PBI Pitney Bowes Inc

Pitney Bowes Inc. (NYSE:PBI), a global technology company providing innovative technology solutions to power commerce, today reported financial results for the full year and the fourth quarter 2016. The Company also has provided an update to its annual guidance for 2017.

Full-Year 2016:

• Revenue of $3.4 billion, a decline of 5 percent; a decline of 4 percent when adjusted for the impact of currency; a decline of 3 percent when adjusted for both the impact of currency and market exits
• GAAP EPS of $0.50; Adjusted EPS of $1.68
• GAAP cash from operations of $491 million; free cash flow of $430 million
• Issued $600 million of 5 year notes and redeemed the Pitney Bowes International Holdings, Inc. preferred stock of $300 million
• Repurchased 10.5 million shares of common stock

Fourth Quarter 2016:

• Revenue of $887 million, a decline of 5 percent; a decline of 4 percent when adjusted for the impact of currency and market exits
• GAAP EPS loss of $0.44; Adjusted EPS of $0.53
• GAAP EPS includes a non-cash $0.89 per share goodwill impairment charge related to the Software Solutions business
• GAAP cash from operations of $200 million; free cash flow of $164 million

“Our fourth quarter and full-year results were not what we wanted or expected,” said Marc B. Lautenbach, President and Chief Executive Officer. “While we were disappointed in our fourth quarter performance, especially in our Software Solutions business, we closed the year with much of the heavy lifting and short-term disruptions from our transformation initiatives behind us. We are poised to take advantage of all of the hard work we completed in 2016 and over the past four years. Going forward, I remain confident in our long-term strategy, our competitive position, our operational excellence initiatives, and our ability to unlock value for our shareholders.”

Full Year 2016 Results

Revenue totaled $3.4 billion for the year, which was a decline of 5 percent versus prior year. Revenue declined 4 percent versus the prior year when adjusted for the impact of currency and declined 3 percent when adjusted for the impact of currency and previously exited direct operations (market exits) in Mexico, South Africa and five markets in Asia.

Generally Accepted Accounting Principles earnings per diluted share (GAAP EPS) were $0.50, which included $0.22 per share for restructuring and asset impairment charges, $0.03 per share charge from the redemption of the preferred stock of the Company’s Pitney Bowes International Holdings (PBIH) subsidiary, $0.02 from loss on dispositions and $0.01 loss for discontinued operations.

In addition, the Company recorded a non-cash estimate of $0.88 per share goodwill impairment charge related to the Software Solutions business principally as a result of recent operating experience. The Company expects to finalize the valuation assessment and resulting goodwill impairment charge at the time the 10-K is filed and does not anticipate any material adjustment.

Adjusted earnings per diluted share from continuing operations (Adjusted EPS) were $1.68. The Company uses Adjusted EPS to measure performance.

GAAP cash flow from operations for the year was $491 million while free cash flow was $430 million. During the year, the Company used cash to pay $197 million for share repurchases, $141 million in dividends to common shareholders and $65 million in restructuring payments.

Fourth Quarter 2016 Results

Revenue totaled $887 million for the quarter, which was a decline of 5 percent versus prior year. Revenue declined 4 percent versus the prior year when adjusted for the impact of currency and market exits.

Digital Commerce Solutions revenue declined 2 percent on a reported basis and grew 1 percent on a constant currency basis. Double-digit revenue growth in ecommerce marketplace and retail was offset by a decline in Software Solutions and office shipping revenues.

Enterprise Business Solutions revenue declined 5 percent. Revenue declined 3 percent compared to the prior year when adjusted for the impact of currency and market exits. Revenue declined in both Production Mail and Presort Services.

Small and Medium Business (SMB) Solutions revenue declined 7 percent. Revenue declined 6 percent when adjusted for the impact of currency and market exits. North America and International Mailing both contributed to the decline.

GAAP EPS was a loss of $0.44, which included a non-cash estimate of $0.89 per share goodwill impairment charge, $0.05 per share for restructuring and asset impairment charges, $0.01 per share from the redemption of the preferred stock of the Company’s PBIH subsidiary and $0.01 from loss on dispositions. Adjusted EPS were $0.53, which grew $0.05 per share over prior year.

