and assumptions used to estimate the fair value of the reporting unit are
inherently subjective and changes in any of these judgements or assumptions used to determine the fair value of this reporting unit at
December 31, 2022 could result in a different fair value determination in a future period. The carrying value of goodwill for the Global
Ecommerce reporting unit at December 31, 2022 was $339 million.
Events and circumstances that could change our original judgements and assumptions and materially impact the fair value
determination of the Global Ecommerce reporting unit, include, but are not limited to, continued financial and operating performance
below expectations, reduced consumer spending due to inflationary pressures and rising prices, a continued and prolonged slow-down
in economic activity, increased competition and pricing pressures, changing consumer behaviors, our ability to increase volumes, gain
economies of scale and improve margins, and rising interest rates.
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,
2021
Acquisitions/
(dispositions)
FX Impact
$
593,231
$
(198,169) $
395,062
$
(55,878) $
220,992
519,049
—
—
220,992
519,049
2,771
—
—
—
(15,045)
December 31,
2022
$
339,184
223,763
504,004
$ 1,333,272
$
(198,169) $ 1,135,103
$
(53,107) $
(15,045) $ 1,066,951
Goodwill
before
accumulated
impairment
Accumulated
impairment
December 31,
2020
Acquisitions/
(dispositions)
FX Impact
December 31,
2021
$
609,431
220,992
520,031
$ 1,350,454
$
$
(198,169) $
—
411,262
220,992
—
520,031
(198,169) $ 1,152,285
$
$
(16,200) $
—
$
—
—
395,062
220,992
13,804
(2,396) $
519,049
(14,786)
(14,786) $ 1,135,103
59
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 swaps
Foreign exchange contracts
Total assets
Liabilities:
Derivatives
Level 1
Level 2
Level 3
Total
December 31, 2022
$
29,087 $
238,536 $
— $
267,623
—
1,520
10,253
—
—
—
—
13,233
6,526
18,796
52,319
126,882
15,283
479
—
—
—
—
—
—
—
13,233
8,046
29,049
52,319
126,882
15,283
479
$
40,860 $
472,054 $
— $
512,914
Foreign exchange contracts
Total liabilities
$
$
— $
— $
(1,472) $
(1,472) $
— $
— $
(1,472)
(1,472)
60
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
Interest rate swap
Foreign exchange contracts
Total assets
Liabilities:
Derivatives
Foreign exchange contracts
Total liabilities
Investment Securities
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
$
$
— $
— $
(304) $
(304) $
— $
— $
(304)
(304)
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 when unadjusted quoted prices in active markets are
available. 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.
61
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, 2022
Gross
unrealized
gains
Gross
unrealized
losses
Estimated fair
value
11
—
—
—
11
$
(8,210) $
(13,981)
(229)
27,545
52,319
1,520
(29,470)
126,882
$
(51,890) $
208,266
Amortized cost
$
35,744
$
66,300
1,749
156,352
$
260,145
$
December 31, 2021
Amortized cost
Gross unrealized
gains
Gross unrealized
losses
Estimated fair
value
$
36,160
$
81
$
(1,012) $
67,906
1,725
176,559
$
282,350
$
259
—
144
484
(2,998)
(33)
(4,685)
35,229
65,167
1,692
172,018
$
(8,728) $
274,106
December 31, 2022
December 31, 2021
Fair Value
Gross unrealized
losses
Fair Value
Gross unrealized
losses
$
17,063
$
2,753
$
16,018
$
48,812
114,839
13,749
28,040
51,385
135,441
$
180,714
$
44,542
$
202,844
$
$
10,061
$
5,457
$
15,438
$
3,508
1,520
12,042
232
229
1,430
8,859
1,692
30,754
579
2,658
4,057
7,294
433
339
33
629
$
27,131
$
7,348
$
56,743
$
1,434
At December 31, 2022, approximately 99% of total securities in the investment portfolio were in a net loss position. However, 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. Accordingly, we have not recognized an impairment loss and our allowance for credit losses on these investment
securities is not significant. Our allowance for credit losses on available-for-sale investment securities is not significant.
62
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
At December 31, 2022, 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
$
2,115
$
15,731
73,002
169,297
1,882
14,190
59,117
133,077
$
260,145
$
208,266
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, 2022 and 2021 totaled $22 million and $20 million, respectively.
Simple Agreement for Future Equity (SAFE) Investment
In October 2022, we invested $10 million in Ambi Robotics Inc., a robotics solutions company, via a SAFE arrangement. The SAFE
investment provides us the right to participate in future equity offerings by Ambi Robotics Inc. The investment is carried at cost and
recorded in Other assets. The carrying value of the investment could be increased or decreased based on future observable transactions
by Ambi Robotics Inc.
