Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - PITNEY BOWES INC /DE/ | ex992pressrelease.htm |
| 8-K - 8-K - PITNEY BOWES INC /DE/ | a8-kfordmt.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Overview
On April 27, 2018, Pitney Bowes Inc. (the Registrant) entered into an Asset Purchase Agreement (the Purchase Agreement) with Stark Acquisition Corporation (the Purchaser), an affiliate of Platinum Equity, LLC, pursuant to which the Registrant agreed to sell its Document Messaging Technologies production mail business and supporting software (DMT). On July 2, 2018 (the Closing Date), the Registrant completed the sale of DMT (the Disposition), other than in certain non-U.S. jurisdictions, to the Purchaser. The sales of the DMT businesses in the non-U.S. jurisdictions are expected to close in the third and early fourth quarters, subject to local regulatory requirements. As a result of the Disposition, the historical operations of DMT will be presented as discontinued operations in the Registrant's financial statements.
Unaudited Pro Forma Consolidated Financial Information
The following unaudited pro forma consolidated financial information (Pro Forma Information) has been derived from the Registrant's historical consolidated financial statements and reflects certain assumptions and adjustments that management believes are reasonable under the circumstances and given the information available at this time. The Pro Forma Information reflects other adjustments that, in the opinion of management, are necessary to present fairly the pro forma financial position and results of operations as of March 31, 2018 and for the three months ended March 31, 2018 and year ended December 31, 2017. The Pro Forma Information is provided for informational purposes only and is not intended to represent or be indicative of what the Registrant's financial position or results of operations would have been had the disposition occurred on March 31, 2018 for the unaudited pro forma consolidated balance sheet and as of January 1, 2017 for the unaudited pro forma consolidated statements of income, nor is it indicative of its future financial position or results of operations. The Pro Forma Information should be read in conjunction with the Registrant's historical consolidated financial statements and accompanying notes.
The following is a brief description of the amounts reported under each of the column headings in the Pro Forma Information:
Historical
This column represents the Registrant's historical financial statements for the periods presented and does not reflect any adjustments related to the Disposition.
The historical consolidated balance sheet as of March 31, 2018 and the consolidated statement of income for the three months ended March 31, 2018 were derived from the Registrant's unaudited interim consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. The historical consolidated statements of income for each of the years ended December 31, 2017, 2016 and 2015 were derived from the Registrant's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017.
Discontinued Operations
This column represents the elimination of the historical assets and liabilities of DMT from the Registrant's historical consolidated balance sheet as of March 31, 2018 and the results of operations of DMT from the Registrant's historical consolidated statements of income for the three months ended March 31, 2018 and years ended December 31, 2017, 2016 and 2015.
Continuing Operations
This column represents the Registrant's financial position and results of operations after the adjustments to reflect the Disposition.
Pro Forma Adjustments
This column gives effect to the cash proceeds received from the Disposition, the payment of transaction costs and taxes, and the Registrant's intention to redeem all of the outstanding 6.25% Notes due March 2019 (the Notes) using the majority of proceeds from the Disposition.
The pro forma adjustments are based on available information and assumptions that management believes reasonably reflects the impact of the Disposition, are factually supportable, and for purposes of the pro forma consolidated statements of income, are expected to have a continuing impact on the Registrant. The pro forma adjustments do not reflect future events that may occur after the Disposition, including the realization of any cost savings. Additional information about the pro forma adjustments can be found in the Notes to Unaudited Pro Forma Consolidated Financial Information.
Pitney Bowes Inc.