GAAP cash flow from operations for the quarter was $200 million while free cash flow was $164 million. In comparison to the prior year, free cash flow improved largely due to timing of working capital requirements. During the quarter, the Company used cash to pay $35 million in dividends to common shareholders and $14 million in restructuring payments.

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

    Fourth Quarter   Full Year

2016

 

2015

2016

 

2015

GAAP EPS ($0.44 ) $ 0.44 $ 0.50 $ 2.03 Discontinued operations – (income) loss     -       ($0.03 )   $ 0.01       ($0.03 ) GAAP EPS from continuing operations ($0.44 ) $ 0.41 $ 0.52 $ 2.00 Goodwill impairment charge $ 0.89 - $ 0.88 - Restructuring charges and asset impairments, net $ 0.05 $ 0.05 $ 0.22 $ 0.09 Preferred stock redemption $ 0.01 - $ 0.03 - Impact of acquisition / divestiture transactions $ 0.01 $ 0.02 $ 0.02 ($0.32 ) Legal settlement - - - $ 0.02 Investment divestiture     -       -       -       ($0.04 ) Adjusted EPS $ 0.53 $ 0.48 $ 1.68 $ 1.75   *   The sum of the earnings per share may not equal the totals above due to rounding.  

Debt Management

During the year, the Company issued $600 million of 3.375 percent 5-year fixed rate notes. The issuance was a debt neutral transaction as the Company paid down commercial paper outstanding and redeemed all $300 million of outstanding shares of the PBIH preferred stock on November 1, 2016. The Company had no commercial paper outstanding as of December 31, 2016.

Fourth Quarter 2016 Business Segment Reporting

The Company’s business segment reporting reflects the clients served in each market and the way it manages these segments for growth and profitability. The reporting segment groups are the SMB Solutions group; the Enterprise Business Solutions group; and the Digital Commerce Solutions group. The segment results for the quarter and prior year may not equal the subtotals for each segment group due to rounding.

The SMB Solutions group offers mailing equipment, financing, services and supplies for small and medium businesses to efficiently create mail and evidence postage. This group includes the North America Mailing and International Mailing segments. North America Mailing includes the operations of U.S. and Canada Mailing. International Mailing includes all other SMB operations around the world.

The Enterprise Business Solutions group includes the global Production Mail and Presort Services segments. Production Mail provides mailing and printing equipment and services for large enterprise clients to process mail. Presort Services provides sortation services to qualify large mail volumes for postal worksharing discounts.

The Digital Commerce Solutions group includes the Software Solutions and Global Ecommerce segments. Software Solutions provide customer engagement, customer information and location intelligence software. Global Ecommerce facilitates global cross-border ecommerce transactions and shipping solutions for businesses of all sizes.

SMB Solutions Group

    ($ millions) Fourth Quarter Revenue

2016

   

2015

   

Y/YReported

   

Y/YEx Currency

   

Y/Y Ex Currency& Market Exits*

North America Mailing $ 341 $ 363 (6 %) (6 %) (6 %) International Mailing   101   114 (11 %) (6 %) (4 %) SMB Solutions Total $ 442 $ 477 (7 %) (6 %) (6 %)   EBIT North America Mailing $ 138 $ 165 (16 %) International Mailing   12   14 (16 %) SMB Solutions Total $ 151 $ 179 (16 %)   *   Excluding $6.2 million related to the impact of currency and $1.7 million related to the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia.  

North America Mailing

Compared to the prior year, overall revenue was primarily affected by lower financing and supplies revenues, as well as some weakness in equipment sales at the end of the quarter. EBIT margin was lower than prior year largely due to the decline in higher-margin recurring revenue streams.

International Mailing

Excluding the effects from currency and market exits, revenue declined at a mid-single digit rate. Equipment sales declined from prior year as strong growth in France was more than offset by weakness in the UK and Italy. Italy’s year-to-year decline was a result of a large government transaction in the prior year. The decline in recurring revenue streams was consistent with the prior quarter. EBIT margin was down versus prior year due to the decline in higher-margin recurring revenue streams partially offset by lower expenses.