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 both December 31, 2022 and 2021, outstanding contracts associated with these anticipated
transactions had a notional amount of $1 million. The amounts included in AOCL at December 31, 2022 will be recognized in
earnings within the next 12 months.
Interest Rate Swaps
We enter into interest rate swaps to manage the cost of our variable rate debt. At December 31, 2022, we had outstanding interest rate
swaps that effectively convert $200 million of our variable rate debt to fixed rates. These swaps 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.
63
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
The fair value of our derivative instruments was as follows:
Designation of Derivatives
Balance Sheet Location
2022
2021
December 31,
Derivatives designated as hedging instruments
Foreign exchange contracts
Other current assets and prepayments
$
15
$
Interest rate swaps
Accounts payable and accrued liabilities
Other assets
(23)
15,283
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
Total net derivative asset
464
(1,449)
15,762
(1,472)
$
14,290
$
21
(10)
3,103
2,453
(294)
5,577
(304)
5,273
No amount of ineffectiveness was recorded in earnings for these designated cash flow hedges.
The following represents the results of cash flow hedging relationships:
Derivative Gain (Loss)
Recognized in AOCI
(Effective Portion)
Derivative Instrument
2022
2021
Foreign exchange contracts
$
159
$
198
Interest rate swaps
12,180
$
12,339
$
5,266
5,464
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)
2022
2021
$
$
—
$
178
549
727
$
289
(117)
(366)
(194)
Non-designated derivative instruments
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, 2022 mature over the
next three months.
The following represents the mark-to-market adjustment on our non-designated derivative instruments:
Derivatives Instrument
Location of Derivative Gain (Loss)
2022
2021
Foreign exchange contracts
Selling, general and administrative expense
$
(28,228) $
(4,540)
Years Ended December 31,
Derivative Gain (Loss)
Recognized in Earnings
64
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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,
2022
2021
$
$
2,205,266
1,856,878
$
$
2,323,838
2,355,894
11. Supplemental Financial Statement Information
Activity in the allowance for credit losses on accounts receivable is presented below.
2022
2021
2020
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
$
$
$
29,179 $
35,344 $
— $
— $
6,421 $
(29,736) $
5,864 $
5,344 $
520
9,355 $
(15,520) $
29,179 $
11,168 $
18,011
17,830 $
15,336 $
19,789 $
(17,611) $
35,344 $
18,899 $
16,445
Other (income) expense consisted of the following:
Loss on redemption/refinancing of debt
Insurance proceeds
Gain on sale of assets
Gain on sale of businesses, including transaction costs
Other (income) expense
Years Ended December 31,
2022
2021
2020
$
4,993 $
56,209 $
36,987
—
(14,372)
(12,239)
(3,000)
(1,434)
(10,201)
$
(21,618) $
41,574 $
(16,928)
(11,908)
—
8,151
In 2022, we entered into a sale and leaseback agreement for our Shelton, Connecticut office building and received proceeds of
$51 million and recognized a gain of $14 million. The gain on sale of businesses includes a $5 million gain on the sale of Borderfree
and a gain of $7 million on proceeds of $16 million related to prior year business sales.
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
Years Ended December 31,
2022
2021
2020
$
$
$
5,213 $
5,305 $
16,098
134,247 $
124,084 $
151,857
14,553 $
4,337 $
20,185
65
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
Selected balance sheet information is as follows:
Other assets:
Long-term investments
Other (net of allowance of $520 and $18,011, 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
12. Restructuring Charges
Activity in our restructuring reserves was as follows:
Balance at December 31, 2020
Expenses, net
Cash payments
Noncash activity
Balance at December 31, 2021
Expenses, net
Cash payments
Noncash activity
Balance at December 31, 2022
December 31,
2022
2021
$
$
259,977
$
333,052
120,442
138,032
380,419
$
471,084
$
315,351
$
310,993
209,662
216,273
165,797
185,528
233,876
192,146
$
907,083
$
922,543
$
74,681
$
115,457
87,745
65,303
126,675
66,596
$
227,729
$
308,728
Severance and
other exit costs
$
$
10,063
19,003
(21,990)
(1,329)
5,747
18,715
(15,406)
(1,409)
7,647
The majority of the remaining restructuring reserves are expected to be paid over the next 12-24 months.