Consolidated Balance Sheet
As of March 31, 2018
(Unaudited; in thousands, except share and per share amounts)
Historical | Discontinued Operations | Continuing Operations | Pro Forma Adjustments | Pro Forma | |||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 719,875 | $ | — | $ | 719,875 | $ | (41,564 | ) | (a) | $ | 678,311 | |||||||
Short-term investments | 55,603 | — | 55,603 | — | 55,603 | ||||||||||||||
Accounts receivable, net | 488,028 | 93,274 | 394,754 | — | 394,754 | ||||||||||||||
Short-term finance receivables, net | 792,802 | — | 792,802 | — | 792,802 | ||||||||||||||
Inventories | 96,224 | 50,742 | 45,482 | — | 45,482 | ||||||||||||||
Current income taxes | 42,274 | — | 42,274 | — | 42,274 | ||||||||||||||
Other current assets and prepayments | 94,227 | 5,560 | 88,667 | — | 88,667 | ||||||||||||||
Total current assets | 2,289,033 | 149,576 | 2,139,457 | (41,564 | ) | 2,097,893 | |||||||||||||
Property, plant and equipment, net | 386,977 | 3,237 | 383,740 | — | 383,740 | ||||||||||||||
Rental property and equipment, net | 182,727 | 1,502 | 181,225 | — | 181,225 | ||||||||||||||
Long-term finance receivables, net | 640,987 | — | 640,987 | — | 640,987 | ||||||||||||||
Goodwill | 1,965,984 | 179,463 | 1,786,521 | — | 1,786,521 | ||||||||||||||
Intangible assets, net | 261,318 | — | 261,318 | — | 261,318 | ||||||||||||||
Noncurrent income taxes | 61,367 | — | 61,367 | — | 61,367 | ||||||||||||||
Other assets | 531,225 | 484 | 530,741 | — | 530,741 | ||||||||||||||
Total assets | $ | 6,319,618 | $ | 334,262 | $ | 5,985,356 | $ | (41,564 | ) | $ | 5,943,792 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Accounts payable and accrued liabilities | $ | 1,375,166 | $ | 31,863 | $ | 1,343,303 | $ | (781 | ) | (b) | $ | 1,342,522 | |||||||
Current income taxes | 9,457 | — | 9,457 | — | 9,457 | ||||||||||||||
Current portion of long-term obligations | 327,429 | — | 327,429 | (299,736 | ) | (c) | 27,693 | ||||||||||||
Advance billings | 292,174 | 49,600 | 242,574 | — | 242,574 | ||||||||||||||
Total current liabilities | 2,004,226 | 81,463 | 1,922,763 | (300,517 | ) | 1,622,246 | |||||||||||||
Deferred taxes on income | 239,472 | — | 239,472 | — | 239,472 | ||||||||||||||
Tax uncertainties and other income tax liabilities | 112,520 | — | 112,520 | — | 112,520 | ||||||||||||||
Long-term debt | 3,248,713 | — | 3,248,713 | — | 3,248,713 | ||||||||||||||
Other noncurrent liabilities | 499,794 | 5,564 | 494,230 | — | 494,230 | ||||||||||||||
Total liabilities | 6,104,725 | 87,027 | 6,017,698 | (300,517 | ) | 5,717,181 | |||||||||||||
Stockholders' equity: | |||||||||||||||||||
Cumulative preferred stock, $50 par value, 4% convertible | 1 | — | 1 | — | 1 | ||||||||||||||
Cumulative preference stock, no par value, $2.12 convertible | 422 | — | 422 | — | 422 | ||||||||||||||
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued) | 323,338 | — | 323,338 | — | 323,338 | ||||||||||||||
Additional paid-in capital | 119,647 | — | 119,647 | — | 119,647 | ||||||||||||||
Retained earnings | 5,235,874 | 247,235 | 4,988,639 | 258,953 | (d) | 5,247,592 | |||||||||||||
Accumulated other comprehensive loss | (771,995 | ) | — | (771,995 | ) | — | (771,995 | ) | |||||||||||
Treasury stock, at cost (136,194,172 shares) | (4,692,394 | ) | — | (4,692,394 | ) | — | (4,692,394 | ) | |||||||||||
Total Pitney Bowes Inc. stockholders’ equity | 214,893 | 247,235 | (32,342 | ) | 258,953 | 226,611 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 6,319,618 | $ | 334,262 | $ | 5,985,356 | $ | (41,564 | ) | $ | 5,943,792 | ||||||||
Pitney Bowes Inc.