Enterprise Business Solutions Group

    ($ millions) Fourth Quarter Revenue

2016

   

2015

   

Y/YReported

   

Y/YEx Currency

   

Y/Y Ex Currency& Market Exits*

Production Mail $ 115 $ 122 (6 %) (5 %) (4 %) Presort Services   118   122 (3 %) (3 %) (3 %) Enterprise Business Total $ 233 $ 245 (5 %) (4 %) (3 %)   EBIT Production Mail $ 19 $ 17 11 % Presort Services   26   28 (6 %) Enterprise Business Total $ 45 $ 45 0 %   *   Excluding $1.2 million related to the impact of currency and $1.8 million related to the divested revenues resulting from the exit of direct operations in Mexico, South Africa and five markets in Asia  

Production Mail

Equipment sales grew 1 percent over prior year on higher inserter equipment placements. Support services revenue declined as a result of the shift from in-house mail production to third party service bureaus who tend to self-service, as well as reduced service revenue associated with the market exits. EBIT margin improved from prior year driven by equipment sales margin and lower expenses.

Presort Services

The revenue decline was driven by lower First Class volumes along with lower average revenue per piece of mail processed largely as a result of the earlier USPS rate change. This was somewhat offset by an increase in Standard Class mail volumes processed.

Digital Commerce Solutions Group

    ($ millions) Fourth Quarter Revenue

2016

   

2015

   

Y/YReported

   

Y/YEx Currency

Software Solutions $ 91 $ 103 (12 %) (9 %) Global Ecommerce   121   112 8 % 10 % Digital Commerce Total $ 212 $ 215 (2 %) 1 %   EBIT Software Solutions $ 12 $ 14 (10

%)

 

Global Ecommerce   10   9 12

%

 

Digital Commerce Total $ 23 $ 23 (1

%)

 

 

Software Solutions

The revenue decline was driven by several anticipated large deals which did not get completed in the last few weeks of the quarter. Customer Engagement and Location Intelligence license revenues declined but were partly offset by growth in Customer Information Management licenses. The Company continues to invest in expanding the indirect channel and training partner sales and technical resources to build future partner-led pipeline and revenue. The Company has made changes to the sales organization structure to improve the direct salesforce effectiveness. EBIT margin improved slightly mostly due to lower expenses.

Global Ecommerce

Excluding the effects of currency, Ecommerce marketplace and retail revenues grew 18 percent from prior year. This was driven by strong growth in UK outbound marketplace and retail volumes. Revenue grew despite a stronger U.S. dollar versus prior year. The Ecommerce marketplace and retail revenue growth was partially offset by a decline in office shipping.

EBIT margin increased versus the prior year due to cross border synergy savings and revenue growth. This was partially offset by a decline in higher-margin domestic office shipping and higher research and development costs.

2017 Guidance

This guidance discusses future results, which are inherently subject to unforeseen risks and developments. As such, discussions about the business outlook should be read in the context of an uncertain future, as well as the risk factors identified in the safe harbor language at the end of this release and as more fully outlined in the Company's 2015 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission.

This guidance excludes any unusual items that may occur or additional portfolio or restructuring actions, not specifically identified, as the Company implements plans to further streamline its operations and reduce costs. Revenue guidance is provided on a constant currency basis. The Company cannot reasonably predict the impact that future changes in currency exchange rates will have on revenue and net income. Additionally, the Company cannot provide GAAP EPS and GAAP cash from operations guidance due to the uncertainty of future potential restructurings, goodwill and asset write-downs, unusual tax settlements or payments and contributions to its pension funds, acquisitions, divestitures and other potential adjustments, which could (individually or in the aggregate) have a material impact on the Company’s performance. The Company’s guidance is based on an assumption that the global economy and foreign exchange markets in 2017 will not change significantly.

Based on 2016 results, including the final fourth quarter outcome, the Company is updating its 2017 annual guidance, principally to reflect a more conservative outlook for the Software Solutions business.

The Company now expects, for the full year 2017:

• Revenue, on a constant currency basis, to be in the range of a 2 percent decline to 1 percent growth when compared to 2016.
• Adjusted EPS to be in the range of $1.70 to $1.85 compared to the original range of $1.80 to $1.95.
• Free cash flow to be in the range of $400 million to $460 million compared to the original range of $415 million to $485 million.