66
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
13. Debt
Notes due April 2023
Notes due March 2024
Term loan due March 2026
Notes due March 2027
Term loan due March 2028
Notes due March 2029
Notes due January 2037
Notes due March 2043
Other debt
Principal amount
Less: unamortized costs, net
Total debt
Less: current portion long-term debt
Long-term debt
Interest rate
2022
2021
December 31,
6.20%
4.625%
SOFR + 2.0%
6.875%
SOFR + 4.0%
7.25%
5.25%
6.70%
$
—
$
90,259
236,749
351,500
396,750
442,125
350,000
35,841
425,000
2,446
242,603
370,500
400,000
446,625
350,000
35,841
425,000
3,685
2,240,411
2,364,513
35,145
40,675
2,205,266
2,323,838
32,764
24,739
$ 2,172,502
$ 2,299,099
During 2022, we redeemed the April 2023 notes and recognized a $5 million pre-tax loss in connection with this redemption. We also
made scheduled principal repayments of $24 million on our term loans and repurchased $6 million of the March 2024 notes and
$3 million of the March 2027 notes in the open market. Through February 16, 2023, we have purchased an additional aggregate
$12 million of the March 2024 notes and March 2027 notes.
The credit agreement that governs our $500 million secured revolving credit facility and term loans contains financial and non-
financial covenants. At December 31, 2022, we were in compliance with all covenants and there were no outstanding borrowings
under the revolving credit facility. In December 2022, we amended this credit facility to adjust our financial covenants and provide
additional financial flexibility. Borrowings under the revolving credit facility and term loans are secured by assets of the company.
We have outstanding interest rate swaps that effectively convert $200 million of our variable rate debt to fixed rates. Under the terms
of these 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.
At December 31, 2022, the interest rate of the 2026 Term Loan was 6.4% and the interest rate on the 2028 Term Loan was 8.4%.
The PB Bank (the Bank), a wholly owned subsidiary, is a member of the Federal Home Loan Bank (FHLB) of Des Moines. As a
member, the Bank has access to certain credit products as a funding source known as "advances." As of December 31, 2022, the Bank
had yet to apply for any advances. The Bank was required to purchase an equity interest in the FHLB of $1 million as a condition of
membership. The equity interest investment is carried at cost since there is no readily determinable fair value as there is no actively
traded market and investment is restricted to members only.
Annual maturities of outstanding principal at December 31, 2022 are as follows:
2023
2024
2025
2026
2027
Thereafter
Total
$
$
32,739
280,956
50,500
244,500
401,250
1,230,466
2,240,411
67
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 defined benefit plans have been frozen. The benefit obligations and funded status of defined benefit
pension plans are as follows:
Accumulated benefit obligation
$ 1,205,135
$ 1,609,125
$
447,401
$
762,558
United States
Foreign
2022
2021
2022
2021
Projected benefit obligation
Benefit obligation - beginning of year
Service cost
Interest cost
Net actuarial gain
Foreign currency changes
Settlements
Benefits paid
$ 1,609,508
$ 1,729,959
$
770,468
$
830,674
55
44,348
(349,261)
—
(1,574)
(97,893)
102
42,434
(53,133)
—
(1,429)
1,214
13,568
(242,488)
(68,519)
—
1,528
11,811
(37,197)
(10,747)
—
(108,425)
(22,906)
(25,601)
Benefit obligation - end of year
$ 1,205,183
$ 1,609,508
$
451,337
$
770,468
Fair value of plan assets
Fair value of plan assets - beginning of year
$ 1,549,157
$ 1,601,786
$
737,443
$
742,639
Actual return on plan assets
Company contributions
Settlements
Foreign currency changes
Benefits paid
(293,968)
5,639
(1,574)
—
51,828
5,397
(1,429)
—
(97,893)
(108,425)
(218,325)
8,731
—
(66,540)
(22,906)
17,929
9,686
—
(7,210)
(25,601)
Fair value of plan assets - end of year
$ 1,161,361
$ 1,549,157
$
438,403
$
737,443
Amounts recognized in the Consolidated Balance Sheets
Noncurrent asset
Current liability
Noncurrent liability
Funded status
$
—
$
—
$
26,570
$
(7,294)
(36,528)
(5,883)
(54,468)
(1,351)
(38,153)
