PBI Pitney Bowes Inc

Pitney Bowes Inc. (NYSE:PBI), a global technology company that provides products and solutions that power commerce, today reported financial results for the third quarter 2016.

Quarterly Financial Results:

• Revenue of $839 million, a decline of 4 percent; a decline of 2 percent when adjusted for the impact of currency and market exits.
• GAAP EPS of $0.35; Adjusted EPS of $0.44.
• GAAP cash from operations of $137 million; free cash flow of $119 million.
• Issued $600 million of 5 year notes and is redeeming the Pitney Bowes International Holdings, Inc. preferred stock of $300 million.
• The Company expects to be at the low-end of its annual guidance range for revenue and adjusted earnings per share.

“We continued to make progress against our strategic initiatives to transform Pitney Bowes,” said Marc B. Lautenbach, President and Chief Executive Officer. “Our new enterprise business platform, which was deployed in the second quarter, continues to provide operational benefits, while our new products and solutions introduced in the second and third quarter tied to the Pitney Bowes Commerce Cloud are resonating well with our clients and gaining traction.

“In the third quarter, our Global Ecommerce business turned in another strong performance and our Production Mail business delivered a solid equipment sales performance,” Lautenbach continued. “While we continue to make progress in building out our partner channel in our Software Solutions business by adding new Regional System Integrators and Location Intelligence partners in the third quarter, license revenue fell short of our expectations. In our Small and Medium Business, equipment sales rebounded after the deployment of our enterprise business platform, but there were some lingering effects that impacted our stream revenues. That said, we are confident that the actions we have put in place in the third quarter will begin to yield better results in the fourth quarter and throughout 2017.”

Third Quarter 2016 Results

Revenue totaled $839 million for the quarter, which was a decline of 4 percent versus prior year. Revenue declined 3 percent versus the prior year when adjusted for the impact of currency and declined 2 percent when adjusted for both the impact of currency and previously exited direct operations (market exits) in Mexico, South Africa and five markets in Asia.

Digital Commerce Solutions revenue declined 1 percent on a reported basis and grew 2 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 grew 1 percent. Revenue grew 2 percent compared to the prior year when adjusted for the impacts of currency and grew 4 percent when adjusted for currency and market exits. Revenue benefited from growth in Production Mail.

Small and Medium Business (SMB) Solutions revenue declined 7 percent. Revenue declined 6 percent when adjusted for the impacts of currency and market exits. SMB equipment sales revenue declined 1 percent globally and also within the North America Mailing segment. The North America Mailing segment’s revenue performance improved from last quarter, but is not yet fully back to the stream revenue run-rate established prior to the implementation of the new enterprise business platform. The Company expects stream revenue related to financing fees and supplies to improve from current levels.

Generally Accepted Accounting Principles earnings per diluted share (GAAP EPS) were $0.35, which included $0.06 per share for restructuring charges and a $0.03 per share charge from the announced redemption of the preferred stock of the Company’s Pitney Bowes International Holdings subsidiary.

Adjusted earnings per diluted share from continuing operations (Adjusted EPS) were $0.44. The Company uses Adjusted EPS to measure profitability and performance.

Earnings per share were favorably impacted by $0.07 per share, principally related to the resolution of tax examinations, which resulted in a lower tax rate on adjusted earnings this quarter of 21.9 percent. Including the tax benefits this quarter, the annual tax rate on adjusted earnings is expected to be at the low-end of the Company’s annual range.

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

  Third Quarter*

2016

 

2015

Adjusted EPS $ 0.44 $ 0.43 Restructuring and asset impairments ($0.06 ) - Tax adjustment – preferred stock redemption ($0.03 ) - Net tax impact from transactions     -     $ 0.01 GAAP EPS $ 0.35 $ 0.44 * The sum of the earnings per share may not equal the totals above due to rounding.  

GAAP Cash from Operations and Free Cash Flow Results

GAAP cash from operations during the quarter was $137 million while free cash flow was $119 million. In comparison to the prior year, free cash flow declined due to timing of accounts payable.

During the quarter, the Company used cash to pay $35 million in dividends to common shareholders, $25 million for the Maponics acquisition and $17 million for restructuring payments.