Consolidated Statement of Income
For the Three Months Ended March 31, 2018
(Unaudited; in thousands, except share and per share amounts)
Historical | Discontinued Operations | Continuing Operations | Pro Forma Adjustments | Pro Forma | |||||||||||||||
Revenue: | |||||||||||||||||||
Equipment sales | $ | 155,808 | $ | 45,437 | $ | 110,371 | $ | — | $ | 110,371 | |||||||||
Supplies | 65,374 | 5,381 | 59,993 | — | 59,993 | ||||||||||||||
Software | 81,616 | 5,322 | 76,294 | — | 76,294 | ||||||||||||||
Rentals | 95,280 | 654 | 94,626 | — | 94,626 | ||||||||||||||
Financing | 80,103 | — | 80,103 | — | 80,103 | ||||||||||||||
Support services | 118,463 | 45,440 | 73,023 | — | 73,023 | ||||||||||||||
Business services | 386,538 | — | 386,538 | — | 386,538 | ||||||||||||||
Total revenue | 983,182 | 102,234 | 880,948 | — | 880,948 | ||||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of equipment sales | 78,751 | 32,697 | 46,054 | — | 46,054 | ||||||||||||||
Cost of supplies | 21,147 | 4,200 | 16,947 | — | 16,947 | ||||||||||||||
Cost of software | 25,353 | 1,298 | 24,055 | — | 24,055 | ||||||||||||||
Cost of rentals | 24,596 | 542 | 24,054 | — | 24,054 | ||||||||||||||
Financing interest expense | 12,225 | — | 12,225 | — | 12,225 | ||||||||||||||
Cost of support services | 75,572 | 32,445 | 43,127 | — | 43,127 | ||||||||||||||
Cost of business services | 297,399 | — | 297,399 | — | 297,399 | ||||||||||||||
Selling, general and administrative | 312,108 | 16,670 | 295,438 | — | 295,438 | ||||||||||||||
Research and development | 32,784 | 2,462 | 30,322 | — | 30,322 | ||||||||||||||
Restructuring charges and asset impairments, net | 1,021 | 117 | 904 | — | 904 | ||||||||||||||
Other components of net pension and post retirement costs | (1,719 | ) | — | (1,719 | ) | — | (1,719 | ) | |||||||||||
Interest expense, net | 30,853 | — | 30,853 | (4,756 | ) | (e) | 26,097 | ||||||||||||
Total costs and expenses | 910,090 | 90,431 | 819,659 | (4,756 | ) | 814,903 | |||||||||||||
Income from continuing operations before income taxes | 73,092 | 11,803 | 61,289 | 4,756 | 66,045 | ||||||||||||||
Provision for income taxes | 19,579 | 3,316 | 16,263 | 1,071 | (f) | 17,334 | |||||||||||||
Net income from continuing operations | $ | 53,513 | $ | 8,487 | $ | 45,026 | $ | 3,685 | $ | 48,711 | |||||||||
Earnings per share attributable to common stockholders (1): | |||||||||||||||||||
Basic | $ | 0.29 | $ | 0.05 | $ | 0.24 | $ | 0.02 | $ | 0.26 | |||||||||
Diluted | $ | 0.28 | $ | 0.05 | $ | 0.24 | $ | 0.02 | $ | 0.26 | |||||||||
Weighted average number of shares outstanding: | |||||||||||||||||||
Basic | 186,863 | 186,863 | 186,863 | 186,863 | |||||||||||||||
Diluted | 188,175 | 188,175 | 188,175 | 188,175 | |||||||||||||||
(1) The sum of earnings per share amounts may not equal totals due to rounding.
Pitney Bowes Inc.
Consolidated Statement of Income
For the Year Ended December 31, 2017
(In thousands, except share and per share amounts)
Historical | Discontinued Operations | Continuing Operations | Pro Forma Adjustments | Pro Forma | |||||||||||||||
Revenue: | |||||||||||||||||||
Equipment sales | $ | 679,803 | $ | 203,112 | $ | 476,691 | $ | — | $ | 476,691 | |||||||||
Supplies | 252,824 | 21,412 | 231,412 | — | 231,412 | ||||||||||||||
Software | 352,595 | 20,752 | 331,843 | — | 331,843 | ||||||||||||||
Rentals | 386,348 | 2,225 | 384,123 | — | 384,123 | ||||||||||||||
Financing | 331,416 | 431 | 330,985 | — | 330,985 | ||||||||||||||
Support services | 478,536 | 178,744 | 299,792 | — | 299,792 | ||||||||||||||
Business services | 1,068,426 | — | 1,068,426 | — | 1,068,426 | ||||||||||||||