$
(43,822) $
(60,351) $
(12,934) $
29,309
(1,345)
(60,989)
(33,025)
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
2022
2021
2022
2021
$ 1,205,183
$ 1,609,508
$ 1,205,135
$ 1,609,125
$ 1,161,361
$ 1,549,157
$
$
$
38,238
37,972
—
$
$
$
59,859
59,352
—
68
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
2022
2021
2022
2021
$
698,815
$
716,585
$
297,753
$
301,913
(105)
—
(149)
—
7,552
(7)
7,804
(7)
$
698,710
$
716,436
$
305,298
$
309,710
The components of net periodic benefit cost (income) for defined benefit pension plans were as follows:
Service cost
Interest cost
United States
2022
2021
2020
2022
Foreign
2021
2020
$
55 $
102 $
86 $
1,214 $
1,528 $
1,650
44,348
42,434
52,103
13,568
11,811
13,379
Expected return on plan assets
(71,080)
(77,119)
(84,719)
(26,770)
(31,869)
(34,391)
Amortization of net transition asset
Amortization of prior service (credit) cost
Amortization of net actuarial loss
Settlements
—
(44)
33,164
394
—
(60)
38,233
551
—
(60)
32,490
1,364
—
252
6,767
—
—
268
9,350
—
(4)
245
7,842
5,060
Net periodic benefit cost (income)
$
6,837 $
4,141 $
1,264 $
(4,969) $
(8,912) $
(6,219)
Other changes in plan assets and benefit obligations for defined benefit pension plans recognized in other comprehensive income were
as follows:
Net actuarial loss (gain)
Amortization of net actuarial loss
Amortization of prior service credit (cost)
Settlements
United States
Foreign
2022
2021
2022
2021
$
15,788
$
(27,842) $
2,607
$
(23,257)
(33,164)
(38,233)
44
(394)
60
(551)
(6,767)
(252)
—
(9,350)
(268)
—
Total recognized in other comprehensive income
$
(17,726) $
(66,566) $
(4,412) $
(32,875)
69
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
2022
2021
2020
5.55%
N/A
2.85%
5.10%
N/A
2.85%
N/A
2.54%
5.60%
N/A
2.54%
N/A
3.34%
6.25%
N/A
1.95 % - 5.10%
2.00 % - 3.00%
0.85 % - 2.85%
1.50 % - 3.65%
0.70 % - 2.40%
1.50 % - 2.50%
0.85 % - 2.85%
3.75 % - 5.75%
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%
A discount rate is used to determine the present value of our future benefit obligations. The discount rate for our U.S. pension 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, future expectations of returns and volatility
of 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
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.
70
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,
2023
2022
2021
16 %
2 %
76 %
5 %
1 %
15 %
2 %
74 %
8 %
1 %
18 %
3 %
73 %
5 %
1 %
100 %
100 %
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 73% 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,
2023
2022
2021
10 %
70 %
10 %
10 %
— %
8 %
70 %
13 %
8 %
1 %
12 %
69 %
9 %
9 %
1 %
100 %
100 %
100 %
71
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, 2022
Level 1
Level 2
Level 3
Total
$
—
—
—
114,084
—
—
—
—
$
10,623
$
137,505
220,281
21,479
527,407
26,450
—
113,802
—
—
—
—
—
—
91,500
—
$
10,623
137,505
220,281
135,563
527,407
26,450
91,500
113,802
$
114,084
$ 1,057,547
$
91,500
$ 1,263,131
(113,802)
10,416
3,525
(1,909)
$ 1,161,361
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
—
—
—
—
—
—
77,494
—
$
3,725
195,037
229,300
228,998
771,529
12,486
77,494
145,855
$
202,416
$ 1,384,514
$
77,494
$ 1,664,424
(145,855)
16,820
20,569
(6,801)
$ 1,549,157
72
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, 2022
Level 1
Level 2
Level 3
Total
—
—
—
—
—
—
—
—
$
8,338
$
42,717
247,337
35,887
26,336
4,446
—
$
—
—
—
—
—
42,980
24,394
8,338
42,717
247,337
35,887
26,336
47,426
24,394
$
365,061
$
67,374
$
432,435
5,485
483
$
438,403
December 31, 2021
Level 1
Level 2
Level 3
Total
—
—
—
—
—
—
—
—
$
8,577
$
96,596
431,845
46,522
33,583
7,168
—
$
—
—
—
—
—
52,491
52,169
8,577
96,596
431,845
46,522
33,583
59,659
52,169
$
624,291
$
104,660
$
728,951
7,966
526
$
737,443
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.
73
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
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
was a remaining unfunded commitment of $6 million and $8 million at December 31, 2022 and 2021, respectively. These investments
comprise 1% of total U.S. Pension Fund assets at both December 31, 2022 and 2021.