Debt Management

During the quarter, the Company issued $600 million of 3.375 percent 5-year fixed rate notes. The issuance will be a debt neutral transaction as the Company paid down commercial paper outstanding during the quarter and is redeeming all $300 million of outstanding shares of the Pitney Bowes International Holdings preferred stock on November 1, 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)     Third Quarter Revenue

2016

   

2015

   

Y/YReported

   

Y/YEx Currency

   

Y/Y Ex Currency& Market Exits*

North America Mailing $ 330 $ 353 (7 %) (7 %) (7 %) International Mailing   96   105 (9 %) (5 %) (3 %)

SMB Solutions Total

$ 426 $ 458 (7 %) (6 %) (6 %)   EBIT North America Mailing $ 139 $ 159 (13 %) International Mailing   10   11 (9 %) SMB Solutions Total $ 148 $ 170 (13 %) * Excluding $3.1 million related to the impacts of currency and $2.2 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

The revenue decline rate for the quarter was an improvement compared to the second quarter, which was impacted by the enterprise business platform cut-over. Equipment sales declined 1 percent compared to prior year, returning to levels similar to the pre-go-live of the new platform. Recurring revenue streams declined at a high single-digit rate largely driven by lower financing-related fees and supplies revenues. EBIT margin was lower than prior year due to the decline in high margin recurring revenue streams.

International Mailing

Excluding the effects from currency and market exits, revenue declined at a low single-digit rate and equipment sales were flat to prior year. Equipment sales benefited from growth most notably in France, Italy and Japan, but were mostly offset by a decline in the UK. Recurring revenue streams declined largely driven by supplies and rental revenues. EBIT margin was relatively flat versus the prior year. The decline in high-margin recurring revenue streams was offset by lower operating expenses.

Enterprise Business Solutions Group

($ millions)   Third Quarter Revenue

2016

   

2015

   

Y/YReported

   

Y/YEx Currency

   

Y/Y Ex Currency& Market Exits*

Production Mail $ 106 $ 102 5 % 5 % 11 % Presort Services   114   116 (2 %) (2 %) (2 %) Enterprise Business Total $ 220 $ 218 1 % 2 % 4 %   EBIT Production Mail $ 16 $ 12 27 % Presort Services   19   26 (26 %) Enterprise Business Total $ 35 $ 38 (9 %) * Excluding $0.5 million related to the impacts of currency and $5.0 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 27 percent over prior year on higher sorter, inserter and print equipment placements due to a number of larger client installations in the quarter. Support services revenue declined as a result of a continuing trend in 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 service delivery cost management initiatives and lower sales and marketing costs.

Presort Services

The average revenue per piece of mail processed declined as a result of the rate change earlier this year and some recently signed lower-margin deals, impacting both revenue and EBIT margin. The segment experienced higher labor costs, which also impacted EBIT margin in the quarter.

Digital Commerce Solutions Group

($ millions)   Third Quarter Revenue

2016

   

2015

   

Y/YReported

   

Y/YEx Currency

Software Solutions $ 89 $ 98 (9 %) (6 %) Global Ecommerce   104   97   8 % 10 % Digital Commerce Total $ 193 $ 194 (1 %) 2 %   EBIT Software Solutions $ 10 $ 15 (29 %) Global Ecommerce   4   (1 )

>100

% Digital Commerce Total $ 15 $ 13 10 %

Software Solutions

The revenue decline was driven by lower Customer Information Management and Location Intelligence license revenues but benefited by growth in Customer Engagement Software licenses. While the Company continues to make good progress in expanding the indirect channel and training partner sales and technical resources, it will take time before results reflect substantial revenue from partner-led deals. The Company continues to focus on improving direct sales efficiency to grow the license revenue pipeline. EBIT margin declined as a result of the lower licensing revenue.

Global Ecommerce

This quarter represents the first quarter of the Borderfree acquisition fully reported in both periods. Ecommerce marketplace and retail revenues grew 17 percent from prior year excluding the impacts of currency on strong growth in UK outbound. U.S. outbound marketplace grew despite a stronger U.S. dollar versus prior year, as well as some temporary disruption on demand for parcel shipments from the U.S. to Canada prior to the resolution of a Canada Post labor dispute. The revenue growth was partially offset by a decline in domestic office shipping.

EBIT margin increased versus the prior year due to synergy savings and revenue growth. The Company remains on-track to achieve its cross border synergy run-rate objective from the acquisition of Borderfree. This was partially offset by a decline in higher- margin domestic office shipping.