In 2017, the Company expects:

• Revenue to benefit from improving trends throughout the year from the following:
  • SMB new products and digital capabilities;
  • Ecommerce volume growth;
  • Software partner channel expansion and improvement in the direct channel;
  • Expansion of the Presort Services network and the January 2017 USPS rate change.
• Ongoing improvement in cost and expense driven by the expected benefits from the Company’s operational excellence initiatives.
• Incremental Marketing expense related to enhancing the Company’s digital capabilities.
• Normalization of variable compensation compared to 2016.
• A tax rate on adjusted earnings expected to be in the range of 31 to 35 percent.

Conference Call and Webcast

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

About Pitney Bowes

Pitney Bowes (NYSE:PBI), is a global technology company powering billions of transactions – physical and digital – in the connected and borderless world of commerce. Clients around the world, including 90 percent of the Fortune 500, rely on products, solutions and services from Pitney Bowes in the areas of customer information management, location intelligence, customer engagement, shipping, mailing, and global ecommerce. And with the innovative Pitney Bowes Commerce Cloud, clients can access the broad range of Pitney Bowes solutions, analytics, and APIs to drive commerce. For additional information visit Pitney Bowes, the Craftsmen of Commerce, at www.pitneybowes.com.

Use of Non-GAAP Measures

The Company's financial results are reported in accordance with generally accepted accounting principles (GAAP); however, in our disclosures we use certain non-GAAP measures, such as adjusted earnings before interest and taxes, Adjusted EPS, revenue growth on a constant currency basis, revenue excluding the impact of currency and market exits, free cash flow and Segment EBIT.

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

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

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

In addition, Management uses segment EBIT to measure profitability and performance at the segment level. Segment EBIT is determined by deducting from revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges and goodwill and asset impairments, which are recognized on a consolidated basis. A reconciliation of Segment EBIT to the Company’s total Net Income can be found in the Company’s attached financial schedules.

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

This document contains “forward-looking statements” about the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not limited to, statements about its future revenue and earnings guidance and other statements about future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: mail volumes; the uncertain economic environment; timely development, market acceptance and regulatory approvals, if needed, of new products; fluctuations in customer demand; changes in postal regulations; interrupted use of key information systems; the ability to protect the Company’s information technology systems against service interruptions, misappropriation of data, or breaches of security resulting from cyber-attacks or other events; management of outsourcing arrangements; the implementation of a new enterprise business platform; changes in business portfolio; the success of our investment in rebranding the Company; the risk of losing some of the Company’s larger clients in the Global Ecommerce segment; integrating newly acquired businesses, including operations and product and service offerings; foreign currency exchange rates; changes in our credit ratings; management of credit risk; changes in interest rates; the financial health of national posts; increased customs and regulatory risks associated with cross-border transactions; and other factors beyond its control as more fully outlined in the Company's 2015 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three and twelve months ended December 31, 2016 and 2015, and consolidated balance sheets as of December 31, 2016 and December 31, 2015 are attached.