Level 3 Gains and Losses
The following table summarizes the changes in the fair value of Level 3 assets:
Balance at December 31, 2020
Realized gains
Unrealized losses
Net purchases, sales and settlements
Foreign currency and other
Balance at December 31, 2021
Realized gains
Unrealized gains (losses)
Net purchases, sales and settlements
Foreign currency and other
Balance at December 31, 2022
U.S. Plans
Foreign Plans
Real estate
Real estate
Diversified
Growth Funds
$
69,347
$
45,275
$
50,750
1,791
6,958
(602)
—
77,494
1,058
12,666
282
—
—
6,357
1,663
(804)
52,491
—
(6,741)
1,729
(4,499)
$
91,500
$
42,980
$
—
1,995
—
(576)
52,169
—
(5,933)
(16,474)
(5,368)
24,394
74
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
Net actuarial gain
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
2022
2021
$
139,516
$
169,210
731
3,679
(31,512)
(740)
(12,399)
909
3,755
(22,305)
123
(12,176)
99,275
$
139,516
—
$
—
12,399
(12,399)
12,176
(12,176)
—
$
—
(11,530) $
(12,841)
(87,745)
(126,675)
(99,275) $
(139,516)
$
$
$
$
$
(1) The benefit obligation for U.S. postretirement medical benefits plan was $90 million and $126 million at December 31, 2022 and 2021,
respectively.
Pretax amounts recognized in AOCL consist of:
Net actuarial (gain) loss
2022
2021
$
(16,405) $
15,175
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
2022
2021
2020
$
731
$
909
$
3,679
—
68
3,755
129
4,090
$
4,478
$
8,883
$
885
4,993
373
3,198
9,449
Other changes in benefit obligation for postretirement medical benefit plans recognized in other comprehensive income were as
follows:
Net actuarial gain
Amortization of net actuarial loss
Amortization of prior service cost
Total recognized in other comprehensive income
75
2022
2021
$
(31,512) $
(22,305)
(68)
—
(31,580) $
$
(4,090)
(129)
(26,524)
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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
2022
2021
2020
5.60 %
5.15 %
2.80 %
2.90 %
2.80 %
2.90 %
2.35 %
2.50 %
2.35 %
2.50 %
3.20 %
3.00 %
The discount rate for our U.S. postretirement medical benefit plan 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 Canada postretirement medical benefit plan is determined by matching the expected cash flows
associated with our benefit obligations to spot rates along a yield curve developed based on yields of corporate long-term, high-quality
fixed income debt instruments available as of the measurement date.
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for the U.S. plan was
6.5% for 2022 and 6.8% for 2021. The assumed health care trend rate is 6.75% for 2023 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.
2023
2024
2025
2026
2027
Thereafter
Pension Benefits
Postretirement
Medical Benefits
$
128,361
$
121,948
122,072
120,822
119,912
582,503
$ 1,195,618
$
11,561
11,076
10,568
10,072
9,523
39,736
92,536
During 2023, we do not anticipate making contributions to our U.S. pension plans and estimate contributing approximately $14
million to our foreign pension plans.
Savings Plans
We offer a voluntary defined contribution 401(k) plan 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 an additional contribution to
participating employees based on their eligible pay. Total employer contributions to the 401(k) plan were $28 million in 2022 and $27
million in 2021.
76
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,
2022
2021
2020
$
$
(39,294) $
(85,258) $
(243,760)
79,174
77,843
60,391
39,880
$
(7,415) $
(183,369)
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,
2022
2021
2020
$
223
(12,284)
(12,061)
$
(7,419)
(13,825)
(21,244)
$
(10,582)
6,516
(4,066)
(9,716)
7,137
(2,579)
8,745
8,835
17,580
(748)
3,688
2,940
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
$
(10,922)
$
7,122
Total provision (benefit) for income taxes
$
Effective tax rate
7.4 %
147.3 %
(3.9) %
The effective tax rate for 2022 includes a tax benefit of $5 million on the pre-tax gain of $5 million from the Borderfree sale as the tax
basis was higher than book basis and a $1 million benefit associated with the 2019 sale of a business.
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.
77
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. (3)
CARES Act carryback benefit
Tax credits
Unrealized stock compensation benefits
Surrender of company-owned life insurance policies
Goodwill impairment
Borderfree tax basis differences
Other, net (4)
Provision (benefit) for income taxes
Years Ended December 31,
2022
2021
2020
$
8,375
$
(1,558) $
(38,507)
(1,612)
3,349
(2,753)
1,089
—
(850)
572
—
—
(5,610)
380
(336)
(2,220)
(7,288)
4,441
(2,270)
(500)
(505)
—
—
—
(686)
$
2,940
$
(10,922) $
1,209
(3,345)
1,802
(2,300)
(1,646)
(750)
2,312
10,313
40,328
—
(2,294)
7,122
(1)
(2)
Includes a benefit of $1 million related to tax resolutions and a benefit of $1 million for tax return true-ups for the year ended
December 31, 2022 and a charge of $2 million for the surrender of company-owned life insurance for the year ended December
31, 2020.