2016 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 because the Company cannot reasonably predict the impact future changes in currency exchange rates will have on revenue. 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 2016 will not change significantly.

The Company expects improving trends in the business in the fourth quarter as a result of actions taken to achieve its long term strategic initiatives. These initiatives include the initial benefits of the implementation of the enterprise business platform, new product introductions and continued enhancement of the channel strategy, which will benefit the fourth quarter, with increasing contribution into 2017.

For 2016, the Company expects to be at the low-end of its annual guidance range for revenue and adjusted earnings per share. The Company’s guidance for the full year 2016:

• Revenue, on a constant currency basis, to be in the range of a 1 percent decline to 3 percent decline when compared to 2015.
• Adjusted EPS to be in the range of $1.75 to $1.82. Adjusted EPS guidance excludes the year-to-date charge of $0.22 per share primarily related to restructuring and asset impairments.
• Free cash flow to be in the range of $400 million to $450 million.

The Company is hosting its annual Analyst Day on December 6th in New York City. At that time, the Company will provide an update on its strategy.

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 nine months ended September 30, 2016 and 2015, and consolidated balance sheets at September 30, 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 September 30,   Nine months ended September 30, 2016   2015 2016   2015 Revenue: Equipment sales $ 173,143 $ 163,857 $ 485,145 $ 495,328 Supplies 61,306 71,174 198,631 215,178 Software 89,087 97,700 257,760 283,241 Rentals 102,747 108,420 309,706 333,729 Financing

87,883

99,925 276,915 306,992 Support services 123,954 136,820 383,632 415,615 Business services   200,911     191,645     607,717     591,030     Total revenue   839,031     869,541     2,519,506     2,641,113     Costs and expenses: Cost of equipment sales 86,147 78,650 235,741 232,706 Cost of supplies 20,348 21,629 60,662 65,912 Cost of software 25,698 27,219 79,496 85,584 Cost of rentals 16,041 21,423 54,951 63,127 Financing interest expense 12,965 17,533 41,375 54,171 Cost of support services 74,799 79,747 224,790 244,853 Cost of business services 140,989 130,004 417,357 405,559 Selling, general and administrative 300,983 309,211 916,445 939,318 Research and development 28,680 29,153 89,761 83,693 Restructuring charges and asset impairments, net 16,494 36 49,503 14,305 Interest expense, net 22,294 20,165 62,394 65,200 Other (income) expense, net   -     (1,781 )   536     (94,916 )   Total costs and expenses   745,438     732,989     2,233,011     2,159,512     Income from continuing operations before income taxes 93,593 136,552 286,495 481,601 Provision for income taxes   23,197     42,676     93,615     145,574     Income from continuing operations 70,396 93,876 192,880 336,027 Loss from discontinued operations, net of tax   (291 )   -     (1,951 )   (582 )   Net income 70,105 93,876 190,929 335,445 Less: Preferred stock dividends attributable to noncontrolling interests   4,593     4,594     13,781     13,781     Net income - Pitney Bowes Inc. $ 65,512   $ 89,282   $ 177,148   $ 321,664     Amounts attributable to common stockholders: Net income from continuing operations $ 65,803 $ 89,282 $ 179,099 $ 322,246 Loss from discontinued operations, net of tax   (291 )   -     (1,951 )   (582 )   Net income - Pitney Bowes Inc. $ 65,512   $ 89,282   $ 177,148   $ 321,664    

Basic earnings per share attributable to common stockholders (1):

Continuing operations $ 0.35 $ 0.45 $ 0.95 $ 1.60 Discontinued operations   0.00     -     (0.01 )   -     Net income - Pitney Bowes Inc. $ 0.35   $ 0.45   $ 0.94   $ 1.60    

Diluted earnings per share attributable to common stockholders (1):

Continuing operations $ 0.35 $ 0.44 $ 0.94 $ 1.60 Discontinued operations   0.00     -     (0.01 )   -     Net income - Pitney Bowes Inc. $ 0.35   $ 0.44   $ 0.93   $ 1.59     Weighted-average shares used in diluted earnings per share   186,682,575     201,016,809     189,592,489     201,884,967     (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

 

September 30,2016

 

December 31,2015 (1)