  Pitney Bowes Inc. Consolidated Statements of Income (Unaudited; in thousands, except share and per share amounts)     Three months ended December 31,   Twelve months ended December 31, 2016   2015 2016   2015 Revenue: Equipment sales $ 190,306 $ 199,831 $ 675,451 $ 695,159 Supplies 64,051 72,925 262,682 288,103 Software 90,901 103,265 348,661 386,506 Rentals 103,032 107,934 412,738 441,663 Financing 89,632 103,043 366,547 410,035 Support services 129,188 139,149 512,820 554,764 Business services   219,959     210,800     827,676     801,830     Total revenue   887,069     936,947     3,406,575     3,578,060     Costs and expenses: Cost of equipment sales 96,201 98,363 331,942 331,069 Cost of supplies 20,758 22,890 81,420 88,802 Cost of software 26,345 27,996 105,841 113,580 Cost of rentals 21,089 21,061 76,040 84,188 Financing interest expense 13,866 17,620 55,241 71,791 Cost of support services 70,895 78,107 295,685 322,960 Cost of business services 151,152 140,642 568,509 546,201 Selling, general and administrative 283,882 340,643 1,200,327 1,279,961 Research and development 31,545 26,463 121,306 110,156 Goodwill impairment 168,563 - 168,563 - Restructuring charges and asset impairments, net 13,793 11,477 63,296 25,782 Interest expense, net 26,576 22,383 88,970 87,583 Other expense (income), net   -     78     536     (94,838 )   Total costs and expenses   924,665     807,723     3,157,676     2,967,235     (Loss) income from continuing operations before income taxes (37,596 ) 129,224 248,899 610,825 Provision for income taxes   38,235     44,204     131,850     189,778     (Loss) income from continuing operations (75,831 ) 85,020 117,049 421,047 (Loss) income from discontinued operations, net of tax   (750 )   5,853     (2,701 )   5,271     Net (loss) income (76,581 ) 90,873 114,348 426,318 Less: Preferred stock dividends attributable to noncontrolling interests   5,264     4,594     19,045     18,375     Net (loss) income - Pitney Bowes Inc. $ (81,845 ) $ 86,279   $ 95,303   $ 407,943     Amounts attributable to common stockholders: Net (loss) income from continuing operations $ (81,095 ) $ 80,426 $ 98,004 $ 402,672 (Loss) income from discontinued operations, net of tax   (750 )   5,853     (2,701 )   5,271     Net (loss) income - Pitney Bowes Inc. $ (81,845 ) $ 86,279   $ 95,303   $ 407,943     Basic (loss) earnings per share attributable to common stockholders (1): Continuing operations $ (0.44 ) $ 0.41 $ 0.52 $ 2.01 Discontinued operations   (0.00 )   0.03     (0.01 )   0.03     Net (loss) income - Pitney Bowes Inc. $ (0.44 ) $ 0.44   $ 0.51   $ 2.04     Diluted (loss) earnings per share attributable to common stockholders (1): Continuing operations $ (0.44 ) $ 0.41 $ 0.52 $ 2.00 Discontinued operations   (0.00 )   0.03     (0.01 )   0.03     Net (loss) income - Pitney Bowes Inc. $ (0.44 ) $ 0.44   $ 0.50   $ 2.03     Weighted-average shares used in diluted earnings per share   185,645,814     197,959,779     188,975,198     200,944,874     (1)   The sum of the earnings per share amounts may not equal the totals due to rounding.     Pitney Bowes Inc. Consolidated Balance Sheets (Unaudited; in thousands, except share amounts)  

Assets

 

December 31,2016

 

December 31,2015 (1)

Current assets: Cash and cash equivalents $ 770,985 $ 650,557 Short-term investments 31,985 117,021 Accounts receivable, net 463,483 476,583 Short-term finance receivables, net 885,994 918,383 Inventories 92,726 88,824 Current income taxes 11,373 6,584 Other current assets and prepayments   68,637     67,400     Total current assets 2,325,183 2,325,352   Property, plant and equipment, net 314,603 330,088 Rental property and equipment, net 188,054 177,515 Long-term finance receivables, net 673,207 760,657 Goodwill 1,573,864 1,745,957 Intangible assets, net 165,172 187,378 Noncurrent income taxes 74,806 70,294 Other assets   524,773     525,891     Total assets $ 5,839,662   $ 6,123,132    

Liabilities, noncontrolling interests and stockholders' (deficit) equity

Current liabilities: Accounts payable and accrued liabilities $ 1,378,822 $ 1,448,321 Current income taxes 34,434 16,620 Current portion of long-term debt and notes payable 614,485 461,085 Advance billings   303,469     353,025     Total current liabilities 2,331,210 2,279,051   Deferred taxes on income 204,320 205,668 Tax uncertainties and other income tax liabilities 61,276 68,429 Long-term debt 2,750,405 2,489,583 Other noncurrent liabilities   593,613     605,310     Total liabilities   5,940,824     5,648,041     Noncontrolling interests (Preferred stockholders' equity in subsidiaries) - 296,370   Stockholders' (deficit) equity: Cumulative preferred stock, $50 par value, 4% convertible 1 1 Cumulative preference stock, no par value, $2.12 convertible 483 505 Common stock, $1 par value 323,338 323,338 Additional paid-in-capital 148,125 161,280 Retained earnings 5,110,232 5,155,537 Accumulated other comprehensive loss (940,133 ) (888,635 ) Treasury stock, at cost   (4,743,208 )   (4,573,305 )   Total Pitney Bowes Inc. stockholders' (deficit) equity   (101,162 )   178,721     Total liabilities, noncontrolling interests and stockholders' (deficit) equity $ 5,839,662   $ 6,123,132     (1)  

Certain prior year amounts have been revised for accounting rules that became effective January 1, 2016 and to conform to current year presentation.