Includes a charge of $2 million for a deferred rate change and a charge of $1 million for the establishment of a valuation
allowance for the year ended December 31, 2022, a benefit of $5 million for a deferred rate change for the year ended December
31, 2021, and 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.
Includes a benefit of $1 million associated with the sale of a 2019 business for the year ended December 31, 2022.
(3)
(4) 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, and a $2 million benefit related to tax balance corrections and a $1 million charge related to interest
for the year ended December 31, 2020.
78
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
Long-term incentives
Net operating and capital losses
Tax credit carry forwards
Section 163j carryforward
Tax uncertainties gross-up
Other
Gross deferred tax assets
Less: Valuation allowance
Net deferred tax assets
Total deferred taxes, net
December 31,
2022
2021
$
(51,717) $
(26,765)
(216,282)
(65,916)
(73,403)
(27,366)
(85,544)
(26,745)
(202,862)
(76,672)
(46,496)
(25,438)
(461,449)
(463,757)
24,892
9,640
78,765
12,946
34,681
20,472
52,271
12,308
130,640
125,699
66,256
23,917
4,982
50,345
402,383
(157,450)
244,933
65,931
10,556
6,929
38,641
367,488
(121,778)
245,710
$
(216,516) $
(218,047)
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 $48 million as of December 31, 2022, the majority of which has an indefinite
carryforward period. We have net operating loss carryforwards in international jurisdictions of $153 million as of December 31, 2022,
of which $139 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 $932 million 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 10
years.
As of December 31, 2022, we assert that we are permanently reinvested in our pre-1987 and post-2017 undistributed earnings of $307
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 $3 million.
79
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:
2022
2021
2020
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
$
45,072
$
50,064
$
6
(6,830)
340
(1,966)
(3,322)
3,016
(4,247)
492
(1,270)
(2,983)
Balance at end of year
$
33,300
$
45,072
$
60,302
2,147
(47)
3,472
(12,508)
(3,302)
50,064
The amount of the unrecognized tax benefits at December 31, 2022, 2021 and 2020 that would affect the effective tax rate if
recognized was $29 million, $39 million and $44 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 20% 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,
2022, 2021 and 2020 were not significant. We had approximately $3 million and $4 million accrued for the payment of interest and
penalties at December 31, 2022 and 2021, respectively.
Other Tax Matters
With regard to U.S. Federal income tax, the Internal Revenue Service examination of our consolidated U.S. income tax returns for tax
years prior to 2019 are closed to audit, except for review of the Tax Cuts and Jobs Act (TCJA) Sec 965 transition tax. On a state and
local level, returns for most jurisdictions are closed through 2017. For our significant non-U.S. jurisdictions, Canada is closed to
examination through 2017 except for a specific issue under current exam, and France, Germany and the U.K. are closed through 2019,
2016, and 2020 respectively. 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 positive or negative
impact 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.
80
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 renewal options. 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 the
lease liability is determined using our incremental borrowing rate at lease commencement. Information regarding operating and
financing leases is as follows:
Leases
Balance Sheet Location
December 31, 2022 December 31, 2021
Assets
Operating
Finance
Total leased assets
Liabilities
Operating
Finance
Operating lease assets
Property, plant and equipment, net
Current operating lease liabilities
Noncurrent operating lease liabilities
Accounts payable and accrued liabilities
Other noncurrent liabilities
$
$
$
296,129 $
54,063
350,192 $
208,428
46,770
255,198
52,576 $
265,696
11,690
43,858
40,299
192,092
10,694
39,535
Total lease liabilities
$
373,820 $
282,620
Lease Cost
Operating lease expense
Finance lease expense
Amortization of leased assets
Interest on lease liabilities
Variable lease expense
Sublease income
Total expense
Years Ended December 31,
2022
2021
2020
$
67,041 $
62,269 $
54,718
12,321
3,323
26,870
9,191
2,826
33,924
(1,086)
(1,761)
3,792
949
21,413
(979)
$
108,469 $
106,449 $
79,893
Operating lease expense includes immaterial amounts related to leases with terms of 12 months or less.