Current assets: Cash and cash equivalents $ 992,089 $ 650,557 Short-term investments 24,259 117,021 Accounts receivable, net 435,015 476,583 Short-term finance receivables, net 862,797 918,383 Inventories 108,766 88,824 Current income taxes 13,060 6,584 Other current assets and prepayments   65,622     67,400     Total current assets 2,501,608 2,325,352   Property, plant and equipment, net 312,597 330,088 Rental property and equipment, net 179,554 177,515 Long-term finance receivables, net 704,294 760,657 Goodwill 1,766,418 1,745,957 Intangible assets, net 174,221 187,378 Noncurrent income taxes 66,547 70,294 Other assets   553,635     525,891     Total assets $ 6,258,874   $ 6,123,132    

Liabilities, noncontrolling interests and stockholders' equity

Current liabilities: Accounts payable and accrued liabilities $ 1,307,808 $ 1,448,321 Current income taxes 19,170 16,620 Current portion of long-term debt and notes payable 535,289 461,085 Advance billings   303,153     353,025     Total current liabilities 2,165,420 2,279,051   Deferred taxes on income 229,998 205,668 Tax uncertainties and other income tax liabilities 57,423 68,429 Long-term debt 2,831,767 2,489,583 Other noncurrent liabilities   547,444     605,310     Total liabilities   5,832,052     5,648,041     Noncontrolling interests (Preferred stockholders' equity in subsidiaries) 296,370 296,370   Stockholders' equity: Cumulative preferred stock, $50 par value, 4% convertible 1 1 Cumulative preference stock, no par value, $2.12 convertible 489 505 Common stock, $1 par value 323,338 323,338 Additional paid-in-capital 149,997 161,280 Retained earnings 5,226,894 5,155,537 Accumulated other comprehensive loss (825,962 ) (888,635 ) Treasury stock, at cost   (4,744,305 )   (4,573,305 )   Total Pitney Bowes Inc. stockholders' equity   130,452     178,721     Total liabilities, noncontrolling interests and stockholders' equity $ 6,258,874   $ 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 September 30,   Nine months ended September 30, 2016   2015   % Change 2016   2015   % Change

Revenue

  North America Mailing $ 329,995 $ 353,159 (7 %) $ 1,001,789 $ 1,071,824 (7 %) International Mailing   95,628     104,615   (9 %)   305,725     331,398   (8 %) Small & Medium Business Solutions   425,623     457,774   (7 %)   1,307,514     1,403,222   (7 %)   Production Mail 106,350 101,646 5 % 289,649 298,880 (3 %) Presort Services   114,053     115,912   (2 %)   357,214     351,365   2 % Enterprise Business Solutions   220,403     217,558   1 %   646,863     650,245   (1 %)   Software Solutions 89,031 97,638 (9 %) 257,417 282,916 (9 %) Global Ecommerce   103,974     96,571   8 %   307,712     249,923   23 % Digital Commerce Solutions   193,005     194,209   (1 %)   565,129     532,839   6 %   Other - - - - 54,807 (100 %)             Total revenue $ 839,031   $ 869,541   (4 %) $ 2,519,506   $ 2,641,113   (5 %)  

EBIT (1)

  North America Mailing $ 138,588 $ 159,319 (13 %) $ 436,730 $ 482,376 (9 %) International Mailing   9,733     10,739   (9 %)   34,365     36,585   (6 %) Small & Medium Business Solutions   148,321     170,058   (13 %)   471,095     518,961   (9 %)   Production Mail 15,696 12,401 27 % 35,434 31,461 13 % Presort Services   19,181     25,908   (26 %)   69,305     76,946   (10 %) Enterprise Business Solutions   34,877     38,309   (9 %)   104,739     108,407   (3 %)   Software Solutions 10,329 14,613 (29 %) 17,908 34,904 (49 %) Global Ecommerce   4,389     (1,240 ) >100%   8,835     9,962   (11 %) Digital Commerce Solutions   14,718     13,373   10 %   26,743     44,866   (40 %)   Other - - - - 10,569 (100 %)             Segment EBIT $ 197,916   $ 221,740   (11 %) $ 602,577   $ 682,803   (12 %)     Reconciliation of segment EBIT to net income   Segment EBIT $ 197,916 $ 221,740 $ 602,577 $ 682,803 Corporate expenses   (51,992 )   (49,235 )   (158,536 )   (151,959 ) Adjusted EBIT 145,924 172,505 444,041 530,844 Interest, net (2) (35,259 ) (37,698 ) (103,769 ) (119,371 ) Restructuring charges and asset impairments, net (16,494 ) (36 ) (49,503 ) (14,305 ) Other income (expense), net - 1,781 (536 ) 94,916 Acquisition/disposition related expenses   (578 )   -     (3,738 )   (10,483 ) Income from continuing operations before income taxes 93,593 136,552 286,495 481,601 Provision for income taxes   (23,197 )   (42,676 )   (93,615 )   (145,574 ) Income from continuing operations 70,396 93,876 192,880 336,027 Loss from discontinued operations, net of tax   (291 )   -     (1,951 )   (582 ) Net income $ 70,105   $ 93,876   $ 190,929   $ 335,445     (1)   Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges and other items, which 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 ended September 30,     Nine months ended September 30,   2016   2015 Y/Y Chg. 2016   2015 Y/Y Chg.  