    Pitney Bowes Inc. Business Segments - Revenue and EBIT (Unaudited; in thousands)     Three months ended December 31,   Twelve months ended December 31, 2016   2015   % Change 2016   2015   % Change

Revenue

  North America Mailing $ 340,884 $ 363,316 (6 %) $ 1,342,673 $ 1,435,140 (6 %) International Mailing   101,072     113,930   (11 %)   406,797     445,328   (9 %) Small & Medium Business Solutions   441,956     477,246   (7 %)   1,749,470     1,880,468   (7 %)   Production Mail 115,054 122,298 (6 %) 404,703 421,178 (4 %) Presort Services   118,368     122,247   (3 %)   475,582     473,612   0 % Enterprise Business Solutions   233,422     244,545   (5 %)   880,285     894,790   (2 %)   Software Solutions 90,817 102,992 (12 %) 348,234 385,908 (10 %) Global Ecommerce   120,874     112,164   8 %   428,586     362,087   18 % Digital Commerce Solutions   211,691     215,156   (2 %)   776,820     747,995   4 %   Other - - - - 54,807 (100 %)             Total revenue $ 887,069   $ 936,947   (5 %) $ 3,406,575   $ 3,578,060   (5 %)  

EBIT (1)

  North America Mailing $ 138,350 $ 164,537 (16 %) $ 575,080 $ 646,913 (11 %) International Mailing   12,182     14,485   (16 %)   46,547     51,070   (9 %) Small & Medium Business Solutions   150,532     179,022   (16 %)   621,627     697,983   (11 %)   Production Mail 18,627 16,793 11 % 54,061 48,254 12 % Presort Services   25,953     27,709   (6 %)   95,258     104,655   (9 %) Enterprise Business Solutions   44,580     44,502   0 %   149,319     152,909   (2 %)   Software Solutions 12,251 13,627 (10 %) 30,159 48,531 (38 %) Global Ecommerce   10,365     9,267   12 %   19,200     19,229   (0 %) Digital Commerce Solutions   22,616     22,894   (1 %)   49,359     67,760   (27 %)   Other - - - - 10,569 (100 %)             Segment EBIT $ 217,728   $ 246,418   (12 %) $ 820,305   $ 929,221   (12 %)     Reconciliation of segment EBIT to net (loss) income   Segment EBIT $ 217,728 $ 246,418 $ 820,305 $ 929,221 Corporate expenses   (30,679 )   (61,136 )   (189,215 )   (213,095 ) Adjusted EBIT 187,049 185,282 631,090 716,126 Interest, net (2) (40,442 ) (40,003 ) (144,211 ) (159,374 ) Goodwill impairment (168,563 ) - (168,563 ) - Restructuring charges and asset impairments, net (13,793 ) (11,477 ) (63,296 ) (25,782 ) Other (expense) income, net - (78 ) (536 ) 94,838 Acquisition/disposition related expenses   (1,847 )   (4,500 )   (5,585 )   (14,983 ) (Loss) income from continuing operations before income taxes (37,596 ) 129,224 248,899 610,825 Provision for income taxes   (38,235 )   (44,204 )   (131,850 )   (189,778 ) (Loss) income from continuing operations (75,831 ) 85,020 117,049 421,047 (Loss) income from discontinued operations, net of tax   (750 )   5,853     (2,701 )   5,271   Net (loss) income $ (76,581 ) $ 90,873   $ 114,348   $ 426,318     (1)   Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges, and other items that are not allocated to a particular business segment.   (2) Includes financing interest expense and interest expense, net.     Pitney Bowes Inc. Reconciliation of Reported Consolidated Results to Adjusted Results (Unaudited; in thousands, except per share amounts)      

Three months endedDecember 31,

   

Twelve months endedDecember 31,

  2016   2015

Y/Y Chg.