Future Lease Payments
Operating Leases
Finance Leases
Total
2023
2024
2025
2026
2027
Thereafter
Total
Less: present value discount
Lease liability
$
73,846 $
14,689 $
69,552
63,096
53,016
46,496
98,880
404,886
86,614
13,378
11,697
9,989
8,178
6,721
64,652
9,104
$
318,272 $
55,548 $
88,535
82,930
74,793
63,005
54,674
105,601
469,538
95,718
373,820
Future lease payments exclude $53 million of payments for leases signed but not yet commenced at December 31, 2022.
81
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, 2022
December 31, 2021
6.4 years
5.1 years
6.7 years
5.5 years
8.2%
6.2%
6.5%
6%
Years Ended December 31,
2022
2021
2020
65,012 $
3,323 $
11,091 $
59,748 $
52,565
2,826 $
7,707 $
949
4,223
135,359 $
20,927 $
48,662 $
30,840 $
38,641
17,741
$
$
$
$
$
The following table summarizes the changes in shares of Common Stock outstanding and Treasury Stock:
Balance at December 31, 2019
Issuance of treasury stock
Balance at December 31, 2020
Issuance of treasury stock
Balance at December 31, 2021
Repurchases of common stock
Issuance of treasury stock
Balance at December 31, 2022
Common Stock
Outstanding
Treasury Stock
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
(2,750,000)
2,750,000
2,049,192
(2,049,192)
174,030,587
149,307,325
At December 31, 2022, 35,385,343 shares were reserved for issuance under our stock plans and dividend reinvestment program.
82
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,
2022
2021
2020
$
—
$
289
$
(161)
$
$
$
$
178
549
727
181
546
(117)
(366)
(194)
(49)
$
(145)
$
11
—
(150)
(37)
(113)
$
10,124
(9) $
—
(9)
(2)
(6)
(7)
(13)
(2)
(7) $
(11)
$
—
$
—
$
(208)
(39,999)
(394)
(40,601)
(9,315)
(337)
(51,673)
(551)
(52,561)
(12,755)
231
10,355
2,589
7,766
4
(558)
(43,530)
(6,424)
(50,508)
(11,930)
$
(31,286) $
(39,806)
$
(38,578)
(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).
83
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, 2019
$
337 $
2,849 $
(819,018) $
(24,311) $
(840,143)
Other comprehensive loss before reclassifications
(1,861)
5,319
(70,623)
37,252
(29,913)
Cash flow
hedges
Available-for-
sale securities
Pension and
postretirement
benefit plans
Foreign
currency
adjustments
Total
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive income
Balance at December 31, 2020
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive (loss) income
Balance at December 31, 2021
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Net other comprehensive income (loss)
113
(1,748)
(1,411)
5,069
145
5,214
3,803
9,246
(546)
8,700
(7,766)
(2,447)
402
(6,662)
11
(6,651)
(6,249)
(33,198)
7
(33,191)
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
(756,639)
—
(34,168)
(21,227)
39,962
58,819
(780,312)
9,297
(71,344)
(85,999)
31,286
40,583
—
(71,344)
30,747
(55,252)
Balance at December 31, 2022
$
12,503 $
(39,440) $
(716,056) $
(92,571) $
(835,564)
20. Stock-Based Compensation Plans
We may grant restricted stock units, non-qualified stock options and other stock awards 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, 2022, there were 17,217,552 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
2022
2021
Shares
Weighted
average fair
value
5,738,293
$
5,280,429
(2,221,027)
(1,599,940)
7,197,755
$
6.95
4.82
6.10
4.69
6.09
Shares
6,560,372
$
2,100,126
(2,504,189)
(418,016)
5,738,293
$
Weighted
average fair
value
6.27
8.36
6.72
6.61
6.95
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, 2022, there was $11 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, 2022 was $27 million. The fair value
of RSUs vested during 2022, 2021 and 2020 was $11 million, $22 million and $6 million, respectively. During 2020, we granted
4,123,544 RSUs at a weighted average fair value of $3.92.
In 2022 and 2021, we granted 158,416 and 121,455 RSUs, respectively, to non-employee directors. These RSUs vest one year from
the grant date.
84
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. There were no PSU awards granted since 2020 and the award period for the final award granted in 2019 closed in
2022. Awards outstanding at December 31, 2022 represent awards that have been deferred and will be issued at a later date.
The following table summarizes share information about PSUs:
Outstanding - beginning of the year
Vested
Forfeited
Outstanding - end of the year
2022
2021
Shares
Weighted
average fair
value
1,009,091
$
(197,471)
—
811,620
$
6.60
6.73
—
9.57
Shares
1,730,002
$
(287,109)
(433,802)
1,009,091
$
Weighted
average fair
value
9.31
9.33
9.33
6.60
Stock Options
Stock options are granted at an exercise price equal to or greater than the market 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, 2022, there was less than $1 million of
unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.3 years.