Total revenue | 3,549,948 | 426,676 | 3,123,272 | — | 3,123,272 | ||||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of equipment sales | 340,745 | 139,629 | 201,116 | — | 201,116 | ||||||||||||||
Cost of supplies | 82,992 | 16,690 | 66,302 | — | 66,302 | ||||||||||||||
Cost of software | 101,969 | 6,936 | 95,033 | — | 95,033 | ||||||||||||||
Cost of rentals | 84,270 | 1,567 | 82,703 | — | 82,703 | ||||||||||||||
Financing interest expense | 50,665 | — | 50,665 | — | 50,665 | ||||||||||||||
Cost of support services | 288,976 | 125,087 | 163,889 | — | 163,889 | ||||||||||||||
Cost of business services | 773,052 | — | 773,052 | — | 773,052 | ||||||||||||||
Selling, general and administrative | 1,237,739 | 61,421 | 1,176,318 | — | 1,176,318 | ||||||||||||||
Research and development | 129,767 | 11,064 | 118,703 | — | 118,703 | ||||||||||||||
Restructuring charges and asset impairments, net | 59,431 | 3,208 | 56,223 | — | 56,223 | ||||||||||||||
Interest expense, net | 113,497 | — | 113,497 | (19,026 | ) | (e) | 94,471 | ||||||||||||
Other expense, net | 3,856 | — | 3,856 | — | 3,856 | ||||||||||||||
Total costs and expenses | 3,266,959 | 365,602 | 2,901,357 | (19,026 | ) | 2,882,331 | |||||||||||||
Income from continuing operations before income taxes | 282,989 | 61,074 | 221,915 | 19,026 | 240,941 | ||||||||||||||
Provision for income taxes | 21,649 | 21,096 | 553 | 7,344 | (f) | 7,897 | |||||||||||||
Net income from continuing operations | $ | 261,340 | $ | 39,978 | $ | 221,362 | $ | 11,682 | $ | 233,044 | |||||||||
Earnings per share attributable to common stockholders (1): | |||||||||||||||||||
Basic | $ | 1.40 | $ | 0.21 | $ | 1.19 | $ | 0.06 | $ | 1.25 | |||||||||
Diluted | $ | 1.39 | $ | 0.21 | $ | 1.18 | $ | 0.06 | $ | 1.24 | |||||||||
Weighted average number of shares outstanding: | |||||||||||||||||||
Basic | 186,332 | 186,332 | 186,332 | 186,332 | |||||||||||||||
Diluted | 187,435 | 187,435 | 187,435 | 187,435 | |||||||||||||||
(1) The sum of earnings per share amounts may not equal totals due to rounding.
Notes to Unaudited Pro Forma Consolidated Financial Information
(a) | The pro forma impact on cash and cash equivalents is as follows: |
Net cash proceeds from the Disposition | $ | 339.4 | |
Assumed redemption of the Notes | (310.9 | ) | |
Estimated tax payment | (59.1 | ) | |
Estimated transaction and closing costs | (11.0 | ) | |
Net impact on cash and cash equivalents | $ | (41.6 | ) |
(b) | Represents the elimination of accrued interest at March 31, 2018 on the Notes. |
(c) | Represents the elimination of the carrying value of the Notes at March 31, 2018. The carrying value at March 31, 2018 is comprised of the face amount of $300 million less $0.3 million of unamortized discount. |
(d) | Represents the elimination of the historical assets and liabilities of DMT from the Registrant’s consolidated balance sheet at March 31, 2018 and the impact of the pro forma adjustments discussed in (a), (b), (e) and (f). |
(e) | Represents the reduction in interest expense due to the Registrant’s announced intention to redeem the Notes. |
(f) | Represents the blended federal and state statutory rate of 22.5% for the three months ended March 31, 2018 and 38.6% for the year ended December 31, 2017. |
Other
In connection with the Disposition, the Registrant and the Purchaser entered into a Transition Services Agreement (TSA) whereby the Registrant will perform certain support functions for a period of three to nine months. Income and expenses related to the TSA have not been included as a pro forma adjustment as the TSA is short-term in nature and will not have a continuing impact on the future results of the Registrant.
Pitney Bowes Inc.