2016   2015 Y/Y Chg.  

Reconciliation of reported revenue to revenue excluding currencyand Market Exits

Revenue, as reported $ 887,069 $ 936,947 (5 %) $ 3,406,575 $ 3,578,060 (5 %) Unfavorable impact on revenue due to currency   13,379     -   NM   36,536     -   NM Revenue, excluding currency 900,448 936,947 (4 %) 3,443,111 3,578,060 (4 %) Less revenue from Market Exits   (2,280 )   (6,018 ) NM   (5,983 )   (25,912 ) NM Revenue, excluding currency and Market Exits $ 898,168   $ 930,929   (4 %) $ 3,437,128   $ 3,552,148   (3 %)     Reconciliation of reported net (loss) income to adjusted earnings Net (loss) income $ (76,581 ) $ 90,873 $ 114,348 $ 426,318 Loss (income) from discontinued operations, net of tax 750 (5,853 ) 2,701 (5,271 ) Goodwill impairment 166,526 - 166,526 - Restructuring charges and asset impairments, net 9,945 9,481 42,343 18,089 Loss (gain) on disposition of businesses 1,194 4,149 3,893 (84,250 ) Preferred stock redemption (2,047 ) - 2,800 - Transaction costs related to acquisitions and dispositions - 48 206 11,475 Acquisition/disposition related expenses - - - 7,246 Legal settlement - - - 4,250 Investment divestiture   -     -     -     (7,756 ) Income from continuing operations, after income taxes, as adjusted 99,787 98,698 332,817 370,101 Provision for income taxes, as adjusted   46,820     46,581     154,062     186,651   Income from continuing operations before income taxes, as adjusted 146,607 145,279 486,879 556,752 Interest, net   40,442     40,003     144,211     159,374   EBIT, as adjusted 187,049 185,282 631,090 716,126 Depreciation and amortization   38,261     45,826     178,486     173,312   EBITDA, as adjusted $ 225,310   $ 231,108   $ 809,576   $ 889,438      

Reconciliation of reported diluted (loss) earnings per share toadjusted diluted earnings per share from continuing operations

Diluted (loss) earnings per share $ (0.44 ) $ 0.44 $ 0.50 $ 2.03 Loss (income) from discontinued operations, net of tax 0.00 (0.03 ) 0.01 (0.03 ) Goodwill impairment 0.89 - 0.88 - Restructuring charges and asset impairments, net 0.05 0.05 0.22 0.09 Loss (gain) on disposition of businesses 0.01 0.02 0.02 (0.42 ) Preferred stock redemption 0.01 - 0.03 - Transaction costs related to acquisitions and dispositions - - - 0.06 Acquisition/disposition related expenses - - - 0.04 Legal settlement - - - 0.02 Investment divestiture   -     -     -     (0.04 ) Diluted earnings per share from continuing operations, as adjusted $ 0.53   $ 0.48   $ 1.68   $ 1.75     Note: The sum of the earnings per share amounts may not equal the totals due to rounding.    

Reconciliation of reported net cash from operating activities to freecash flow

Net cash provided by operating activities $ 199,763 $ 163,656 $ 490,692 $ 515,056 Capital expenditures (45,299 ) (36,418 ) (160,831 ) (166,746 ) Restructuring payments 13,769 16,030 64,930 62,086 Pension contribution - - 36,731 - Reserve account deposits (3,996 ) 1,428 (2,183 ) (24,202 ) Acquisition/disposition related expenses - - - 10,483 Tax payment related to investment divestiture - - - 20,602 Tax payment related to sale of Imagitas - 5,306 - 21,224 Cash transaction fees   -     6,856     335     17,971     Free cash flow $ 164,237   $ 156,858   $ 429,674   $ 456,474  

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Pitney Bowes Inc.Editorial -Bill Hughes, 203/351-6785Chief Communications OfficerorFinancial -Adam David, 203/351-7175VP, Investor Relations