The intrinsic value of options outstanding and exercisable at December 31, 2022 was not significant.
The following table summarizes information about stock option activity:
2022
2021
Per share
weighted
average
exercise prices
Per share
weighted
average exercise
prices
Shares
Shares
Options outstanding - beginning of the year
11,120,069
$
10.65
12,814,365
$
11.81
Granted
Exercised
Canceled
Expired
Options outstanding - end of the year
Options exercisable - end of the year
—
—
(93,021)
(1,000,000)
10,027,048
8,912,286
$
$
—
—
8.09
18.29
9.91
10.42
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
During 2020, 33,501 stock options were exercised at a weighted average fair value of $6.82.
The following table provides additional information about stock options outstanding and exercisable at December 31, 2022:
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 - $7.24
$8.21 - $13.16
$16.82 - $23.94
4,605,995 $
3,674,457 $
1,746,596 $
10,027,048 $
5.14
12.05
17.94
9.91
6.5 years
5.1 years
2.5 years
5.3 years
3,905,829 $
3,259,861 $
1,746,596 $
8,912,286 $
5.31
12.49
17.94
10.42
6.4 years
4.8 years
2.5 years
5.0 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.
85
PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
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
2.4%
70.0%
1.1%
7 years
$4.53
$3,342
5.0 %
43.0 %
1.5 %
7 years
$1.01
$2,830
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 381,229 shares and 182,899 shares in
2022 and 2021, respectively. We have reserved 1,437,498 common shares for future purchase under the ESPP.
86
PITNEY BOWES INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in thousands)
Description
Valuation allowance for deferred tax asset
2022
2021
2020
Balance at
beginning of year
Additions charged
to expense
Deductions
Balance at end of
year
$
$
$
121,778
116,543
110,781
$
$
$
44,188
7,490
23,150
$
$
$
(8,516)
(2,255)
(17,388)
$
$
$
157,450
121,778
116,543
87
About Pitney Bowes
Pitney Bowes (NYSE:PBI) is a global shipping and mailing company that provides technology, logistics, and financial services to more than 90 percent of the Fortune 500. Small business, retail,
enterprise, and government clients around the world rely on Pitney Bowes to remove the complexity of sending mail and parcels. For the latest news, corporate announcements and financial results
visit https://www.pitneybowes.com/us/newsroom.html. For additional information visit Pitney Bowes at www.pitneybowes.com.
Forward-Looking Statements
This document contains “forward-looking statements” about the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not
limited to, statements about future revenue and earnings guidance and future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and
uncertainties that could cause actual results to differ materially from those projected. In particular, we continue to navigate the impacts of the Covid-19 pandemic (Covid-19) as well as the risk of a
global recession, and the effects that they may have on our and our clients’ business. Other factors which could cause future financial performance to differ materially from expectations, and which
may also be exacerbated by Covid-19 or the risk of a global recession or a negative change in the economy, include, without limitation, 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, United States Postal
Service (USPS) commercial programs, or our contractual relationships with the USPS or USPS’s performance under those contracts; our ability to continue to grow and manage volumes, gain
additional economies of scale and improve profitability within our Global Ecommerce segment; changes in labor and transportation availability and costs; and other factors as more fully outlined in
the Company’s 2022 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission (the “SEC”). Pitney Bowes assumes no obligation to update any forward-looking
statements contained in this document as a result of new information, events or developments.
Important Additional Information and Where to Find It
Pitney Bowes has filed a definitive proxy statement (the “Proxy Statement”) and other documents with the SEC in connection with its solicitation of proxies from shareholders in respect of the
Annual Meeting. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ ALL RELEVANT DOCUMENTS, INCLUDING PITNEY BOWES’ PROXY STATEMENT
AND ANY AMENDMENTS AND SUPPLEMENTS THERETO AND THE ACCOMPANYING GOLD PROXY CARD, FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN, OR WILL
CONTAIN, IMPORTANT INFORMATION ABOUT PITNEY BOWES. Shareholders may obtain free copies of the Proxy Statement and other relevant documents that Pitney Bowes files with the SEC and on
Pitney Bowes’ website at www.pitneybowes.com or from the SEC’s website at www.sec.gov.
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.
©2022–2023 Pitney Bowes Inc. All rights reserved.
3001 Summer Street, Stamford, CT 06926 203.356.5000 www.pitneybowes.com