Consolidated Statement of Income
For the Year Ended December 31, 2016
(In thousands, except share and per share amounts)
Historical | Discontinued Operations | Continuing Operations | |||||||||
Revenue: | |||||||||||
Equipment sales | $ | 675,451 | $ | 195,420 | $ | 480,031 | |||||
Supplies | 262,682 | 20,732 | 241,950 | ||||||||
Software | 348,661 | 23,084 | 325,577 | ||||||||
Rentals | 412,738 | 2,497 | 410,241 | ||||||||
Financing | 366,547 | 123 | 366,424 | ||||||||
Support services | 512,820 | 183,396 | 329,424 | ||||||||
Business services | 827,676 | — | 827,676 | ||||||||
Total revenue | 3,406,575 | 425,252 | 2,981,323 | ||||||||
Costs and expenses: | |||||||||||
Cost of equipment sales | 331,942 | 128,722 | 203,220 | ||||||||
Cost of supplies | 81,420 | 15,911 | 65,509 | ||||||||
Cost of software | 105,841 | 9,690 | 96,151 | ||||||||
Cost of rentals | 76,040 | 1,583 | 74,457 | ||||||||
Financing interest expense | 55,241 | — | 55,241 | ||||||||
Cost of support services | 295,685 | 129,438 | 166,247 | ||||||||
Cost of business services | 568,509 | — | 568,509 | ||||||||
Selling, general and administrative | 1,200,327 | 54,951 | 1,145,376 | ||||||||
Research and development | 121,306 | 13,928 | 107,378 | ||||||||
Restructuring charges and asset impairments, net | 63,296 | 3,001 | 60,295 | ||||||||
Goodwill impairment | 171,092 | 22,911 | 148,181 | ||||||||
Interest expense, net | 88,970 | — | 88,970 | ||||||||
Other expense, net | 536 | 536 | — | ||||||||
Total costs and expenses | 3,160,205 | 380,671 | 2,779,534 | ||||||||
Income from continuing operations before income taxes | 246,370 | 44,581 | 201,789 | ||||||||
Provision for income taxes | 131,819 | 24,844 | 106,975 | ||||||||
Net income from continuing operations | 114,551 | 19,737 | 94,814 | ||||||||
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests | 19,045 | — | 19,045 | ||||||||
Net income from continuing operations - Pitney Bowes Inc. | $ | 95,506 | $ | 19,737 | $ | 75,769 | |||||
Earnings per share attributable to common stockholders (1): | |||||||||||
Basic | $ | 0.51 | $ | 0.11 | $ | 0.40 | |||||
Diluted | $ | 0.51 | $ | 0.10 | $ | 0.40 | |||||
Weighted average number of shares outstanding: | |||||||||||
Basic | 187,945 | 187,945 | 187,945 | ||||||||
Diluted | 188,975 | 188,975 | 188,975 | ||||||||
(1) The sum of earnings per share amounts may not equal totals due to rounding.
Pitney Bowes Inc.
Consolidated Statement of Income
For the Year Ended December 31, 2015
(In thousands, except share and per share amounts)
Historical | Discontinued Operations | Continuing Operations | |||||||||
Revenue: | |||||||||||
Equipment sales | $ | 695,159 | $ | 187,045 | $ | 508,114 | |||||
Supplies | 288,103 | 25,002 | 263,101 | ||||||||
Software | 386,506 | 25,779 | 360,727 | ||||||||
Rentals | 441,663 | 3,474 | 438,189 | ||||||||
Financing | 410,035 | — | 410,035 | ||||||||
Support services | 554,764 | 201,526 | 353,238 | ||||||||
Business services | 801,830 | — | 801,830 | ||||||||
Total revenue | 3,578,060 | 442,826 | 3,135,234 | ||||||||
Costs and expenses: | |||||||||||
Cost of equipment sales | 331,069 | 123,223 | 207,846 | ||||||||
Cost of supplies | 88,802 | 18,147 | 70,655 | ||||||||
Cost of software | 113,580 | 10,440 | 103,140 | ||||||||
Cost of rentals | 84,188 | 1,701 | 82,487 | ||||||||
Financing interest expense | 71,791 | — | 71,791 | ||||||||
Cost of support services | 322,960 | 144,314 | 178,646 | ||||||||
Cost of business services | 546,201 | — | 546,201 | ||||||||
Selling, general and administrative | 1,279,961 | 64,051 | 1,215,910 | ||||||||
Research and development | 110,156 | 17,761 | 92,395 | ||||||||
Restructuring charges and asset impairments, net | 25,782 | (130 | ) | 25,912 | |||||||
Interest expense, net | 87,583 | — | 87,583 | ||||||||
Other income, net | (94,838 | ) | — | (94,838 | ) | ||||||
Total costs and expenses | 2,967,235 | 379,507 | 2,587,728 | ||||||||
Income from continuing operations before income taxes | 610,825 | 63,319 | 547,506 | ||||||||
Provision for income taxes | 189,778 | 24,270 | 165,508 | ||||||||
Net income from continuing operations | 421,047 | 39,049 | 381,998 | ||||||||
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests | 18,375 | — | 18,375 | ||||||||
Net income from continuing operations - Pitney Bowes Inc. | $ | 402,672 | $ | 39,049 | $ | 363,623 | |||||
Earnings per share attributable to common stockholders (1): | |||||||||||
Basic | $ | 2.01 | $ | 0.20 | $ | 1.82 | |||||
Diluted | $ | 2.00 | $ | 0.19 | $ | 1.81 | |||||
Weighted average number of shares outstanding: | |||||||||||
Basic | 199,835 | 199,835 | 199,835 | ||||||||
Diluted | 200,945 | 200,945 | 200,945 | ||||||||
(1) The sum of earnings per share amounts may not equal totals due to rounding.