Reconciliation of reported revenue to revenue excluding currencyand Market Exits

Revenue, as reported $ 839,031 $ 869,541 (4%) $ 2,519,506 $ 2,641,113 (5%) Unfavorable impact on revenue due to currency   8,436     -  

NM

  23,157     -   NM Revenue, excluding currency 847,467 869,541 (3%) 2,542,663 2,641,113 (4%) Less revenue from Market Exits   (1,164 )   (8,352 ) NM   (3,703 )   (19,894 ) NM Revenue, excluding currency and Market Exits $ 846,303   $ 861,189   (2%) $ 2,538,960   $ 2,621,219   (3%)     Reconciliation of reported net income to adjusted earnings Net income $ 70,105 $ 93,876 $ 190,929 $ 335,445 Loss from discontinued operations, net of tax 291 - 1,951 582 Restructuring charges and asset impairments, net 10,840 47 32,399 8,607 Loss (gain) on disposition of businesses 275 30 2,698 (88,399 ) Transaction costs related to acquisitions and dispositions 90 5,323 206 11,428 Legal settlement - (370 ) - 4,250 Investment divestiture - (7,756 ) - (7,756 ) Tax cost - preferred stock redemption 4,847 - 4,847 - Acquisition/disposition related expenses   -     -     -     7,246   Income from continuing operations, after income taxes, as adjusted 86,448 91,150 233,030 271,403 Provision for income taxes, as adjusted   24,217     43,657     107,242     140,070   Income from continuing operations before income taxes, as adjusted 110,665 134,807 340,272 411,473 Interest, net   35,259     37,698     103,769     119,371   EBIT, as adjusted 145,924 172,505 444,041 530,844 Depreciation and amortization   50,687     42,333     140,225     127,486   EBITDA, as adjusted $ 196,611   $ 214,838   $ 584,266   $ 658,330      

Reconciliation of reported diluted earnings per share to adjusteddiluted earnings per share from continuing operations

Diluted earnings per share $ 0.35 $ 0.44 $ 0.93 $ 1.59 Loss from discontinued operations, net of tax - - 0.01 - Restructuring charges and asset impairments, net 0.06 - 0.17 0.04 Loss (gain) on disposition of businesses - - 0.01 (0.44 ) Transaction costs related to acquisitions and dispositions - 0.03 - 0.06 Legal settlement - - - 0.02 Investment divestiture - (0.04 ) - (0.04 ) Tax cost - preferred stock redemption 0.03 - 0.03 - Acquisition/disposition related expenses   -     -     -     0.04   Diluted earnings per share from continuing operations, as adjusted $ 0.44   $ 0.43   $ 1.16   $ 1.28     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 $ 137,342 $ 150,392 $ 290,929 $ 351,400 Capital expenditures (44,173 ) (40,716 ) (115,532 ) (130,328 ) Restructuring payments 17,295 15,281 51,161 46,056 Pension contribution - - 36,731 - Reserve account deposits 8,956 (4,166 ) 1,813 (25,630 ) Acquisition/disposition related expenses - - - 10,483 Tax (receipts) payments related to investment divestiture - (5,773 ) - 20,602 Tax payment related to sale of Imagitas - 15,918 - 15,918 Cash transaction fees   -     -     335     11,116     Free cash flow $ 119,420   $ 130,936   $ 265,437   $ 299,617  

View source version on businesswire.com: http://www.businesswire.com/news/home/20161101005255/en/

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