Pitney Bowes Announces First Quarter 2018 Financial Results

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

Segment EBIT is the primary measure of profitability and operational performance at the segment level. Segment EBIT is determined by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges and goodwill and asset impairments, which are recognized on a consolidated basis. The Company has also included segment EBITDA as a useful measure for profitability and operational performance, and an additional way to look at the economics of the segments, especially in light of some of the Company’s more recent, larger acquisitions. Segment EBITDA further excludes depreciation and amortization expense for the segment. A reconciliation of segment EBIT and EBITDA to total net income can be found in the attached financial schedules.

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

This document contains “forward-looking statements” about the Company’s expected or potential future business and financial performance. Forward-looking statements include, but are not limited to, statements about its future revenue and earnings guidance and other statements about future events or conditions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: declining physical mail volumes; competitive factors, including pricing pressures, technological developments, the introduction of new products and services by competitors, and fuel prices; our success in developing new products and services, including digital-based products and services, obtaining regulatory approvals, if needed, of new products, and the market’s acceptance of these new products and services; our ability to fully utilize the enterprise business platform in North America, and successfully deploy it in major international markets without significant disruptions to existing operations; a breach of security, including a cyberattack or other comparable event; the continued availability and security of key information technology systems and the cost to comply with information security requirements and privacy laws; changes in postal or banking regulations; changes in, or loss of, our contractual relationships with the United States Postal Service; the risk of losing large clients in the Global Ecommerce segment; macroeconomic factors, including global and regional business conditions that adversely impact customer demand, foreign currency exchange rates, interest rates and labor conditions; capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs; management of outsourcing arrangements; integrating newly acquired businesses, including operations and product and service offerings; management of customer credit risk and other factors beyond its control as more fully outlined in the Company's 2017 Form 10-K Annual Report and other reports filed with the Securities and Exchange Commission. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information, events or developments.

Note: Consolidated statements of income; revenue and EBIT by business segment; and reconciliation of GAAP to non-GAAP measures for the three months ended March 31, 2018 and 2017, and consolidated balance sheets as of March 31, 2018 and December 31, 2017 are attached.

Pitney Bowes Inc.
Consolidated Statements of Income
(Unaudited; in thousands, except share and per share amounts)
 
  Three months ended March 31,
2018  

2017

Revenue:
Equipment sales $ 155,808 $ 162,974
Supplies 65,374 66,818
Software 81,616 77,867
Rentals 95,280 99,870
Financing 80,103 85,745
Support services 118,463 118,847
Business services 386,538 224,519
   
Total revenue   983,182     836,640  
 
Costs and expenses:
Cost of equipment sales 78,751 69,562
Cost of supplies 21,147 21,471
Cost of software 25,353 25,308
Cost of rentals 24,596 20,662
Financing interest expense 12,225 12,974
Cost of support services 75,572 73,354
Cost of business services 297,399 150,843
Selling, general and administrative (1) 312,108 304,847
Research and development 32,784 31,856
Restructuring charges, net 1,021 2,082
Other components of net pension and postretirement cost (1) (1,719 ) 1,456
Interest expense, net 30,853 25,676
   
Total costs and expenses   910,090     740,091  
 
Income before income taxes 73,092 96,549
Provision for income taxes 19,579 31,416
   
Net income $ 53,513   $ 65,133  
 
Basic earnings per share $ 0.29   $ 0.35  
Diluted earnings per share $ 0.28   $ 0.35  
 
Weighted-average shares used in diluted earnings per share   188,174,983     186,875,143  
(1)   Effective Janaury 1, 2018, components of net periodic pension and postretirement costs, other than service costs, are required to be reported seperately. Accordingly, for the three months ended March 31, 2017, $1.5 million of costs have been reclassified from selling, general and administrative expense to Other components of net pension and postretirement cost.
 

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